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Liberty Mutual’s Q3 income rises to $397mn despite almost $1bn of cat losses

5th November 2020 - Author: Luke Gallin

Liberty Mutual Holding Company Inc. (LMHC) and its subsidiaries today reported a 46% rise in net income for the third-quarter of 2020 to $397 million, despite a significant increase in quarterly catastrophe losses, year-on-year, to $980 million.

liberty mutualFor the quarter, net income jumped from the $125 million reported for the second-quarter of 2020, but fell by 55.5% for 9M 2020 to $596 million, compared with $1.34 billion for the same period in 2019.

The catastrophe experience was substantial in the third-quarter of this year and combined with Q1 and Q2, takes the company’s catastrophe losses for the nine month period ended September 30th, 2020 to around $2.2 billion, which represents an increase of 80.2% from the same period last year.

Within this $2.2 billion total, approximately $565 million of losses relate to the COVID-19 pandemic, which includes Global Risk Solutions (GRS) estimated loss activity directly related to the pandemic.

Commenting on the firm’s performance, Liberty Mutual’s Chairman and Chief Executive Officer (CEO), David H. Long, said: “Despite elevated catastrophe losses, net income for the third quarter was $397 million, a 46% increase from the prior year quarter.

“Results benefited from strong investment income as valuations in our partnership portfolio, booked on a quarter lag, rebounded from March lows. Catastrophe losses of nearly $1 billion, which doubled from the prior year quarter, were driven by an increased frequency of events across the U.S., including Hurricane Laura and the wildfires on the west coast. We are grateful for the efforts of our claims personnel to support our impacted customers, especially during these challenging times, and for the continued resiliency of all our employees globally during the pandemic.

“Net written premium grew 3.7% to $10.7 billion in the quarter reflecting a 16% increase in renewal rate within Global Risk Solutions and a higher policy count in Global Retail Markets U.S. Personal Lines. Within Global Risk Solutions, the rate increases continued to flow through to the bottom line as evidenced by a 97.1% core combined ratio, which is 1.9 points lower than last year. Going forward, rate increases will continue to be critical as economic conditions pressure returns in our longer tailed business.”

For the third-quarter, net realised gains amounted to $219 million, which is an increase of more than 170% on the same period last year. For 9M 2020, net realised gains totalled $375 million, which is actually a decline of 4.6% from 9M 2019.

Liberty Mutual has also reported on the impacts of the Ironshore acquisition and integration costs for both the third-quarter and the first nine months of the year. For Q3, this totalled $5 million and for 9M 2020 $16 million. Additionally, the firm has announced restructuring costs of $28 million for Q3 2020 and $30 million for 9M 2020.

Overall, Liberty Mutual has reported a combined ratio of 104% for Q3 2020, which represents an increase of 1.5 percentage points over Q3 2019. However, the consolidated combined ratio, so before cats and COVID-19, net incurred losses attributable to prior years and current accident year re-estimation, stands at 93.6%.

For 9M 2020, Liberty Mutual has reported a combined ratio of 101.8%, which represents an increase of 1.8 percentage points over 9M 2019. The consolidated combined ratio for 9M 2020 totalled 91.8%, a decrease of 2.6 percentage points from the same period in 2019.

Commenting on its financial position, and Liberty Mutual notes that total equity was $25.129 billion as at the end of September 2020, an increase of more than 6% from the end of December 2019.

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