Liberty Mutual Insurance has reported a 22.4% decline in net income for the first-quarter of 2020 to $519 million, as COVID-19 related financial market volatility adversely impacted the company’s investment portfolio in the period.
Net income fell by $150 million from the $699 million recorded in the first-quarter of 2019, as the firm recorded net realised losses of $247 million from a decline in market value in public equities, and unrealised losses of $576 million from its fixed income investment portfolio.
Although Liberty Mutual’s investment performance suffered from COVID-19 impacts in Q1 2020, on the underwriting side, the company says that while this continues to evolve, the crisis did not materially impact its insurance results in the quarter.
Expanding on this, Liberty Mutual Chairman and Chief Executive Officer (CEO), David Long, explained that the firm expects the insurance impact to be similar to what it has experienced for a moderately sized catastrophe loss.
“The lines of business we expect to be the most exposed to losses related to the pandemic include trade credit, general liability, workers compensation, and event cancellation, among others. With respect to business interruption, we do not expect to have material losses based on the contractual language in our policies,” he continued.
On the investment impact, Long said: “With respect to the potential financial exposure from COVID-19, you can find added disclosure on our investment portfolio in our earnings presentation. The overall investment portfolio was relatively well positioned as we entered the pandemic with a very high quality fixed income portfolio and de-risked equity positioning. This has enabled us to selectively take advantage of the opportunities, both defense and offense, offered by market dislocations.”
Overall, net written premiums jumped by 3.5% year-on-year to more than $10 billion, with strong operational results across both Global Retail Markets (GRM) and Global Risk Solutions (GRS).
Excluding the impacts of catastrophe events and net incurred losses attributable to prior years, Liberty Mutual’s combined ratio declined slightly to 92.8% in Q1 2020. However, catastrophe losses increased by almost 10% year-on-year to $306 million in Q1, taking the total combined ratio to 96.3%, which is unchanged from the previous year.
Other highlights of the first-quarter include Ironshore acquisition and integration costs of $4 million, compared with $6 million a year earlier, and restructuring costs of $2 million, which is unchanged year-on-year.
As at the end of March 2020, Liberty Mutual has reported total equity of $23.122 billion, which is a decline of $497 million from the end of December 2019.
“The global COVID-19 pandemic has caused an unprecedented impact on our society, changing life as we know it. We are grateful for the contributions of essential workers and extend our deepest sympathies to all those impacted. During these uncertain times, we are proud to offer our full support to our customers and distribution partners through initiatives such as our personal auto and small commercial premium refunds, as well as flexible payment options. I also wanted to thank our Liberty Mutual employees for their resilience and ability to support our customers and each other.
“Despite the challenges and uncertainties posed by COVID-19, we are confident in our ability to withstand this crisis and to continue to support our customers when they need us most,” said Long.
