Liberty Mutual: 1st Quarter Income Down, New Business Up; Call Today

Liberty Mutual Group reported net income of $292 million for the three months ended March 31, 2006, a decrease of $104 million or 26.3% from the same period in 2005. 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.

“I am pleased with our financial results in the quarter,” said Edmund F. Kelly, Liberty Mutual chairman, president and CEO. “Revenue growth reflects higher retention of existing accounts and very satisfactory new business growth. Our core underwriting results before catastrophes and prior year reserve increases improved versus the prior year and reflect our continued disciplined approach to underwriting and balance sheet strength.”

Kelly pointed to Moody’s decision to affirm the group’s ratings and to revise the outlook to stable as “a positive and welcome development.”

First Quarter Highlights
Revenues for the three months ended March 31, 2006 were $5.448 billion, an increase of $477 million or 9.6% over the same period in 2005.

Net written premium for the three months ended March 31, 2006 was $5.310 billion, an increase of $653 million or 14.0% over the same period in 2005.

Pre-tax income for the three months ended March 31, 2006 was $404 million, a decrease of $1 million from the same period in 2005.
Cash flow from operations for the three months ended March 31, 2006 was $498 million, a decrease of $360 million or 42.0% from the same period in 2005.

The combined ratio before catastrophes, net incurred losses attributable to prior years and discount accretion for the three months ended March 31, 2006 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 1.0 point over 2005 to 100.1% in 2006.

Financial Condition as of March 31, 2006
Total assets increased to $81.177 billion as of March 31, 2006, an increase of $2.353 billion or 3.0% over December 31, 2005.

Policyholders’ equity was $8.792 billion as of March 31, 2006, a decrease of $66 million or 0.7% from December 31, 2005.

After-tax net unrealized gains on fixed maturities and equity securities, as of March 31, 2006 were $355 million, a decrease of $414 million or 53.8% from December 31, 2005.

Statutory surplus as regards policyholders for the combined operations of Liberty Mutual Insurance Company and its U.S. affiliates was $10.096 billion, an increase of $227 million or 2.3% over December 31, 2005.

The consolidated debt-to-capital ratio including accumulated other comprehensive income as of March 31, 2006 was 23.8%, an increase of 0.4 points over December 31, 2005. Excluding AOCI, the consolidated debt-to-capital ratio was 23.8%, a decrease of 0.4 points from December 31, 2005.

Liberty Mutual Group’s financial results are available on the company’s web site at www.libertymutual.com/investors.

At 10:00 a.m. Wed., May 3, CEO Edmund F. Kelly will host a conference call to discuss the company’s financial results. To listen to the call and participate in Q&A, dial 877-825-5811 fifteen minutes before the starting time using conference ID number 7280163. A replay will be available until May 10, 2006 at 877-519-4471 using the reservation number 7280163.

Source: Liberty Mutual