Liberty Mutual aligns commercial & specialty for lockstep march to margin
Liberty Mutual will realign its global commercial and specialty re/insurance operation Global Risk Solutions (GRS) to leverage strength across component units and achieve new margin targets.
That puts Liberty Specialty Markets, the group’s reinsurance operations, Liberty’s Lloyd's presence, North American commercial and global surety all on course for dovetailed operations under a “one GRS” mantra.
“The journey forward for GRS is more than positioning ourselves for a competitive environment,” division president Neeti Bhalla Johnson told her company's investor day gathering.
Liberty’s forward-looking stance, in contrast, should capture a “performance gap” between leaders and laggards that can explode once the market softens, she argued.
Underwriting capacities and geographic reach across Liberty Mutual’s units must dovetail now to pay off long-term. But GRS can “no longer be everything to everyone,” she said.
The key target metric: a combined ratio hacked down to the 92% market by 2025 at the latest, chiefly on better underwriting and more focused growth towards lower loss ratios.
The loss ratio should head to the low 60's, still a ways away, despite major margin gains in recent years to 68.8% in 2022 from 72.4% in 2021 and 76.7% in 2020.
Expense ratios should stay below 30%, largely accomplished already in recent years. But officials note that expense ratios are “middle of the pack” and company leaders “are not going to remain content” with such positioning. More efficiency may be possible.
The combined units grew net written premium by 2.7% in 2022 to $15 billion, a notable slowdown from the 9.8% annual growth in the prior year.
Specialty accounted for 28% of the total business mix, followed by reinsurance at 17%, casualty at 16% and commercial property at 12%.
Nearly half the business comes from North America commercial and specialty, followed by 25% in Liberty Specialty Markets and 17% or $2.6 billion in reinsurance.
Long-term growth will likely be heavily tilted towards emerging markets, Liberty Mutual believes.
But M&A is not necessarily required to capture that growth, save where moderate steps can enhance scale.
Liberty Has “no big burning appetite” and management is “comfortable with the footprint” in emerging markets it wields today across some 29 countries, CEO Tim Sweeney said.
“We think we have most of the product, most of the markets, most of the distribution we need,” Sweeney said.
Achieving scale can be the differentiator. “Where we are going to grow it is essential we have scale.”
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