Loews Corporation
Address:
667 Madison Avenue
New York, New York 10021-8087
U.S.A.
Telephone: (212) 521-2000
Fax: (212) 521-2525
http://www.loews.com
Statistics:
Public Company
Incorporated: 1969
Employees: 30,900
Sales: $21.47 billion (1999)
Stock Exchanges: New York
Ticker Symbol: LTR
NAIC: 551112 Offices of Other Holding Companies; 524126 Direct Property and Casualty Insurance Carriers; 524113 Direct Life Insurance Carriers; 524114 Direct Health and Medical Insurance Carriers; 524130 Reinsurance Carriers; 312221 Cigarette Manufacturing; 721110 Hotels (Except Casino Hotels) and Motels; 213111 Drilling Oil and Gas Wells; 421940 Jewelry, Watch, Precious Stone, and Precious Metal Wholesalers
Key Dates:
1956: The Tisch brothers erect the Americana Hotel in Bal Harbour, Florida, establishing themselves as major hotel operators.
1960: The Tisch brothers gain control of Loew's Theaters (the apostrophe is later dropped from the corporate name).
1968: The Tisch brothers acquire Lorillard, the oldest U.S. tobacco maker.
1969: The Tisch brothers create a holding company, Loews Corporation, for their diversified interests.
1974: Loews acquires CNA Financial Corporation.
1979: The company purchases a majority stake in Bulova Watch Co.
1985: The movie theaters are divested and a 25 percent stake in CBS is purchased, with Larry Tisch becoming president.
1990: Company acquires Houston drilling firm Diamond M Offshore.
1992: Odeco Drilling is acquired.
1993: Diamond M and Odeco are merged to form Diamond Offshore Drilling, Inc.
1994: CNA acquires Continental Corporation.
1995: Loews engineers the sale of CBS to Westinghouse, with Loews gaining nearly $900 million from the sale; Loews takes Diamond Offshore public through an IPO.
1998: The Tisch brothers step down as co-CEOs; James Tisch is promoted to president and CEO. Lorillard and other tobacco firms reach $206 billion settlement with 46 states over tobacco-related health costs.
2000: A Florida jury awards $144.9 billion in punitive damages in a class-action lawsuit filed against the tobacco industry; Lorillard's share is $16.25 billion.
Company History:
Loews Corporation is a holding company with diversified interests in insurance, tobacco, offshore drilling, hotels, and watches. Run from the post-World War II era to the late 1990s by brothers Preston Robert (Bob) and Laurence (Larry) Tisch, the company was amassed through 'value investing.' The Tisches earned a reputation for purchasing troubled firms, making them profitable, and selling them at a premium. Bob was known for his operational savvy, while elder brother Larry was considered the financial genius. In the early 21st century, Loews remained in the control of the Tisch families, who held more than 30 percent of the firm's publicly traded stock. Two sons of Larry, James and Andrew Tisch, and a son of Bob, Jonathan Tisch, began running the company in the late 1990s. Among the company's major holdings is an 86.5 percent stake in the publicly traded CNA Financial Corporation, one of the ten largest insurance companies in the United States; CNA contributes about 75 percent of Loews' revenues. Another 19 percent of revenues is derived from the wholly owned Lorillard, Inc., the oldest and fourth largest U.S. cigarette maker and the producer of such brands as Newport, Kent, and True. Another wholly owned subsidiary, Loews Hotels Holding Corporation, operates 14 hotels and resorts in the United States and Canada. Loews also holds a 52 percent stake in Diamond Offshore Drilling, Inc., one of the world's leading contract drillers of offshore oil and gas wells; and 97 percent of Bulova Corporation, a major distributor of watches and clocks under the Bulova, Accutron, and Sportstime brands.
Early Involvement in Hotels
The Tisch brothers received an early business education from their father, Al, who owned a manufacturing plant in Manhattan. Bob and Larry were given the task of making phone sales to retail stores and wholesale distributors. The two brothers also helped operate a few summer camps their parents owned in New Jersey. This 'hands-on' experience was coupled with formal training. After a brief hiatus spent in the army, Bob graduated with a degree in economics from the University of Michigan in 1948. Larry graduated cum laude from New York University's School of Commerce at the age of 18, went on to earn an M.B.A. from the Wharton School in Philadelphia, and later enrolled in Harvard's law school.
In 1946, Al and Sadye Tisch sold their summer camps and purchased the Laurel-in-the-Pines Hotel in Lakewood, New Jersey. The hotel business went well, and soon became more than the parents could handle alone. Larry dropped out of Harvard in order to help run the business and Bob soon followed. It was not long before the older couple decided to sign over their share of the hotel (worth about $75,000 at the time) to their sons and give them control of the operation.
The brothers soon began leasing two other small New Jersey hotels and managed to turn a profit. Then, in 1952, they acquired two grand but old hotels in Atlantic City called the Brighton and the Ambassador. They demolished one to build a motel in its place, and quickly resold the other at a profit. Later, the Tisches liquidated some of their New Jersey investments to purchase their first two hotels in New York City. These early transactions established the pattern that would characterize their later business dealings, which grew increasingly diverse and valuable.
In 1956, with only eight years' experience in the business, Bob and Larry erected the $17 million Americana Hotel in Bal Harbour, Florida, and paid for it in cash. Although it was subsequently sold to Sheraton in the 1970s, it represented an important step in the brothers' careers. With the Americana, they firmly established themselves among the major hotel operators, and later acquired such prominent hotels in the United States as the Mark Hopkins, the Drake, the Belmont Plaza, and the Regency.
Adding Theaters and Tobacco in the 1960s
In 1959 a major antitrust ruling forced Metro-Goldwyn-Mayer to relinquish ownership of Loew's Theaters. This decision created an opportunity for the Tisch brothers, allowing them to move into a new business area. Six months before MGM was to divest Loew's, Bob and Larry purchased a large stake in the theater chain; by May 1960 they had gained control of the company.
The brothers did not enter into the theater business because they knew about the motion picture industry. Nor did they purchase Loew's because it was already a profitable operation on its own. On the contrary, Loew's theaters were losing money. They were large, multitiered movie houses with high ceilings and interiors reminiscent of the industry's 'golden age,' by this time long past. They played only one motion picture at a time and were rarely filled to capacity. Television and the proliferation of films coming out of Hollywood meant that theaters would have to cater to various tastes simultaneously in order to secure larger audiences. The old Loew's theaters were not designed for this purpose.
The reason Bob and Larry Tisch purchased Loew's had to do with real estate. The Loew's theaters, though antiquated, were located on valuable city property. It was the opportunity to acquire this valuable property that prompted the brothers to purchase the company. Almost immediately they began liquidating the theaters, demolishing 50 of them in a matter of months and then selling the vacant lots to developers. This, of course, hastened the demise of the palatial movie house, but it was nonetheless a necessary business tactic. Loew's remained a prominent participant in the movie industry into the early 1980s.
The long-established and well-recognized Loews name became the corporate title under which all Tisch operations (including hotels) were placed. Loews Corporation, a holding company formed in 1969, ran smoothly and efficiently, turning substantial profits every year. By 1968 the brothers again had the capital and the inclination to diversify and invest in a new business sector. This time they acquired Lorillard Industries, America's oldest tobacco manufacturer.
Lorillard, the maker of Kent and Newport cigarettes, had once been a major company with a large share of the tobacco market. Managerial incompetence and discord, however, had paralyzed the company, bringing it near collapse. Upon assuming control of Lorillard, the first thing Larry Tisch did was examine the firm's subsidiaries, particularly its candy and cat food divisions which were consuming a disproportionate amount of resources. The brothers discovered that the top executives spent 75 percent of their time on candy and cat food, which together made up only five percent of Lorillard's total business. Lorillard divested itself of these interests and of the executives who were so fond of them, then redirected the company toward its tobacco operations. Market share slippage was reversed, and Lorillard climbed back to the top ranks of America's tobacco market.
1970s and 1980s: CNA, Bulova, and CBS
A similar scenario took place in 1974, when Loews acquired CNA Financial Corporation, a large insurance firm. The Chicago-based conglomerate had reported a $208 million deficit that year and was expected to lose more. Like Lorillard, its subsidiaries were draining the financial resources of the company. CNA's tangential interests were poorly managed and veritable 'money pits.' Moreover, there was considerable waste at the top of CNA's corporate structure.
When Loews took charge it divested unprofitable or distractive subsidiaries to concentrate on the worthwhile core businesses. The Tisch brothers then took aim at the wastefulness that plagued CNA's headquarters. Many executives were fired as Tisch austerity measures prevailed over past CNA lavishness. The 3,000-square-foot suite of the former chairman was rented out, as was the corporate dining room. The streamlining had a dramatic and positive effect. In 1975 CNA earned a $110 million profit, and remained financially sound over the next decade, achieving annual revenues of over $3 billion by the late 1980s.
Loews' next major turnaround target was the Bulova Watch Co. In 1979 the Tisch brothers bought 93 percent of the then-troubled firm for $38 million. At the time, Bulova's quality-control problems had contributed to its slip from the top of the watch market to the number two spot. Not only had longtime rival Seiko Corporation won the market share battle, but Bulova was also threatened by Timex Enterprises Inc.'s introduction of competitively priced entries. It looked to some observers as if Bulova had squandered its brand cachet; the name was simply not recognized by a new generation of consumers.
The Tisch brothers applied their proven method of managerial restructuring, but without total success. Bulova's problems went beyond personnel and corporate networks: the product itself needed to be revised. James Tisch, Larry's son, headed the operation and immediately introduced 600 new watch styles, complete with extended warranties. To deal with the image problem, an extensive advertising campaign was launched. The company recovered, albeit slowly. By 1984 it had cut its losses to $8 million (roughly half of its 1980 total), yet it was still not paying for itself. The company did not turn a profit until 1986. That year, Bob Tisch accepted an appointment as U.S. Postmaster General. Despite the concerns of those who felt his absence would weaken the company's performance, most analysts contended that Bob Tisch's move to Washington, D.C., would help Loews, citing the advantages of both political and financial connections.
Late in 1985 Larry Tisch sold the company's namesake movie theaters and purchased a significant amount of CBS Inc. stock to help the company fight a takeover attempt by Ted Turner. Throughout 1986 Tisch increased Loews' holdings in CBS to 24.8 percent and obtained a seat on the board of directors. He was elected president of CBS that September, much to the relief of stockholders and employees, who had grown frustrated and uneasy during the Turner takeover attempt.
Tisch's popularity was short-lived, however. Intending to operate CBS as if it were any other business, he took measures to alleviate waste and make CBS more cost-effective. Wage cuts and spending reductions, along with wholesale firings, caused a serious rift in the huge broadcasting firm. The news division, traditionally given considerable leeway in regard to fiscal accountability, was especially hard hit. Some wondered if Tisch would be able to mend CBS without sacrificing the people and principles that once made it the most respected of the three major American broadcasting networks. Eventually, Loews reduced its investment in CBS to 18 percent through sale of stock back to the company.
Bob Tisch's activities and interests outside Loews garnered attention as well. He was one of New York City's most vocal supporters and had been elected over 15 times to the chairmanship of New York's Convention and Visitors Bureau. In fact it was Bob Tisch and the bureau's president, Charles Grillett, who came up with the idea of using an old jazz expression, the 'big apple,' to signify New York City. Later, Bob would represent the metropolis as its 'official ambassador' (read lobbyist) in Washington, D.C. In 1990, he accepted the chairmanship of that city's chamber of commerce. In 1991, Bob Tisch paid over $75 million to acquire half of the New York Giants professional football team.
Early 1990s: Enter Offshore Drilling, Exit CBS
Over the course of the 1980s, the Tisches had reduced their stake in Loews from 45 percent to 24 percent, prompting some analysts to speculate that they were preparing to dismantle their conglomerate. Instead, the company--which had amassed a $1.75 billion 'war chest'--started investing in new ventures, most notably oil. By 1990 Loews had spent $75 million on oil rigs and acquired Diamond M Offshore Inc., a Houston, Texas, drilling company. Loews amassed the world's largest fleet of offshore drilling rigs with the 1992 purchase of Odeco Drilling, Inc., which was merged with Diamond M in 1993 to form Diamond Offshore Drilling, Inc. In spite of that status, Loews' drilling segment lost over $103 million in 1992, 1993, and 1994. The company's annual report for the latter year blamed regional overcapacity and reduced demand for the negative results.
While other large hotel companies struggled in the early 1990s, Loews Hotels thrived under the direction of Jonathan Mark Tisch, son of Bob Tisch. Jonathan Tisch was praised for creative, ambitious, and often philanthropic promotions. His annual 'Monopoly Power Breakfasts' featured celebrity contestants who played the famous Parker Brothers game competing on a customized board. Proceeds of the event went to charities. The upscale hotel chain's 'Good Neighbor Policy' and its recycling programs earned it industry accolades as well. Following an industry-wide trend, Loews Hotels lost $1.79 million in 1993, then reported a net profit of $17.02 million in 1994.
The Tisches continued to apply their turnaround strategies to Bulova in the early 1990s. In 1995, they completed the divestment of that subsidiary's defense interests in order to concentrate on the core timepiece business. Although sales and profits declined as a result, Bulova was able to stay in the black in the early 1990s.
Loews' two largest investment areas, cigarettes and insurance, were very vulnerable in the early 1990s. Price wars prompted Lorillard to launch a bargain cigarette brand, Style, in 1992, then cut the retail price of its flagship Newport brand by 25 percent in 1994. In the decidedly antismoking climate that predominated, cigarette manufacturers already faced with legislation that banned smoking from virtually all public places also encountered many lawsuits. As of fiscal 1994, Lorillard was a named defendant in 17 individual and class-action suits brought by cigarette smokers, their estates and heirs, and even flight attendants who claimed to be victims of secondhand smoke.
When Loews subsidiary CNA Financial acquired Continental Corporation in December 1994 for $1.1 billion, it became America's third largest property and casualty insurer. It also took on Continental's liabilities regarding Fibreboard Corporation, a company that manufactured asbestos insulation products from 1928 to 1971. In 1993, Continental and its codefendants reached a $2 billion settlement (of which Continental was responsible for $1.44 billion) to cover past and potential liabilities.
Another key divestment came in 1995, when Loews engineered the sale of CBS to Westinghouse Electric Corporation for $5.4 billion. This ended Larry Tisch's controversial reign at CBS, and Loews' share of the proceeds amounted to nearly $900 million, swelling the company's coffers. In late 1995, Loews took Diamond Offshore public, selling about 30 percent of the company in an offering that raised $300 million.
Titular changes in the early 1990s seemed to indicate preparations for a changing of the guard at Loews. In the late 1980s, Bob had occupied the positions of president and chief operating officer, while Larry acted as chairman and CEO. But as the two brothers became septuagenarians, they consolidated their responsibilities, becoming co-chairmen and co-CEOs. James S. Tisch, son of Larry and a likely successor, advanced to president and chief operating officer, while Andrew H. Tisch, another son of Larry, led Lorillard.
Late 1990s and Beyond
In late 1995 Lorillard agreed to buy six discount cigarette brands from B.A.T. Industries PLC for about $33 million, but in April 1996 the Federal Trade Commission rejected the deal on antitrust grounds. Loews Hotel, meantime, entered into a joint venture with MCA Inc. in 1996 to develop three themed luxury hotels in Orlando, Florida, as part of MCA's expansion of its Universal Studios Florida theme park. The first, the Portofino Bay Hotel, opened in the fall of 1999 with 750 rooms. This property aimed to replicate the famous Italian seaside village of Portofino. The Hard Rock Hotel was slated to open in 2000 and the Royal Pacific in 2001. After helping to develop the hotels, Loews Hotels would also manage the properties under a contract arrangement. With the travel industry enjoying a resurgence in the economic boom time of the late 1990s, Loews Hotels moved ahead with other expansion plans as well. The company returned to Miami in 1998 with the opening of the Loews Miami Beach Hotel, an 800-room property in the Art Deco district of Miami Beach. In early 2000 the 590-room Loews Philadelphia Hotel was opened near the downtown convention center, and Loews Hotels also purchased the Coronado Bay Resort hotel in San Diego, California.
In 1997 Loews lost more than $900 million on a pretax basis from its $70 billion securities portfolio as a result of the bearish Larry Tisch's short-selling strategies against the long-running bull market. Net income as a result fell to $793.6 million from the $1.38 billion figure of the previous year. Late in 1998 the succession from one Tisch generation to another came to fruition. The Tisch brothers stepped down from their co-CEO positions but remained co-chairmen. James Tisch was promoted to president and CEO. In addition, an office of the president was formed consisting of James Tisch, Andrew Tisch, who also held the title of chairman of the executive committee, and Jonathan, who also continued to serve as president and CEO of Loews Hotels.
The new leadership at Loews faced many challenges, not the least of which was the increasing level of litigation and regulation facing Lorillard. The settlement costs from tobacco-related suits began to reach significant levels in 1997, when Lorillard paid out $122 million. Payments then escalated to $346.5 million the following year. Late in 1998 Lorillard and the other major tobacco companies reached a $206 billion settlement with 46 states for the reimbursement of public healthcare costs associated with smoking. Settlements with other states totaled another $48 billion. Lorillard took pretax charges of $579 million and $1.07 billion in 1998 and 1999, respectively, in connection with the settlements, the payments for which were to continue into the 2020s. In September 1999 the U.S. Justice Department filed a massive lawsuit against the major tobacco makers, modeled after the state lawsuits, with a potential industry liability well in excess of the state settlement.
Individual and class-action lawsuits continued as well, with Lorillard a defendant in no fewer than 825 cases as of the end of 1999. The most important of these was a class-action lawsuit filed in Florida, Engle v. R.J. Reynolds Tobacco Co., et al. The Engle trial began in October 1998, with a jury returning a verdict against the defendants in July 1999, finding that cigarette smoking is addictive and causes lung cancer, and that the tobacco companies had engaged in 'extreme and outrageous conduct' in concealing the dangers of smoking from the public. The penalty phase of the trial then commenced. In April 2000 the jury awarded $12.7 million in compensatory damages to three sample plaintiffs, but then three months later delivered a potentially huge blow to the industry when it awarded $144.9 billion in punitive damages--by far the largest punitive damage award in U.S. history, dwarfing the $5 billion awarded in a suit against Exxon Corporation in connection with the Exxon Valdez oil spill. Lorillard's share was a whopping $16.25 billion. The tobacco companies immediately vowed to appeal, a process that had the potential to last years. In the meantime, Lorillard and the other tobacco firms had been able to manage the increasing litigation payments simply by raising cigarette prices.
Meanwhile, with the insurance market slumping and earnings down, CNA was undergoing a restructuring. In 1998 the company cut its workforce by 2,400, consolidated some processing centers, and exited from certain areas, such as entertainment and agriculture insurance. In October 1999 CNA sold its personal lines insurance business, which included automobile and homeowners insurance, to the Allstate Corporation. In early 2000 CNA put its life insurance and life reinsurance units on the block but in August of that year announced that it would keep them.
Principal Subsidiaries: CNA Financial Corporation (86.5%); Lorillard, Inc.; Loews Hotels Holding Corporation; Diamond Offshore Drilling, Inc. (52%); Bulova Corporation (97%).
Principal Competitors: American International Group, Inc.; The Allstate Corporation; American Financial Group, Inc.; British American Tobacco p.l.c.; Canadian Pacific Limited; The Chubb Corporation; CIGNA Corporation; Citigroup Inc.; Citizen Watch Co., Ltd.; Fossil, Inc.; Four Seasons Hotels Inc.; The Hartford Financial Services Group, Inc.; Hilton Hotels Corporation; Hyatt Corporation; Marriott International, Inc.; Movado Group, Inc.; Philip Morris Companies Inc.; The Prudential Insurance Company of America; R & B Falcon Corporation; The Ritz-Carlton Hotel Company, L.L.C.; SAFECO Corporation; The St. Paul Companies, Inc.; Starwood Hotels & Resorts Worldwide, Inc.; State Farm Insurance Companies; The Swatch Group Ltd.; Timex Corporation; Vector Group Ltd.; Wyndham International, Inc.
Further Reading:
Bary, Andrew, 'A New Leaf?: Loews' Neglected Stock Could Jump If Tobacco Unit Is Spun Off,' Barron's November 30, 1998, pp. 23--24.
Browning, E.S., 'Tisches Got Stampeded by Bull Run,' Wall Street Journal, August 15, 1997, p. C1.
Carrns, Ann, 'Loews Hotels: The Road Less Traveled,' Wall Street Journal, May 21, 1997, p. B14.
Dodds, Lynn Strongin, 'Nothing to Fear,' Financial World, September 30, 1986, p. 100.
Fabrikant, Geraldine, 'CBS Accepts Bid by Westinghouse,' New York Times, August 2, 1995, p. A1.
Fairclough, Gordon, and Milo Geyelin, 'Tobacco Companies Rail Against Verdict, Plan to Appeal $144.87 Billion Award,' Wall Street Journal, July 17, 2000, pp. A3, A6.
Geyelin, Milo, and Gordon Fairclough, 'Taking a Hit: Yes, $145 Billion Deals Tobacco a Huge Blow, but Not a Killing One,' Wall Street Journal, July 17, 2000, pp. A1, A8.
Hager, Bruce, 'Loews Sees the Future, and It's Oil,' Business Week, March 19, 1990, pp. 126--27.
------, 'Tisch the Younger Takes His Turn,' Business Week, July 8, 1991, pp. 88--89.
Hamilton, Martha M., 'Loews Corp. Hits a Gusher: Firm's Investment in Drilling Rigs Pays Off Big in Newly Thriving Gulf of Mexico,' Washington Post, November 21, 1996, p. D1.
Jensen, Elizabeth, 'Sharp Contrast: Why Did ABC Prosper While CBS Blinked?,' Wall Street Journal, August 2, 1995, p. A1.
Kadlec, Daniel, 'Tisch's Bad Bet,' Time, November 30, 1998, p. 130.
Lesly, Elizabeth, 'Loews Could Be Worth More Dead Than Alive,' Business Week, December 13, 1993, pp. 104--7.
Lohse, Deborah, 'Loews Announces Succession in Tisch Family,' Wall Street Journal, November 5, 1998, p. A4.
Ozanian, Michael, 'America's Most Undervalued Stock,' Financial World, May 29, 1990, pp. 22--24.
Pesmen, Sandra, 'Jonathan Tisch's Road Show,' Business Marketing, February 1991, pp. 68--70.
Sheridan, Mike, 'Rather Than REIT, Tisch Sets Loews Hotels on New-Development Track,' Hotel Strategies, June 1999, pp. 8--9.
Smith, Randall, 'For Tisch Empire, It Looks Like It's Back to the Basics,' Wall Street Journal, August 2, 1995, p. C1.
Sparks, Debra, 'Tisch: The Ultimate Bear,' Business Week, June 8, 1998, p. 112.
Winans, Christopher, The King of Cash: The Inside Story of Laurence Tisch, New York: Wiley, 1995, 288 p.
Source: International Directory of Company Histories, Vol. 36. St. James Press, 2001.
