Liberty Mutual Insurance Reports Second Quarter 2017 Results

BOSTON, Aug. 3 -- Liberty Mutual 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 $126 million and $477 million for the three and six months ended June 30, 2017, increases of $111 million and $69 million over the same periods in 2016, respectively. Including $1 million of net income attributable to non-controlling interest in both periods, consolidated net income for the three and six months ended June 30, 2017 was $127 million and $478 million, respectively.

"Net income for the quarter was $126 million, up $111 million from last year, as improved investment returns offset a 1.3 point deterioration of the combined ratio," said David H. Long, Liberty Mutual Insurance Chairman and CEO.

"Net premiums written in the quarter grew 9.9% including the impact of the Ironshore acquisition which was completed in May."

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 ended June 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 ended June 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 ended June 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 ended June 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 ended June 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 ended June 30, 2017 increased 3.2 points to 102.1%.

Financial Condition as of June 30, 2017

* Total debt was $9.321 billion as of June 30, 2017, an increase of $1.718 billion or 22.6% over December 31, 2016.

* Total equity was $21.471 billion as of June 30, 2017, an increase of $1.084 billion or 5.3% over December 31, 2016.

Subsequent Events

Management has assessed material subsequent events through August 3, 2017, the date the financial statements were available to be issued.

Click here to view the table: https://www.libertymutualgroup.com/about-liberty-mutual-site/news-site/Documents/Q2%202017%20Press%20Release.pdf

1 Catastrophes are defined as a natural catastrophe or terror event exceeding $25 million in estimated ultimate losses, net of reinsurance, and before taxes. Catastrophe losses, where applicable, include the impact of accelerated earned catastrophe premiums and earned reinstatement premiums.

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 March 31, 2017 and 2016, respectively.

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. Ironshore acquisition and integration costs are not included in the combined ratio.