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The long arm of Liberty Mutual: Liberty Mutual Insurance Cos. has been a leader in workers' compensation almost as long as employers have been required to buy it to protect their employees. But many industry watchers would be surprised to know that workers' comp is not the company's biggest line--and the United States is not the only country where it's a leader.

The best-kept secret in the world of insurance could be that Liberty Mutual does more Ethan write workers' compensation insurance in the United States.

While Liberty Mutual has been the largest private workers' comp writer in the United States from 1936 to 2002, its private passenger auto line has outpaced workers' comp to become the company's largest single line. Workers' compensation still brings in a fourth of the company's total net premiums written, yet those two lines are just a part of Liberty Mutual's story.

The Boston-based company boasts it's the second-largest U.S.-based international writer of property/casualty insurance--behind behemoth American International Group. While many mutual companies maintain a strong regional presence, Liberty Mutual, a mutual holding company, has reached well beyond that to become the largest U.S. managing agent at Lloyd's, the legendary London-based insurance market. It also holds strong positions in several Latin American countries, writing business in a total of 17 nations. It became the first Lloyd's syndicate to open an office in Paris.

>From the City of Lights to its home town of Beantown, Liberty Mutual has quietly grown from its original niche--workers' compensation--to a multiline, multi-country company writing $12.5 billion in net premiums in 2003. Most recently, the once quiet mutual holding company--the largest mutual holding company in the United States--has taken the unusual approach of releasing detailed quarterly earnings reports, hosting conference calls with investors and equity and debt analysts, and launching a Web site for investors.

Liberty Mutual does not have equity investors, but it does have debt investors, and is only one of a few companies--not just insurers, but all companies--to have issued 100-year surplus notes.

Throughout its growth, the 92-year-old company has stuck to its "Creed"--which includes helping policyholders prevent losses--by investing millions of dollars into safety research. That research has done more than simply help Liberty Mutual's own customers; it's made the world a safer place--safer for people at home, at work, and on the road.

The Liberty Mutual Creed

Many companies have a credo or mission statement, but many declarations are mothballed at the bottom of forgotten desk drawers or buried in corporate-speak in annual reports. That's not the case at Liberty Mutual.

All who enter Liberty Mutual's headquarters in Boston must walk beneath a replica of the Statue of Liberty, the company's logo, surrounded by the national flag for every country where Liberty Mutual operates. On the opposite wall, in brass letters, is the company's creed:

"With our policyholders we are engaged in a great mutual enterprise. It is great because it seeks to prevent crippling injuries and death by removing the causes of home, highway and work accidents. It is great because it deals in the relief of pain and sorrow and fear and loss. It is great because it works to preserve and protect the things people earn and build and own and cherish. Its true greatness will be measured by our power to help people live safer, more secure lives."

"It's really our legacy and our future. Everything we do one way or another is about that creed," Dennis Langwell, Liberty Mutual's chief financial officer, said.

Paul Condrin, executive vice president of personal lines for Liberty Mutual, said the creed couldn't be more appropriate. "What differentiates us from a lot of companies is the time and energy we spend in preventing the loss," he said. In addition to employing more than 700 safety and health experts in the field to work with customers in preventing losses, the company's 50-year-old Research Institute for Safety is devoted to studying the science of preventing losses. (See "Liberty and the Pursuit of Safety" below.)

But don't think the creed's worshipped like some flamboyant cult leader.

"We're fairly low-key. At some companies, creeds can almost engender a religious fervor," said Gary Gregg, executive vice president, commercial market. "We take the approach that it's better to walk the walk, rather than talk the talk. [The creed] is a critical part of who we are, but it's not like people are walking around quoting it."

Yet the creed is the backbone of most, if not every, company decision. The creed is why the company spends $8 million a year on its research center. "We believe strongly in our business,' said Edmund F. (Ted) Kelly, chairman and chief executive officer of the company. "We do something pretty good here: We put people's lives back together. Think about that--If a house burns down, or there's a workplace injury, or a large claim, we help them get through that. I don't want to sound hokey, but it's a pretty noble thing."

The creed is why the company believes in taking a long-term view in regard to earnings and investing, Kelly said.

"We've made a promise to pay people--sometimes 10 or 20 or 30 years from now. Do we have enough money to pay them?" Kelly said.

That attitude is why the company has added more than $1.1 billion to its asbestos reserves since 1998. "Our priority is to put things behind us when we recognize problems," Langwell said. The company completed a comprehensive asbestos ground-up study in 2003, following which reserves were strengthened by $331 million, including $158 million allowance for doubtful accounts related to reinsurance recoverables.

The company plans to be around a long time, as evidenced by its being one of just a few companies to ever issue surplus notes for a longer duration than 50 years. In 1997, the company issued a lO0-year, $500 million surplus note. In taking that long-term view, Liberty Mutual's leaders said they are more interested in a strong balance sheet than posting impressive quarterly earnings.

"We are probably in as good a time in the property/casualty business as we've ever seen. Every one of our businesses is doing well. That's going to change ... it's inevitable," Kelly said. "There are a couple things we can do to capitalize on these favorable trends. First, we continue to strengthen our balance sheet. Second, we maintain our underwriting and pricing discipline. But it's much more important that we exit this strong period with a balance sheet that is rock solid. History has shown the last thing you want is soft pricing and a bad balance sheet."

A League of Its Own

When compared to its peers--other large property/casualty writers--Liberty Mutual lags somewhat in profitable underwriting. For instance, for every $1 of premium written in 2003, Liberty Mutual paid out $1.06 in claims and expenses--more than any other company ranked in the top 10 property/casualty writers by net premiums written, according to A.M. Best Co. data. Only one other company in the top 10, Zurich/Farmers Group, failed to turn an underwriting profit, but it paid out $1.02 in claims and expenses for every $1 of premium.

Matt Coyle, Liberty Mutual's newly hired director of investor relations, said the company's combined ratio is improving. It dropped to 103.7 in the first quarter, down from 105.7 a year ago. But, he said the combined ratio may be higher than other companies because of Liberty Mutual's higher concentration in workers' comp business relative to the industry, and in particular, large deductible policies--a product that traditionally tends to run a higher combined ratio than some other property/casualty lines--and because the company is reserving conservatively its current accident year loss reserves.

However, combined ratios can run higher due to underpricing, as well as conservative reserving.

"The perception in the market is that Liberty Mutual is an aggressive player not necessarily as disciplined as stock-owned companies," said Christopher Winans, vice president of equity research for Lehman Brothers' property/casualty insurance division. "There's no way that any company in this hard market should be posting combined ratios above 100. I know [Liberty Mutual] took an asbestos charge, but so did everyone else."

Coyle said the company is maintaining its underwriting and pricing discipline. He said the company prices its products to earn an annual return on equity of 12% to 13% on average. "At the end of the first quarter, we reported rate increases in excess of our loss trends across our core product lines, which would indicate we are continuing to earn a positive margin on new and renewal business," Coyle said.

Stephan Petersen, an equity analyst with Cochran, Caronia Securities, said mutual companies and mutual holding companies can take a longer-term view than public companies. "Generally, publicly waded firms feel a bit more constrained than a large mutual carrier like Liberty Mutual. A mutual company isn't probably held to the same level of scrutiny by its policyholders that a public company would be by shareholders. 2Mutual policyholders are probably less worried about ROE targets, as long as they are getting cost-effective insurance and good claims handling."

Kelly said the company will walk away from unprofitable business. For instance, he pointed to the company's intentional step back from the California workers' comp market, and its drop to become the No. 2 private writer of workers' comp, behind AIG. (The largest writer of workers' comp is the State Compensation Insurance Fund of California.) It's the first time in 67 years that Liberty Mutual hasn't led the pack among private writers.

"That would be a concern to us if we hadn't diversified" Kelly said. "But you've got to grow when the opportunity is there, and not grow when it's not, and have the patience to do it right. There will be a time to sow, a time to reap, ,and a time to show restraint when the market's bad."

Robert Farnam, senior financial analyst and actuary at A.M. Best Co., said Liberty Mutual "may not have the same pressure as a fully public company to produce the same earnings. Their results are improving, but profitability is still relatively modest compared to many of its competitors."

Petersen said there are advantages and disadvantages for both public and mutual companies.

"I wouldn't say that mutual companies are viewed as backwards, but they are probably not rewarded for innovation the way public companies are," Petersen said. "From a commercial property/casualty perspective, Liberty Mutual is one of the largest mutual writers out there, so their sheer size and scale put them in a class by themselves."

Diversify and Prosper

Although workers' compensation insurance continues to be the heart of Liberty Mutual's operation, Kelly said the company became concerned about its concentration in that line in 1992."We began to look at diversification, and there are lots of ways to diversify: risk, capital, market, geography, distribution."

In the late 1990s, the company concentrated on growing three business units--personal markets, regional agency markets, and international business--in addition to its well-established commercial markets unit. Today, no single business unit is responsible for more than a third of the company's revenue (see "By the Books," pg. 51).

Liberty Mutual dipped its toe into the international markets by buying a financially troubled company in Venezuela. Liberty Mutual turned the company around, and grew it from the seventh-largest insurer in the country to the largest. Also through acquisitions and organic growth, Liberty Mutual has continued to grow internationally, and has a significant leadership position in many Latin American and Southern European countries. The company also owns two Lloyd's syndicates, is currently the fourth-largest overall managing agent at Lloyd's--and the largest U.S. managing agent at Lloyd's. The international business accounted for about 17% of the company's revenues compared with 10 years ago, when Liberty Mutual was just beginning to establish a footprint in the international property and casualty business.

Tom Ramey, executive vice president of Liberty Mutual Group and president of Liberty International, credits the growth to the company's operating structure and philosophy.

"The approach is very entrepreneurial and based on our strengths--not the fad of the moment," Ramey said.

For example, the company received a license for China last year, becoming the first foreign property and casualty insurer in western China. "Everyone else is in Shanghai and Beijing, and we're in Chongqing, a city of 31 million people," Ramey said.

The company is "willing to go into China realizing we will not be profitable in the short term, but will be in the long term," Kelly said. "We're also prepared to weather the ups and downs in Latin America. Fortunately, we've always made money there."

Since 1998, the company has averaged 2.5 international acquisitions a year, most recently buying MetLife's personal auto business in Spain and Winterthur's insurance operations in Portugal. In addition to international acquisitions, Liberty Mutual has been busy with domestic acquisitions, averaging one a year since 1998, Ramey said.

"There's been an extraordinary amount of growth through acquisitions," Ramey said. "One of the things that Liberty does very well is integrate companies. But acquisitions are not the only way we've grown. Liberty International Underwriters, our casualty and specialty company, has had strong organic growth rivaling that of Bermuda start-ups."

In 1997, the company formed Regional Agency Market--a national organization of seven regional and two specialty companies that write small to midsize commercial and personal lines business exclusively through 5,000 independent agencies. RAM grew to an organization with revenues of $3.4 billion in 2003 through the acquisition of seven property and casualty companies between 1997 and 1999, including the operations of Guardian Royal Exchange in 1999, as well as the renewal rights to approximately $1 billion of OneBeacon business in 42 states excluding New England, New York and New Jersey, from the White Mountains Insurance Group in 2001. The OneBeacon transaction provided the opportunity for RAM to create two new regional companies to serve the Gulf and North Central regions of the United States.

RAM was Liberty Mutual's foray into selling property and casualty insurance through independent agents. Before RAM, the majority of Liberty Mutual's business was written on a direct basis.

RAM is also unique in that it provides its independent agents with the benefits of working with a regional company along with the capabilities of a national organization, the company said. "Our agents are pleased that we are not a large bureaucracy. "While we have achieved considerable synergies due to our size, we pride ourselves on our ability to make decisions at the local level where the knowledge of the marketplace is greatest," said Roger Jean, president of RAM.

Liberty Mutual also sought to grow its commercial insurance distribution channels, branching out from being predominately a direct writer of workers' comp. Today, two-thirds of middle and large market commercial is sold through brokers, while one-third is sold directly. "In all markets, we could see the power shifting from the manufacturer to the consumer ... you could see that companies could no longer dictate to the consumer how they could buy a product, whether it was toothpaste or insurance. We decided to be multichannel," Kelly said.

Liberty Mutual's largest line of business is now personal lines. Through acquisitions like Prudential's $1 billion U.S. property and casualty business, as well as organic growth, Liberty Mutual's private passenger auto book has grown 73% from 1998 to 2003, to $4.5 billion in 2003, according to A.M. Best Co.'s state/line reports.

The company's personal lines are sold four ways: direct field representatives (1,100 employees), Prudential's 2,700 agents, direct response and through the Internet, Condrin said.

The company boasts it's the largest affinity writer in the country, with relationships with 8,300 employers, credit unions anti professional and alumni associations. For instance, it offers policies through 325 college alumni associations.

The affinity channel brought in 71% of the new personal lines business in 2003. Besides providing new business, the affinity channel has a slight cost advantage. "Our approach doesn't require all of the advertising that a Progressive or Allstate does," Kelly said.

Liberty Mutual also decided to become more focused and exit some businesses. In 2001, it sold its annuity and bank marketing business to Sun Life Assurance Company of Canada, and sold its asset management business to Fleet Boston Financial, for total proceeds of $2.1 billion.

Kelly said the business didn't have enough scale to compete with larger competitors, yet was too big to have carved out a special niche. "If you are too small to be big and too big to be small, you're going to die," Kelly said.

And Liberty Mutual intends to be big--very big.

"I have absolutely no doubts that within not too many years, we will be one of the top property/casualty companies 2worldwide," Kelly said. "To get there, you have to do remarkably well in the biggest market in the world, which is North America. We will continue to grow our footprint. In many senses, we are better known abroad than we are in the U.S., but being understood is not as important as being good."

Key Points

* Liberty Mutual's creed, "to help people live safer, more secure lives," is the backbone of its operations, and one of the reasons it spends $8 million annually on its research institute.

* Liberty Mutual is still a top writer of workers' compensation insurance, but it has branched out into personal lines and international markets.

* Taking a page from its public counterparts, Liberty Mutual is hosting quarterly earnings conference calls with investors. The spread on the company's surplus notes has improved dramatically since it became more vocal.

Learn More

Liberty Mutual Insurance Cos.

A.M. Best Company # 00060

Distribution: Multichannel including direct, independent agents and brokers, and captive agents, including Prudential's agents (Liberty Mutual purchased Prudential's property/casualty business.)

For ratings and other financial strength information about these companies, visit www.ambest.com.

Liberty and the Pursuit of Safety

You may not know the name of David S. Beyer, but he's reached a hero's superstar status at Liberty Mutual.

He didn't excel in sports or music. He didn't grace the silver screen.

Beyer was a safety engineer.

And the fact that he was the first employee hired by Liberty Mutual back in 1912 has become a legend at the company, which devotes a great deal of time, money and effort to studying why people get hurt at work, how to prevent those injuries and how get them back to work sooner.

Loss prevention is "the cornerstone of what we stand for," said Karl Jacobson, senior vice president of loss prevention at Liberty Mutual.

The center of Liberty Mutual's loss prevention is its Liberty Mutual Research Institute for Safety. Funded with an annual budget of $8 million, the research institute employs 46 staff members, including 25 full-time researchers who are devoted to studying the various aspects of workplace and worker safety.

It's a sound investment, Liberty Mutual says. Workplace injuries caused $45.8 billion in costs in 2001, up from $44.2 billion in 2000, according to its 2003 Workplace Safety Index.

At any given time, there are about 70 different research projects under way in the institute's 11 labs. The findings are shared with the world, including other insurance companies, through publication in peer-reviewed scientific journals.

Tom Leamon, vice president and director of the institute, said it's important that the findings be published and accepted in the scientific community.

"Otherwise, why would anyone accept our opinion? They'd say, 'that's what you'd expect an insurance company to say," Leamon said. "This gives us credibility."

Many of the studies revolve around the three leading causes of workplace injury: overexertion, falls on the same level (as opposed to tailing from a height) and bodily reactions (injury caused by the body contorting in an attempt to avoid falling).Those three causes of injury were responsible for 51% of workers' injury costs in 2000, according to the company.

"It doesn't matter what industry you are in: restaurant, manufacturer, office. I can tell you the cause of your major workers' comp losses" Leamon said.

The institute spends a lot of its time studying slips, trips and falls, physical work and return-to-work programs.

After publishing its various findings--74 published last year alone--Liberty Mutual then uses the results from its findings to develop risk-management guidelines, which are proprietary. It shares those guidelines with the company's more than 700 safety and health professionals in the field, who work with clients to improve safety. Each of Liberty Mutual's business units has its own assigned loss prevention experts.

Over the years, Liberty Mutual's findings have included such industry-changing concepts as guards to prevent workers from losing hands and fingers in machines to an emergency shut-off switch on escalators that prevents children and others from getting hurt if their shoes get caught under a moving step. Many of the company's industrial findings have became standards utilized by the Occupational Safety and Health Administration and other domestic and international regulatory organizations, And the escalator emergency shut-off switch has been a building code requirement in the United States since 1960.

"We don't do this because we want to create standards. We do this to reduce losses," Jacobson said. "We consider ourselves business partners with our customers. We care about the long term. Preventing losses is a win/win for both of us."

The institute often does joint projects with colleges and universities. For instance, in 1957 and 1961, the institute and Cornell University developed two "survival cars," which were designed to show how safety measures could prevent vehicle crashes and injuries. The cars included 17 safety features, including seat belts, air bags, collapsible steering columns, headrests and special brakes that eventually became standard in U.S. automobiles.

If the institute needs to measure a particular factor, and there isn't an appropriate measurement device in existence, it will design and create the needed tool. The institute holds several patents, including one for a machine that measures the slipperiness of floors. However, the institute's focus is not on creating devices or seeking patents.

"We don't want to design products. We create knowledge and others can use that knowledge to create the product. We are not in the business of producing patents," Jacobson said.

It's difficult to measure the impact the institute has had on Liberty Mutual's bottom line, but that's not the main goal of the facility either, Leamon said.

"My job is to give the competition an inferiority complex. They can't go someplace else to have a better control of their risk. That's a visible part of who we are," Leamon said.

Located about 26 miles west of Boston, in Hopkinton, Mass., the 93,000 square-foot research institute is divided into two entities. The Center for Safety Research works to improve workplace safety by investigating the causes of workplace accidents and injuries, including studying how people respond physically to various tasks. The Center for Disability Research studies the causes, consequences and prevention of disabilities in workers, and helps to develop safe and sustained return to work for injured workers. The institute, which recently doubled its size with a new addition, is 50 years old.

While the institute is geared to do studies to share with the world, the institute also houses an operation specifically to improve Liberty Mutual's personal claims handling. The institute includes a 14,000 square-foot claims training center where personal auto and homeowners adjusters learn first hand how to repair damaged homes and autos. In addition to classroom training, the center includes a working garage where adjusters--and even customer service representatives who answer phones--can learn the basics of how to repair damaged cars and homes.

The traditional-looking classrooms include garage doors that open up into a warehouse-sized facility. In addition to a working garage, where auto claims adjusters can learn how to pull a dent from a bumper or realign a damaged frame, the facility also includes a newly built, full-sized, two-story home where homeowners claims adjusters can learn about different building techniques and materials. The home includes some Plexiglas walls, so students can see the innerworkings--pipes and wiring--of a house, and how various types of sample materials can be used.

"They learn the terminology, which helps them interact with body shops and customers," said Tom Smyth, director of technical training for Personal Markets.

Home adjusters attending a training program that spans several weeks actually build a small house-like shed, which is "damaged" by teachers, who spray red spray paint to represent fire damage. Then the adjusters estimate how much it will cost to repair the damage, and then, they repair the damage themselves to see how close they come to their estimate.

"It's a great learning experience," Smyth said.

Outside the facility is a three-acre auto training and testing track, equipped with sprinklers to wet the pavement. Using specially prepared vehicles, instructors can show participants-often commercial vehicle driver trainers, or fleet managers--driving techniques to use during difficult emergency driving conditions, such as when they have to stop suddenly, or the vehicle begins to slip into a tailspin skid.

"It's one thing to tell someone what to do in an emergency. But that's not likely to be as effective as letting them do it, and feel it, for themselves," said Dave Money director of transportation training.

All aspects of the institute point to its motto, "From Research to Reality," Leamon said. "There's a difference between the perception and the reality of risk. Our mission is to do research, reduce risks and differentiate Liberty Mutual. Our purpose really is to help people live safer, more secure lives."

What You Didn't Know About Liberty Mutual

Liberty Mutual traditionally has been a major writer of workers' compensation insurance in the United States. But did you know that its private passenger auto has surpassed its workers' comp business to become the company's largest single line?

Here are some other facts about Liberty Mutual that you may find surprising:

* No. 1 U.S. investor in Lloyd's

* No. 1 insurance company in Venezuela

* No. 1 property/casualty writer in Colombia

* No. 1 workers' comp writer in Argentina

* No. 5 largest auto insurer in Thailand

* No. 4 U.S. managing general agent at Lloyd's

* No. 5 largest commercial lines writer in the United States

* No. 8 largest personal lines writer in the United States

* No. 1 affinity writer (personal auto) in the United States

* No. 116 among Fortune 500 list of largest U,S. companies

* $16.6 billion in consolidated revenue

* Founded in 1912

* 38,000 employees in 900 offices.

Source: Liberty Mutual Group, as of Dec. 31,2003

Liberty Mutual People

Edmund F. (Ted) Kelly, Liberty Mutual's chairman, president and chief executive officer, said Liberty Mutual's employees are the key to its success.

"You won't find it in any business book, but a huge part of our success is that Liberty Mutual people are nice people and our policyholders like doing business with us," Kelly said. "We have an extraordinary group of employees. Pound for pound, we've got the best organization in the business."

Helen Sayles, senior vice president of Human Resources, said the company employee retention was 89% in 2002 and 88% in 2003, significantly higher than its peer companies. Keeping employees satisfied and challenged is important, she said, because the company prefers to promote from within.

For instance, Gary Gregg, executive vice president, commercial market, said when be was hired in 1989, he was only the second elected officer to come from outside the company.

"We have the intensity and focus of a public company," Gregg said. "We owe it to our customers to never be satisfied as a management group."

The company's culture is one where people are treated "with dignity and respect," Gregg said. Yet people are held accountable for their decisions, and good performance is demanded and rewarded, he said.

Liberty Mutual employees have a flexible time-off plan, which employees can use for sick time or vacation time as they see fit. "Our employees work very hard, but we believe they'll be more effective with balance," Sayles said.

While generous--employees earn 1.5 days off a month, up to 15 days their first year to a maximum of 30 days total--the plan is designed to reward the right behavior. "It's not the norm in the industry," she said.

"If we force people to chose between Liberty Mutual and their families, we will lose--and we should," Sayles said. "That drives what we do." >From the lowest employee on up to Kelly in the CEO's office, employees who meet performance standards share in a bonus program when the company hits its performance goals, Kelly said.

"I want people to feel a sense of ownership," Kelly said. "And they do."

Walks Like a Mutual, Talks to the Public

Liberty Mutual may not face the same quarterly earnings pressure as its public company peers, but its leaders still felt compelled in 2003 to release quarterly earnings and field calls from equity and debt analysts.

"We are not a well-understood company," Edmund F. (Ted) Kelly, chairman, president and chief executive officer, said. "People don't realize our biggest line of business is personal lines, by far. We have a $3 billion international operation. We are the largest U.S. investor in Lloyd's. People think we are a workers' compensation carrier, and we were getting punished for it. It wasn't fair to our bond holders."

At one point, before Liberty Mutual began hosting conference calls and quarterly earnings, its surplus notes were selling at 50 cents to the dollar. By issuing more detailed earnings and opening up to answer questions from analysts and investors, Liberty Mutual drastically improved the spread on its debt notes, Kelly said.

Kelly emphasized there are no plans for the company to fully demutualize and issue public stock.

"We're having too much fun as a mutual holding company," Kelly said, with a chuckle. "Being a mutual company allows us to take a bit longer point of view. Over many short-term periods, Liberty has never looked as good as the competition. But over the long term, it does. Our secret is more than being a risk-taking business. It's a partnership between us and our customers. It's a partnership to reduce accidents. It's a partnership to get injuried workers back to work quickly."

Chief Financial Officer Dennis Langwell, who's been with the company a total of 11 years, returned to the company seven years ago after leaving for a stint at another insurance company. He came back to Liberty Mutual because "it's a terrific environment to work in. Vibrant," Langwell said. "There's a real sense of urgency. There's a perception in the marketplace that Liberty Mutual is low-key and quiet. That's not the case at all."

Liberty Mutual's property/casualty business is underwritten by nearly 40 insurers, led by Liberty Mutual Insurance Co., which was founded in Boston in 1912--the year after Massachusetts became one of the first states to mandate employers protect their employees with workers' compensation insurance.

Liberty Mutual Insurance Co's primary purpose was to provide workers' compensation insurance at cost. Since that time, the group has grown into one of the largest multiline writers of property/casualty business in the United States. Liberty Mutual also ranks 116 among the Fortune 500 largest industrial/service corporations in the United States.

After nine decades operating as a traditional group of mutual insurance companies, Liberty Mutual formed two mutual holding companies in 2001 as the initial step in an overall plan to bring its primary insurance affiliates under a single mutual holding company structure.

"The single mutual-holding company structure creates a more streamlined, efficient governance and administrative process, while preserving the separate identities and brands of the companies within the Liberty Mutual Group," A.M. Best Co. said in its Liberty Mutual company report.

In 2002, Liberty merged the mutual-holding companies with Liberty Mutual Holding Co. being the survivor, and Liberty Mutual Insurance Co., Liberty Mutual Fire Insurance Co., and Employers Insurance Company of Wausau becoming wholly-owned subsidiaries of the mutual holding company. The process, which was approved by the Massachusetts and Wisconsin insurance departments and policyholders, was completed in March 2002.

The new structure gives the company more flexibility, Langwell said. Last year, Liberty Mutual Group issued $750 million in senior unsecured debt to repay a portion of existing debt and make capital contributions to its insurance company subsidiaries.

"That's something we couldn't do tinder the old structure," Langwell said.

By the Books

Not one of Liberty Mutual's four business units is responsible for more than a third of its total revenue. This is who they are, with their key figures, reported in generally accepted accounting principles, for 2003:

Personal Market: Private passenger auto, homeowners, valuable possessions and personal liability sold through a captive sales force, two direct response centers, Prudential agents and the Internet.

* Revenue: $4.69 billion

* Combined Ratio: 97.9

Commercial Market: Workers' compensation, general liability (including product liability), commercial auto, property, bonds and wrap-ups for large construction projects as well as short- and long-term disability services and group life insurance.

* Revenue: $5.34 billion

* Combined Ratio: 106.1

Regional Agency Market: A group of locally branded, regional property and casualty insurance companies that distribute their products through independent agents and brokers. Products include commercial and personal lines.

* Revenue: $3.39 billion

* Combined Ratio: 100.6

International: Liberty International provides personal and small commercial lines through operations in Argentina, Brazil, China, Colombia, Hong Kong, Portugal, Singapore, Spain, Thailand and Venezuela. Liberty International Underwriters, a global specialty lines insurance and reinsurance business, writes casualty, marine, energy, engineering and aviation through offices in Asia, Australia, Europe and North America. Lloyd's of London syndicates 190 and 282 write both marine and nonmarine insurance and reinsurance business.

* Revenue: $2.93 billion

* Combined Ratio: 101.1

Total company:

* Revenue: $16.62 billion

* Pretax operating income: $405 million

* Pretax net income: $777 million

* Total assets: $64.42 billion

* Combined Ratio: 104.4

Source: Liberty Mutual Group, as of Dec. 31,2003
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Title Annotation:Liberty Mutual Profile
Comment:The long arm of Liberty Mutual: Liberty Mutual Insurance Cos. has been a leader in workers' compensation almost as long as employers have been required to buy it to protect their employees.
Author:Green, Meg
Publication:Best's Review
Geographic Code:1USA
Date:Aug 1, 2004
Words:5613
Previous Article:Leveraging information: enterprise data strategies and data road maps help manage corporate data assets.
Next Article:Direct premiums written by line, property/casualty, United States--2003.
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