Liberty Mutual profits nosedive 81% in H1 due to COVID-19 economic downturn

Profit at Liberty Mutual declined 81.3 percent in the first half of the year and the combined ratio worsened due to the significant impact from COVID-19 and consequent economic downturn as well as above average catastrophe losses.

The company made a net profit of $199 million for H1 2020, down 81.3 percent from $1.066 billion profit it made in the same period of 2019. For the second quarter of 2020, Liberty Mutual swung to a net loss of $320 million, compared with a net profit of $397 million in the same period a year ago.

The total combined ratio for Q2 was 105.2 percent, an increase of 4.0 points over the same period in 2019. For the half year, the total combined ratio was 100.6 percent, an increase of 1.9 points over the same period in 2019.

Net written premium (NWP) for Q2 2020 was $9.780 billion, a decrease of $259 million from the same period in 2019. NWP for the first half of 2020 was $19.819 billion, an increase of $81 million over the same period in 2019.

David Long, Liberty Mutual chairman and chief executive officer, said: "For the second quarter, we reported a net loss attributable to LMHC of $320 million, reflecting significant impacts from the COVID-19 pandemic and consequent economic downturn as well as above average catastrophe losses. Incurred losses for COVID-19 amounted to $529 million in the quarter, with roughly half of these losses related to event cancellation. Based on our size and industry footprint, these losses fall within our expectations for an event of this magnitude. Catastrophe losses of $878 million were up $384 million from the prior year quarter and resulted primarily from a high frequency of severe storm activity and include $147 million of losses related to civil unrest. On the investment side, realized gains from the sale of fixed maturities were more than offset by losses in our partnership portfolio, which are booked on a quarter lag."

He added: "Despite these extraordinary events, our core combined ratio in the quarter improved 4.6 points to 89.1%, and we are encouraged by the continued market firming in commercial lines which should only accelerate as COVID-19 weighs on industry profitability. Within Global Risk Solutions, we achieved renewal rate increases of 16% in the quarter which is in excess of observed loss trend. The market has been receptive to the need for rate in recent quarters as loss trends remain elevated. We expect this will have a meaningful impact on our core underwriting results going forward."