Liberty Mutual Holding Co. Inc. reported net income $126 million for the three months ended June 30, 2017, an increase of $111 million over the same period in 2016 thanks to improved investment returns.
The rise in net income offset a 1.3 point deterioration in the total combined ratio that rose to 102.7.
Net premiums written in the quarter grew 9.9 percent including the impact of the acquisition of specialty insurer Ironshore in May.
Liberty Mutual acquired a 100 percent ownership interest in Ironshore for approximately $3 billion. The company financed the acquisition primarily through short-term borrowings that it said will be repaid by the end of the third quarter using cash from operations.
David H, Long, chairman and chief executive officer, said the company believes Ironshore will be a “significant contributor” with “lots of synergies” in reinsurance purchasing in particular and overall brings valuable scale and capabilities in excess and surplus lines in the U.S. that the insurer has not had up until now.
The insurer is combining its Liberty International Underwriters U.S. business and Ironshore’s U.S. specialty lines business under the Ironshore brand, creating the sixth largest writer of excess and surplus lines in the U.S. based on 2016 direct written premium.
The acquisition and integration costs for the Ironshore acquisition for three months were $26 million.
Second Quarter Results
Net income for the three months ended June 30, 2017 was $126 million, an increase of $111 million over the same period in 2016.
Net written premium for the three months was $9.910 billion, an increase of $892 million or 9.9 percent over the same period in 2016.
Net operating income was $54 million, a decrease of $64 million or 54.2 percent from the same period in 2016.
The consolidated combined ratio before catastrophes was 93.8, an increase of 1.5 points over the same period in 2016. Including the impact of catastrophes, the combined ratio increased 1.3 points to 102.7.
Personal lines saw operating profit fall to $11 million from $60 million for the same quarter last year and the combined ratio rise to 101.4 from 100.2.
The U.S. auto business ended the quarter with a 101.4 combined ratio, up slightly from last period largely due to weather losses. The company has been increasing its rates to address auto loss trends and expects to see results in this line improve this year and into next year.
Total commercial lines new written premiums were $2.5 billion, up 6.5 percent from $2.4 billion. Commercial lines operating income fell to $31 million from $131 million. The commercial combined ratio was 108.5 (99.2 without catastrophes), compared to 103.5 in the second quarter last year. There was adverse development in commercial auto, which recorded a combined ratio of 113.
Six Months Results
Year-to-date net written premiums for the six months ended June 30, 2017 was $19.144 billion, an increase of $1.354 billion or 7.6 percent over the same period in 2016. Consolidated net income for the six months was $478 million, an increase of $65 million or 15.7 percent over the same period in 2016.
The consolidated combined ratio for the six months was 93.9, an increase of 1.2 points over the same period in 2016. Including the impact of catastrophes, the combined ratio for the six months increased 3.2 points to 102.1.
Source: Liberty Mutual
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