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Virus hit like 'moderately sized' catastrophe: Liberty Mutual

Liberty Mutual

Liberty Mutual Holding Co. Inc. said Tuesday that COVID-19’s impact on first-quarter earnings will be on the order of a “moderately sized” catastrophe.

Business areas most exposed to insurance losses related to the pandemic and resulting economic downturn include trade credit, general liability, workers compensation and event cancellation coverage, the company said in a statement, although Liberty Mutual Chairman and CEO David Long noted the pandemic is “still evolving.”

The larger impact from the pandemic, he said, is anticipated to come in the insurer’s investment portfolio, where net investment income will be “dampened” along with lower valuations on the company’s private equity investments.

First-quarter net written premium, forecast at approximately $10 billion, “was not materially impacted by COVID-19,” the statement said, adding the combined ratio is expected to be approximately 97%.

Future quarters, however, are expected to see a hit to premiums, and a more dramatic effect on combined ratio.

“While losses from COVID-19 had a marginal impact on the combined ratio in the quarter, we expect a more meaningful impact in the second and third quarters as the situation evolves and we continue to assess our potential exposure,” the statement said.

A decline in total equity of approximately 2% to about $23 billion is primarily driven by unrealized investment losses, as a result of the market fallout stemming from COVID-19.

Cash on hand is $1.4 billion and the company has access to a further $6 billion in liquidity, according to the statement.

Liberty Mutual plans to release first-quarter financial results on May 14.

More insurance and risk management news on the coronavirus crisis here.