Liberty Mutual Holdings Co. reported a net loss of $ 320 million in the second quarter of 2020 compared to a profit of $ 397 million in the same period last year, largely due to loss of events from COVID-19, natural disasters and civil unrest, the insurer reported Thursday.
In addition, the pandemic's effect on the economy damaged the insurance company's investment performance.
"As expected, COVID-19 and the associated economic downturn significantly affected our insurance and investment performance," said David Long, Boston-based Liberty Mutual Chairman and CEO of Revenue Talks. "These losses … are entirely within our global risk management business."
The insurer reported $ 878 million in disaster losses for the quarter ̵
Liberty Mutual reported revenue of $ 10.17 billion for the second quarter, a 5.7% dip from the same quarter in 2019.
Liberty Mutual's investment income decreased to $ 144 million in the second quarter from $ 1.37 billion in the same quarter in 2019, according to the insurer's financial analysis.
In the global risk solution segment, which includes large account companies, the net written premium increased to $ 2.95 billion, an improvement of 9.5% compared to the same quarter in 2019, but the segment's combined ratio decreased to 116.2% from 106, 0% in the same period last year, with 18 points attributed to COVID-19 losses, the analysis said.
"The biggest driver of COVID-19 impact was the event cancellation product line, which contributed approximately 9 points," said Dennis Langwell, Vice President and CEO of Liberty's Global Risk Solutions segment, at the earnings call. He attributed approximately $ 100 million to property-related losses and expected litigation costs and approximately $ 260 million to the cancellation of conditional lines.
Mr. Langwell said the insurer applied pandemic exemptions to cancellation rules for events beginning in January 2020 and estimates it could see about $ 50 million related to further event outages in 2021.
In the global retail market segment, which includes personal and small business lines the net written premium fell 5.7% in the second quarter of 2020 to $ 6.86 million, but the combined ratio was almost stable at 98.9%.
"The main driver of the downturn (within the segment) was the premium business and personal line assistance program," said Timothy Sweeney, Vice President and President of GRM. In March, the insurer provided premium assistance to personal policyholders for passenger cars and small commercial businesses affected by the pandemic.
The insurer reported its sharpest net quarter decrease from the second quarter in its commercial car line, which reported a decline of 20.3% to $ 429 million and its workers' compensation line, which reported a decrease of 18.3% to $ 421 million.
The insurer has "seen some losses coming in but not much" for coronavirus-related workers' compensation losses, Langwell said.
"But this is not over – we do not know how workers' compensation will play out for additional exposures in subsequent periods," he said. "We expect that the effects of COVID-19 in combination with the low interest rate environment … will be a catalyst for a more meaningful rate hike in workers' compensation in the future."
More insurance and risk management news about the coronavirus crisis  here .
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