Three Months Ended December 31, 2018 Compared to 2017
The lower corporate tax rate in 2018 contributed to improved net income for all segments with pretax income. For those segments with pretax losses, the net loss increased on a comparative basis due to the reduced tax benefit in 2018.
CNA’s net income in 2017 was affected by a $78 million net charge related to the Tax Act. Absent this charge, CNA’s results in 2018 decreased due to lower net investment income reflecting declines in CNA’s limited partnership and common equity investments and realized investment losses as compared to realized gains in the prior year period. In 2018, CNA generated underwriting losses in its core property & casualty business, as compared to underwriting gains in 2017, resulting from higher net catastrophe losses, lower favorable prior year development and a higher underlying loss ratio. CNA’snon-core operations also contributed to the unfavorable quarterly impact as compared to the prior year due mainly to the timing of reserve reviews.
Diamond Offshore’s net loss increased by $6 million in 2018 as compared to 2017. Excluding the impact of the adjustment to deferred taxes required by the Tax Act, net loss would have increased by $8 million due to lower revenue reflecting current challenging market fundamentals, which negatively affected both rig utilization and dayrates. Results in 2017 were also impacted by an impairment charge related to the carrying value of three drilling rigs and by restructuring costs.
Boardwalk Pipeline’s net income in 2017 was affected by a $294 million net benefit related to the Tax Act. Absent this net tax benefit, net income in 2018 increased as a result of Loews now owning 100% of the company as compared to 51% in the prior year period. This increase was partially offset by lower net transportation revenues, resulting primarily from a contract restructuring and reduced rates on renewing contracts, offset in part by revenues from growth projects.
Loews Hotels & Co’s net income in 2017 were affected by a $27 million net benefit related to the Tax Act. Absent this net tax benefit, net income decreased primarily due to a state tax adjustment.
Investment results generated by the parent company investment portfolio decreased primarily due to losses in the current period on common equity and limited partnership investments as compared to gains in the prior year, as well as a lower level of invested assets than during 2017.
Year Ended December 31, 2018 Compared to 2017
The following discussion excludes the 2017 impact on each segment of the Tax Act, which is included in the quarterly discussion described above. However, the discussion below includes the impact of the lower corporate tax rate in 2018 resulting from the Tax Act.
CNA’s net income decreased primarily due to lower net investment income driven by limited partnership returns, as well as realized investment losses as compared to gains in 2017. Lower favorable net prior year loss reserve development was offset by lower net catastrophe losses. CNA also recognized increased losses from its loss portfolio transfer due to the timing of reserve reviews andnon-recurring costs associated with the transition to a new IT infrastructure service provider. The lower corporate tax rate partially offset the year-over-year decline in earnings.
Diamond Offshore’s results decreased primarily due to lower rig utilization, lower dayrates and aone-time charge related to a legal settlement, partially offset by lower drilling rig impairment charges in 2018, and a charge in 2017 related to the early redemption of debt. The lower corporate tax rate reduced the tax benefit recognized in 2018 as compared to 2017.
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