Loews Corp (L): A Contrarian Play on Resilience Amid Headwinds

Loews Corp (L) has been under pressure this year, with its stock down nearly 15% year-to-date as investors focus on near-term headwinds at its subsidiaries. But beneath the noise, the conglomerate's core businesses—CNA Financial, Boardwalk Pipeline Partners, Loews Hotels, and Altium Packaging—remain anchored by structural strengths that suggest the market is overlooking a compelling contrarian opportunity. With a fortress balance sheet, undervalued assets, and shareholder-friendly capital allocation, Loews could be primed for a rebound as short-term challenges subside.

The Near-Term Stumbles

The market's skepticism is rooted in Q1 results that highlighted two key issues:
1. CNA's underwriting struggles: The insurer reported a combined ratio of 98.4% in Q1 2025, up from 94.6% a year earlier. Catastrophe losses from California wildfires added 3.8 points, while prior-year reserve adjustments for commercial auto claims added another 2.5 points.
2. Loews Hotels' soft performance: Occupancy dropped at Universal Orlando Resort, and the division's EBITDA fell 18% year-over-year due to higher costs and competitive pressures in the hospitality sector.

Yet these challenges are largely cyclical or one-off. Let's dissect the underlying resilience.

CNA: Core Underwriting Strengths Outweigh Noise

While CNA's headline combined ratio rose, its underlying performance—excluding catastrophes and reserve adjustments—was a robust 92.1%, up just 1.1 points from Q1 2024. This reflects pricing discipline in key lines like commercial auto and specialty insurance, which are slowly offsetting cost inflation. Critically, CNA's balance sheet remains rock solid, with $13 billion in statutory surplus as of March 2025, ample to absorb volatility.

The market's focus on short-term volatility ignores CNA's long-term track record of capital preservation and its parent's conservative risk management.

Boardwalk Pipelines: A Growth Engine in Energy Infrastructure

Boardwalk's value is often underappreciated. The partnership is expanding its Permian Basin assets to serve the shale boom and has secured long-term contracts with top producers. Its distributable cash flow (DCF) grew 9% year-over-year in 2024, and leverage remains low at 3.5x DCF. With a 6.5% distribution yield, it offers both income and growth.

Loews' Balance Sheet: A Fortress in a Volatile Market

Loews' parent company holds $3.5 billion in cash and investments against $1.8 billion in debt, with no near-term maturities. Its current ratio (current assets/liabilities) is a sturdy 2.5x, and its cash ratio (cash/liabilities) is 1.9x—both well above industry benchmarks. This liquidity buffer allows it to weather sector-specific headwinds while pursuing opportunities.

Shareholder-Friendly Capital Allocation

Loews has returned $429 million to shareholders through buybacks in early 2025 alone, reducing shares outstanding by 2%. With book value per share rising to $81.73 (excluding AOCI), the stock trades at just 0.8x book value—a stark discount to peers like Berkshire Hathaway (1.4x) or Chubb (1.7x).

Why Now? A Contrarian Opportunity

The disconnect between Loews' short-term challenges and its long-term fundamentals is striking. CNA's underwriting should stabilize as commercial auto claims normalize, Boardwalk's growth is durable, and Loews Hotels' issues are likely temporary. Meanwhile, the balance sheet provides a margin of safety.

Investors should consider buying L here, especially as the stock's price-to-earnings ratio of 10.2x is near its five-year low. The $3.5 billion cash hoard and 2.8% dividend yield (which has grown 10% annually over five years) add further comfort.

Risks to Consider

• Prolonged softness in the hospitality sector.
• Further catastrophe losses at CNA.
• A sharp slowdown in energy demand impacting Boardwalk.

Final Verdict

Loews Corp is a classic value play: a company with strong subsidiaries, a fortress balance sheet, and a management team committed to shareholder returns. While near-term headwinds are real, they're outweighed by its structural resilience and undervalued assets. For investors with a long-term horizon, L offers a compelling entry point to capture the upside of a conglomerate that's often misunderstood.

Investment recommendation: Buy Loews Corp (L) at current levels, with a 12-month price target of $55–60, implying a 20–30% upside from recent prices.