Liberty Mutual yesterday reported net income decreasing in the first quarter by 26.3 percent.
The Boston-based insurer reported first-quarter net income of $292 million compared with $396 million in the comparable year ago period.
Results in the quarter include a $112 million increase in federal and foreign income taxes over the same period in 2005 as a result of the amortization of the domestic valuation allowance, which offset the federal and foreign income tax expense in the prior period.
Edmund F. Kelly, Liberty Mutual chairman, expressed satisfaction with the results. "Revenue growth reflects higher retention of existing accounts and very satisfactory new business growth," he said.
The company listed as first-quarter highlights:
o First-quarter revenues of $5.4 billion, an increase of $477 million or 9.6 percent over the same period in 2005.
o Quarterly net written premium of $5.3 billion, an increase of $653 million or 14 percent over the comparison period.
o Pre-tax income for the quarter was $404 million, a decrease of $1 million from the same period in 2005.
o The quarterly combined ratio before catastrophes, net incurred losses attributable to prior years and discount accretion was 96.1, a decrease of 0.8 points from the same period in 2005. Including the impact of catastrophes, net incurred losses attributable to prior years and discount accretion, the company's combined ratio increased one point over 2005 to 100 in 2006.
In a conference call with analysts this morning, Mr. Kelly said the pricing environment in the quarter remained for the most part rational with some notable exceptions.
In New Jersey, Mr. Kelly said, the company had some significant loss of personal lines business to an unnamed competitor which then reported a loss ratio of 97 percent. "It was some of the worst business and they were welcome to it," he said.
In the personal lines agency business, another competitor undercut margins by about 10-to-15 percent, which Mr. Kelly did not think was sustainable in the long run.
In the workers' compensation market in which Liberty specializes, Mr. Kelly noted the company was getting better pricing than the market as indicated by a Council of Insurance Agents and Brokers survey. He said that sector is proving profitable after difficult times in the past few years.
Mr. Kelly said of the Moody's decision today to affirm ratings and revise the company's outlook to stable from negative, "We're pleased with it, although we thought they should have done it long ago."
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