You Were Expecting, Maybe, Liberty Mutual?

Carrier relinquished lead spot in WC in 2002 as part of risk diversification program

"We don't have overdependence on any one line of business," Mr. Langwell said, presenting the details of an overall diversification strategy that limits Liberty's exposure to any one line, geographic area or distribution channel.

Reporting that Liberty is among the top-10 personal and commercial lines writers, he said that workers' comp is still the insurer's biggest commercial market. However, "we've long since ceded dominance in the workers' compensation line," he said, noting the group now ranks third, behind the State Compensation Insurance Fund in California and American International Group.

While SCIF is the largest workers' comp insurer nationwide, with nearly $8 billion in earned premiums in 2003, AIG is shown as the top dog on a chart of leaders accompanying this article. Data for our chart was retrieved from the U.S. Insurance product of National Underwriter Insurance Data Services, which excludes data for some state funds, per an agreement with the National Association of Insurance Commissionersthe ultimate source of the information.

According to NUIDS, Liberty Mutual last ranked ahead of AIG back in 2001, with the New York-based carrier overtaking Liberty for line dominance in 2002.

"In terms of business mix, workers' compensation is a much smaller percentage of our total book of business," said Mr. Langwell, noting that although Liberty's workers' comp premiums more than doubled over the last 10 years, it accounted for 22 percent of the group's $14.5 billion in net premiums in 2003down from 45 percent in 1993. (Personal auto accounted for 31 percent of premium writings in 2003, he reported.)

According to information from NUIDS, in the workers' comp line over the last six years, net written premiums for Liberty Mutual rose nearly 52 percent to $3.2 billion in 2003 from $2.1 billion in 1998. At the same time, AIG's workers' comp premiums nearly tripled, jumping from $1.1 billion in 1998 to $4.3 billion in 2003.

In addition to the overall diversification strategy, Mr. Langwell gave several reasons that the workers' comp line has shrunk in relation to other parts of the group's insurance portfolio:

o Regulatory reform in the 1990s.

A shift to large-deductible products through which workers' comp customers take on more risk in exchange for paying lower premiums.

A state-by-state strategy through which Liberty moves in and out of states depending on market conditions. (California, he said, is a good example of a state where Liberty contracted, he said.)

Mr. Langwell also noted that $700 million of the $3.2 billion in workers' comp net premiums comes from its Regional Agency Markets operation. RAM was not around in 1993, he said, adding that its existence now disguises a greater shrinkage in a larger-accounts book of workers' comp business.

That business has been replaced by premiums on less hazardous accounts offered to smaller employers through the RAM operation, he said.

Reproduced from National Underwriter Edition, August 19, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.