Earnings Roller Coaster: Liberty Mutual’s $572 Million Swing from Q1 2022 Profit to Q1 2023 Loss
On May 11, 2023, Liberty Mutual Holding Company Inc., the Boston-based insurer and its subsidiaries collectively known as LMHC, reported a net loss of $74 million for Q1 2023. This loss compares to last year’s Q1 results when LMHC posted a net income of $498 million: a change of $572 million.
Some financial results improved despite high CAT losses
LMHC’s President & CEO, Tim Sweeney, attributed the net loss largely to elevated catastrophe losses. These losses were caused primarily by severe weather storms in the Midwest. Despite these challenges, the company has reported some positive results, including:
Over the past year, LMHC achieved a premium renewal rate increase of 12.8% in U.S. Personal Lines.
LMHC’s Global Risk Solutions segment has made progress towards previously stated combined ratio targets, with a total combined ratio of 97.5%, a 2.2-point improvement from Q1 2022.
Key Q1 2023 Financial Highlights
LMHC’s consolidated financial results for Q1 2023 presented some notable changes:
Net Written Premium (NWP) by Business: Global Retail Markets and Global Risk Solutions saw changes of +5.1% and -3.5%, respectively. The total NWP increased by 2.8% from Q1 2022.
Revenues: The company saw a 7.5% increase in revenues, totaling $12,760 million.
Pre-tax operating income: This saw a significant drop from $399 million in Q1 2022 to $61 million in Q1 2023.
Cash flow from continuing operations: This saw a drastic decrease from $786 million in Q1 2022 to $53 million in Q1 2023.
The U.S. Segment of Global Retail Markets includes personal and commercial lines
LMHC’s Global Retail Markets include a U.S. segment divided into Personal and Business Lines. Personal Lines sell various types of property and casualty insurance to individuals in the United States. These insurance products are distributed through various channels, including licensed employee Comparion agents, telesales counselors, independent agents, third-party producers, and online and sponsored affinity groups. Business Lines serve small commercial customers, leveraging local underwriting, market knowledge, and service with the advantages of a national company.
Summary of U.S. segment of Global Retail Markets.
The following information relating to Global Retail Markets in the United States is derived from LMHC’s “Management’s Discussion & Analysis of Financial Condition and Results of Operations for the quarter ended March 31, 2023.”
In March 2022, the company began selling U.S. Personal and Business Lines coverages under the newly acquired SAM brand. The acquisition of SAM, [State Automobile Mutual Insurance Company], a super-regional insurance holding company based in Columbus, Ohio, was completed on March 1, 2022.
Net written U.S. premium for the segment
The Net Written Premiums (NWP) for the U.S. segment for the quarter ending March 31, 2023, was $6.944 billion, a 2.7% increase from the same period in 2022. The acquisition of SAM resulted in two additional months of topline production for U.S. personal lines and U.S. business lines in 2023 compared to last year.
The increase in U.S. personal lines was driven by an increase in average written premium due to rate actions to offset rising personal lines severity and frequency trends. Similarly, U.S. business lines saw an increase in average written premiums due to an increase in endorsements and exposure. However, these increases were partially offset by targeted actions across the U.S. to reduce new business growth to address rising severity and frequency trends.
Pre-tax operating results
Pre-tax operating (loss) income for the three months ended March 31, 2023, was ($250) million, down from $249 million for the same period in 2022. This decrease primarily reflects additional catastrophe loss exposure from the SAM acquisition and higher-than-expected catastrophe losses in the U.S.
For the same period, revenues were $8.790 billion, an increase of $997 million over the same period in 2022. This increase primarily reflects higher earned premiums due to the topline impacts previously discussed. However, claims, benefits, and expenses were $9.009 billion, an increase of $1.430 billion over the same period in 2022. The increase primarily reflects additional claims, benefits, and expenses from SAM and AmGeneral [a Malaysian insurer] acquisitions and higher-than-expected catastrophe losses in the U.S.
The Global Retail Markets underlying combined ratio for the three months ended March 31, 2023, was 94.4%, an increase of 0.9 points over the same period in 2022. The total combined ratio for the same period was 104.8%, an increase of 6.5 points over the same period in 2022. These increases primarily reflect higher U.S. non-catastrophe losses and unfavorable catastrophe losses.
About Liberty Mutual
Liberty Mutual has been providing insurance coverage since 1912. Today, it ranks as the fifth-largest global property and casualty insurer based on 2022 gross written premium and the 78th-largest corporation in the U.S. based on 2021 revenue. With a presence in 29 countries, Liberty Mutual employs over 50,000 people worldwide and offers a vast range of insurance products and services.
For more detailed financial information on Liberty Mutual’s Q1 2023 performance, visit their Investor Relations website at www.libertymutualgroup.com/investors. For more about the company, visit www.libertymutualinsurance.com.
