Liberty Mutual Insurance Reports Third Quarter 2018 Results

BOSTON, Nov. 1, 2018 /PRNewswire/ -- Liberty Mutual Holding Company Inc. and its subsidiaries (collectively "LMHC" or the "Company") reported net income attributable to LMHC of $282 million and $1.911 billion for the three and nine months ended September 30, 2018 versus net loss attributable to LMHC of $665 million and $188 million for the same periods in 2017. Including $1 million of net income attributable to non-controlling interest, consolidated net income for the three and nine months ended September 30, 2018 was $283 million and $1.912 billion, respectively.

"Our business platform continues to develop and diversify across geographies and products, evidenced by net written premium growth in the quarter of 3.4% to $10.2 billion with strong growth coming from our international operations," said David H. Long, Liberty Mutual Insurance Chairman and CEO.

"Net income in the quarter increased to $282 million while our combined ratio decreased to 99.5%. The improvement in both figures was driven primarily by decreased catastrophe activity within the quarter."

"We look forward to providing an update on our strategy and recent financial results at our upcoming inaugural investor day on December 5."

Third Quarter Highlights

• Net written premium ("NWP") for the three months ended September 30, 2018 was $10.189 billion, an increase of $335 million or 3.4% over the same period in 2017.
• Pre-tax operating income (loss) before partnerships, limited liability companies ("LLC") and other equity method income for the three months ended September 30, 2018 was $312 million versus ($1.290) billion for the same period in 2017.
• Partnerships, LLC and other equity method income for the three months ended September 30, 2018 was $186 million, a decrease of $19 million or 9.3% from the same period in 2017.
• Net realized (losses) gains for the three months ended September 30, 2018 were ($104) million versus $177 million for the same period in 2017.
• Ironshore Inc. ("Ironshore") acquisition and integration costs for the three months ended September 30, 2018 were $7 million, a decrease of $31 million or 81.6% from the same period in 2017.
• Restructuring costs for the three months ended September 30, 2018 were $26 million, an increase of $3 million or 13.0% over the same period in 2017.
• Loss on extinguishment of debt for the three months ended September 30, 2018 was $5 million versus zero for the same period in 2017.
• Discontinued operations, net of tax, for the three months ended September 30, 2018 were zero versus $52 million for the same period in 2017.
• Consolidated net income (loss) for the three months ended September 30, 2018 was $283 million versus ($664) million for the same period in 2017.
• Net income attributable to non-controlling interest for the three months ended September 30, 2018 was $1 million, no change versus the same period in 2017.
• Net income (loss) attributable to LMHC for the three months ended September 30, 2018 was $282 million versus ($665) million for the same period in 2017.
• Cash flow provided by continuing operations for the three months ended September 30, 2018 was $1.256 billion, an increase of $523 million or 71.4% over the same period in 2017.
• The consolidated combined ratio before catastrophes¹, net incurred losses attributable to prior years² and current accident year re-estimation³ for the three months ended September 30, 2018 was 95.0%, an increase of 1.9 points over the same period in 2017. Including the impact of catastrophes, net incurred losses attributable to prior years and current accident year re-estimation, the total combined ratio⁴ for the three months ended September 30, 2018 was 99.5%, a decrease of 17.7 points from the same period in 2017.

Year-to-date Highlights

• NWP for the nine months ended September 30, 2018 was $29.694 billion, an increase of $1.766 billion or 6.3% over the same period in 2017.
• Pre-tax operating income (loss) before partnerships, LLC and other equity method income for the nine months ended September 30, 2018 was $1.176 billion versus ($1.170) billion for the same period in 2017.
• Partnerships, LLC and other equity method income for the nine months ended September 30, 2018 was $693 million, an increase of $222 million or 47.1% over the same period in 2017.
• Net realized (losses) gains for the nine months ended September 30, 2018 were ($8) million versus $346 million for the same period in 2017.
• Ironshore acquisition and integration costs for the nine months ended September 30, 2018 were $31 million, a decrease of $43 million or 58.1% from the same period in 2017.
• Restructuring costs for the nine months ended September 30, 2018 were $57 million, an increase of $34 million or 147.8% over the same period in 2017.
• Loss on extinguishment of debt for the nine months ended September 30, 2018 was $8 million, an increase of $7 million over the same period in 2017.
• Discontinued operations, net of tax, for the nine months ended September 30, 2018 were $530 million, an increase of $369 million over the same period in 2017.
• Consolidated net income (loss) for the nine months ended September 30, 2018 was $1.912 billion versus ($186) million for the same period in 2017.
• Net income attributable to non-controlling interest for the nine months ended September 30, 2018 was $1 million, a decrease of $1 million or 50% from the same period in 2017.
• Net income (loss) attributable to LMHC for the nine months ended September 30, 2018 was $1.911 billion versus ($188) million for the same period in 2017.
• Cash flow provided by continuing operations for the nine months ended September 30, 2018 was $2.412 billion, an increase of $948 million or 64.8% over the same period in 2017.
• The consolidated combined ratio before catastrophes and net incurred losses attributable to prior years for the nine months ended September 30, 2018 was 94.2%, an increase of 0.3 points over the same period in 2017. Including the impact of catastrophes and net incurred losses attributable to prior years, the total combined ratio for the nine months ended September 30, 2018 was 98.8%, a decrease of 8.5 points from the same period in 2017.

Financial Condition as of September 30, 2018

• Total debt was $8.255 billion as of September 30, 2018, a decrease of $70 million or 0.8% from December 31, 2017.
• Total equity was $21.014 billion as of September 30, 2018, an increase of $326 million or 1.6% over December 31, 2017.

Subsequent Events

Management has assessed material subsequent events through November 1, 2018, the date the financial statements were available to be issued.

Consolidated Results of Operations

Financial Information:  The Company's financial results, management's discussion and analysis of operating results and financial condition, accompanying financial statements and other supplemental financial information for the three and nine months ended September 30, 2018 are available on the Company's Investor Relations web site at www.libertymutualgroup.com/investors.

About Liberty Mutual Insurance

Boston-based LMHC, the parent corporation of the Liberty Mutual Insurance group of entities, is a diversified global insurer and third largest property and casualty insurer in the U.S. based on 2017 direct written premium.  The Company also ranks 68^th on the Fortune 100 list of largest corporations in the U.S. based on 2017 revenue. As of December 31, 2017, LMHC had $142.502 billion in consolidated assets, $121.814 billion in consolidated liabilities, and $39.409 billion in annual consolidated revenue.

LMHC, through its subsidiaries and affiliated companies, offers a wide range of property and casualty insurance products and services to individuals and businesses alike.  In 2001 and 2002, the Company formed a mutual holding company structure, whereby the three principal mutual insurance companies, Liberty Mutual Insurance Company, Liberty Mutual Fire Insurance Company and Employers Insurance Company of Wausau, each became separate stock insurance companies under the ownership of LMHC.

Functionally, the Company conducts substantially all of its business through two business units, with each operating independently of the other in certain areas such as sales, underwriting, and claims, but, as appropriate, collaborating in other areas such as actuarial and financial.  Management believes this structure provides increased synergy to the Company and permits each business unit to execute its business strategy and/or to make acquisitions without impacting or disrupting the operations of the other business unit.

LMHC employs nearly 50,000 people in over 800 offices throughout the world.  For a full description of the Company's business operations, products and distribution channels, please visit Liberty Mutual's Investor Relations web site at www.libertymutualgroup.com/investors.

Cautionary Statement Regarding Forward Looking Statements

This report contains forward looking statements that are intended to enhance the reader's ability to assess the Company's future financial and business performance.  Forward looking statements include, but are not limited to, statements that represent the Company's beliefs concerning future operations, strategies, financial results or other developments, and contain words and phrases such as "may," "expects," "should," "believes," "anticipates," "estimates," "intends" or similar expressions.  Because these forward looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond the Company's control or are subject to change, actual results could be materially different.

Some of the factors that could cause actual results to differ include, but are not limited to the following: the occurrence of catastrophic events (including terrorist acts, hurricanes, hail, tornados, tsunamis, earthquakes, floods, snowfall and winter conditions); inadequacy of loss reserves; adverse developments involving asbestos, environmental or toxic tort claims and litigation; adverse developments in the cost, availability or ability to collect reinsurance; disruptions to the Company's relationships with its independent agents and brokers; financial disruption or a prolonged economic downturn; the performance of the Company's investment portfolios; a rise in interest rates; risks inherent in the Company's alternative investments in private LPs, LLCs, commercial mortgages and direct investments in natural resources; difficulty in valuing certain of the Company's investments; subjectivity in the determination of the amount of impairments taken on the Company's investments; unfavorable outcomes from litigation and other legal proceedings, including the effects of emerging claim and coverage issues and investigations by state and federal authorities; the Company's exposure to credit risk in certain of its business operations; the Company's inability to obtain price increases or maintain market share due to competition or otherwise; inadequacy of the Company's pricing models; changes to insurance laws and regulations; changes in the amount of statutory capital that the Company must hold to maintain its financial strength and credit ratings; regulatory restrictions on the Company's ability to change its methods of marketing and underwriting in certain areas; assessments for guaranty funds and mandatory pooling arrangements; a downgrade in the Company's claims-paying and financial strength ratings; the ability of the Company's subsidiaries to pay dividends to the Company; inflation, including inflation in medical costs and automobile and home repair costs; the cyclicality of the property and casualty insurance industry; political, legal, operational and other risks faced by the Company's international business; potentially high severity losses involving the Company's surety products; loss or significant restriction on the Company's ability to use credit scoring in the pricing and underwriting of personal lines policies; inadequacy of the Company's controls to ensure compliance with legal and regulatory standards; changes in federal or state tax laws; risks arising out of the Company's securities lending program; the Company's utilization of information technology systems and its implementation of technology innovations; difficulties with technology or data security; insufficiency of the Company's business continuity plan in the event of a disaster; the Company's ability to successfully integrate operations, personnel and technology from its acquisitions; insufficiency of the Company's enterprise risk management models and modeling techniques; and changing climate conditions. The Company's forward looking statements speak only as of the date of this report or as of the date they are made and should be regarded solely as the Company's current plans, estimates and beliefs.  For a detailed discussion of these and other cautionary statements, visit the Company's Investor Relations website at www.libertymutualgroup.com/investors. The Company undertakes no obligation to update these forward looking statements.

SOURCE Liberty Mutual Holding Company Inc.