Liberty Mutual Insurance, the Boston-based insurance giant, reported a substantial improvement in its financial performance for the second quarter of 2024, marking a significant turnaround from the previous year. The company’s results, released on August 7, 2024, highlight several key areas of progress:
- Net income of $717 million for Q2 2024, compared to a net loss of $585 million in Q2 2023
- The underlying combined ratio improved by 9.5 points to 84.0%
- Pre-tax operating income of $1.144 billion versus a loss of $503 million in the same period last year
Tim Sweeney, Liberty Mutual’s President & CEO, attributed the improved performance to several factors: “Our underlying combined ratio improved 9.5 points from the prior year to 84.0%. Of that, 7.1 points of improvement resulted from our targeted underwriting strategies improving both personal and commercial lines.”
Expense management shows results
The company’s focus on expense management also paid dividends, with Sweeney noting a 2.4-point improvement in the expense ratio, bringing it down to 26.4% for both the second quarter and the first half of the year.
Despite these improvements, Liberty Mutual continues to face challenges. Catastrophe losses, while lower than the previous year, remained elevated at $1.742 billion for the quarter, primarily due to severe convective storm activity in the US Midwest. However, the total combined ratio, including catastrophes and prior year development, showed a marked improvement at 99.6%, a 9.8-point betterment over the prior year.
Investment income up
The company’s investment performance was another bright spot. Net investment income reached $1.3 billion, benefiting from higher reinvestment rates and favorable private equity valuations.
US Retail Markets
In the US Retail Markets segment, which represents a significant portion of Liberty Mutual’s business, the company reported:
- Pre-tax operating income of $126 million, compared to a loss of $989 million in Q2 2023
- Underlying pre-tax operating income of $1.681 billion, an increase of $991 million year-over-year
- Revenues of $7.746 billion, a modest increase of $73 million from the same period in 2023
Several factors drove the improvements in the US Retail Markets segment:
- Favorable non-catastrophe losses due to improved personal lines frequency and continued underwriting actions to limit risk exposure
- Lower expenses resulting from reduced advertising spend and lower employee-related costs
- Increased personal lines average written premium per policy
However, unfavorable net incurred losses attributed to prior years, driven by reserve releases in 2023, partially offset these positive trends.
Looking ahead
Looking ahead, the company’s strategic focus on underwriting discipline and expense management appears to be yielding results, but the ongoing threat of catastrophic events, particularly severe weather, remains a concern for the industry as a whole.
The insurer also announced the pending sale of Hughes Insurance in Northern Ireland to Markerstudy Group, subject to regulatory approval. This move aligns with Liberty Mutual’s strategy to streamline its operations and focus on core markets.
