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Liberty Mutual Holding Co. Inc. late Wednesday reported fourth-quarter net income of $612 million, a 15.2% decrease from the prior year quarter, with the drop largely attributed to lower investment returns.
During a conference call with analysts Thursday, CEO Tim Sweeney said the profit decline was due to nonreoccurence of income from investments in limited partnerships, which had seen extraordinary returns in 2021. Limited partnerships income for the fourth quarter was $144 million compared to $916 million in the prior year quarter.
Mr. Sweeney said that pre-tax operating income before limited partnerships in the fourth quarter was $759 million, more than double the income of the prior year quarter. Higher underwriting income and rising interest rates contributed to the increase, he said.
“In 2023 we expect continued rate increases … to show up more meaningfully in underwriting margins,” Mr. Sweeney said.
Liberty Mutual’s net written premium for the fourth quarter was $11.5 million, a 4.5% increase over the prior year quarter. The rise was largely driven by acquisitions in its personal lines business and firm pricing across most lines, Mr. Sweeney said.
Liberty Mutual’s combined ratio for the fourth quarter improved to 96.9% from 99.2% in the prior year quarter.
Neeti Bhalla Johnson, president of global risk solutions, said macroeconomic challenges faced by the company in the fourth quarter included tight labor markets, inflation and supply chain disruptions.
“It will be important for rate increases to keep pace with rising loss trends,” she said.