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Cat losses drive Liberty Mutual underwriting loss

Boston-based Liberty Mutual slid into an underwriting loss for full-year 2010 after taking a $1.1bn catastrophe hit, up 54.1 percent from the $717mn suffered in 2009.

The firm's combined ratio slipped to 101.3 percent from 99.9 percent a year earlier.

This was driven by poor performance in its commercial lines, with an underwriting performance of 111.2 percent in the fourth quarter contributing to a full-year combined ratio of 110.9 percent.

This was the second consecutive year that Liberty's commercial lines have disappointed, but the results have also deteriorated from last year's fourth quarter ratio of 103.6 percent and full-year figure of 106.1 percent.

Liberty's LMAC, personal and international lines all made an underwriting profit for full-year 2010.

However, all of its lines recorded a net incurred loss attributable to prior-year development, totalling $308mn for the year, though this was markedly better than 2009's prior-year losses of $824mn.

The firm's revenues were boosted by private equity income of £398mn, which helped push pre-tax operating income up by 61.6 percent to $1.9bn for the year.

Net income also rose by 64 percent from the 2009 results to $1.68bn.

Revenues for 2010 increased by 6.8 percent to $33.2bn, while net written premium expanded by 3.3 percent over the same period to $29.2bn.

Liberty's investment income also recovered in 2010, with a 25.5 percent increase from 2009's result to $3,328mn.

Shareholder equity expanded for the period by 15 percent to $16.98bn.

Edmund Kelly, chairman and CEO of Liberty Mutual Group, remained confident of the group's success in the year ahead.

"Our industry-leading domestic personal lines businesses along with our unparalleled international operations more than compensated for the industry-wide problems in commercial lines," he said.

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