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Liberty Mutual Estimates Q1 Loss from Coronavirus to Be Like Moderate Catastrophe

Global insurer Liberty Mutual said the COVID-19 pandemic is likely to have the most impact on its first quarter investment portfolio results, with its business in trade credit, general liability, workers compensation, and event cancellation coverage among the lines most exposed due to the economic downturn from the pandemic.

“While the pandemic is still evolving, from a financial perspective we expect the impact of COVID-19 on our insurance operations to be similar to those we have experienced for a moderately sized catastrophe loss,” said Liberty Mutual Chairman and Chief Executive Officer David Long in a prepared statement.

The company said it anticipates the larger impact from COVID-19 will come through its investment portfolio, where it has taken realized and unrealized losses caused by the recent market downturn. It expects its net investment income will be dampened in the coming quarters as well by lower valuations on its private equity investments.

But Long said the company’s “liquidity position remains excellent,” with access to over $6 billion in total, not including current cash on hand of $1.4 billion. “We are confident in the strength and resiliency of our operations to allow us to endure these uncertain times and continue to serve our customers,” he stated.

Long said virtually all of the insurer’s employees have been working from home.

The following are preliminary estimates for the first quarter of 2020:

• Net written premium of approximately $10 billion: The first quarter net written premium was not materially impacted by COVID-19, however COVID-19 and the related economic downturn are expected to dampen net written premium growth in future quarters.
• Combined ratio of approximately 97%: While losses from COVID-19 had a marginal impact on the combined ratio in the quarter, Liberty Mutual expects a more meaningful impact in the second and third quarters as the situation evolves.
• Total equity of approximately $23 billion: This would be down approximately 2% from December 31, 2019. The decline in equity is primarily driven by unrealized investment losses, as a result of the market fallout stemming from COVID-19.

The company is releasing its full first quarter 2020 financial results on May 14.