Loews Corporation (NYSE:L) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
David Adelman – Morgan Stanley: Jim, were there any material changes in Loews’s investment portfolio and its composition during the quarter?
James S. Tisch – President and CEO: No, not significant. You are talking about the holding company level, I assume?
David Adelman – Morgan Stanley: Yes.
James S. Tisch – President and CEO: Yes. Nothing significant, no.
David Adelman – Morgan Stanley: So the bond proceeds more or less were allocated as to – pro-rata with the existing mix and makeup.
James S. Tisch – President and CEO: No, they are generally being held in cash instruments. So roughly, I would say the amount of hedge funds and equities that we own did not increase.
David Adelman – Morgan Stanley: Then Jim, with respect to HighMount and the effort with respect to oil production and the process you’re going through and the test drilling and so forth that’s being done, what over the next year or two are going to be the key milestones that will indicate to you the prospects of success?
James S. Tisch – President and CEO: So, in both the Mississippian Lime and also in the Permian Basin in the Wolfcamp Shale, we’re looking to see if we can produce oil from those two regions at economic rates. We know there is oil down there because we have drilled wells and we have and we still are producing it. But the question is whether we can figure out how to extract the oil and earn at least a reasonable rate of return on our investment. It will take us another several quarters to be able to determine whether or not we can do that. But we do know that the oil is down there.
Robert Glasspiegel – Janney Montgomery Scott: I was wondering if you could, number one, give me what your debt balances were 6/30?
Peter W. Keegan – SVP and CFO: We had $1.7 billion in debt at the holding company level, Bob.
Robert Glasspiegel – Janney Montgomery Scott: So you raised $1 billion and your earning – is greatest as the rates are that your borrow and congratulations on timing it brilliantly. But…
James S. Tisch – President and CEO: Like I said, I’d rather be (lock even) smart.
Robert Glasspiegel – Janney Montgomery Scott: Great. But you’re earning a negative carry on it, so I was wondering should we think of the next three to five years, the $1 billion is just going to be used in your trading portfolio or is this get to your sort of acquisition team to a different level that you can do deals that you might not have, and what do you anticipate the primary use is going to be over the sort of intermediate term?
James S. Tisch – President and CEO: Bob, I don’t know. But the thing I do know is that, over the past 15 years or so at least, we’ve had cash balances of $2 billion, $3 billion, $4 billion, $5 billion or $6 billion. We never worried about spending it. But low and behold, the incoming cash that we had coming into Loews was spent either buying businesses or buying our shares or supplying capital at attractive returns to the businesses that we own. So somehow or other, we’re able to find investments to make. The thing that’s driving us though is, like I said in my prepared remarks, we find it’s much better to raise capital when the rates are attractive rather than to raise it when you need it. When you need it, the debt or the equity capital can be very, very expensive…
Robert Glasspiegel – Janney Montgomery Scott: Fully understood. But you didn’t mention buying stocks or buying bonds with the money is sort of a potential avenue to you to employ over the next three to five years. I mean I know – (like the) public comments about bonds, I would think rates would have to go up a decent bit to think about putting money at the corporate level there.
James S. Tisch – President and CEO: Here is what I’d say. If you want to buy the stock of a company that’s got a significant equity portfolio, go to Berkshire Hathaway. We do not think that we’re going to generate significant long-term returns for our shareholders by having a large equity portfolio. We’re looking to either buying our shares, buy another business or invest in our own businesses. That’s the main way that we’re going to build value for our shareholders.
Robert Glasspiegel – Janney Montgomery Scott: You do have a trading portfolio for a reason though, right?
James S. Tisch – President and CEO: Say again.
Robert Glasspiegel – Janney Montgomery Scott: You do have a trading portfolio for a reason.
James S. Tisch – President and CEO: Yes, yes. We have an equity portfolio of about $500 million, $600 million. We have that because we do want – we do have expertise in investing in equities, and we do think we can do a good job at it combined with the fact that by having the equity portfolio, it keeps us closely in touch with the markets and what’s going on. But in terms of that being a line of business or an avenue to significant shareholder value growth, I just don’t think that’s going to be the place.