Loews Corporation

Good day, everyone, and welcome to today's Lowe's Corporation Q3 2022 earnings conference call. At this time, all participants are in a listen-only mode. Please note this call is recorded. I will be standing by if you need any assistance. It is now my pleasure to turn the conference over to Mr. Chris Nugent.

Thank you, Shelby. Good morning, everyone, and welcome to Lowe's Corporation's third quarter earnings conference call. A copy of our earnings release and investor presentation may be found on our website, Lowes.com. On the call this morning, we will have our Chief Executive Officer, Jim Tisch, and Chief Financial Officer, Jane Wong. Following our prepared remarks this morning, we will have a question and answer session with questions from our shareholders. Before we begin, however, I will remind you that this conference call may include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statement due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we may also discuss non-GAAP financial measures. Please refer to our security filings and investor presentation for reconciliation to the most comparable GAAP measures. With that, I'd like to turn the call over to Jim. Jim, over to you.

Thank you, Chris, and good morning. Before I discuss our financial results, I'd like to tell you about some executive changes that are taking place at Lowe's Hotels. On January 1st of next year, John Tisch will become the executive chairman of Lowe's Hotels, and Alex Tisch will assume the role of president and CEO. John will also continue to be a member of the Office of the President of Lowe's Corp and the co-chairman of the Lowe's Corporation Board of Directors, along with Andrew Tisch. In his 43 years at Lowe's Hotels, John has engineered the company's expansion and emergence as a leading hotel business. In particular, John was instrumental in building Lowe's Hotels' longstanding partnership in Orlando with Universal Studios, while also having the foresight to develop the iconic Lowe's Miami Beach Hotel. As a result, Lowe's Hotels now has nearly 10,000 rooms in the sought-after Florida market. Additionally, John created a corporate culture that places a high value on empowering team members, satisfying customers, and contributing to communities. John has successfully guided the company through several of the most turbulent periods in the hospitality industry, most recently the COVID pandemic. Lowe's Hotels is now stronger than it has ever been, as evidenced by the company's outstanding financial results. We are deeply grateful for John's contributions to the company and his continued presence will be of tremendous value to Lowe's Hotels. Alex Tisch joined Lowe's Hotels in June of 2017 after working at Lowe's Corp since 2008. Over the last five years, Alex has been instrumental in the creation and execution of the company's highly effective growth strategy and has proven himself to be a dynamic leader and a talented hotel executive. Alex oversaw the development of Lowe's Hotels' 800-room property in Kansas City and was integral in developing key partnerships, such as the company's partnership with the city of Arlington, Texas. I'm confident that Alex will continue to chart a course for sustained growth at Lowe's Hotels, and we are excited to welcome him into this new leadership role. Moving on to our third quarter financial results, Our subsidiaries performed very well this quarter, which led to good consolidated results for the company. Before we discuss the financials, I'd like to acknowledge our employees who were impacted by Hurricane Ian and thank them for their strength and dedication during these trying times. In particular, I want to give a big shout out to the almost 2,000 employees who moved into our properties in Orlando in order to help our approximately 20,000 guests and displaced residents on the Universal Campus who are fleeing the storm. Thank you very much, guys. I'm happy to report that Lowe's Hotels experienced minimum financial impact from Hurricane Ian. Both leisure and group travel have bounced back dramatically from the pandemic levels, and the company continues to benefit from its five resort and convention properties that opened during the past few years. Very soon, we'll be able to add the Lowe's Carl Gables Hotel to that list. The new property will formally open in November, adding to Lowe's Hotels' presence in South Florida. With the addition of Carl Gables, the company will have approximately 16,500 guest rooms. Lowe's Hotels has adjusted EBITDA for the third quarter with $77 million. up $18 million compared to the third quarter of 2021. And for the nine months ending September 30th, Lowe's Hotels reported $261 million of adjusted EBITDA, which is higher than the company's pre-COVID full-year 2019 adjusted EBITDA of $227 million. In Texas, construction continues on schedule and on budget for the nearly 900-room Lowe's Arlington Hotel, Related to open in the first quarter of 2024, this property epitomizes Lowe's Hotel's strategy of owning and operating hotels with high-quality meeting and event space that also have built-in demand generators. The Lowe's Arlington will be within walking distance of three professional sports and performance venues, as well as the National Medal of Honor Museum, among other attractions. We remain committed to growth in this area of the hotel and hospitality industry. Moving on to CNA, CNA's core income of $213 million during the third quarter includes $87 million in pre-tax catastrophe losses related to Hurricane Ian. Results continue to be strong, with CNA reporting an underlying combined ratio of 91.1 during the third quarter. CNA's all-in combined ratio, including catastrophe losses, was 95.8, an improvement of 4.2 points over the prior year. Net written premiums grew by 8% due to improved retention and new business. Despite CNA's stellar performance over the past several years, we believe the company still trades at a substantial discount to its peers. Furthermore, I believe the property and casualty insurance industry itself is undervalued by the market. While the S&P 500 trades at around 17 times 2022 earnings, the commercial P&C insurance industry trades in the low double digits. In a show of support for CNA, its strategy, and its management team, in the third quarter, Lowe's bought about 670,000 shares of CNA common stock for approximately $26 million. As for Boardwalk Pipelines, the company continues to perform well and grow revenue. We look forward to the resolution of our litigation, whose appeal is currently pending in the Delaware Supreme Court. That case was heard on September 14th. We continue to have every hope that this case will be resolved positively by the end of this year. If you'd like to know more about our thoughts on the boardwalk litigation, I refer you to my remarks from the first quarter earnings call of this year. Our plastic packaging company, Altium, completed the $270 million acquisition of Plastic Industries in the second quarter, which was funded with $150 million of equity, including $79 million from Lowe's, and $120 million of debt. Plastic Industries is a blow molding packaging manufacturer that was headquartered in Nashua, New Hampshire. Altium purchased the company for approximately nine times EBITDA, and we anticipate that that multiple will be several turns lower after operational synergies are realized. Concerning shale repurchases, from July 29th The last day we reported share repurchases until today, we have repurchased approximately 3.5 million shares of Lowe's common stock for $193 million. Year to date, we've bought back 4.5% of our outstanding shares for $652 million. Since we believe that Lowe's trades at a significant discount to our view of its intrinsic value, we are very enthusiastic about purchasing our shares at these levels. However, with the boardwalk litigation pending, we believe it's prudent to moderate our share repurchase activity until the case is fully resolved. Finally, we understand that most of you are reading a transcript of this call as opposed to listening to the live broadcast. For this reason, we are considering simply posting a transcript and discontinuing the call in the future. We welcome your feedback on this option. Thank you and stay tuned for more details. And now I'd like to hand the call over to our CFO, Jane Wong.