Liberty Mutual in the midst of strategic transition

Liberty Mutual hosted its Q2’23 earnings call on Aug 10, 2023. Select highlights:

• Liberty Mutual is refining its focus to provide more value to customers and partners, aiming for target profitability.
• The company will focus on the US market and select global markets with potential long-term value.
• Liberty Mutual has chosen to divest certain businesses in Europe and Latin America.
• GRM (​Global Retail Markets) West personal and small commercial businesses, as well as some GRS direct insurance businesses in Brazil, Chile, and Colombia, will be divested.
• GRM US business will become a stand-alone unit named US Retail Markets (USRM) led by Hamid Mirza. USRM will concentrate on US personal and small commercial lines.
• Asia is identified as a significant growth region for the company.
• The company’s GRM East operations will be renamed Asia Retail Markets, streamlining their focus on Asia.
• Jim MacPhee, formerly the President of GRM, will now be the Chief Operating Officer of Liberty Mutual, focusing on operationalizing scale advantages and improving expenses and data capabilities.
• For Q2, the company reported a net loss of $585 million, a greater loss than the $343 million in 2022, due to challenging market conditions in the personal lines industry.
• The combined ratio for the quarter was 109.4%, an increase of 3.8 points compared to the second quarter of 2022.
• Catastrophe losses, mainly from wind and hail events, added 20 points to the combined ratio.
• Underlying loss ratio improved by 3.4 points due to rate actions in both business segments.
• GRS business’s underlying loss ratio has seen improvement over the past 2 quarters.
• Q2 net written premium stood at $11.8 billion, roughly the same as 2022.
• Increases from State Auto and AmGen acquisitions were offset by reductions in GRM and GRS.
• The company maintains a disciplined underwriting approach to meet profitability targets.
• Investment portfolio yielded $797 million, down from $938 million in 2022. Lower returns from limited partnership investments in private capital are the main cause.
• Net written premium for the first half was $23.0 billion, a 1.0% increase from 2022.
• Growth was due to robust rate increases across various lines.
• Actions to reduce new business growth and decrease exposure were taken to address unprofitability. These actions were especially significant in U.S. personal lines due to persistently high loss trends.