Catastrophe Losses, Currency Volatility Upended Liberty Mutual’s Q2

Liberty Mutual Insurance faced a net income decline of close to 36 percent in the 2015 second quarter, with currency volatility, higher catastrophe losses and energy sector market pressures to blame.

Consolidated net income landed at $249 million during the quarter, a 35.5 percent dip from $386 million produced over the same period last year.

Liberty Mutual Chairman and CEO David Long noted the triple-threat of challenges that hit the company in Q2. Still, he argued that Liberty Mutual’s underlying operations and growth trajectory remains sound. Net written premium, for example, grew 6 percent during the quarter.

“These events are tempered by the continued strength of our underlying operations and growth in each of our four strategic business units,” Long said in prepared remarks.

Liberty Mutual said that net written premium for the quarter reached nearly $10.4 billion, a $432 million (4.3 percent) jump from the 2014 second quarter. The consolidated combined ratio was more mixed. It reached 102.4 for the quarter with catastrophes and net incurred losses from previous years factored in. That’s a 2.1 point jump from the same period a year ago. Without catastrophes or net incurred losses from previous years, it hit 93, a 1.1-point uptick from comparable numbers in the 2014 second quarter.

Other Q2 result highlights:

• Net investment income came in at $726 million, but that’s a $79 million drop – nearly 10 percent – from the 2014 second quarter.
• Catastrophe losses are booked at $800 million, a $125 million surge from the same period last year. That’s an 18.5 percent hike.
• A pre-tax loss connected to the Venezuela devaluation and foreign exchange under hyperinflationary accounting is booked at $81 million, versus a $92 million pre-tax gain in the 2014 second quarter.
• Cash flow from operations was $855 million, $323 million (27.4 percent) lower than the 2014 second quarter.

Source: Liberty Mutual Holding Company