Ladies and gentlemen, thank you for standing by, and welcome to Loews Corporation's Second Quarter 2020 Earnings Conference Call. At this time, all participants have been placed on mute to prevent any background noise. It is now my pleasure to turn the call over to Mary Scoffidas to begin. Please go ahead, ma'am.
Thank you, Maria. Good morning, everyone. And as Maria said, welcome to Lozis Corporation's 2nd quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On this call this morning, we have our Chief Executive Officer, Jim Tisch and our Chief Financial Officer, David Adelson.
Following our prepared remarks this morning, we will have a question and answer session from that has questions from our shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward looking statements.
This disclaimer is only a brief summary of the company's forward looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, you may also we may also discuss non GAAP measures. Please refer to our security filings and earnings supplements for reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson, will walk you through the key drivers for the quarter. But before he does, Jim Fish, our CEO will kick off the call.
Jim, over to you.
Thank you, Mary, and good morning, everyone. Rather than get into specifics about the quarter, I want to use this call today as an opportunity to get something off my chest. I am beyond frustrated with where the low where the stock market has been pricing Lowe's and CNA, and I can't believe how undervalued the stocks are. Lowe's market capitalization as of this morning is about $9,800,000,000 and our stake in CNA plus net cash alone account for more than $9,400,000,000 of that number. That leaves the market's valuation of our non publicly traded subsidiaries, Boardwalk, Loews Hotels and Altium at less than $500,000,000 which to my mind is patently absurd.
I also think CNA's value is patently absurd, but more on that later. Let's look at each of Lowe's privately held subsidiaries to see if I can demonstrate to you that collectively they are worth dramatically more than $500,000,000 First, let's look at Boardwalk Pipelines. In July of 2018, Loews purchased the outstanding common units of Boardwalk that we didn't already own for $1,500,000,000 putting the total equity value of Lowe's ownership stake in Boardwalk at $3,000,000,000 Keep in mind that Lowe's is in litigation over Boardwalk with a trial date set for January of 2021. So we can't get into too much detail. However, since the time of our purchase of Boardwalk's remaining public float, nothing has occurred with the performance of the company that would lead us to reconsider that purchase.
Boardwalk has successfully made it through the challenge of re contracting and since going private has reinvested a majority of its distributable cash flow in order to reduce the risk and volatility of future earnings. And since July of 2018, EBITDA for the business is essentially flat despite the significant re contracting headwinds the company has experienced. While future growth projects have become more difficult to complete in the current regulatory environment, Boardwalk benefits from its base of 14,000 miles of pipe in the ground. Boardwalk also benefits from stable fixed fee contracts. The company has over $9,000,000,000 of contractual backlog or 7 times Boardwalk's annual revenues.
Essentially, I'm comfortable with the guidance I gave last quarter for Boardwalk. The company is currently tracking slightly better than forecast for the first half of the year. Its flow volumes are up, the pipes are doing well and storage revenues are strong. At the end of 2020, Boardwalk should continue to have a debt to EBITDA ratio below 5 times. For all the reasons I've just outlined, I'm very disappointed by the market's implied value of Boardwalk.
Clearly, the company is worth much more than the market gives us credit for. Next, let's take a look at Loews Hotels. At the risk of stating the obvious, this year will be a washout for the entire hotel and travel industry and Loews Hotels is no exception to the rule. During my Q1 remarks, I've made note of the fact that there were only 4 of those hotels open at the time. Today, many more of our hotels are operational, but occupancy rates remain abysmally low, especially for our properties located in city centers.
Our resort hotels are doing a bit better, but since many of them are located in COVID hotspots, there's plenty of room for improvement. I believe that over time, whether through a vaccine or other mitigants, the travel industry will recover and Loews Hotels will once again be a growth engine for Loews. One last thought on hotels. As I mentioned, the market currently values our privately held subsidiaries at about $500,000,000 We make available on the parent company website Loews Hotels' adjusted EBITDA and adjusted mortgage debt. When looking at these numbers, however, keep in mind that the hotel company has invested equity in projects that have recently opened or have yet to open.
And the true earning power of these hotels has never been reflected in Loews Hotels' historical EBITDA. It's clear that even if you did a back of the envelope valuation for Loews Hotels, you would see that any in any sort of hotel industry recovery, the equity we have in Loews Hotels would be measured in the 1,000,000,000 of dollars. Before getting to CNA, let me address our privately held subsidiary, Altium. Altium became a Lowe's subsidiary in 2017. At the time, Lowe's paid $1,200,000,000 for Altium, consisting of $600,000,000 in equity and $600,000,000 in subsidiary debt.
When we acquired the company, Altium's net sales were about $800,000,000 Now Altium's net sales have grown to about $1,000,000,000 driven mostly by 6 accretive acquisitions funded with internally generated cash flow and additional debt at the subsidiary level. With everything we are seeing, we think this will be a good year for Altium as year to date organic EBITDA has grown by about 13% and total EBITDA has grown about 35%. Judging from the increase in sales and improved earnings, it's clear that our equity value in Altium is worth more than what we paid for it a few years ago. After the survey of our privately held subsidiaries and the description of how we think about each of them, hopefully, you will understand why I feel the market is asleep at the switch when it comes to low stock. Last but certainly not least, I want to talk about our publicly held subsidiary, CNA.
So far, I have focused my remarks on how wrong the market has been in valuing our privately held subsidiaries. But that doesn't mean the market has gotten CNA's valuation right. CNA trades at a substantial discount to its peers despite its stellar underwriting performance. And while CNA trades at a discount, I believe the commercial property and casualty insurance the commercial P and C industry trades in the high single to low double digits. In a show of support for CNA and its management team and to signal our displeasure with the market's valuation of the company, Loews bought about 500,000 shares of CNA in the Q2.
And speaking of the Q2, I want to take a moment to commend CNA's management team on delivering strong underlying results, especially considering the challenging economic environment. When you strip out all the noise in the quarter, the company's underlying combined ratio was 93.4%. CNA continues to benefit from a strong premium rate environment. Rates increased by 3 percentage points from the Q1 of 2020 to about 11% in the 2nd quarter. And the company is actively managing its long term care business, taking actions to reduce risk now and into the future.
CNA's portfolio investment portfolio also had a good quarter, reflecting the market's rebound. The CNA investment portfolio had $4,400,000,000 in unrealized gains. At the end of the second quarter, the portfolio had bounced back nicely and its unrealized gain was near its prior high. The downside of such large unrealized gains is that the market yields are low. The yield on 10 year treasury notes is currently below 60 basis points.
For entities like insurance companies that make money on float, such low rates can become a drag on earnings. All else being equal, a 100 basis point increase in market yields would reduce CNA's unrealized gains by about $2,700,000,000 However, investment income would go up dramatically. In short, CNA would have lower unrealized gains, though would have higher earnings in the intermediate to long term. Finally, I want to talk about capital allocation at Lowe's. Over the last quarter, we bought a little under a 1000000 shares of Lowe's stock and as I mentioned about a 500,000 shares of CNA.
We bought the CNA shares because we wanted to send a signal to the market that we think the company is trading at too steep a discount. With over $3,600,000,000 in cash and investments on our balance sheet, we are willing to continue to highlight how egregiously our shares and CNA shares are being priced. That means that share repurchases are certainly not off the table, but we won't be buying in shares at the pace set over the last 2 years. Right now, as we experience so much uncertainty in the world and the financial markets, our focus is on maintaining a substantial cash position as our rainy day fund. At Lowe's, we are constantly reevaluating our capital allocation strategy and making adjustments accordingly.
And 2020 is no different. And now, I'd like to hand the call over to our CFO, David Edelson.
Thank you, Jim, and good morning, everyone. For the Q2, those reported a net loss of $835,000,000 or $2.96 per share compared to net income of $249,000,000 or $0.82 per share in last year's Q2. This year's Q2 included a net investment loss related to the deconsolidation of Diamond Offshore caused by its bankruptcy filing in late April. This loss totaled $957,000,000 after tax. 2 other items furthered the year over year decline.
Catastrophe losses at CNA and losses at those hotels stemming from the severe impact of the pandemic on travel. On a positive note, CNA's underlying underwriting results were excellent, investment results were favorable at both CNA and the parent company and operations at both Boardwalk Pipelines and Altium Packaging were strong. Before I jump into the quarter and the ongoing impact of the COVID-nineteen pandemic, let me remind you what gave rise to the Diamond related net investment loss. Up to the bankruptcy filing date of April 26, we accounted for Diamond on a consolidated basis, just as we have historically. These results are shown on Page 4 of our earnings release on the Diamond Offshore line.
Once Diamond filed for bankruptcy, Loews no longer controlled Diamond for GAAP purposes. As such, we ceased consolidating Diamond and began accounting for Diamond at fair value. Our net GAAP carrying value of Diamond was $988,000,000 as of the bankruptcy date. At quarter end, the carrying value of our stake was $31,000,000 based on the fair value of our shares and a related deferred tax asset. The difference between these two values are $957,000,000 is included in the corporate segment as a net investment loss.
Now let me turn to the performance of CNA, Boardwalk, Loews Hotels and Ultium Packaging. CNA's contribution to our net income declined 46% year over year to $135,000,000 The P and C business performed well, posting an underlying combined ratio of 93.4 percent and an average rate increase of almost 11%. As a reminder, CNA's underlying combined ratio for full year 2019 was 1.4 points higher at 94.8%. However, as pre announced on July 15, CNA booked $300,000,000 of pretax $301,000,000 of pretax catastrophe losses in Q2, up from $38,000,000 in last year's Q2. 60% of these cat losses related to the COVID-nineteen pandemic with civil unrest and weather related events accounting for about 20% each.
CNA's $182,000,000 of Q2 COVID related cat losses, combined with the $13,000,000 booked in Q1, represent the company's current best estimate of its ultimate insurance losses and loss adjustment expenses, including defense costs, resulting from the pandemic and the consequent economic crisis. 2nd quarter cat losses in total added 17.5 points to CNA's loss ratio and reduced our net income by 212,000,000 dollars Last quarter, we discussed how COVID induced volatility in the financial markets reduced CNA's net investment income, caused significant net investment losses and materially shrunk the unrealized gain in the company's investment portfolio. In Q2, net investment income benefited from a strong quarter for equities and alternatives and net investment gains were significant, largely thanks to the market appreciation on CNA's holdings of non redeemable preferred stock. Moreover, as Jim described, CNA's net unrealized gain increased more than 100% from March 31 to 4,400,000,000 dollars surpassing the year end level of $4,100,000,000 Moving on to Boardwalk. The company contributed $34,000,000 to our net income in Q2, down from $53,000,000 last year.
Last year's Q2 included a $19,000,000 net benefit from a customer bankruptcy and related contract cancellation. Excluding this non recurring item, Boardwalk's net income contribution was flat year over year. As we have discussed previously, Boardwalk has experienced contract expirations and restructurings over the past few years related to pipelines placed into service between 2,008 2010. The net effect has been for contracts to be renewed or replaced at lower rates. This re contracting activity essentially concluded by year end 2019.
This year's Q2 results fully reflect the recontracting activity. Net operating revenue in Q2, excluding last year's non recurring item, was down less than 2% year over year with pipeline growth projects, park and loan and storage and other items almost fully offsetting the revenue loss from contract expirations and restructurings. Natural gas throughput and liquid volumes increased more than 7% year to date in 2020 versus 2019. Boardwalk Management is actively monitoring the credit quality of its customers given the declines in crude oil and natural gas prices. Thus far, the impact has been de minimis.
Boardwalk will have spent approximately $2,000,000,000 on growth projects during the 2016 to 2020 period. These investments have helped the company compensate for the re contracting pressures faced over the last few years. These investments have also allowed the company to execute on its strategy to diversify its revenue stream by increasing the percent of revenues coming from end user demand pull customers. Now turning to Loews Hotels. The second quarter was tough for Loews Hotels as almost all its rooms were out of service for most of the quarter.
Operations were not suspended at only 4 properties. The company posted a net loss of 72,000,000 dollars in Q2 as compared to net income of $12,000,000 last year. GAAP operating revenue was just $9,000,000 down 94% from last year's Q2. Revenue at the company's JV properties, which is not included in GAAP consolidated operating revenue declined a similar percentage. Adjusted EBITDA, which is defined in our earnings supplement and excludes non recurring items, decreased $122,000,000 year over year to a loss of $54,000,000 13 properties resumed operations in Q2 spread out from May 29 through June 26.
And the Loews Kansas City opened on June 1, after its grand opening was delayed by COVID. 5 more properties resumed operations during July. As of today, 4 properties, plus the yet to be opened Endless Summer Dockside property in Orlando are not operational. We stated last quarter that during each month of suspended of fully suspended operations, the hotel company was expected to generate negative cash flow of about $25,000,000 We explained that this amount should decline as properties resume operations since Loews Hotels management intended to restart operations at properties only when doing so improve cash flow. This is thus far proven to be the case as the hotel company is effectively and aggressively managing property level and management company expenses.
Turning to Altium Packaging. Altium continued to experience strong revenue and EBITDA growth as it benefited from its recent acquisitions, namely its pharmaceutical packaging business as well as increased demand for such core products as household chemicals, water and beverages. Conversely, demand weakened somewhat in segments including automotive, commercial food service and institutional dairy. Altium contributed a slight net loss despite its robust EBITDA increase. Depreciation and amortization were up from the prior year, driven by the recent acquisitions and by the accelerated amortization of the CCC trade name.
All in all, Altium is performing above plan and has been very successful in winning new business by demonstrating reliability and customer focus. Across the board, we remain focused on ensuring that our subsidiaries implement effective policies and procedures to protect the safety and health of their employees. Boaze's long term success rests on the success of our subsidiaries, so the well-being of their employees is our foremost concern. Finally, a few words about the parent company. As always, we are focused on maintaining a strong and highly liquid balance sheet.
At quarter end, the parent company portfolio of cash and investments totaled $3,600,000,000 with about 80% in cash and equivalents and the remainder mainly in marketable equity securities and a small portfolio of limited partnership investments. The parent company investment portfolio generated pre tax income of $110,000,000 in Q2, up from $33,000,000 in Q2 2019 and well ahead of the $166,000,000 loss in Q1. Equities drove the parent company investment results. We received $90,000,000 in dividends from CNA during the 2nd quarter. As a reminder, Boardwalk has adopted an annual dividend policy and we expect to receive a dividend in the 4th quarter approximating last year's $100,000,000 I will now hand the call back to Mary.
Thank you, David. As is our practice, we have received several questions from shareholders that we will answer. Every quarter, we encourage shareholders to send us questions that they would like us to answer, and we've received several for this quarter. First question has to do with CNA. Those has more privately held subsidiaries and publicly held subsidiaries.
What is the benefit of CNA as a public company?
So, we've always believed that having a public marker for CNA is beneficial for Loews, especially for our shareholders. And I dare say that if CNA wasn't public, there would be clamoring for us to take it public. However, it's really rare for CNA to be trading as drastically undervalued as it is now. The public my sense is that the public market today doesn't make much sense and is certainly not an accurate reflection of the value of CNA. Also, all P and C companies, as I said in my remarks, are undervalued.
Of course, there are lots of good reasons for keeping CNA as a public company, and those outweigh what I consider to be the short term problem of the undervaluation. Number 1, it's important to regulators and credit rating agencies. It's important for attracting talent to be able to give them long term incentive that is based on the stock. And it's also important just for transparency. And as for the added expense of keeping CNA public in the context of the size of Lowe's and of CNA, there really aren't any significant expenses that could be saved.
Okay, great. The next question has to do with the deal environment. Jim, is Lowe's looking to add another subsidiary right now?
No, we are not. We're not actively looking at any deals right now. In these uncertain times, as I said in my remarks, our focus is on conserving cash. Both CNA and Lowe's are so cheap that when we think the time is right, we'll continue to buy in Lowe's shares. But as I say all the time, we like to keep an open mind.
And if the relative values of Lowe's and the deal markets change, then it is very possible that we could switch from repurchasing our own shares to hunting for new businesses to buy.
Jim, you said in your remarks that this year is probably a washout for the hotel travel industry. Can you talk a little bit about what recovering the whole industry in the hotel industry looks like?
A washout, it certainly is. First, let me start by saying something that was told to me when I was in college. It's an old expression. He who lives by the crystal ball must learn to eat ground glass. And with that as a caveat, let me add that I think 2020 will be the bottom of the hotel industry in terms of the effects of the pandemic.
And I believe that 2021 will be dramatically better than 2020. And if I'm going to forecast longer than that, I think that 'twenty two will even be better than 'twenty one. Currently, we're seeing more of a pickup in driving leisure type travel at our resorts destinations. The business travel and hotels and city centers are lagging the resorts at this point in time. My guess is that this will persist for some time as companies weigh employee safety and security as well as reassess their travel budgets.
But I believe that in the fullness of time, those that travel and those budgets will be come back at similar levels to where they were before this all began. Keep in mind that we're seeing a pickup in occupancy from a few months ago, but occupancy is still very, very low measured at 10%, 20%, 30% or 40% most of the time. We opened the hotels because we found that we lose less cash by keeping those hotels open rather than keeping them closed. But we are still losing money in those hotels.
Okay. The next question has to do with capital allocation. Lowe's has plenty of cash on its balance sheet. And with Lowe's stock trading where it is, why not use a $1,000,000,000 or $2,000,000 towards share repurchases?
So that's a very good question. We keep as you all know, we keep our level of cash and investments above our debt levels because it's important for the company to maintain its bond ratings and the rating agencies like to see us have more cash and investments than debt. The Lowe's rating provides an uplift to some of our subsidiary ratings giving them among other things access to cheaper debt. So under exceptional circumstances, we would certainly consider allowing our cash and our investment balances to go below our debt levels, but buying in low shares at an exceptional price isn't yet included in my definition of an exceptional circumstance. Maintain it makes a lot of sense to be cautious and maintain ample liquidity.
But as Loews shares continue to be remarkably undervalued, my calculus on this is very possible to change.
Okay. And the last question we have is, we just received this question even though you answered this topic earlier in the call, we wanted to ask it again. The question is, the market is giving Lowe's almost no value for its privately held subsidiaries. How should investors think of Lowe's system value?
Well, you're right. I did cover it in my opening remarks and for people that are just reading a transcript, I'd recommend that you go back. Sorry, just reading the Q and A of the transcript, I recommend that you go back and read those remarks. But I'll just go over this briefly. Over the our purchase say 2 years ago of the outstanding common units of Boardwalk, that placed an equity valuation of about $3,000,000,000 on Boardwalk.
And as I said previously, nothing has occurred in the performance of the company that would lead us to reconsider that purchase at all. Prior to the COVID pandemic, the valuation of our hotel business was measured in the 1,000,000,000 of dollars. And I still feel comfortable that in the recovery from the pandemic, which I see coming, certainly in the next year or so, we will see that valuation again. And finally, our I believe the valuation should be higher now. So when you add all that up, in my mind, the market valuation of $500,000,000 for all of our non publicly traded subsidiaries is to me ludicrous, when they are clearly worth dramatically more than that.
Okay, great. Thank you, Jim. Thank you, David. And thank you, everyone, for listening. That concludes the Lowe's call.
Please feel free to reach out to me with any additional questions atmscobitislowes.com and a replay will be available on our website, loews.com in approximately 2 hours.
And thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect.