Liberty Mutual reports 59% jump in operating profits and lowest CR in 20 years for Q4

By David Bull

March 5 - (The Insurer) - Liberty Mutual has reported Q4 operating income of $1.76 billion, up 59% on the prior-year period, with a combined ratio of 91.5%, as its CEO Tim Sweeney said the carrier is making “remarkable progress” towards achieving a 95% combined ratio this year despite $1.2 billion of California wildfire losses.

• Q4 pre-tax operating income before limited partnerships income up 59% to $1.76 billion

• Combined ratio improves from 95.1% to 91.5%

• Announces initial estimate of $1.2 billion for CA wildfires to impact Q1 results

• Cat losses of $234 million; A&E reserves strengthened by $175 million; "All other" by $760 million

• Underlying combined ratio improves by 9.9 points to 81.2%

• US Retail Markets CR improves 15.9 points to 77.1%; underlying by 12.0 points to 75.3%

• Global Risk Solutions CR improves 3.6 points to 90.3%; underlying by 5.3 points to 88.5%

• Personal lines rates up 15.9% on average; US small commercial up 12.5%

• Global Risk Solutions rates up 6.7% on average (accelerating from 4.2% in Q3 2024)

The reported operating income is before tax and limited partnerships income and compared to $1.11 billion in the fourth quarter of 2023.

The combined ratio for the period improved from 95.1% in Q4 2023 and was the lowest in 20 years, said Sweeney in commentary.

“We are making remarkable progress toward our goal of achieving a 95% combined ratio in 2025, driven by underwriting and expense discipline in both US Retail Markets and Global Risk Solutions,” he added.

The comments came despite Liberty Mutual reporting that it has made a preliminary pre-tax estimate of cat loss related to the January’s Southern California wildfires of $1.2 billion, which will be recorded in its first quarter financials.

The loss pick includes estimated assessments from the California Fair Plan and reinsurance recoveries net of reinstatement premium but doesn’t include any subrogation.

For the quarter, Liberty Mutual reported net written premium down 6.9% to $10.55 billion, with a 5.2% reduction to $6.70 billion in US Retail Markets as its Global Risk Solutions arm saw a 10.5% reduction in net written premium to $3.84 billion.

The quarter included cat losses of $234 million, which were in line with the prior-year period.

There was unfavorable movement on prior-year net incurred losses of $175 million for asbestos and environmental – up from $110 million in Q4 2023 – while “All other” accounted for a $760 million negative impact, up from $40 million in the prior-year period.

Cat losses added 2.1 points to the combined ratio, with the reserve strengthening for asbestos and environmental adding 1.6 points and All other adding 6.8 points.

As well as the 3.6 percentage points improvement in its reported combined ratio for the fourth quarter, the Boston, Massachusetts-based company delivered a 9.9 points improvement in its underlying combined ratio to 81.2%.

The combined ratio improvement was driven by Liberty Mutual’s US Retail Markets business.

The calendar year combined ratio improved by 15.9 points to 77.1% in the fourth quarter, with the underlying combined ratio narrowing by a full 12.0 points to 75.3%.

The unit includes the carrier’s personal lines business and its small commercial lines business.

The carrier reported that its personal lines business delivered 15.9% rate increases on average in the quarter, down from 23.4% in Q3 2024, with a retention rate of 71.6%.

In private passenger auto, the renewal rate was 13.4%, with bigger increases averaging 22.4% in property.

In US small commercial, rate increases averaged 12.5%, with a retention rate of 75.9%.

In Global Risk Solutions – which houses the group’s E&S, large commercial and reinsurance offerings – the combined ratio also improved, by 3.6 points to 90.3% on a calendar year basis.

On an underlying basis it improved by 5.3 points to 88.4%.

Overall rate increases in the division picked up to an average of 6.7% from 4.2% in Q3 2024, with a retention rate of 85.1%.

Rate movements ranged from reductions of 0.6% in workers’ compensation to increases of 8.4% in casualty and 12.8% in commercial auto in the fourth quarter. Commercial property rates were flat at -0.1%, with specialty rates down 1.4% and reinsurance up 3.2%.