Liberty Mutual returns to Q1 underwriting gain; trims every loss metric
Liberty Mutual swung back to first quarter underwriting profits, trimming 8.4 points from its combined ratio to 95.8% by shrinking its way back to profits in US retail and benefitting from low cat losses all around.
“Underwriting results continue to improve,” CEO Tim Sweeney said of results. “We continue to make on profit improvement as we march towards our 95% combined ratio target in 2025.”
The group's margin improvement versus the loss-making prior year period was visible alongside every cost measure. Loss ratios improved for attritional, cats, still-unfavourable PYD and expense.
The greater margin gain came in US retail markets where the business shrank 5.7% in terms of net written premium but segment pre-tax operating profit swung from a prior year $310 million loss to a $626 million gain.
Liberty trimmed 5.2 ratio points from its US retail attritional loss ratio, another 1.7 points from its cat loss ratio and3.1 points from its expense ratio on its way to a 10.2 point improvement in the segment combined ratio to 95.4%.
In the Global Risk Solutions segment, which includes Liberty Specialty Markets and reinsurer Liberty Re amongst others, the group got its combined ratio to an even better 94.2%, a 3.9 point reduction versus Q1 2023 as reduced cats and a shift to neutral reserving more than overcame a 2.8 point deterioration in the attritional loss ratio.
Throughout the group, growth proved very selective, with year-on-year gains in net written premium only visible in commercial property, reinsurance in the global risk solutions business and surety.
US retail NPW were down 5.7%. within personal lines, mark auto down 6.7% and homeowners down 5.9%. Retention slipped again, now to 76.4%, as rate growth accelerated nearly 4 percentage points to 22%.
“The decrease reflects targeted actions to reduce new business growth in response to elevated severity and frequency trends,” management said, with note that portfolio actions to date have resulted in supportive rate change.
Similar cases could be found in US retail commercial. Most notably, multi-peril was down 23% on similar “targeted actions to reduce new business growth in response to elevated severity and frequency trends.”
Growth in the Global Risk Solutions segment of 3.7% in net written premium was split between net decline for specialty on higher reinsurance cessions and an outright gain for reinsurance attributed to rate increases and new business. Reinsurance premium was up 9.6% year on year.
Casualty lines, chiefly general liability, excess & umbrella and environmental lines of business, saw a 3.9% decline in NPW on what management called “de-risking of the portfolio in less profitable products.”
Together with a rise in investment earnings and a $663 million after-tax benefit from an asset sale, Liberty Mutual laid claim to a group net profit of $1.54 billion, up from a fractional prior year period loss.
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