Liberty Mutual Boosted Q4, 2018 Profit Helped by Lower Catastrophe Losses

February 28, 2019

Liberty Mutual Holding Co. and its subsidiaries reported net income of $249 million for the fourth quarter 2018 and $2.160 billion for the full year 2018, increases of $44 million and $2.143 billion over the same periods in 2017.

Catastrophe losses fo the year were well below what they were in 2017, although they still were above average. Catastrophe losses totaled $534 million in the fourth quarter, up 18 percent from the same period in 2017 and totaled $1.9 billion for the full yeaR, which was down 47 percent from 2017 full year.

Due to catastrophe losses, Liberty Mutual reported $17 million in net income for 2017, down substantially from more than $1 billion in 2016.

“Premium growth was strong at 6.3 percent for the year as market conditions improved domestically and international growth remained robust at 13.1 percent,” noted David H. Long, Liberty Mutual chairman and chief executive officer, in prepared remarks.

The combined ratio for the full year improved 6.4 points to 99.2.

Long said the company’s new operating structure introduced at the start of last year that formed Global Retail Markets and Global Risk Solutions is delivering “tangible results” and has the firm well positioned to continue to improve performance.

Edward Peña, director of Investor Relations, called it an “OK” fourth quarter on a call with analysts.

Fourth Quarter 2018

  • Net written premium for the fourth quarter was $9.406 billion, an increase of $545 million or 6.2 percent over the same period in 2017.
  • Restructuring costs for the quarter were $37 million, a decrease of $31 million from the same period in 2017.
  • The consolidated combined ratio before catastrophes for the three months was 94.7, an increase of 0.5 points over the same period in 2017. Including the impact of catastrophes, net incurred losses attributable to prior years and current accident year re-estimation, the total combined ratio for the three months was 100.4, a decrease of 0.1 points from the same period in 2017.
  • Homeowners’ net written premium increased $91 million, reflecting rate increases.
  • Specialty insurance increased $156 million, reflecting new business growth and favorable rate increases.

Full Year 2018

  • Net written premium for the 12 months ended December 31, 2018 was $39.100 billion, an increase of $2.311 billion or 6.3 percent over the same period in 2017. About 36 percent is private passenger auto, 17 percent homeowners and the rest is commercial lines and specialty business.
  • The consolidated combined ratio before catastrophes was 94.4, an increase of 0.2 points over the same period in 2017. Including the impact of catastrophes and net incurred losses attributable to prior years, the total combined ratio for the year was 99.2, a decrease of 6.4 points from the same period in 2017.
  • Private passenger automobile net written premium increased $270 million. The increase reflected increased rate to keep pace with U.S. industry loss cost trends, organic growth and higher retention.
  • Homeowners’ net written premium increased $251 million, reflecting rate increases.
  • Specialty insurance increased $941 million. The increase reflected the Ironshore acquisition, new business growth and favorable rate increases.

Last October, Liberty Mutual Insurance announced it was beginning a strategic review of its London-based Pembroke Managing Agency Ltd., acquired in its the lronshore purchase in May of 2017. The company says that review is still ongoing.

In May 2018, the company’s Spanish subsidiary, Liberty Seguros Compania de Seguros y Reaseguros S.A., completed the sale of its entire 99.44 percent interest in its Turkish insurance affiliate, Liberty Sigorta A.S., to Talanx International.

Also in May, the company completed the sale of Liberty Life Assurance Co. of Boston to Lincoln Financial Group.

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