Loews (L) Q1 2016 Earnings Call

Loews (L) CEO James Tisch said their has been an influx of capital into the insurance industry in search of return 

“Over the last several years, there’s been a significant increase in third-party capital coming into the insurance and the reinsurance market, and this capital is increasing competition for the more generic insurance and reinsurance providers. It’s having less of effect on CNA’s book of business, however, because of the company’s extensive and well-established nationwide agency network. This network is a tremendous asset, and CNA is one of only a handful of industry players with this type of distribution channel. This web of distributed offices with local underwriters working with local agents is remarkably expensive to duplicate, creating high barriers to entry for new players.”

Much like other insurance companies, Loews is investing in analytics which should give a boost to the information technology sector

“CNA has consciously increased investments in information technology, analytics and talent with a goal of becoming a top-quartile underwriter. While these investments put pressure on margins today, we believe they will have a favorable impact on CNA’s long-term profitability.”

Loews (L) CEO James Tisch said US shale oil producers are unprofitable at today’s prices

“Since I often get asked about my outlook for oil, I thought I’d beat you to the punch today. One of my favorite sayings is he who lives by the crystal ball must learn to eat ground glass. And while I’m not a fan of ground glass, I’ll share with you what I’m seeing and forecasting with respect to oil.  First, it is now abundantly clear that in the absence of OPEC intervention, U.S. shale oil is the world’s swing producer. Shale production can come on quickly and relatively cheaply, and is largely developed by nimble independent producers who have the incentive to quickly respond to changing prices. The second point that’s becoming clear is that U.S. shale producers are unlikely to experience any time soon, the growth they enjoyed several years ago. In order to simply maintain production using internally generated cash, our guess is that the U.S. shale industry needs oil prices to be about $50 per barrel to $60 per barrel. With current prices at around $45 per barrel, U.S. production will continue to decline.”

Oil industry is dramatically under investing which may cause a supply crunch

“Today, the world is dramatically underinvesting in oil exploration and production, and the effects of this underinvestment will start to by evident over the next two years to five years. Oil price declines have largely been driven by the strength of supply, not the weakness of demand. In fact, demand for oil is still growing and remains quite healthy.”

Loews (L) CEO James Tisch predicted $65 oil by 2018

“I’d rather predict where oil prices will be two years from now than two months from now. And now that I brought it up, my fearless forecast is that oil will be $65 per barrel or higher by the end of 2018. That’s the price that I believe will be required for E&P companies to invest in productive capacity necessary to satisfy demand. It certainly won’t happen at $45 per barrel, when you compare today’s oil prices with the recent low of $27 per barrel reached in January of 2016, it looks like we could be halfway to my fearless forecast.”

Returns in their hedge fund portfolio have come down

“In the past number of years and especially more recently, the returns haven’t been there. So we’ve reduced our investment in hedge funds. What we’re doing is that, we’re holding those proceeds for a time when other risk assets seemed to be very attractive in the marketplace.”