Liberty Mutual’s third-quarter results showed its US personal lines business shrinking and underlying margins weakening, with large reserve releases cushioning the headline figures.
The Boston-based mutual insurer reported net income of $2.07 billion, down from $2.22 billion a year earlier. Its combined ratio rose to 89.5% from 84.7%. For the first nine months, net income rose 32.6% to $6.75 billion and the combined ratio improved 1.4 points to 88.1%, helped by much lower catastrophe losses than in 2025, when the Los Angeles wildfires struck.
“With the strongest capital position in our history, we will remain disciplined and pursue profitable growth amid changing market dynamics,” said Tim Sweeney, chairman and chief executive.
Net written premiums in US Retail Markets, Liberty Mutual’s personal lines business, fell 5.6% to $6.72 billion in the quarter, and 2.8% over nine months. Global Risk Solutions, its commercial and specialty business, was flat at $4.0 billion in the quarter and up 3.1% for the year to date.
Total net written premiums fell 2.8% to $10.74 billion.
The fall in US Retail Markets premiums comes as personal lines pricing softens nationally. Personal auto premiums are forecast to fall slightly in 2026 after several years of sharp rate increases, and carriers have begun filing rate decreases in some states.
The underlying combined ratio, which excludes catastrophes and prior-year development, rose 4.5 points to 91.9%. The main driver was a 4.0-point increase in the underwriting expense ratio to 35.4%. Liberty Mutual’s release didn’t explain the increase. The claims ratio rose 0.5 points to 56.5%.
Two factors offset the weaker underlying result. Favorable prior-year development of $840 million, more than double the $416 million a year earlier, improved the combined ratio by 7.7 points. Limited partnership income also rose 36% to $810 million. Catastrophe losses rose to $585 million, or 5.3 points, from $114 million.
Liberty Mutual also agreed on October 14 to acquire Austral Seguradora, a Brazilian surety provider. The deal is expected to close in 2027, subject to regulatory approval.
For personal lines agents, the fall in Liberty Mutual’s US Retail Markets premiums suggests a carrier that is focusing on profitability rather than chasing growth as the market softens. That may limit how aggressively it competes on price for new business, even as other carriers cut rates.
The jump in the expense ratio is worth watching. Insurers often spend more on marketing, technology and distribution when they plan to grow, and Liberty Mutual has been investing in new channels, including launching a ChatGPT app for auto quotes earlier this year. If spending keeps rising while premiums fall, pressure on margins could grow.
The reliance on reserve releases also matters. Releases of this size can’t be counted on every quarter. If they shrink, the weaker underlying results will show through more clearly, which could affect pricing and appetite in 2027.
