Fitch Affirms Loews' IDR at 'A' Following Acquisition Announcement; Outlook Stable.

CHICAGO -- Fitch Ratings has affirmed Loews Corporation's (Loews) (NYSE:LTR) debt ratings following the company's June 4, 2007, announcement that it has agreed to purchase the natural gas exploration and production assets in Texas, Michigan and Alabama from Dominion Resources for approximately $4.025 billion in cash. Fitch rates Loews' debt as follows:

--Issuer Default Rating (IDR) 'A';

--Senior unsecured notes 'A'.

The Rating Outlook is Stable. Approximately $870 million of debt is impacted by this rating action.

The primary properties being acquired are located in the Permian Basin in Texas, the Antrim Shale in Michigan and the Black Warrior Basin in Alabama, with estimated proved reserves totaling approximately 2.5 trillion cubic feet equivalent. These properties produce predominantly natural gas and are characterized by long reserve lives and high well completion success rates. Fitch expects the majority of the transaction to be funded with cash and the remainder with debt at a new operating subsidiary level.

Loews' ratings are supported by the cash flow derived from its major operating subsidiaries, Lorillard Inc. (Lorillard), Loews' tobacco subsidiary, CNA Financial Corporation (NYSE:CNA), a regulated property & casualty insurance company, and Diamond Offshore Drilling, Inc. Loews is currently experiencing strong financial performance across all of its major operating units, which has resulted in increasing diversification of its cash flows. Market share gains and positive volume trends at Lorillard have resulted in higher operating earnings and cash flow. Diamond Offshore is experiencing heightened earnings, which Fitch expects to last through the intermediate term due to the lock in of high day rates and an increasing backlog. Additionally, continued operational and financial improvements at CNA have strengthened its capital base and CNA instituted a dividend in April 2007.

Fitch currently rates Loews' other operating subsidiaries as follows:

CNA

--Issuer Default Rating (IDR) 'BBB';

--Senior unsecured debt 'BBB-';

--Rating Outlook Stable.

Boardwalk Pipelines, LP

--Issuer Default Rating (IDR) 'BBB';

--Senior unsecured debt 'BBB';

--Rating Outlook Stable.

Texas Gas Transmission, LLC 

--Issuer Default Rating (IDR) 'BBB+';

--Senior unsecured debt 'BBB+';

--Rating Outlook Stable.

The ratings are further supported by substantial liquidity at the parent company as a part of a conservative financial strategy that has resulted in cash and investments exceeding debt levels for many years. This practice reduces the credit risk at the parent level. Loews has periodically provided financial support to CNA; however, such support has not resulted in increased leverage at Loews. Cash and marketable investments were approximately $5.3 billion at Mar. 31, 2007 at the parent level. While Fitch expects the company to make acquisitions utilizing a portion of its cash and investment balances, a high level of liquidity is expected to be maintained.

Overall credit measures continue to improve due to increased operating earnings, cash flow and lower debt levels. However, credit metrics will decline given the company's acquisition of the natural gas exploration and production assets and pipeline expansion plans. The pipeline expansion is expected to cost $3.3 billion over the next two years and will be partially funded with debt. Total-debt to earnings before interest, taxes, depreciation and amortization (EBITDA) was 1.2 times (x) for the year ended Dec. 31, 2006, and EBITDA-to-interest expense was 14.1x, calculated with CNA and Diamond Offshore on the equity basis of accounting. Consolidated total-debt to EBITDA was 1.1x for the latest twelve month period ended Mar. 31, 2007 and total EBITDA-to-interest expense was 15.6x for the same period. Loews does not prepare financial statements at the interim periods with CNA and Diamond Offshore on the equity basis of accounting.

Lorillard, one of the most significant cash flow providers to Loews, is subject to U.S. tobacco industry litigation risk. Fitch's assessment of the industry litigation risk centers on class action cases with the greatest financial risk in the near-to-intermediate term. The three major cases that Fitch has followed are the Price 'light' cigarettes case in Illinois, the Engle smoking and health case in Florida, and the U.S. Department of Justice (DoJ) case in Washington D.C. Positive developments in all of these cases has significantly reduced the near term financial risk for the industry. Nonetheless, there are numerous negative pressures on the industry including extensive smoking bans which dampen demand and rising excise taxes which reduce pricing flexibility. Overall domestic consumption continues to decline at low single digit levels annually, resulting in the tobacco companies fighting for market share with a shrinking pool of consumers. Fitch will continue to analyze the impact of theses factors and may review the ratings if accelerated declines in industry operating earnings and cash flows occur.

Loews is a holding company with subsidiaries engaged in the following lines of business: commercial property and casualty insurance (CNA, a 89% owned subsidiary); the production and sale of cigarettes (Lorillard, a wholly owned subsidiary); the operation of interstate natural gas transmission pipeline systems (Boardwalk Pipeline, LP (Boardwalk Pipeline), an 80% owned subsidiary); the operation of offshore oil and gas drilling rigs (Diamond Offshore, a 51% owned subsidiary); the operation of hotels (Loews Hotels Holding Corporation, a wholly owned subsidiary) and the distribution and sale of watches and clocks (Bulova Corporation, a wholly owned subsidiary).

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.