Liberty Mutual reports first quarter 2020 results

Liberty Mutual Holding Company Inc. and its subsidiaries reported net income attributable to LMHC of $519 million for the three months ended March 31, 2020, a decrease of $150 million from the same period in 2019.

“The global COVID-19 pandemic has caused an unprecedented impact on our society, changing life as we know it,” said David H. Long, Liberty Mutual Chairman and Chief Executive Officer. “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.

“For the first quarter, we report net income of $519 million, down from $669 million in the prior year quarter. Operational results across both GRM and GRS were strong with net written premium growth of 3.5% and a combined ratio of 96.3%. Our investment portfolio was impacted by the market volatility surrounding COVID-19 as we recognized losses of $247 million from a decline in market value in public equities. Our balance sheet was further impacted by unrealized investment losses of $576 million from the fixed income portfolio, which contributed to a 2% decline in equity. 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.

“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. On the insurance side, the situation is still evolving and did not materially impact our results through the first quarter. Looking ahead we expect the insurance impact to be similar to what we have 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.”

First Quarter Highlights

• Net written premium (“NWP”) for the three months ended March 31, 2020 was $10.039 billion, an increase of $340 million or 3.5% over the same period in 2019.
• Pre-tax operating income before partnerships, limited liability companies (“LLC”) and other equity method income for the three months ended March 31, 2020 was $705 million, an increase of $45 million or 6.8% over the same period in 2019.
• Partnerships, LLC and other equity method income for the three months ended March 31, 2020 was $100 million, an increase of $17 million or 20.5% over the same period in 2019.
• Net realized (losses) gains for the three months ended March 31, 2020 were ($247) million versus $250 million for the same period in 2019.
• Unit linked life insurance for the three months ended March 31, 2020 was $114 million versus ($61) million for the same period in 2019.
• Ironshore Inc. (“Ironshore”) acquisition and integration costs for the three months ended March 31, 2020 were $4 million, a decrease of $2 million or 33.3% from the same period in 2019.
• Restructuring costs for the three months ended March 31, 2020 were $2 million, no change from the same period in 2019.
• Consolidated net income for the three months ended March 31, 2020 was $519 million, a decrease of $150 million or 22.4% from the same period in 2019.
• Net income attributable to non-controlling interest for the three months ended March 31, 2020 was zero, no change from the same period in 2019.
• Net income attributable to LMHC for the three months ended March 31, 2020 was $519 million, a decrease of $150 million or 22.4% from the same period in 2019.
• Net income attributable to LMHC excluding unrealized impact¹ for the three months ended March 31, 2020 was $803 million, an increase of $338 million or 72.7% over the same period in 2019.
• Cash flow provided by continuing operations for the three months ended March 31, 2020 was $419 million, an increase of $184 million or 78.3% over the same period in 2019.
• The consolidated combined ratio before catastrophes² and net incurred losses attributable to prior years³ for the three months ended March 31, 2020 was 92.8%, a decrease of 0.1 points from the same period in 2019. Including the impact of catastrophes and net incurred losses attributable to prior years, the total combined ratio⁴ for the three months ended March 31, 2020 was 96.3%, no change from the same period in 2019.

Financial Condition as of March 31, 2020

• Total debt excluding unamortized discount and debt issuance costs was $8.627 billion as of March 31, 2020, a decrease of $44 million or 0.5% from December 31, 2019.
• Total equity was $23.122 billion as of March 31, 2020, a decrease of $497 million or 2.1% from December 31, 2019.