Liberty Mutual Q1 2025 Results: Shifting Dynamics Amid Catastrophe Losses

A Look at the Q1-2025 Results for Massachusetts Largest Insurer

Boston, MA – Liberty Mutual Holding Company Inc. (LMHC) recently announced its financial results for the first quarter ending March 31, 2025, revealing a complex picture of improved underlying performance set against a backdrop of significant catastrophe losses and evolving trends within its U.S. Retail Markets (USRM) segment. The Company reported consolidated net income attributable to LMHC of $1.025 billion for the quarter, a decrease from $1.535 billion in the first quarter of 2024.

Tim Sweeney, Liberty Mutual Chairman & Chief Executive Officer, commented on the results, stating, “For the first quarter, we reported net income attributable to LMHC of $1.0 billion, reflecting improvement in our underlying combined ratio and strong investment results.” He highlighted the “continued discipline in our underwriting,” which led to a “notable 6.5-point improvement in the underlying combined ratio, achieving an 81.9% for the first quarter.” However, Sweeney also acknowledged the impact of “elevated catastrophe losses, driven by the devastating California wildfires,” which brought the total combined ratio to 96.6%. The Company’s investment income was a bright spot, contributing $1.3 billion, aided by higher reinvestment rates and favorable private equity valuations.

U.S. Retail Markets: A Closer Look

Liberty Mutual’s USRM segment offers key insights. This segment, which encompasses both personal and small commercial lines, reported a decrease in net written premiums (NWP) and shifts in profitability.

Key USRM Financial Performance Highlights for Q1 2025 (compared to Q1 2024):

• Net Written Premium (NWP): Decreased by 7.4% to $6.061 billion from $6.545 billion.
  • Personal Lines NWP: $4.785 billion, down 8.6% from $5.238 billion.
  • Small Commercial Lines NWP: $1.276 billion, down 2.4% from $1.307 billion.
• Pre-tax Operating Income: Increased by 6.1% to $664 million from $626 million.
• Underlying Pre-tax Operating Income: Rose significantly by 31.4% to $1.846 billion from $1.405 billion, indicating improved core underwriting performance before catastrophes and prior year development.
• Combined Ratio: Improved slightly to 95.0% from 95.4%.
• Underlying Combined Ratio: Showed notable improvement, decreasing by 6.6 points to 78.2% from 84.8%. This reflects better non-catastrophe loss experience and underwriting actions.
• Catastrophes: Impact increased significantly to $1.369 billion from $775 million, largely attributed to the California Wildfires. The catastrophe loss ratio for USRM jumped to 20.2% from 10.5% in Q1 2024.

Liberty Mutual stated that the decrease in USRM NWP was primarily driven by personal lines auto results reflecting an increase in policyholder shopping. This was partially offset by increased assumed written premiums in small commercial lines and decreased ceded premiums in both personal and small commercial lines due to pricing and exposure reduction actions.

A Little Detail about USRM Personal Lines— Third largest agency writer in the U.S.

Per the Company’s Q1 2025 Earnings Presentation, Liberty Mutual’s USRM segment is ranked as the 3rd largest in independent agency personal lines in the U.S., based on 2024 Direct Written Premium (DWP).

The personal lines segment, which forms the larger portion of USRM, saw distinct trends in its auto and homeowners businesses.

• Private Passenger Auto NWP: Declined by 15.9% to $2.579 billion.
  • Liberty Mutual attributes this to “an increase in policyholder shopping. “Renewal rates for private passenger auto stood at 8.6% in Q1 2025, down from 21.7% in Q1 2024.Retention in auto was 66.4% in Q1 2025, compared to 73.5% in Q1 2024.
  • Sequential Policies in Force (PIF) growth for auto was -4.5% in Q1 2025.
• Homeowners NWP: Increased by 1.2% to $1.802 billion, reflecting an average written premium per policy increase.
  • Property renewal rates were 16.0% in Q1 2025, down from 24.4% in Q1 2024 (note: property renewal rate does not include the impact of inflation protection mechanisms). Property retention was 72.8% in Q1 2025, compared to 77.5% in Q1 2024.
  • Sequential PIF growth for property was -3.1% in Q1 2025.

The Company noted favorable non-catastrophe losses in the USRM book, driven by improved personal lines frequency and underwriting actions executed to address persistent loss trends.

USRM Small Commercial Lines

The small commercial lines segment within USRM also experienced changes:

• Small Commercial Lines NWP: Decreased by 2.4% to $1.276 billion.
• Renewal Rate: Increased to 13.2% in Q1 2025, up from 11.4% in Q1 2024.
• Retention: Stood at 75.6% in Q1 2025, slightly improving from 74.6% in Q1 2024.

Liberty Mutual highlighted that USRM Small Commercial was renamed in Q2 2024 (formerly USRM Business Lines) “to align with our agents and partners, and better reflect our market appetite.”

Liberty Mutual is ranked as the “4th largest commercial lines writer in the US” based on 2024 direct written premium.

Company Commentary and Outlook

While the underlying results in USRM show progress from underwriting discipline, the significant impact of catastrophes, particularly the California Wildfires, underscores the volatility inherent in the property and casualty market. Liberty Mutual reported that the California wildfires contributed to an estimated $1.2 billion in pre-tax catastrophe losses for the Company as a whole.

Mr. Sweeney expressed overall satisfaction with the quarter’s performance, emphasizing the Company’s continued pursuit of “profitable growth and progress toward our 95% combined ratio goal at the end of 2025.”

Liberty Mutual’s Q1 2025 results indicate the Company’s continued focus on underwriting profitability, particularly within personal lines, while navigating a challenging catastrophe environment and competitive market pressures leading to increased customer shopping in auto. The improvements in the underlying combined ratio suggest that pricing and underwriting actions are taking effect, a trend that will be closely watched in the coming quarters.

More about Liberty Mutual

Boston-based LMHC, the parent corporation of the Liberty Mutual Insurance group of entities, is a diversified global insurer and the ninth largest global property and casualty insurer based on 2024 gross written premium. The Company also ranks 87th on the Fortune 100 list of the largest corporations in the U.S. based on 2023 revenue. As of December 31, 2024, LMHC had $166.695 billion in consolidated assets, $136.043 billion in consolidated liabilities, and $50.2 billion in annual consolidated revenue.

LMHC, through its subsidiaries and affiliated companies, offers a wide range of property and casualty insurance products and services to individuals and businesses alike. In 2001 and 2002, the Company formed a mutual holding company structure, whereby the three principal mutual insurance companies, LMIC, LMFIC, and EICOW, each became separate stock insurance companies under the ownership of LMHC.

Functionally, the Company conducts substantially all of its insurance business through two business units, with each operating independently of the other in certain areas such as sales, underwriting, and claims, but, as appropriate, collaborating in other areas such as actuarial and financial. Management believes this structure provides increased synergy to the Company and permits each business unit to execute its business strategy and/or to make acquisitions without impacting or disrupting the operations of the other business unit.

LMHC employs over 40,000 people in 28 countries and economies around the world. For a full description of the Company’s business operations, products, and distribution channels, please visit Liberty Mutual’s Investor Relations website at www.libertymutualgroup.com/investors