Liberty Mutual reports first-quarter net income fell 31 percent, impacted by the devaluation of Venezuela's currency and premium declines primarily in Workers' Compensation.
The Boston-based company reports a $141 million drop in net income to $318 million. The combined ratio improved 2.6 points to 98.3 thanks to overall premium increases and light catastrophe losses.
Speaking during a conference call yesterday, CEO David H. Long notes the company is shedding poorly-performing accounts on rate increases while keeping retentions in the mid-80s and growing new business. He says premium growth came in the personal and global specialty lines where rates rose more than 6 percent.
The devaluation of the Venezuela bolivar in February resulted in $223 million in realized losses, he says. However, he expects much of that loss to reverse itself over the year with the addition of premium.
On Workers' Comp, net written premium decreased $238 million resulting from a decline in new business and a reduction of 29 percent in exposures resulting from disciplined underwriting. Rate increases of 10 percent partially offset the drop.
Long says the increases were significantly higher in the middle market. Commercial insurance P&C premium declined 11.6 percent in the quarter because of workers' comp, and excluding rate increases, exposures declined 18 percent. With the actions the company has taken, he says commercial is becoming more profitable each month. The first-quarter combined ratio for commercial improved 8 points over last year to 101.6.
Long says prices escalated across all lines of business, led by workers' comp and property, amounting to more than 9.3 points of rate increase compared to 6.6 points of increase during 2012's first quarter.
“We think we are on the right track and we will stick with our plan,” says Long. “We will continue to grow where we can do so profitability and walk-away from underpriced risk.”
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