Liberty’s CEO Long sees Q2 2019 net income drop as cats cause ‘unusual volatility’

Liberty Mutual Insurance saw a considerable drop in its net income in Q2 2019 from the same quarter a year earlier, as chairman and chief executive David Long highlighted “unusual volatility” caused by Typhoon Jebi and higher than expected non-catastrophe loss activity.

The insurer reported net income of $399 million for the second quarter of 2019 a drop of 59.3 percent from $981 million for the same three months in 2018.

In the first six months of the year, it reported net income of $1.07 billion, representing a 34.3 percent decrease from $1.62 billion in the same period a year before.

The company’s consolidated combined ratio including the impact of catastrophes, net incurred losses attributable to prior years and current accident year re-estimation, had increased to 101.2 percent, up 3.3 points, from 97.9 percent in the second quarter of 2018.

Excluding catastrophes, net incurred losses attributable to prior years and current accident year re-estimation the combined ratio was 93.9 percent up 1.6 percentage points from 92.3 percent Q2 2018.

Catastrophe losses were still $477 million in Q2, despite dropping 7 percent from $513 million in the same period a year earlier.

Net written premiums (NWP) for the three months ended June 30, 2019 was $10.03 billion, a decrease of 0.3 percent from the same period in 2018.

The acquisition and integration of Ironshore costs for the three months ended June 30, 2019 were $6 million, a decrease of $4 million or 40 percent, from the same period in 2018.

Restructuring following the Ironshore purchase and other runoff costs in Q2 2019 were $1 million, down $27 million or 96.4 percent, from the same period in 2018.

Liberty’s chairman and chief executive Long said: “For the second quarter, consolidated net income from continuing operations was $399 million, down $110 million from 2018.

“We witnessed unusual volatility resulting from $82 million of Typhoon Jebi development and higher than expected non-catastrophe loss activity, including adverse trends in liability lines consistent with industry wide results.

“Results for the first six months were more in line with expectations as consolidated net income from continuing operations was $1.1 billion, up $21 million from 2018, with revenues up 4.1 percent. Key drivers include a combined ratio of 98.7 percent, investment income up 2 percent, and a one point reduction in the expense ratio.

“While year-to-date results are in-line with 2018, we remain committed to further improving underwriting performance, specifically in commercial lines, and feel confident that market conditions will allow us to do so.”

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