Liberty Mutual Insurance Reports Fourth Quarter and Full Year 2018 Results

BOSTON, Massachusetts, Feb. 26 -- Liberty Mutual Insurance Group issued the following news release:

Liberty Mutual Holding Company Inc. and its subsidiaries (collectively "LMHC" or the "Company" reported net income attributable to LMHC of $249 million and $2.160 billion for the three and twelve months ended December 31, 2018, increases of $44 million and $2.143 billion over the same periods in 2017. Including zero and $1 million of net income attributable to non-controlling interest, consolidated net income for the three and twelve months ended December 31, 2018 was $249 million and $2.161 billion, respectively.

"Premium growth was strong at 6.3% for the year as market conditions improved domestically and international growth remained robust at 13.1%," said David H. Long, Liberty Mutual Chairman and Chief Executive Officer. "Net income was $2.2 billion despite another year of above average catastrophe losses.

"The combined ratio for the full year improved 6.4 points to 99.2% and our investment portfolio again delivered strong results. Our new operating structure, forming Global Retail Markets and Global Risk Solutions, is delivering tangible results and has us well positioned to continue to improve performance."

Fourth Quarter Highlights

* Net written premium ("NWP") for the three months ended December 31, 2018 was $9.406 billion, an increase of $545 million or 6.2% over the same period in 2017.

* Pre-tax operating income before partnerships, limited liability companies ("LLC") and other equity method income for the three months ended December 31, 2018 was $277 million, an increase of $112 million or 67.9%over the same period in 2017.

* Partnerships, LLC and other equity method income for the three months ended December 31, 2018 was $285 million, an increase of $185 million or 185.0% over the same period in 2017.

* Net realized (losses) gains for the three months ended December 31, 2018 were ($ 139) million versus $122 million for the same period in 2017.

* Ironshore Inc. ("Ironshore") acquisition and integration costs for the three months ended December 31, 2018were $55 million, an increase of $43 million over the same period in 2017.

* Restructuring costs for the three months ended December 31, 2018 were $37 million, a decrease of $31 millionor 45.6% from the same period in 2017.

* Loss on extinguishment of debt for the three months ended December 31, 2018 was zero, no change versus thesame period in 2017.

* Discontinued operations, net of tax, for the three months ended December 31, 2018 were ($2) million versus $52 million for the same period in 2017.

* Consolidated net income for the three months ended December 31, 2018 was $249 million, an increase of $44million or 21.5% over the same period in 2017.

* Net income attributable to non-controlling interest for the three months ended December 31, 2018 was zero, no change versus the same period in 2017.

* Net income attributable to LMHC for the three months ended December 31, 2018 was $249 million, an increase of $44 million or 21.5% over the same period in 2017.

* Cash flow provided by continuing operations for the three months ended December 31, 2018 was $1.136billion, an increase of $776 million over the same period in 2017.

* The consolidated combined ratio before catastrophes, net incurred losses attributable to prior years and current accident year re-estimation for the three months ended December 31, 2018 was 94.7%, an increase of 0.5points over the same period in 2017. Including the impact of catastrophes, net incurred losses attributable to prior years and current accident year re-estimation, the total combined ratio 4 for the three months ended December 31, 2018 was 100.4%, a decrease of 0.1 points from the same period in 2017.

Year-to-date Highlights

* NWP for the twelve months ended December 31, 2018 was $39.100 billion, an increase of $2.311 billion or 6.3% over the same period in 2017.

* Pre-tax operating income (loss) before partnerships, LLC and other equity method income for the twelvemonths ended December 31, 2018 was $1.453 billion versus ($1.004) billion for the same period in 2017.

* Partnerships, LLC and other equity method income for the twelve months ended December 31, 2018 was $978 million, an increase of $408 million or 71.6% over the same period in 2017.

* Net realized (losses) gains for the twelve months ended December 31, 2018 were ($147) million versus $468 million for the same period in 2017.

* Ironshore acquisition and integration costs for the twelve months ended December 31, 2018 were $86 million, no change versus the same period in 2017.

* Restructuring costs for the twelve months ended December 31, 2018 were $94 million, an increase of $3 million or 3.3% over the same period in 2017.

* Loss on extinguishment of debt for the twelve months ended December 31, 2018 was $8 million, an increase of $7 million over the same period in 2017.

* Discontinued operations, net of tax, for the twelve months ended December 31, 2018 were $528 million, an increase of $315 million or 147.9% over the same period in 2017.

* Consolidated net income for the twelve months ended December 31, 2018 was $2.161 billion, an increase of $2.142 billion over the same period in 2017.

* Net income attributable to non-controlling interest for the twelve months ended December 31, 2018 was $1 million, a decrease of $1 million or 50% from the same period in 2017.

* Net income attributable to LMHC for the twelve months ended December 31, 2018 was $2.160 billion, an increase of $2.143 billion over the same period in 2017.

* Cash flow provided by continuing operations for the twelve months ended December 31, 2018 was $3.548 billion, an increase of $1.724 billion or 94.5% over the same period in 2017.

* The consolidated combined ratio before catastrophes and net incurred losses attributable to prior years for the twelve months ended December 31, 2018 was 94.4%, an increase of 0.2 points over the same period in 2017. Including the impact of catastrophes and net incurred losses attributable to prior years, the total combined ratio for the twelve months ended December 31, 2018 was 99.2%, a decrease of 6.4 points from the same period in 2017.

Financial Condition as of December 31, 2018

* Total debt was $8.233 billion as of December 31, 2018, a decrease of $92 million or 1.1% from December 31, 2017.

* Total equity was $20.762 billion as of December 31, 2018, an increase of $74 million or 0.4% over December 31, 2017.

Subsequent Events

On February 13, 2019, following a strategic review of certain operations, the Company has classified its investments in Pembroke Managing Agency Ltd., Visionary Underwriting Agency Ltd., Ironshore Europe Designated Activity Company, and Ironshore Corporate Capital 3 Ltd. as held for sale. The Company is evaluating the impact of this classification.

On January 28, 2019, Liberty Mutual Group Inc. ("LMGI") exchanged $1 billion par value of Senior Notes due 2029 (the "2029 Notes") for $270 million of its 5.00% Notes due 2021, $277 million of its 4.95% Notes due 2022 and $453 million of its 4.25% senior notes due 2023. LMGI paid an aggregate of $40 million cash consideration, including accrued and unpaid interest, for the existing notes accepted for exchange. Interest on the 2029 Notes is payable semi-annually at a fixed rate of 4.569%. The 2029 Notes mature on February 1, 2029.

Management has assessed material subsequent events through February 26, 2019, the date the financial statements were available to be issued.

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