Liberty Mutual Holding Co. Inc. late Wednesday reported fourth-quarter net income of $612 million, down 15.2% from the year-ago quarter, with the decline largely attributable to lower investment returns.
On a conference call with analysts Thursday, CEO Tim Sweeney said the profit decline was due to the non-return of income from limited partnership investments, which had had extraordinary returns in 2021. Fourth-quarter limited partnership income was $144 million, compared with $916 million in the year-ago quarter .
Mr. Sweeney said pretax operating income before limited partnerships in the fourth quarter was $759 million, more than double the prior-year quarter. Higher insurance income and rising interest rates contributed to the increase, he said.
“In 2023, we expect continued interest rate increases … to show more meaningfully in insurance margins,”; Sweeney said.
Liberty Mutual’s net premium income for the fourth quarter was $11.5 million, an increase of 4.5% over the prior year quarter. The increase was largely driven by acquisitions in the company’s personal business and fixed pricing across most lines, Mr. Sweeney.
Liberty Mutual’s total expense ratio for the fourth quarter improved to 96.9% from 99.2% in the prior year.
Neeti Bhalla Johnson, president of global risk solutions, said macroeconomic challenges the company faced in the fourth quarter included tight labor markets, inflation and supply chain disruptions.
“It will be important for rate hikes to keep pace with rising loss trends,” she said.