S&P confirms Loews, off watch

Standard & Poor's confirmed Loews Corp. including its $1.15 billion 3.125% exchangeable subordinated notes due 2007 at A- and senior notes and debentures at A and removed them from CreditWatch negative. The outlook is negative.

S&P said the confirmation follows its review of the company, specifically, the impact of a $1.4 billion capital plan for Loews' 90%-owned insurance subsidiary, CNA Financial Corp.

The ratings on Loews are based on the diversified company's highly liquid balance sheet, its moderate financial investment policies, and strong (albeit declining) cash flow from its tobacco subsidiary, Lorillard Inc., S&P said.

However, the ratings and outlook also reflect the increased financial support for its insurance subsidiary, CNA, as well as the heightened litigation risk and the weakened operating environment facing U.S. tobacco companies.

CNA's capital plan is now largely complete. Taking all these transactions into consideration (as well as the $300 million surplus note repayment), S&P estimates that Loews' total reduction in cash balances as a result of the capital plan will range from $400 million to $850 million. Beyond the potential for an additional $150 million of surplus notes outlined in the plan and included in S&P's estimated range of cash contributions from Loews, S&P does not expect Loews to provide any more capital to CNA as part of this capital plan.

S&P said it also believes that future capital contributions by Loews to CNA will not be necessary, given CNA's stronger capital base and the rationalization of its business operations as a result of these initiatives.

However, if CNA's operating performance does not continue to improve or, on the other hand, if operating performance weakens, Loews' rating could be lowered, S&P said.

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