Liberty Mutual Insurance Reports Second Quarter 2017 Results
"Net income for the quarter was
Second Quarter Highlights
- Net written premium ("NWP") for the three months ended
June 30, 2017 was$9.910 billion , an increase of$892 million or 9.9% over the same period in 2016.
- Pre-tax operating income ("PTOI") before partnerships, limited liability companies ("LLC") and other equity method income (loss) for the three months ended
June 30, 2017 was$86 million , a decrease of$87 million or 50.3% from the same period in 2016.
- Net operating income before partnerships, LLC and other equity method income (loss) for the three months ended
June 30, 2017 was$54 million , a decrease of$64 million or 54.2% from the same period in 2016.
Partnerships, LLC and other equity method income (loss) for the three months endedJune 30, 2017 was$108 million versus($59) million for the same period in 2016.
- Net realized gains (losses) for the three months ended
June 30, 2017 were$30 million versus($95) million for the same period in 2016.
Ironshore Inc. ("Ironshore ") acquisition and integration costs for the three months endedJune 30, 2017 were$26 million versus zero for the same period in 2016.
- Loss on extinguishment of debt was zero for the three months ended
June 30, 2017 and 2016.
- Consolidated net income for the three months ended
June 30, 2017 was$127 million , an increase of$117 million over the same period in 2016.
- Net income attributable to LMHC for the three months ended
June 30, 2017 was$126 million , an increase of$111 million over the same period in 2016.
- Cash flow provided by operations for the three months ended
June 30, 2017 was$1.180 billion , an increase of$834 million over the same period in 2016.
- The consolidated combined ratio before catastrophes1, net incurred losses attributable to prior years2 and current accident year re-estimation3 for the three months ended
June 30, 2017 was 93.8%, an increase of 1.5 points over the same period in 2016. Including the impact of catastrophes, net incurred losses attributable to prior years and current accident year re-estimation, the Company's combined ratio4 for the three months endedJune 30, 2017 increased 1.3 points to 102.7%.
Year-to-date Highlights
- NWP for the six months ended
June 30, 2017 was$19.144 billion , an increase of$1.354 billion or 7.6% over the same period in 2016.
- PTOI before partnerships, LLC and other equity method income (loss) for the six months ended
June 30, 2017 was$254 million , a decrease of$533 million or 67.7% from the same period in 2016.
- Net operating income before partnerships, LLC and other equity method income (loss) for the six months ended
June 30, 2017 was$196 million , a decrease of$337 million or 63.2% from the same period in 2016.
Partnerships, LLC and other equity method income (loss) for the six months endedJune 30, 2017 was$270 million versus($36) million for the same period in 2016.
- Net realized gains (losses) for the six months ended
June 30, 2017 were$199 million versus($134) million for the same period in 2016.
Ironshore acquisition and integration costs for the six months endedJune 30, 2017 were$36 million versus zero for the same period in 2016.
- Loss on extinguishment of debt for the six months ended
June 30, 2017 was$1 million , a decrease of$7 million or 87.5% from the same period in 2016.
- Consolidated net income for the six months ended
June 30, 2017 was$478 million , an increase of$65 million or 15.7% over the same period in 2016.
- Net income attributable to LMHC for the six months ended
June 30, 2017 was$477 million , an increase of$69 million or 16.9% over the same period in 2016.
- Cash flow provided by operations for the six months ended
June 30, 2017 was$1.114 billion , an increase of$469 million or 72.7% over the same period in 2016.
- The consolidated combined ratio before catastrophes and net incurred losses attributable to prior years for the six months ended
June 30, 2017 was 93.9%, an increase of 1.2 points over the same period in 2016. Including the impact of catastrophes and net incurred losses attributable to prior years, the Company's combined ratio for the six months endedJune 30, 2017 increased 3.2 points to 102.1%.
Financial Condition as of
- Total debt was
$9.321 billion as ofJune 30, 2017 , an increase of$1.718 billion or 22.6% overDecember 31, 2016 .
- Total equity was
$21.471 billion as ofJune 30, 2017 , an increase of$1.084 billion or 5.3% overDecember 31, 2016 .
Subsequent Events
Management has assessed material subsequent events through
Consolidated Net Operating Income |
Three Months Ended |
Six Months Ended |
|||||
$ in Millions |
2017 |
2016 |
Change |
2017 |
2016 |
Change |
Net operating income before |
|
|
(54.2%) |
|
|
(63.2%) |
|
70 |
(38) |
NM |
176 |
(20) |
NM |
Net realized gains (losses), net of tax |
20 |
(70) |
NM |
130 |
(95) |
NM |
|
(17) |
- |
NM |
(23) |
- |
NM |
Loss on extinguishment of debt, net of |
- |
- |
- |
(1) |
(5) |
(80.0) |
Less: Net income (loss) attributable to |
1 |
(5) |
NM |
1 |
5 |
(80.0) |
Net income attributable to LMHC |
|
|
NM |
|
|
16.9% |
NM = Not Meaningful |
Consolidated Results of Operations |
Three Months Ended |
Six Months Ended |
|||||
$ in Millions |
2017 |
2016 |
Change |
2017 |
2016 |
Change |
Revenues |
|
|
10.4% |
|
|
9.1% |
PTOI before catastrophes, net incurred |
|
|
(5.1%) |
|
|
(10.9%) |
Catastrophes1 |
(692) |
(765) |
(9.5) |
(1,331) |
(1,146) |
16.1 |
Net incurred losses attributable to |
||||||
- Asbestos and environmental2 |
(5) |
9 |
NM |
(9) |
9 |
NM |
- All other2,3 |
(40) |
47 |
NM |
(30) |
101 |
NM |
Current accident year re-estimation4 |
(48) |
(36) |
33.3 |
- |
- |
- |
PTOI before partnerships, LLC and |
86 |
173 |
(50.3) |
254 |
787 |
(67.7) |
|
108 |
(59) |
NM |
270 |
(36) |
NM |
PTOI |
194 |
114 |
70.2 |
524 |
751 |
(30.2) |
Net realized gains (losses) |
30 |
(95) |
NM |
199 |
(134) |
NM |
|
(26) |
- |
NM |
(36) |
- |
NM |
Loss on extinguishment of debt |
- |
- |
- |
(1) |
(8) |
(87.5) |
Pre-tax income |
198 |
19 |
NM |
686 |
609 |
12.6 |
Income tax expense |
71 |
9 |
NM |
208 |
196 |
6.1 |
Consolidated net income |
127 |
10 |
NM |
478 |
413 |
15.7 |
Less: Net income (loss) attributable to |
1 |
(5) |
NM |
1 |
5 |
(80.0) |
Net income attributable to LMHC |
|
|
NM |
|
|
16.9% |
Cash flow provided by operations |
|
|
12.8% |
|
|
4.8% |
Pension contributions |
(1) |
(701) |
(99.9) |
(402) |
(802) |
(49.9) |
Cash flow provided by operations |
|
|
NM |
|
|
72.7% |
1 |
Catastrophes are defined as a natural catastrophe or terror event exceeding |
2 |
Asbestos and environmental is gross of the related adverse development cover (the "NICO Reinsurance Transaction"), and All other includes all cessions related to the NICO Reinsurance Transaction. |
3 |
Net of earned premium and reinstatement premium attributable to prior years of |
4 |
Re-estimation of the current accident year loss reserves for the three months ended |
5 |
|
NM = Not Meaningful |
Financial Information: The Company's financial results, management's discussion and analysis of operating results and financial condition, accompanying financial statements and other supplemental financial information for the three and six months ended
Conference Call Information: On
About
LMHC, through its subsidiaries and affiliated companies, offers a wide range of property and casualty insurance products and services to individuals and businesses alike. In 2001 and 2002, the Company formed a mutual holding company structure, whereby the three principal mutual insurance companies,
Functionally, the Company conducts substantially all of its business through the SBUs, with each operating independently of the others with dedicated sales, underwriting, claims, actuarial, financial and certain information technology resources. Management believes this structure allows each business unit to execute its business strategy and/or to make acquisitions without impacting or disrupting the operations of the Company's other business units.
LMHC employs more than 50,000 people in over 800 offices throughout the world. For a full description of the Company's business operations, products and distribution channels, please visit Liberty Mutual's Investor Relations web site at www.libertymutualgroup.com/investors.
Cautionary Statement Regarding Forward Looking Statements
This report contains forward looking statements that are intended to enhance the reader's ability to assess the Company's future financial and business performance. Forward looking statements include, but are not limited to, statements that represent the Company's beliefs concerning future operations, strategies, financial results or other developments, and contain words and phrases such as "may," "expects," "should," "believes," "anticipates," "estimates," "intends" or similar expressions. Because these forward looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond the Company's control or are subject to change, actual results could be materially different.
Some of the factors that could cause actual results to differ include, but are not limited to the following: the occurrence of catastrophic events (including terrorist acts, hurricanes, hail, tornados, tsunamis, earthquakes, floods, snowfall and winter conditions); inadequacy of loss reserves; adverse developments involving asbestos, environmental or toxic tort claims and litigation; adverse developments in the cost, availability or ability to collect reinsurance; disruptions to the Company's relationships with its independent agents and brokers; financial disruption or a prolonged economic downturn; the performance of the Company's investment portfolios; a rise in interest rates; risks inherent in the Company's alternative investments in private LPs, LLCs, commercial mortgages and natural resource working interests; difficulty in valuing certain of the Company's investments; subjectivity in the determination of the amount of impairments taken on the Company's investments; unfavorable outcomes from litigation and other legal proceedings, including the effects of emerging claim and coverage issues and investigations by state and federal authorities; the Company's exposure to credit risk in certain of its business operations; the Company's inability to obtain price increases or maintain market share due to competition or otherwise; inadequacy of the Company's pricing models; changes to insurance laws and regulations; changes in the amount of statutory capital that the Company must hold to maintain its financial strength and credit ratings; regulatory restrictions on the Company's ability to change its methods of marketing and underwriting in certain areas; assessments for guaranty funds and mandatory pooling arrangements; a downgrade in the Company's claims-paying and financial strength ratings; the ability of the Company's subsidiaries to pay dividends to the Company; inflation, including inflation in medical costs and automobile and home repair costs; the cyclicality of the property and casualty insurance industry; political, legal, operational and other risks faced by the Company's international business; potentially high severity losses involving the Company's surety products; loss or significant restriction on the Company's ability to use credit scoring in the pricing and underwriting of personal lines policies; inadequacy of the Company's controls to ensure compliance with legal and regulatory standards; changes in federal or state tax laws; risks arising out of the Company's securities lending program; the Company's utilization of information technology systems and its implementation of technology innovations; difficulties with technology or data security; insufficiency of the Company's business continuity plan in the event of a disaster; the Company's ability to successfully integrate operations, personnel and technology from its acquisitions; insufficiency of the Company's enterprise risk management models and modeling techniques; and changing climate conditions. The Company's forward looking statements speak only as of the date of this report or as of the date they are made and should be regarded solely as the Company's current plans, estimates and beliefs. For a detailed discussion of these and other cautionary statements, visit the Company's Investor Relations website at www.libertymutualgroup.com/investors. The Company undertakes no obligation to update these forward looking statements.
Contact: |
Investor Relations |
Media Relations |
|
|
|
857-224-6655 |
617-574-6638 |
1 |
Catastrophes are defined as a natural catastrophe or terror event exceeding |
2 |
Net incurred losses attributable to prior years is defined as incurred losses attributable to prior years (including prior year losses related to catastrophes and prior year catastrophe reinstatement premium) including earned premium attributable to prior years. |
3 |
Re-estimation of the current accident year loss reserves for the three months ended |
4 |
The combined ratio, expressed as a percentage, is a measure of underwriting profitability. This measure should only be used in conjunction with, and not in lieu of, underwriting income and may not be comparable to other performance measures used by the Company's competitors. The combined ratio is computed as the sum of the following property and casualty ratios: the ratio of claims and claim adjustment expense less managed care income to earned premium; the ratio of insurance operating costs plus amortization of deferred policy acquisition costs less third-party administration income and fee income (primarily related to the Company's involuntary market servicing carrier operations) and installment charges to earned premium; and the ratio of policyholder dividends to earned premium. Provisions for uncollectible premium and reinsurance are not included in the combined ratio unless related to an asbestos and environmental commutation and certain other run off. |
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