First Quarter 2020 Results May 14, 2020
Cautionary Statement Regarding Forward Looking Statements This report contains forward looking statements that are intended to enhance the reader’s ability to assess the future financ ial and business performance of Liberty Mutual Holding Company Inc., the parent corporation of the Liberty Mutual Insurance group of entities (the “Company” or “LMHC”). Forward looking statements include, but are not limited to, statements that represent the Company’s beliefs concerning future operati ons, strategies, financial results or other developments, and contain words and phrases such as “may,” “expects,” “should,” “believes,” “anticipates,” “ est imates,” “intends” or similar expressions. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond the Company’s control or are subject to change, actual results could be m aterially different. Some of the factors that could cause actual results to differ include, but are not limited to the following: the occurrence of catastrophic events (including terrorist acts, hurricanes, hail, tornados, tsunamis, earthquakes, floods, snowfall and winter conditions); inadequacy of loss reserves; adverse developments involving asbestos, environmental or toxic tort claims and litigation; adverse developments in the cost, availability or ability to collect reinsurance; disruptions to the Company’s relationships with its independent agents and brokers; financial disruption or a pr olonged economic downturn; prolonged epidemic or pandemic in countries in which we operate; the performance of the Company’s investment portfolios; a ri se in interest rates; risks inherent in the Company’s alternative investments in private limited partnerships (“LP”), limited liability companies (“LLC”) , commercial mortgages and direct investments in natural resources; difficulty in valuing certain of the Company’s investments; subjectivity in the dete rmination of the amount of impairments taken on the Company’s investments; unfavorable outcomes from litigation and other legal proceedings, including t he effects of emerging claim and coverage issues and investigations by state and federal authorities; the Company’s exposure to credit risk in certa in of its business operations; the Company’s inability to obtain price increases or maintain market share due to competition or otherwise; inadequacy of the Co mpany’s pricing models; changes to insurance laws and regulations; changes in the amount of statutory capital that the Company must hold to maintain its financial strength and credit ratings; regulatory restrictions on the Company’s ability to change its methods of marketing and underwriting in certa in areas; assessments for guaranty funds and mandatory pooling arrangements; a downgrade in the Company’s claims -paying and financial strength ratings; the ability of the Company’s subsidiaries to pay dividends to the Company; inflation, including inflation in medical costs and automobile and ho me repair costs; the cyclicality of the property and casualty insurance industry; political, legal, operational and other risks faced by the Compa ny’ s international business; potentially high severity losses involving the Company’s surety products; loss or significant restriction on the Company’s ab ility to use credit scoring in the pricing and underwriting of personal lines policies; inadequacy of the Company’s controls to ensure compliance with legal and regulatory standards; changes in federal or state tax laws; risks arising out of the Company’s securities lending program; the Company’s utilizatio n of information technology systems and its implementation of technology innovations; difficulties with technology or data security; insufficiency of the Co mpany’s business continuity plan in the event of a disaster; the Company's ability to successfully integrate operations, personnel and technology from its acquisitions; insufficiency of the Company’s enterprise risk management models and modeling techniques; the Company’s ability to identify and accurately ass ess complex and emerging risks, and changing climate conditions. The Company’s forward -looking statements speak only as of the date of this report or as of the date they are made and should be regarded solely as the Company’s current plans, estimates and beliefs. For a detailed discussion of t hese and other cautionary statements, visit the Company’s Investor Relations website at www.libertymutualgroup.com/investors. The Company undertakes no obligation to update these forward-looking statements. The United Kingdom’s withdrawal from the European Union occurred on January 31, 2020. That date also marks the beginning of a transition period during which the United Kingdom will remain in the EU's customs union and single market but will negotiate with the European Union regarding the terms of the future UK-EU relationship. The withdrawal could have a negative impact on economic conditions in the United Kingdom and could result in unintended consequences in other countries as well. The Company acknowledges that there are risks and uncertainties associated with the United Kingdom’s withdrawal from the European Union and has developed a course of action related to the withdrawal but will continue to monitor the negotiations as they develop. 2 2
Cautionary Statement Regarding Forward Looking Statements (Continued) In December 2019, a novel coronavirus commonly referred to as “COVID - 19” surfaced in Wuhan, China. The outbreak has since spread to other countries, including the United States, and efforts to contain the spread of this coronavirus have intensified and are ongoing. The outbreak and any preventative or protective actions that governments, other third parties or we may take in respect of the coronavirus may result in a continued period of business disruption and reduced operations. The extent to which the coronavirus impacts our future results will depend on developments which are highly uncertain and cannot be predicted, including litigation developments, legislative or regulatory actions and intervention, the length and severity of the coronavirus (including of second waves) and the actions of government actors to contain the coronavirus or treat its impact, among others. Possible effects on our business and operations include: disruptions to business operations resulting from working from home or from closures of our corporate or sales offices and the offices of our agents and brokers and quarantines of employees, customers, agents, brokers and suppliers in areas affected by the outbreak; disruptions to business operations resulting from travel restrictions and reduced consumer spending on new homes or new automobiles which could reduce demand for insurance; disruptions to business operations resulting from our customers having lower payrolls and revenues which could have an impact on insurance revenue; increased claims related to trade credit, general liability, workers compensation, and event cancellation coverage, among others; executive or legislative mandates or court decisions expanding property insurance policy coverage to cover business interruptions resulting from COVID-19 notwithstanding any exclusions set forth in such policies or conditions precedent generally required for liability under such policies; and disruption of the financial markets resulting in reductions in the value of our investment portfolio. A significant rise in the number of COVID-19 infections, infections in a wide range of countries and regions, or a prolongation of the outbreak, could create an adverse economic effect on the Company. Furthermore, as a consequence of the COVID-19 stay at home orders in effect throughout much of the United States and abroad, policyholders are driving fewer miles than normal. Accordingly, on April 7, 2020, the Company announced its Personal Auto Customer Relief Refund (“PACRR)” plan which gives personal auto insurance customers a 15% refund on two months of their annual 2020 premium. On April 23, 2020, the Company launched its Liberty Mutual Businessowners Policy (“BOP”) Refund for small commercial customers issuing a 15% refund of two months of premium for all BOP policies. In addition, late fee charges were automatically stopped and cancellations due to non-payment were temporarily paused for both personal auto and home customers from March 23 through at least May 22, 2020. The Company will work with individual customers to extend payment dates if needed and provide personalized support on an ad hoc basis. All personal auto policy coverages have been expanded to cover customers who use their personal vehicles to deliver food and medicine even though some of our standard personal auto policies typically exclude such coverage. This additional protection will remain in effect for all personal auto policies in all states for losses occurring from March 16 to May 22, 2020 and reported by July 1, 2020.The aggregate payments under the PACRR and BOP customer support programs will be approximately $300 million. 3 3
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