Liberty Mutual to sell Venezuelan unit after damaging $427mn loss

Property/casualty insurer Liberty Mutual is cutting its losses and putting its Venezuelan arm up for sale after the subsidiary cost them a lot of money, among other factors

Insurance News

By Lyle Adriano

The second-largest property/casualty insurer in the U.S. recorded its worst loss in at least ten years—$427 million—on costs associated with the deconsolidation of its Venezuela subsidiary.

Liberty Mutual also cited the declining value of several of its energy-related investments as additional factors in its reported losses.

The $427 million loss contrasts the $605 million profit Liberty Mutual generated in the same period last year, according to a statement the insurer made on its website December 9.

Liberty Mutual took a $690 million impairment charge on its Venezuelan operations, and looks to classify them as discontinued and held for sale. At its height, Liberty Mutual was the number one property/casualty insurer in Venezuela, commanding about 15.2% market share.

According to company management, its Venezuelan losses were driven by the country’s skyrocketing inflation and devaluation of the bolivar, Venezuela’s currency.

On the black market, the bolivar fell by 80% this year, trading for 16 cents. In a separate statement released December 9, Liberty Mutual revealed that it booked its holdings in Venezuela at the rate of 13.5 bolivar per dollar (the so-called “sicad” rate), but the insurer gradually became unsure of its ability to continue its operations.

Liberty Mutual chairman and chief executive David H. Long said that he estimated the South American country’s annual inflation of 140% in June; Venezuela has not released official word on its inflation statistics in a year.

"Our continuing strong operating performance was masked in the third quarter by a nonrecurring loss of approximately $700 million from the deconsolidation of our Venezuelan subsidiary and energy investment related losses," Long contested.

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