Catastrophes, Reserves Halve Liberty Mutual’s Q4 Earnings

Net income at Liberty Mutual Insurance fell nearly 51 percent in 2011's fourth quarter and about 78 percent for the year on catastrophe losses and reserve strengthening.

Liberty Mutual profited $284 million during Q4 2011, down from $576 during Q4 2010. The combined ratio for the period was 104.2, up 5 points from 2010.

“Another quarter, another catastrophe,” David H. Long, president and CEO of Liberty Mutual, said during a conference call.

During the last three months of 2011 the company suffered $90 million in losses related to the flooding in Thailand. Most of the loss is attributable to a Lloyd's syndicate. Local companies took about $20 million in losses, Long said during the call.

Liberty Mutual recorded a total of $234 million in cat losses during the fourth quarter, compared to $198 million during the same time the prior year.

The company posted net income of $365 million for 2011, down drastically from $1.68 billion in 2010.

Results included hundreds of millions in reserve strengthening. After a “ground-up reserve study,” Liberty Mutual strengthened asbestos-related reserves $294 million in 2011.

Additionally, a re-estimation of current accident-year loss reserves resulted in a Q4 2011 net-incurred loss of $121 million.

“I'm pretty happy it's no longer 2011,” Long said. “At least, I thought so until last weekend,” when severe storms and tornadoes ravaged a dozen states.

Good news for the Boston-based insurer included increases of 10.6 percent and 6.8 percent in net-written premium during the fourth quarter and year, respectively.

Long said Liberty Mutual continues to see favorable growth trends in domestic personal lines, with rate increases of more than 3 percent in auto and 5.5 percent in homeowners' insurance.

In commercial lines there is also a general trend in rate increases, led by double-digit jumps in workers' comp, he added.