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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 10, 1995
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LOEWS CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-6541 13-2646102
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
667 Madison Avenue, New York, N.Y. 10021-8087
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 545-2000
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NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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Page 1 of 12 Pages
Item 2. Acquisition or Disposition of Assets.
On May 10, 1995, CNA Financial Corporation ("CNA"), an 84% owned subsidiary of
the Loews Corporation, consummated the merger (the "Merger") of its wholly owned
subsidiary, Chicago Acquisition Corp. ("Merger Sub"), with and into The
Continental Corporation ("Continental"), pursuant to the Merger Agreement dated
as of December 6, 1994, by and among CNA, Continental and Merger Sub, for
aggregate consideration of $1,125 million (based on a conversion price of $20.00
per share of Continental's common stock, par value $1.00 per share). CNA is
funding the cash purchase price with proceeds from a five-year revolving credit
facility from a syndicate of banks led by The First National Bank of Chicago, as
administrative agent, and The Chase Manhattan Bank, N.A., as syndication agent.
As a result and upon the consummation of the Merger, Continental became a wholly
owned subsidiary of CNA. Continental is an insurance holding company principally
engaged in the business of owning a group of property and casualty insurance
companies, which business CNA currently intends to continue.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
The financial statements of Continental required to be filed are incorporated
by reference. See Exhibits 99.01 and 99.02.
(b) Pro forma financial information
The required pro forma financial information is included as Exhibit 99.03.
(c) Exhibits:
Exhibit No. Description
----------- -----------
2.01 Securities Purchase Agreement, dated as of December 6, 1994,
by and between CNA and Continental (with exhibits thereto)
(incorporated herein by reference to Exhibit 1 to CNA's Form
8-K (Commission File Number 1-5823) dated December 9, 1994).
2.02 Merger Agreement, dated as of December 6, 1994, by and among
CNA, Merger Sub and Continental (incorporated herein by
reference to Exhibit 2 to CNA's Form 8-K (Commission File
Number 1-5823) dated December 9, 1994).
4.01 Certificate of Merger of Merger Sub with and into Continental
as filed with the Secretary of State of the State of New York
on May 10, 1995 (incorporated herein by reference to Exhibit
4.01 to CNA's Form 8-K/A (Commission File Number 1-5823) dated
July 24, 1995).
Page 2 of 12 Pages
Exhibit No. Description
----------- -----------
23.01 Consent of KPMG Peat Marwick LLP (incorporated herein by
reference to Exhibit 23.01 to CNA's Form 8-K/A (Commission
File Number 1-5823) dated July 24, 1995).
99.01 Consolidated Balance Sheets of Continental as of December 31,
1994 and 1993, and the related Consolidated Statements of
Income, Shareholders' Equity and Cash Flows for each of the
three years in the period ended December 31, 1994,together
with the notes thereto and the related report of Independent
Accountants (incorporated herein by reference to Schedule 14A
(pages F17 to F51) to Continental's Proxy Statement Commission
File Number 1-5686)dated March 29, 1995).
99.02 Consolidated Balance Sheets of Continental as of March 31,
1995 (unaudited) and December 31, 1994, and the related
Consolidated Statements of Income and Cash Flows for the Three
Months Ended March 31, 1995 and 1994 (unaudited),and Notes to
Financial Statements (incorporated herein by reference to
pages 3 through 17 of Continental's Form 10-Q (Commission File
Number 1-5686) dated May 15, 1995).
99.03* Unaudited Pro Forma Consolidated Condensed Balance Sheet as of
March 31, 1995 and Unaudited Pro Forma Consolidated Condensed
Statements of Operations for the three months ended March 31,
1995 and for the year ended December 31, 1994.
*Filed herewith
Page 3 of 12 Pages
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LOEWS CORPORATION
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(Registrant)
Dated: July 24, 1995 By: /s/ Barry Hirsch
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Barry Hirsch
Senior Vice President
Page 4 of 12 Pages
Exhibit 99.03
PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
The following unaudited Pro Forma Consolidated Condensed Financial Information
gives effect to the acquisition of The Continental Corporation ("Continental")
as more fully described in Item 2. The unaudited Pro Forma Consolidated
Condensed Balance Sheet has been prepared as if the acquisition had been
consummated on March 31, 1995. The unaudited Pro Forma Consolidated Condensed
Statements of Operations for the year ended December 31, 1994 and for the three
month period ended March 31, 1995 have been prepared as if the acquisition had
been consummated at the beginning of the period, January 1, 1994 and January 1,
1995, respectively. Such Pro Forma Consolidated Condensed Financial Information
is not necessarily indicative of the results of operations or financial position
of the Company that would have been reported had the acquisition been
consummated on the dates indicated, nor is it necessarily indicative of the
future consolidated results of operations.
The acquisition of Continental is accounted for as a purchase, therefore the
Pro Forma Consolidated Condensed Financial Information reflects the preliminary
purchase price allocation based on relative fair values. These fair values are
based on appraisals and other studies which are not yet completed. Although the
final allocation may be different than the amounts reflected herein, the Pro
Forma Consolidated Condensed Financial Information reflects management's best
estimate based on currently available information.
The unaudited Pro Forma Consolidated Condensed Financial Information should be
read in conjunction with the accompanying Notes to Pro Forma Consolidated
Condensed Financial Information; the audited consolidated financial statements
and the unaudited consolidated interim financial statements of Continental
incorporated herein by reference; and the Company's Annual Report on Form 10-K
for the year ended December 31, 1994 and Quarterly Report on Form 10-Q for the
first quarter of 1995.
Page 5 of 12 Pages
<TABLE>
<CAPTION>
Loews Corporation and Subsidiaries
Pro Forma Consolidated Condensed Balance Sheets
March 31, 1995
- -------------------------------------------------------------------------------------------------
(Amounts in thousands of dollars)
Historical Pro Forma Pro Forma
Loews Continental Adjustments Consolidated
----------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Fixed maturities ........................ $19,499,381 $ 6,237,400 $ (275,000)(a) $25,461,781
Equity securities ....................... 1,601,739 75,400 1,677,139
Mortgage loans and notes receivable ..... 65,905 88,600 154,505
Policy loans ............................ 176,426 176,426
Other investments ....................... 114,188 419,400 533,588
Short-term investments .................. 8,852,752 980,100 9,832,852
---------------------------------------------------
Total investments .................... 30,310,391 7,800,900 (275,000) 37,836,291
Cash ...................................... 133,610 122,100 255,710
Receivables-net ........................... 7,575,046 4,787,300 12,362,346
Receivable for securities sold ............ 1,186,835 1,186,835
Inventories ............................... 226,104 226,104
Investments in associated companies ....... 347,699 347,699
Property, plant and equipment-net ......... 1,083,714 392,000 (120,000)(b) 1,355,714
Deferred income taxes ..................... 1,361,674 509,700 227,900 (b) 2,099,274
Other assets .............................. 695,500 1,106,600 302,200 (b) 2,104,300
Deferred policy acquisition costs of
insurance subsidiaries ................... 1,053,078 315,100 1,368,178
Separate Account business ................. 6,004,405 6,004,405
---------------------------------------------------
Total assets ......................... $49,978,056 $15,033,700 $ 135,100 $65,146,856
===================================================
Page 6 of 12 Pages
<CAPTION>
Historical Pro Forma Pro Forma
Loews Continental Adjustments Consolidated
----------------------------------------------------
<S> <C> <C> <C> <C>
Liabilities and Shareholders' Equity:
Insurance reserves and claims ............. $29,120,662 $11,326,500 $ 160,000 (c) $40,607,162
Accounts payable and accrued liabilities .. 1,369,004 1,200,344 44,500 (b) 2,613,848
Payable for securities purchased .......... 757,720 757,720
Securities sold under repurchase agreements 2,824,967 2,824,967
Long-term debt, less unamortized discount . 2,142,027 776,700 1,324,100 (d) 4,238,927
(3,900)(b)
Deferred credits and participating
policyholders' equity .................... 771,053 298,056 42,500 (b) 1,111,609
Separate Account business ................. 6,004,405 6,004,405
---------------------------------------------------
Total liabilities .................... 42,989,838 13,601,600 1,567,200 58,158,638
---------------------------------------------------
Minority interest ......................... 945,209 945,209
---------------------------------------------------
Redeemable preferred stocks ............... 275,000 (275,000)(a)
---------------------------------------------------
Shareholders' equity:
Preferred stock, $.10 par value,
Authorized--25,000,000 shares
Common stock, $1 par value:
Authorized--200,000,000 shares
Issued--58,964,900 shares ............. 58,965 65,700 (65,700)(e) 58,965
Additional paid-in capital .............. 219,137 612,900 (612,900)(e) 219,137
Earnings retained in the business ....... 5,669,615 1,020,900 (1,020,900)(e) 5,669,615
Unrealized appreciation (depreciation) .. 119,585 (116,300) 116,300 (e) 119,585
Pension liability adjustment ............ (19,962) (19,962)
Cumulative translation adjustment ....... (61,200) 61,200 (e)
---------------------------------------------------
Total ................................ 6,047,340 1,522,000 (1,522,000) 6,047,340
Less common stock (48,500 shares) held in
treasury, at cost ...................... 4,331 364,900 (364,900)(e) 4,331
---------------------------------------------------
Total shareholders' equity ........... 6,043,009 1,157,100 (1,157,100) 6,043,009
---------------------------------------------------
Total liabilities and shareholders'
equity .............................. $49,978,056 $15,033,700 $ 135,100 $65,146,856
===================================================
See accompanying Notes to Pro Forma Consolidated Condensed Financial Statements.
</TABLE>
Page 7 of 12 Pages
<TABLE>
<CAPTION>
Loews Corporation and Subsidiaries
Pro Forma Consolidated Condensed Statements of Operations
Three Months Ended March 31, 1995
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(In thousands, except per share data)
Historical Pro Forma Pro Forma
Loews Continental Adjustments Consolidated
----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums:
Property and casualty ................. $1,784,321 $ 831,200 $2,615,521
Life .................................. 729,894 729,894
Investment income, net of expenses,
principally of insurance subsidiaries .. 460,938 130,800 $ (9,400) (f) 583,738
1,400 (g)
Realized investment gains ............... 64,207 92,900 157,107
Manufactured products (including excise
taxes of $101,760) ..................... 474,332 474,332
Other ................................... 189,503 20,700 210,203
----------------------------------------------------
Total ................................ 3,703,195 1,075,600 (8,000) 4,770,795
----------------------------------------------------
Expenses:
Insurance benefits and underwriting
expenses ............................... 2,355,654 669,800 (2,100) (i) 3,023,354
Amortization of deferred policy
acquisition costs ...................... 360,819 269,500 630,319
Cost of manufactured products sold ...... 215,670 215,670
Selling, operating, advertising and
administrative expenses ................ 383,936 22,000 8,000 (g) 402,036
(11,900) (j)
Interest ................................ 43,079 13,800 (100) (g) 86,879
18,200 (h)
11,900 (j)
----------------------------------------------------
Total ................................ 3,359,158 975,100 24,000 4,358,258
----------------------------------------------------
344,037 100,500 (32,000) 412,537
----------------------------------------------------
Income taxes (benefits) ................. 103,736 51,600 (9,900) (k) 145,436
Minority interest ....................... 25,831 4,251 (l) 30,082
----------------------------------------------------
Total ................................ 129,567 51,600 (5,649) 175,518
----------------------------------------------------
Income (loss) from continuing operations .. $ 214,470 $ 48,900 $(26,351) $ 237,019
====================================================
Per share ................................. $ 3.64 $ 4.02
====================================================
Weighted average number of shares
outstanding .............................. 58,921 58,921
====================================================
See accompanying Notes to Pro Forma Consolidated Condensed Financial Statements.
</TABLE>
Page 8 of 12 Pages
<TABLE>
<CAPTION>
Loews Corporation and Subsidiaries
Pro Forma Consolidated Condensed Statements of Operations
Year Ended December 31, 1994
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(In thousands, except per share data)
Historical Pro Forma Pro Forma
Loews Continental Adjustments Consolidated
-----------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums:
Property and casualty ................. $ 6,837,122 $ 4,429,100 $11,266,222
Life .................................. 2,616,466 2,616,466
Investment income, net of expenses,
principally of insurance subsidiaries .. 1,671,254 504,200 $ (100)(f) 2,181,054
5,700 (g)
Realized investment gains (losses) ...... (446,980) 76,000 (370,980)
Manufactured products (including excise
taxes of $431,720) ..................... 2,061,415 2,061,415
Other ................................... 775,924 92,100 868,024
---------------------------------------------------
Total ................................ 13,515,201 5,101,400 5,600 18,622,201
---------------------------------------------------
Expenses:
Insurance benefits and underwriting
expenses ............................... 9,246,446 4,400,900 (8,500)(i) 13,638,846
Amortization of deferred policy
acquisition costs ...................... 1,373,090 1,383,400 2,756,490
Cost of manufactured products sold ...... 929,342 929,342
Selling, operating, advertising and
administrative expenses ................ 1,525,610 283,700 32,000 (g) 1,789,310
(52,000)(j)
Interest ................................ 174,565 40,900 (400)(g) 341,065
74,000 (h)
52,000 (j)
---------------------------------------------------
Total ................................ 13,249,053 6,108,900 97,100 19,455,053
---------------------------------------------------
266,148 (1,007,500) (91,500) (832,852)
---------------------------------------------------
Income taxes (benefits) ................. (9,041) (365,100) (26,700)(k) (400,841)
Minority interest ....................... 7,355 (117,088)(l) (109,733)
---------------------------------------------------
Total ................................ (1,686) (365,100) (143,788) (510,574)
---------------------------------------------------
Income (loss) from continuing operations .. $ 267,834 $ (642,400) $ 52,288 $ (322,278)
===================================================
Per share ................................. $ 4.45 $ (5.35)
===================================================
Weighted average number of shares
outstanding .............................. 60,192 60,192
===================================================
See accompanying Notes to Pro Forma Consolidated Condensed Financial Statements.
</TABLE>
Page 9 of 12 Pages
LOEWS CORPORATION
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
1. The unaudited Pro Forma Consolidated Condensed Balance Sheet gives effect
to the pro forma adjustments necessary to reflect the acquisition of
Continental as if the acquisition had been consummated on March 31, 1995,
and as if Continental's assets and liabilities were adjusted to fair value
in accordance with generally accepted accounting principles as of March 31,
1995. The adjustments reflected in the Pro Forma Consolidated Condensed
Balance Sheet are based on the fair value adjustments expected to be made as
of the actual acquisition date.
(a) To eliminate the Company's investment in Continental redeemable
preferred stock.
(b) To reflect adjustments relating to the allocation of purchase price to
the fair value of Continental's assets and liabilities. The principal
adjustments are as follows:
Debit
(Credit)
--------------
(In thousands)
Assets:
Property and equipment, primarily real estate .... $(120,000)
Intangible assets, including excess purchase price
over fair value of net assets acquired .......... 302,200
Net deferred tax benefit ......................... 227,900
Liabilities:
Refinance of short-term debt ..................... $ 205,000
Liability established for the estimated cost of
severance, employee relocation and leased
facilities closed and significantly underutilized
leased properties ............................... (249,500)
---------
$ (44,500)
=========
Discount allocated to long-term debt based on
current interest rates .......................... $ 3,900
Other liabilities, primarily pension and
postretirement obligations ...................... (42,500)
Page 10 of 12 Pages
(c) To conform Continental's accounting policy by adjusting the discount
rates used to establish Continental's reserves for workers' compensation
lifetime claims to the rates used by CNA. Such rates are also used for
CNA's statutory reporting.
(d) To establish long-term debt used to fund the acquisition of
Continental's common stock ($1,125,000,000) and refinance short-term
debt ($205,000,000). CNA borrowed $1,325,000,000 under a five-year
revolving credit facility. The borrowings under the credit facility are
classified as long-term debt as it is the Company's intention to
maintain the credit facility or to arrange for longer-term financing on
more favorable terms. There is no prepayment penalty on borrowings under
the credit facility.
(e) To eliminate Continental's shareholders' equity.
The unaudited Pro Forma Consolidated Condensed Statements of Operations
give effect to the pro forma adjustments necessary to reflect the
acquisition of Continental as if it had been consummated as of the beginning
of the pro forma periods. The adjustments are based on the fair value
adjustments expected to be made as of the actual acquisition date.
(f) To eliminate dividends on the Continental preferred stock owned by CNA.
(g) To reflect adjustments relating to the allocation of purchase price
based on relative fair value of the acquired net assets as follows:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
(In thousands)
<S> <C> <C>
Reduction of depreciation expense .... $ (800) $(3,100)
Amortization of intangible assets,
including excess of purchase price
over the fair value of net assets
acquired, over 20 years ............. 3,800 15,100
Accretion of the liability established
for future lease obligations on
closed or to be closed and
significantly underutilized
facilities using the interest method 5,000 20,000
------ -------
$8,000 $32,000
====== =======
Page 11 of 12 Pages
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
(In thousands)
<S> <C> <C>
Amortization of discount allocated to
investments using the interest method
over the estimated life of the
investments ......................... $1,400 $ 5,700
Amortization of discount allocated to
long-term debt using the interest
method .............................. 100 400
</TABLE>
(h) To record interest on acquisition borrowings at the weighted average
rate of 6.583% and to eliminate interest expense on the Continental debt
refinanced through these borrowings. Interest on borrowings under the
credit facility is based on LIBOR plus 35 basis points. CNA has entered
interest rate swap agreements which effectively fix the interest rate on
$950,000,000 of these borrowings.
(i) To reduce the accretion on workers' compensation lifetime claims based
on discount rates, adjusted to conform to CNA accounting policies.
(j) To reclassify interest expense to conform to CNA reporting.
(k) To reflect the income tax effect of the above pro forma adjustments
at the statutory rate.
(l) To reflect minority interest relating to Continental's operations and
pro forma adjustments.
2. The accompanying Pro Forma Consolidated Condensed Financial Information is
prepared as prescribed by Article 11 of Securities and Exchange Commission
Regulation S-X, and generally accepted accounting principles. Management
does not believe that such information is necessarily indicative of the
future consolidated results of operations. As the organizational integration
of CNA and Continental is completed over the next year, management expects
to begin realizing significant market efficiencies and economies of scale
which will result in reduced costs. These future benefits of the merger are
not reflected in the Pro Forma Consolidated Condensed Financial Information.
Page 12 of 12 Pages
