60086--2/26/2007--LOEWS

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We are a holding company and derive substantially all of our cash flow from our subsidiaries. In prior years, we have restated our financial results and identified material weaknesses in our internal control over financial reporting. Risks Related to an Investment in Our Carolina Group Stock We cannot be certain that we will continue to pay dividends on our Carolina Group stock. The independence of the board of directors of Lorillard, Inc. and the board of directors of its wholly owned subsidiary, Lorillard Tobacco Company, may affect Lorillard s payment of dividends to us and thereby inhibit our ability or willingness to pay dividends and make other distributions on our Carolina Group stock. We have allocated to the Carolina Group any liabilities or expenses that we incur as a result of tobacco-related litigation. The Engle Agreement may affect Lorillard s payment of dividends to us and thereby inhibit our ability or willingness to pay dividends on our Carolina Group stock. Holders of our common stock and Carolina Group stock are shareholders of one company and, therefore, financial impacts on one group could affect the other group. The complex nature of the terms of our Carolina Group stock, or confusion in the marketplace about what a tracking stock is, could materially adversely affect the market price of Carolina Group stock. Holders of our common stock and Carolina Group stock generally vote together as a single class. Holders of our common stock will have significantly greater voting power than holders of our Carolina Group stock with respect to any matter as to which all of our common shares vote together as one class. Holders of our Carolina Group stock may have interests different from holders of our common stock. If our Carolina Group stock is not treated as a class of our common stock, several adverse federal income tax consequences will result. Changes in the tax law or in the interpretation of current tax law may result in redemption of the Carolina Group stock or cessation of the issuance of shares of Carolina Group stock. Our board of directors may, at any time until the 90th day after the disposition of 80% of the assets attributed to the Carolina Group, redeem shares of our Carolina Group stock. If we choose to redeem our Carolina Group stock for cash, holders of Carolina Group stock may have taxable gain or taxable income. Our board of directors does not owe a separate duty to holders of Carolina Group stock. Our board of directors may change the Carolina Group policy statement without shareholder approval. Our directors and officers disproportionate ownership of our common stock compared to our Carolina Group stock may give rise to conflicts of interest. Because it is possible for an acquiror to obtain control of us by purchasing shares of our common stock without purchasing any shares of our Carolina Group stock, holders of Carolina Group stock may not share in any takeover premium. Holders of our Carolina Group stock may receive less consideration upon a sale of the assets attributed to the Carolina Group than if the Carolina Group were a separate company. We may cause a mandatory exchange of our Carolina Group stock. If we are liquidated, amounts distributed to holders of our Carolina Group stock may not reflect the value of the assets attributed to the Carolina Group. Risks Related to Us and Our Subsidiary, CNA Financial Corporation If CNA determines that loss reserves are insufficient to cover its estimated ultimate unpaid liability for claims, CNA may need to increase its loss reserves. We may cause a mandatory exchange of our Carolina Group stock. If we are liquidated, amounts distributed to holders of our Carolina Group stock may not reflect the value of the assets attributed to the Carolina Group. Risks Related to Us and Our Subsidiary, CNA Financial Corporation If CNA determines that loss reserves are insufficient to cover its estimated ultimate unpaid liability for claims, CNA may need to increase its loss reserves. Loss reserves for asbestos, environmental pollution and mass torts are especially difficult to estimate and may result in more frequent and larger additions to these reserves. Loss reserves for asbestos, environmental pollution and mass torts are especially difficult to estimate and may result in more frequent and larger additions to these reserves. CNA s key assumptions used to determine reserves and deferred acquisition costs for its long term care product offerings could vary significantly. High levels of retained overhead expenses associated with business lines in run-off negatively impact CNA s operating results. CNA s premium writings and profitability are affected by the availability and cost of reinsurance. CNA may not be able to collect amounts owed to it by reinsurers. Rating agencies may downgrade their ratings for CNA in the future, and thereby adversely affect CNA s ability to write insurance at competitive rates or at all. CNA is subject to capital adequacy requirements and, if it does not meet these requirements, regulatory agencies may restrict or prohibit CNA from operating its business. CNA s insurance subsidiaries, upon whom CNA depends for dividends in order to fund its working capital needs, are limited by state regulators in their ability to pay dividends. CNA is responding to subpoenas, interrogatories and inquiries relating to insurance brokers and agents, contingent commissions and bidding practices, and certain finite-risk insurance products. CNA s investment portfolio, which is a key component of its overall profitability, may suffer reduced returns or losses, especially with respect to its equity in various limited partnership net assets which are often subject to greater leverage and volatility CNA may be adversely affected by the cyclical nature of the property and casualty business. Risks Related to Us and Our Subsidiary, Lorillard, Inc. Lorillard is a defendant in approximately 2,840 tobacco-related lawsuits, which are extremely costly to defend, and which could result in substantial judgments against Lorillard. A substantial judgment has been rendered against Lorillard in the Scott litigation. The verdict returned in the federal government s reimbursement case, while not final, could impose significant financial burdens on Lorillard and adversely affect future sales and profits. Lorillard is a defendant in a case that has been certified as a nationwide class action and that could result in a substantial verdict. The Florida Supreme Court s approval of an order vacating a $16.3 billion judgment against Lorillard in the Engle litigation is not final. The Florida Supreme Court s ruling in Engle could encourage additional litigation against cigarette manufacturers, including Lorillard. The United States Surgeon General has issued a report regarding the risks of cigarette smoking to non-smokers that could result in additional litigation against cigarette manufacturers, additional restrictions placed on the use of cigarettes, and additional regulations placed on the manufacture or sale of cigarettes. Lorillard has substantial payment obligations under litigation settlement agreements which will materially adversely affect its cash flows and operating income in future periods. Concerns that mentholated cigarettes may pose greater health risks could adversely affect Lorillard. Lorillard is subject to important limitations on advertising and marketing cigarettes that could harm its competitive position. Sales of cigarettes are subject to substantial federal, state and local excise taxes. Lorillard is dependent on the U.S. cigarette business, which we expect to continue to contract. Lorillard derives most of its revenue from the sales of one product in the premium market. The use of significant amounts of promotion expenses and sales incentives in response to competitive actions and market price sensitivity may have a material adverse impact on Lorillard. Several of Lorillard s competitors have developed alternative cigarette products. Lorillard may not be able to develop, produce or commercialize competitive new products and technologies required by regulatory changes or changes in consumer preferences. The availability of counterfeit cigarettes could adversely affect Lorillard s sales. Lorillard relies on a single manufacturing facility for the production of its cigarettes. Lorillard relies on a small number of suppliers for certain of its tobacco leaf. Risks Related to Us and Our Subsidiary, Boardwalk Pipeline Partners, LP s expansion projects may not be completed or completed on materially different terms or timing than initially anticipated. If completed, the expansion project may not achieve the intended benefits. Boardwalk Pipeline s natural gas transportation and storage operations are subject to FERC rate-making policies. Boardwalk Pipeline s operations are subject to operational hazards and unforeseen interruptions for which Boardwalk Pipeline may not be adequately insured. Because of the natural decline in gas production from existing wells, Boardwalk Pipeline s success depends on its ability to obtain access to new sources of natural gas. Successful development of LNG import terminals in the eastern or northeastern United States could reduce the demand for Boardwalk Pipeline s services. Boardwalk Pipeline may not be able to maintain or replace expiring gas transportation and storage contracts at favorable rates. Boardwalk Pipeline depends on certain key customers for a significant portion of its revenues. Boardwalk Pipeline is exposed to credit risk relating to nonperformance by its customers. Boardwalk Pipeline depends on third-party pipelines and other facilities interconnected to its pipelines. Significant changes in natural gas prices could affect supply and demand, and reduce system throughput. Risks Related to Us and Our Subsidiary, Diamond Offshore Drilling, Inc. Diamond Offshore s business depends on the level of activity in the oil and gas industry, which is significantly affected by volatile oil and gas prices. Diamond Offshore s industry is cyclical. The terms of some of Diamond Offshore s drilling contracts may limit its ability to benefit from increasing dayrates in a rising market. The majority of Diamond Offshore s contracts for its drilling units are fixed dayrate contracts, and increases in Diamond Offshore s operating costs could adversely affect the profitability of those contracts. Diamond Offshore s drilling contracts may be terminated due to events beyond Diamond Offshore s control. Rig conversions, upgrades or newbuilds may be subject to delays and cost overruns. Diamond Offshore s business involves numerous operating hazards and Diamond Offshore is not fully insured against all of them. Diamond Offshore significantly increased its insurance deductibles and has elected to self-insure for a portion of its liability exposure and for physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico. Diamond Offshore s international operations involve additional risks not associated with domestic operations. s drilling contracts in the Mexican GOM expose it to greater risks than they normally assume. Fluctuations in exchange rates and nonconvertibility of currencies could result in losses. Risks Related to Us and Our Subsidiaries Generally Future acts of terrorism could harm us and our subsidiaries. Certain of our subsidiaries face significant risks related to the impact of hurricanes and other natural disasters. Certain of our subsidiaries are subject to extensive federal, state and local governmental regulations. The businesses operated by our subsidiaries face intense competition. We and our subsidiaries are subject to litigation. We and our subsidiaries are each dependent on a small number of key executives and other key personnel to operate our businesses successfully. Certain of our subsidiaries face significant risks related to compliance with environmental laws.

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60086--2/26/2007--LOEWS_CORP