Premium Growth and Investment Gains Offset Catastrophe Losses
In a press release, Liberty Mutual president and CEO Tim Sweeney pointed to “elevated catastrophe losses from widespread wind and hail events in Texas, Oklahoma, and Colorado” as the key factor behind the increased net loss. Catastrophe claims jumped to $2.27 billion in Q2 2023, more than double the $1.1 billion in the prior year period.
- The catastrophe claims stem largely from major spring storms that swept across the central U.S. Liberty Mutual’s home state of Massachusetts was spared from major storm damage.
- The catastrophic weather contributed to the company’s combined ratio rising nearly 4 percentage points to 109.4% in Q2. A ratio above 100% indicates an underwriting loss.
Sweeney said Liberty Mutual has taken “rate and underwriting action to address the inflationary pressures in personal lines.” This helped drive a 4.7 point improvement in the underlying loss ratio for the company’s global retail markets business compared to last year.
- The rate increases are aimed at keeping up with elevated claims costs amid high inflation. Auto claims have been especially pressured by the spike in used car prices.
Liberty Mutual also saw investment income plummet with limited partnerships revenue sinking 77% to $107 million in Q2. Overall company revenue did manage to improve 7% from a year ago to $12.4 billion.
- The investment arm was hurt by the downturn in financial markets, as equity markets sold off in the first half of 2022.
Strategic Moves Position Liberty Mutual for Future
Along with the quarterly results, Liberty Mutual announced several strategic moves meant to streamline operations and focus on core business lines.
- This includes the pending sale of international operations, such as its European general insurance unit, to concentrate more on U.S. markets.
Sweeney said the deals allow Liberty Mutual “to elevate our US-focused personal and small commercial business into a standalone business unit.” He said the changes will “better leverage scale advantages to drive target profitability.”
- Liberty Mutual is realigning to tap its leadership in U.S. home and auto insurance, where it is a top 5 national carrier.
The organizational shift comes after Liberty Mutual already made big changes last year when it acquired State Auto Group for $2.3 billion to expand and consolidate its middle market business.
With significant repositioning behind it, Sweeney said Liberty Mutual is aiming “to enhance focus on long-term strategic markets” and deliver sustainable profitable growth. That likely means continuing to emphasize rate increases and disciplined underwriting against a challenging claims cost environment.
