Liberty Mutual Posts $284M Q4 Income, Diversifies Business

Liberty Mutual Group reported $284 million in net profit for its 2011 fourth quarter — down 50.7 percent compared to the same period one year ago. The insurer said the quarterly operating results were hurt especially by losses from Thailand floods. Overall CAT losses for the quarter were tallied at $234 million, up 18.2 percent from one year ago. Net written premium rose on both the quarterly and full-year basis.

Net written premium for the quarter was $7.72 billion, up 10.6 percent from one year ago. Revenues for the quarter were $8.96 billion, up 4.8 percent from one year ago.

The consolidated combined ratio for the quarter (before catastrophes and net incurred losses attributable to prior years and current accident year re-estimation) was 98.3 percent, deteriorating 1.0 point from the previous year. When including the impact of catastrophes, net incurred losses attributable to prior years and current accident year re-estimation, the combined ratio for the quarter was 104.2 percent, up 5.0 points from one year ago.

Net profit on the full-year basis also fell. The company reported $365 million net profit for the full year 2011, down 78.2 percent from 2010. Net written premium for the full year was $31.18 billion, up 6.8 percent from one year ago. Revenues for the year were $34.67 billion, up 4.5 percent from one year ago.

The consolidated combined ratio for the full year (before catastrophes and net incurred losses attributable to prior years) was 97.5 percent, down 0.1 points from 2010. When including the impact of catastrophes and net incurred losses attributable to prior years, the combined ratio for the year was 107.4 percent, deteriorating 6.2 points from one year ago.

“Operating results in the fourth quarter were adversely affected by the Thailand floods, bringing our pre-tax catastrophe losses for the year to a historically high level of $2.7 billion,” said CEO David Long. But he emphasized that core earnings are solid and that the insurer’s diversification continues to help the company.

“Not immediately evident in the numbers are the opening of our fourth China branch in Guangdong Province, a second level of regulatory approval of our joint venture in India, the acquisition of Quinn insurance operations in Ireland, and a favorable trajectory of pricing trends across multiple lines of business,” Long said. “Collectively, these position us well for a more prosperous 2012.”

Also speaking during an earnings call, Long said he thought he was happy to put 2011 behind — until recently. “In summary, I’m pretty happy that it’s no longer 2011, or at least I thought so until last weekend,” said Long, referring to scores of tornadoes in early March. According to Eqecat, these tornadoes could cost up to $2 billion in insured losses for the industry.

He said Liberty Mutual will continue with the same strategy. “We’ll grow where we can do so profitably and contract where we need to. This rule applies to any business segment, geography or product.”

He said the company is seeing rate hikes of over 3 percent in personal auto insurance and 5.5 percent in homeowners insurance in the U.S. — as well as continuing positive rate hike trends for business insurance.