Exhibit 99.1
Loews Corporation
Unaudited Pro Forma Financial Information
The following unaudited pro forma financial information presents Loews
Corporation's (the "Company") pro forma unaudited Consolidated Condensed
Balance sheet as of September 30, 2002 and the Company's pro forma unaudited
Consolidated Condensed Statements of Operations for the year ended December
31, 2001 and for the nine months ended September 30, 2002.
On October 31, 2002, CNA Financial Corporation ("CNA"), a 90% owned
subsidiary, completed the sale of the shares of CNA Re Management Company
Limited and its wholly-owned subsidiary CNA Reinsurance Company Limited
(collectively referred to hereinafter as CNA Re U.K.) to Tawa U.K. Limited.
The sale includes business underwritten since inception by CNA Re U.K. except
for certain risks retained by Continental Casualty Company ("CCC"), a wholly-
owned subsidiary of CNA, as discussed below. This sale does not impact CNA
Re's on-going U.S.-based operations.
CNA Re U.K. was sold for $1, subject to adjustments that are primarily
driven by certain operating results and changes in interest rates between
January 1, 2002 and October 31, 2002, and realized foreign currency losses
recognized by CNA Re U.K. prior to December 31, 2002. Due to the various
components of the completion adjustments, which are initially prepared by the
buyer, the final purchase price cannot yet be determined. However, based upon
information currently available to CNA, management believes there will be a
reduction in the previously recognized impairment loss, which will be
reflected as a realized gain when the completion adjustments are finalized.
The anticipated realized gain on sale is not reflected in the pro forma
adjustments.
Concurrent with the sale, several reinsurance agreements under which CCC
provided retrocessional protection to CNA Re U.K. will be terminated. As part
of the sale, CNA Re U.K.'s net exposure to all IGI Program liabilities, as
described in note B2 below, will be ceded to CCC. Further, CCC will provide a
$100 million stop loss reinsurance cover attaching at carried reserves on CNA
Re U.K.'s 2001 underwriting year exposures for which CCC received premiums of
$25 million.
The pro forma adjustments are presented as if they had occurred, as of
September 30, 2002, for the purposes of the pro forma unaudited Consolidated
Condensed Balance Sheet, and as of the beginning of the respective period
presented for the purposes of the pro forma unaudited Consolidated Condensed
Statements of Operations.
This pro forma unaudited financial information does not purport to represent
what the Company's actual financial position and results of operations would
have been had such events actually occurred on the aforementioned dates. The
pro forma unaudited financial information also does not purport to serve as a
forecast of the Company's financial position or results of operations for any
future periods.
The pro forma adjustments are based on currently available information and
upon certain assumptions that management believes are reasonable in the
circumstances. This pro forma financial information should be read in
conjunction with the Company's audited consolidated financial statements as of
and for the year ended December 31, 2001 appearing in the Company's Annual
Report on Form 10-K for the year ended December 31, 2001, and the unaudited
consolidated condensed financial statements as of September 30, 2002 and for
the nine-month period then ended appearing in the Company's Quarterly Report
on Form 10-Q for the quarter then ended.
Loews Corporation and Subsidiaries
Pro Forma Consolidated Condensed Balance Sheets (Unaudited)
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(In millions) September 30, 2002
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Pro Forma Adjustments
Decrease (Increase)
------------------------------------------
CNA RE U.K.
Historical (A) Other (B) Notes Pro Forma
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<s> <c> <c> <c> <c> <c>
Assets:
Investments and cash . $ 42,998.9 $ 1,115.8 $ 286.1 (B1),(B2),(B3) $41,597.0
Receivables-net . . . . 18,416.7 1,330.2 (76.8) (B2) 17,163.3
Other assets . . . . . 8,398.6 27.7 8,370.9
Deferred acquisition
costs of insurance
subsidiaries . . . . . 2,547.8 0.9 2,546.9
Separate account
business . . . . . . . 3,147.3 3,147.3
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Total assets . . . $ 75,509.3 $ 2,474.6 $ 209.3 $72,825.4
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Liabilities and Shareholders' Equity:
Insurance reserves . . $ 42,580.1 $ 2,179.3 $ 307.5 (B1),(B2) $40,093.3
Long-term debt, less
unamortized discount 5,914.9 5,914.9
Reinsurance balances
payable . . . . . . . 3,031.9 104.2 (34.6) (B2) 2,962.3
Other liabilities . . . 7,836.8 191.1 (63.6) (B1),(B2),(B3) 7,709.3
Separate account
business . . . . . . . 3,147.3 3,147.3
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Total liabilities 62,511.0 2,474.6 209.3 59,827.1
Minority interest . . . 1,891.3 3.0 (G) 1,888.3
Shareholders' equity . 11,107.0 (3.0) (G) 11,110.0
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Total liabilities
and shareholders'
equity . . . . . $ 75,509.3 $ 2,474.6 $ 209.3 $72,825.4
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Loews Corporation and Subsidiaries
Consolidated Condensed Statements of Operations (Unaudited)
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(In millions) Year Ended December 31, 2001
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Pro Forma Adjustments
Decrease (Increase)
--------------------------------
Restated
Historical(C) CNA RE U.K. (D) Other (E)(G) Pro Forma
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<s> <c> <c> <c> <c>
Revenues:
Insurance premiums . . . . . $ 9,285.1 $ 223.4 $ 9,061.7
Investment income, net of
expenses . . . . . . . . . . 2,103.8 58.9 $ 15.0 2,029.9
Investment gains (losses) . . 1,390.4 (2.8) 1,393.2
Manufactured products 4,584.1 4,584.1
Other . . . . . . . . . . . . 1,933.0 0.2 1,932.8
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Total . . . . . . . . . . 19,296.4 279.7 15.0 19,001.7
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Expenses:
Insurance claims and
policyholders' benefits . . 11,279.4 466.8 10,812.6
Amortization of deferred
acquisition costs . . . . . 1,803.9 63.1 1,740.8
Cost of manufactured
products sold . . . . . . . 2,237.1 2,237.1
Other operating expenses . . 4,218.7 50.5 4,168.2
Restructuring and other
related charges . . . . . . 251.0 6.0 245.0
Interest . . . . . . . . . . 332.0 332.0
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Total . . . . . . . . . . 20,122.1 586.4 19,535.7
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(825.7) (306.7) 15.0 (534.0)
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Income tax expense
(benefit) . . . . . . . . . (177.2) 67.2 5.0 (249.4)
Minority interest . . . . . . (103.1) (45.5) (57.6)
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Total . . . . . . . . . . (280.3) 67.2 (40.5) (307.0)
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Loss from continuing operations $ (545.4) $ (373.9) $ 55.5 $ (227.0)
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Basic and diluted loss from
continuing operations
per Loews common share . . . . $ (2.79) $ (1.16)
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Weighted average number of
shares outstanding Loews
Common Stock . . . . . . . . . 195.33 195.33
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Loews Corporation and Subsidiaries
Pro Forma Consolidated Condensed Statements of Operations (Unaudited)
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(In millions, except per share data)
Nine Months Ended September 30, 2002
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Pro Forma Adjustments
Decrease (Increase)
--------------------------------
Historical CNA RE U.K. (D) Other (F)(G) Pro Forma
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<s> <c> <c> <c> <c>
Revenues:
Insurance premiums . . . . . $ 7,922.9 $ 13.2 $ 7,909.7
Investment income, net of
expenses . . . . . . . . . . 1,399.7 32.4 $ 7.0 1,360.3
Investment gains (losses) . . (145.0) 11.1 (156.1)
Manufactured products . . . . 3,076.4 3,076.4
Other . . . . . . . . . . . . 1,258.5 1,258.5
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Total . . . . . . . . . . 13,512.5 56.7 7.0 13,448.8
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Expenses:
Insurance claims and
policyholders' benefits . . 6,542.4 15.0 6,527.4
Amortization of deferred
acquisition costs . . . . . 1,349.9 4.9 1,345.0
Cost of manufactured products
sold . . . . . . . . . . . . 1,760.0 1,760.0
Other operating expenses . . 2,388.9 11.9 2,377.0
Interest . . . . . . . . . . 231.8 231.8
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Total . . . . . . . . . . 12,273.0 31.8 12,241.2
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1,239.5 24.9 7.0 1,207.6
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Income tax expense (benefit) 453.6 1.0 3.0 449.6
Minority interest . . . . . . 59.7 3.0 56.7
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Total . . . . . . . . . . 513.3 1.0 6.0 506.3
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Income from continuing
operations . . . . . . . . . . $ 726.2 $ 23.9 $ 1.0 $ 701.3
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Income from continuing
operations attributable to:
Loews Common Stock . . . . . $ 622.4 $ 23.9 $ 1.0 $ 597.5
Carolina Group Stock . . . . 103.8 103.8
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$ 726.2 $ 23.9 $ 1.0 $ 701.3
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Basic and diluted income
from continuing operations
per common share:
Loews common share . . . . . $ 3.30 $ 3.17
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Carolina Group common share . $ 2.58 $ 2.58
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Weighted average number of
shares outstanding:
Loews Common Stock . . . . . 188.31 188.31
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Carolina Group Stock . . . . 40.23 40.23
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Notes To Unaudited Pro Forma Consolidated Condensed Financial Statements
[A] This column of pro forma adjustments represents the balance sheet of CNA
Re U.K. as included in the Company's Consolidated Condensed Balance Sheet
as of September 30, 2002 as reported.
[B] This column of pro forma adjustments includes the transfer of certain
assets and liabilities between CNA Re U.K. and its parent, CCC, arising
from several concurrent completion transactions as more fully described
below.
[B1] Represents the impact of the termination of four intercompany
reinsurance agreements under which CNA Re U.K. ceded losses to CCC. These
terminations result in a transfer of insurance reserves of $337.0 million
and cash of $262.0 million from CCC to CNA Re U.K.
[B2] In 1997, CNA Re U.K. entered into an arrangement with IOA Global, Ltd.
("IOA"), an independent managing general agent based in Philadelphia,
Pennsylvania, to develop and manage a book of accident and health
coverages. Pursuant to this arrangement, IGI Underwriting Agencies, Ltd.
("IGI"), a personal accident reinsurance managing general underwriter,
was appointed to underwrite and market the book under the supervision of
IOA. Between April 1, 1997 and December 1, 1999, IGI underwrote a number
of reinsurance arrangements with respect to personal accident insurance
worldwide (the "IGI Program").
This pro forma adjustment reflects the retrocession to CCC of CNA Re
U.K.'s remaining net exposure relating to the IGI Program. This
retrocession includes a transfer of insurance reserves of $29.0 million,
receivables of $77.0 million, related liabilities of $35.0 million and
cash of $2.0 million.
[B3] Represents the impact of other aspects of the transaction including
estimated foreign currency losses and other estimated future completion
adjustments, which decreases cash by $22.0 million and decreases other
liabilities by $22.0 million.
[C] The Company's Consolidated Condensed Statement of Operations for the year
ended December 31, 2001 is restated to reclassify the results of CNA Vida
as discontinued operations.
[D] These columns of pro forma adjustments represent the results of
operations of CNA Re U.K. as included in the Company's Consolidated
Condensed Statements of Operations for the respective periods presented.
[E] This column of pro forma adjustments represents the estimated reduction
of investment income assuming the cash related to CNA's completion
transactions in pro forma note B, was transferred to CNA Re U.K. as of
January 1, 2001. The estimated reduction of interest income totals $15.0
million, which is based on the approximate two-year U.S. Treasury yield
of 5.0% as of January 1, 2001.
[F] This column of pro forma adjustments represents the estimated reduction
of investment income assuming the cash related to CNA's completion
transactions in pro forma note B, was transferred to CNA Re U.K. as of
January 1, 2002. This estimated reduction of interest income totals $7.0
million, which is based on the approximate two-year U.S. Treasury yield
of 3.0% as of January 1, 2002.
[G] Minority interest expense (benefit) related to the pro forma adjustments
was $3.0 and $(45.5) for the nine months ended September 30, 2002 and
year ended December 31, 2001, respectively.