Liberty Mutual Q2 Net Income More Than Triples to $448M

August 8, 2013

Liberty Mutual Holding Co. Inc. posted $448 million net income for its 2013 second quarter, a 222 percent jump from $139 million net income posted during the same quarter last year. The company benefited from lower catastrophe losses and improved underwriting results.

Net income for the first six months of 2013 also rose, advancing 28 percent to $766 million, compared to $598 million during the first half of 2012.

Total net written premiums for the 2013 second quarter were $8.893 billion, up $558 million or 6.7 percent from $8.335 billion one year ago. Total net written premiums for the first six months of 2013 were $17.486 billion, rising $1.073 billion or 6.5 percent from $16.413 billion a year ago.

Big gains in net written premiums were seen in the domestic Personal Insurance unit, which posted $3.898 billion net written premiums for the second quarter, a 12.1 percent jump from $3.478 billion a year ago. For the first six months of 2013, Personal Insurance net written premiums were $7.439 billion, up 12.2 percent from last year.

In the Commercial Insurance unit, net written premiums declined 7.5 percent to $2.231 billion during the second quarter, primarily reflecting lowered exposures in workers’ compensation. Commercial Insurance net written premiums for the first six months were $4.532 billion, down 8.8 percent from a year ago.

The total combined ratio for the second quarter was 101.5 percent, improving from 105.8 percent one year ago. The combined ratio for the first half of 2013 was 99.9 percent, improving from 103.4 percent a year ago.

Second-quarter catastrophe losses were $617 million, compared to $702 million losses one year ago. Catastrophe losses for the first half of 2013 were $824 million, down from $1.059 billion losses posted one year ago.

Net investment income for the second quarter was $855 million, up 2.8 percent from $832 million one year ago. But net investment income for the first six months fell 6.1 percent to $1.591 billion, compared to $1.694 billion one year ago.

Net realized gains for the second quarter were $63 million, compared to $172 million gain one year ago. For the first six months, the company recorded net realized losses of $134 million, compared to net realized gains of $221 million one year ago. The company also reported a $39 million loss tied to the extinguishment of debt during the second quarter, compared to a $148 million loss a year ago.

Underwriting results continue to improve through the first six months, Liberty Mutual Insurance Chairman and CEO David Long said, pointing to a decrease of 3.5 points in the combined ratio to 99.9 percent as evidence.

“The improvement highlights our commitment to disciplined underwriting and profitable growth, a strategy that we intend to continue,” Long said.

The following are more results by Liberty Mutual’s major business units.

Personal Insurance

Pre-tax operating income for the Personal Insurance lines was $145 million, compared to a pre-tax operating loss of $29 million a year ago. Pre-tax operating income for the first half of the year was $501 million, up 53.7 percent from $326 million a year ago.

The Personal Insurance combined ratio for the second quarter was 99.7 percent, improving from 105.5 percent during the prior-year quarter. The combined ratio for the first six months also improved, falling to 96.5 percent from 99.5 percent one year ago. Catastrophe losses for the quarter were $542 million, down from $614 million a year ago.

Overall net written premiums in Personal Insurance for the second quarter were $3.898 billion ($2.232 billion for private passenger auto; $1.540 billion for homeowners and other; and $126 million for individual life), a 12.1 percent jump from $3.478 billion during the same period last year ($2.003 billion for private passenger auto; $1.361 billion for homeowners and other; and $114 million for individual life).

A breakdown of Personal Insurance net written premiums by market segments shows that of the $3.898 billion net written premiums for the second quarter, Safeco represented $1.613 billion, up 15 percent from $1.403 billion a year ago.

Commercial Insurance

Pre-tax operating income for Commercial Insurance was $175 million for the second quarter, up 173.4 percent from $64 million a year ago.

The total combined ratio improved to 104.5 percent for the quarter, falling from 112.0 percent a year ago. Catastrophe losses for the quarter were $102 million, compared to $161 million last year.

The net written premiums for the quarter were $2.231 billion, down 7.5 percent from $2.412 billion during the prior-year quarter. Net written premiums for the “workers compensation- voluntary” line of business were $640 million, a 23.3 percent decline compared to the prior-year first quarter. “Workers compensation – involuntary” net written premiums were flat at $28 million. Commercial multiple-peril net written premiums fell 2.2 percent to $485 million. Commercial auto net written premiums fell 4.3 percent to $360 million. General liability net written premiums remained flat at $273 million. On the other hand, net written premiums for group disability and group life rose 11.2 percent to $218 million.

Liberty International

Pre-tax operating income for Liberty International, which sells property/casualty, health and life insurance products and services to individuals and businesses in Latin America, Europe and Asia, was $121 million for the second quarter, up 86.2 percent from $65 million one year ago. The total net written premiums were $1.420 billion for the quarter, up 2.7 percent from $1.382 billion one year ago. The combined ratio for the quarter was 104.6 percent, compared to 103.2 percent a year ago.

Global Specialty

Global Specialty — which is composed of a wide array of products and services offered through three market segments from LIU, LMS, and LMR — saw its pre-tax operating income fall to $111 million for the quarter, down 31.5 percent from $162 million a year ago.

Net written premiums for the quarter were $1.263 billion, up 16.1 percent from $1.088 billion a year ago. The combined ratio for the quarter was 96.7 percent, compared to 91.9 percent a year ago. Adverse factors included higher current year losses related to Cyclone Oswald and Central European Floods, LIU third party prior year loss activity and catastrophe losses in the U.S. incurred from Texas and Oklahoma tornadoes in 2013.

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