Liberty Mutual Reports Net Income Up 67% in Busy 2003

Liberty Mutual Group in Boston reported net income of $851.3 million for the 12 months ended 2003, a 67.4% increase over the same period in 2002.

“I am very pleased with our overall operating performance in 2003,” said Edmund F. Kelly, Liberty Mutual Group Chairman, president and chief executive officer. “The underwriting and balance sheet actions we have taken over the last several years provide us with a solid foundation for future profitable growth.”

Kelly reviewed the company’s main events in 2003:

— Acquired Prudential Financial, Inc.’s (NYSE: PRU) U.S. personal lines property and casualty operations business (excluding New Jersey business and the specialty automobile and affinity businesses of Prudential) (“PruPac”). The transaction is expected to add $1.1 billion in Personal Insurance business (LMG’s largest line of business) solidifying LMG’s market position as the eighth largest personal lines writer based on 2002 direct premiums written.
— Purchased Met Life’s Spanish operations, including its non-life subsidiary, Genesis Seguros Generales, S.A., and its life subsidiary, Seguros Genesis, S.A. The acquisition was the company’s third in Spain since 2001, giving LMG a significant presence in the Iberian Peninsula.
— Completed the sale of LMG’s Canadian health business and recognized a pre-tax gain of $81.9 million.
— Completed comprehensive ground-up analysis of asbestos reserves which resulted in a $331 million charge, including an allowance for uncollectible reinsurance of $158 million. Following the announcement, Standard & Poor’s revised its outlook on the Liberty Mutual Insurance Companies to ‘stable’ from ‘negative’.
— Underwriting results continued to improve in each of the four strategic business units, largely benefiting from the significant pricing actions taken over the last several years.
— Policyholder surplus increased to $7.2 billion, up approximately $2.0 billion from a year ago.
— Completed a $750 million private placement debt offering in March of 2004. Proceeds will be used to refinance existing debt obligations and further strengthen capitalization at insurance operations.
— Announced an agreement on January 19, 2004 to sell Canadian personal lines business, including Liberty Insurance Co. of Canada to Meloche Mennox, Inc., a member of TD Bank Financial Group. The sale allows LMG’s Personal Market Business Unit to focus on its core profitable U.S. personal lines business.