By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®
Like his soon-to-be-predecessor, David H. Long is straightforward.
"It's a pretty darn tough market still," he said about the business-insurance market. "To be honest with you, I'd say we view the commercial market as a place where we're just grinding it out."
Liberty Mutual will take its modest successes. In the first-quarter of 2011, the Boston-based insurance carrier, the third biggest in the United States, saw total net written premium increase to $7.5 billion, 5.2 percent over the year-ago period. Long told Risk & Insurance® by telephone that he attributes that primarily to growth in the International Business Unit and rate and exposure increases in domestic personal-lines businesses.
Overall, opportunity in core commercial just isn't there.
"We're not looking for an awful lot of growth," Long said.
Long has been president of Liberty Mutual Group since June 2010 and will take on the additional role of CEO on June 29, succeeding current CEO Edmund F. Kelly, who will remain as board chairman.
Long will have a tall order in front of him at first. The insurance group's combined ratio for the first quarter including catastrophe losses from around the world was 102.5 percent. For its commercial unit, the combined ratio with CATS was 116.1 percent.
Is Long comfortable losing money on Liberty Mutual's underwriting?
"I am not particularly happy with it," he replied.
Besides the catastrophe losses from events like the Australian floods and the Japan and New Zealand earthquakes, Liberty Mutual suffered from its involvement in workers' compensation. The line represents about 13 percent of Liberty Mutual's revenue, according to Long. It also has a combined ratio across the industry of 120 percent, he said, and with interest rates where they are, "you're 15 points away from making a decent return."
That hurts when you have a disproportionate share of the workers' comp marketplace and you're "booking it appropriately," Long said.
WHAT TO DO
Long's solution in this near-term, bump-and-grind commercial insurance marketplace is to sharpen the proverbial elbows.
That means pushing a little harder to get business that's adequately priced. Long said he's willing to sacrifice top-line growth to get it, which might be offset by growth elsewhere, such as in global insurance hotspots in the developing world.
"We're quite prepared to invest capital in China, we're quite prepared to invest in Latin America," he said. Long said that appetite could extend even to India. It might be a drain on resources in the here and right now, but it's a good long-term investment.
As for workers' comp in the U.S. market, some carriers still trumpet their opportunities for growth there. Who are they kidding, though? Growth only means cutting rate further.
For Long, the most difficult place to price and make money in workers' comp is in the middle market, where each account wants to be priced individually and there's enough competition that they can get their way. All it takes is one carrier to make a "dumb move."
"We all do that," Long said.
Yes, David H. Long is straightforward like Kelly, albeit a wee bit less in-your-face about it.
Under Long, Liberty Mutual is going to be focusing in workers' comp on risk selection and the service component of large accounts.
"We think that given the amount of data that we have, that we can identify good accounts at a portfolio basis and price them appropriately," he said.
Of course, it's another matter if the market will accept those prices.
June 20, 2011
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