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Liberty Mutual posts second-quarter loss, expects rate rises

David H. Long

Liberty Mutual Holding Co. Inc. will continue to push for higher insurance rates after reporting a second-quarter net loss of $343 million, compared with $769 million in net income in the same period last year, as lower investment income and higher claims costs hit the insurer, its top executives said Thursday.

“Inflation continues to weigh on repair and replacement costs for auto and property lines. As such, we’re taking a cautious approach to growth for the rest of the year, and we'll continue to push for rate,” said David H. Long, Liberty Mutual’s chairman and CEO, on a conference call with analysts on Thursday.

Net written premium for the quarter increased 15.5% compared with the prior-year quarter to $12.52 billion. Liberty Mutual’s combined ratio deteriorated to 105%, compared with 98.1% last year. Catastrophe losses for the quarter totaled $1.11 billion, compared with $660 million in the prior-year period.

Net realized investment losses increased to $671 million from $191 million in losses in last year’s second quarter. Investments in limited partnerships fell to $469 million from $954 million.

Liberty Mutual’s global retail markets division, which includes its personal lines auto insurance business, reported a pre-tax operating loss of $643 million, compared with a $274 million quarterly profit in the year-earlier period.

The insurer’s global risk solutions division, which includes its large account business, reported a pre-tax operating income of $418 million, up 15.8%. Net written premium for the division increased 10% to $3.71 billion.

The aggregate renewal premium increase in the quarter was 6% overall, and 7.1% excluding workers compensation, said Timothy M. Sweeney, Liberty Mutual’s president.

“We continue to see rates exceeding loss trends in most lines, except workers compensation and casualty where rates are close to even with loss trends,” he said.

Workers comp severity is expected to increase as medical inflation rises and utilization rates increase, said Neeti Bhalla Johnson, president of global risk solutions.