Third Quarter 2019 Results November 7, 2019
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 resul ts could be materially 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; the performance of the Company’s investment portfolios; a rise 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; d ifficulty in valuing certain of the Company’s investments; subjectivity in the determination of the amount of impairments taken on the Company’s investments; unfavorable outcomes from litigation and other legal proceedings, including the effects of emerging claim and coverage issues and investigations by state and federal authorities; the Company’s exposure to credit risk in certain of its business operations; the Company’s inability to obtain p rice increases or maintain market share due to competition or otherwise; inadequacy of the Company’s pricing models; changes to insurance laws and regul ations; changes in the amount of statutory capital that the Company must hold to maintain its financial strength and credit ratings; regulatory restric tions on the Company’s ability to change its methods of marketing and underwriting in certain 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 divide nds to the Company; inflation, including inflation in medical costs and automobile and home repair costs; the cyclicality of the property and casualty insurance industry; political, legal, operational and other risks faced by the Company’s international business; potentially high severity losses in volving the Company’s surety products; loss or significant restriction on the Company’s ability to use credit scoring in the pricing and underwriting of p ersonal lines policies; inadequacy of the Company’s controls to ensure compliance with legal and regulatory standards; changes in federal or state tax laws; ris ks arising out of the Company’s securities lending program; the Company’s utilization of information technology systems and its implementation of t echnology innovations; difficulties with technology or data security; insufficiency of the Company’s business continuity plan in the event of a disa ster; 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; 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 di scussion of these 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 could have a negative impact on economic conditions in the United Kin gdom 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 if the impending withdrawal is upheld in th e fourth quarter of 2019. 2 2
Liberty Mutual Overview Helping people embrace today and confidently pursue tomorrow P&C Businesses Global Retail Markets (GRM) Global Risk Solutions (GRS) • Liberty Specialty Markets • U.S. - Personal Lines and Business Lines • National Insurance • West - Brazil, Colombia, Chile, Ecuador, Spain, Portugal, and Ireland • North America Specialty • East - Thailand, Singapore, Hong Kong, • Global Surety Vietnam, Malaysia, India, China, and Russia • Other GRS • GRM Reinsurance 1 st in U.S. Surety 2,3 • • Mutual holding company structure 3 rd largest P&C writer in the U.S. 2 • • $126.0B of assets and $41.6B of revenues in 2018 4 th largest commercial lines writer in the U.S. 2 • • The most diversified P&C insurer 5 th largest global P&C insurer 4 • 75 th among Fortune 500 companies 1 • 6 th largest personal lines writer in the U.S. 2 • 9 th largest surplus lines carrier in the U.S. 2 • 1 Based on 2018 revenue – as reported. 2 Based on 2018 direct written premium (“DWP”). 3 Includes AmTrust surety full-year 2018 results. 4 Based on 2018 gross written premium (“GWP”), excludes state -owned companies. 3 3
Liberty Mutual’s Global Presence Liberty Mutual operates in 30 countries and economies around the globe Americas Europe Asia / Pacific • Italy • Russia • Belgium • Australia • India • Thailand • U.S. (HQ) • Canada • Ecuador • Luxembourg • Spain • France • China • Malaysia • UAE • Bermuda • Chile • Mexico • Netherlands • Switzerland • Germany • Hong Kong • Singapore • Vietnam • Brazil • Colombia • Peru • Portugal • U.K. • Ireland Headquarters GRM GRS GRM & GRS 4 4
Analysis of Consolidated Net Written Premium (“NWP”) NWP by Business 1 NWP by Line of Business GRS Inland Corporate September YTD 2019 Commercial Marine Reinsurance & Property 1% Other 3 2% 5% Global Risk Surety Solutions 3% General 30% Liability Private 4% Passenger Auto Commercial 35% Auto 5% Workers Comp 5% Commercial Multiple-Peril 6% GRS Global Retail Reinsurance Markets 6% 70% GRS Specialty Homeowners Insurance 2 16% 12% NWP year-to-date in 2019 totaled $30.1 billion, an increase of 1.2% over the same period in 2018 (or an increase of 2.2% 4 excluding FX over the same period in 2018) 1 Excludes “Corporate and Other” of $2 million. 2 Specialty insurance is reported within Global Risk Solutions and includes marine, energy, construction, aviation, property, casualty, warranty and indemnity, excess casualty, directors and officers, errors and omissions, environmental impairment liability, trade credit, crisis management, contingent lines and other. 3 Corporate Reinsurance is NWP associated with internal reinsurance assumed into Corporate, net of corporate external placements. Other primarily includes NWP from allied lines, domestic inland marine, internal reinsurance, life and health reported within Global Retail Markets. 4 Determined by assuming constant foreign exchange rates between periods. 5 5
Consolidated Results Third Quarter Year-to-Date ($ Millions) 2019 2018 Change 2019 2018 Change NWP $10,325 $10,189 1.3% $30,063 $29,694 1.2% Pre- tax operating income (“PTOI”) before $125 $312 (59.9%) $998 $1,176 (15.1%) partnerships, LLC and other equity method income Partnerships, LLC and other equity method income 1 162 186 (12.9) 556 693 (19.8) Net realized gains (losses) 81 (104) NM 393 (8) NM Consolidated net income from continuing operations 274 283 (3.2) 1,394 1,382 0.9 Discontinued operations, net of tax - - - (50) 530 NM Net income attributable to LMHC 274 282 (2.8) 1,344 1,911 (29.7) Net income attributable to LMHC excluding $291 $282 3.2% $1,151 $1,911 (39.8%) unrealized impact 2 Cash flow provided by continuing operations $1,494 $1,256 18.9% $3,039 $2,412 26.0% As of ($ Millions) September 30, 2019 December 31, 2018 Change Total equity $24,005 $20,762 15.6% 1 Partnerships, LLC and other equity method income includes LP, LLC and other equity method income within net investment income in the accompanying Consolidated Statements of Income and revenue and expenses from direct investments in natural resources. 2 Excludes unrealized gains on equity securities, unit linked life insurance, and the corresponding tax impact. NM = Not Meaningful 6 6
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