Liberty Mutual CEO Questions P/C Pricing Sense

The chief executive said it was logical for prognosticators to think there would be a "little more sanity" in pricing at the start of the year but "common sense and property/casualty insurance are mutually contradicting," he said during a conference call to discuss second-quarter earnings.

"One large company in particular," Kelly said, is being "extremely aggressive" in all lines of business in all regions. Kelly did not name the company. When asked how irrational the pricing was from the company Kelly spoke of, he said they "are welcome to a lot of the business they are taking. That is a shared view by the market."

Kelly said Liberty Mutual continues to walk away from business it thinks is not adequately priced. Nearly 80% of rate filings during the second quarter in automobile lines were for rate increases. The insurer also continues to look for rate increases in the homeowners market, which he described as "very intense." Kelly said significant catastrophe losses continue due to storms in the Midwest and the company is seeking rate increases to match the risk.

Liberty Mutual Group reported a drop in second-quarter net income to $274 million from $300 million during the same period a year ago. Net written premium for the quarter increased $625 million, or 10%, over the same period a year ago.

First announced in April 2008, Liberty Mutual's $6.2 billion acquisition of the publicly traded Safeco closed Sept. 22 for $68.25 per share in cash. The merger created the sixth-largest property/casualty insurance group in the United States. Kelly said Liberty Mutual now insures about 13.2 million automobiles -- a growth of about 50.6% over last year. Without Safeco, the growth was 5.5%, he said.

Liberty Mutual Insurance Cos. currently has a Best's Financial Strength Rating of A (Excellent).