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Liberty Specialty Markets on financial results and value of being a mutual insurer

Liberty Specialty Markets on financial results and value of being a mutual insurer | Insurance Business

Liberty Specialty Markets on financial results and value of being a mutual insurer

When Matthew Moore (pictured) first took on his position as MD and president of Liberty Specialty Markets (LSM) in 2017, he had the ambition of telling the mutual insurer’s unique story. LSM has a great story, he said, it just needs to tell it better and get better at articulating the unique upsides to being a mutual insurance company.

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Today represents a strong next chapter for the business which has published its Syndicate 4472 full-year 2020 results which saw it deliver a 3.8% increase in GWP and a profit of $201 million (approx. £145.47 million) up from $165 million (approx. £119.4 million) in 2019. Speaking with Insurance Business, Moore noted that the results were particularly impressive as the business is one of the market leaders in event cancellation coverage, so 2020 was a year designed to test the team.

“So to have dealt with that and handled the pains well while giving great support to the customers was really good,” he said. “So, partly because we’re a mutual and we have our full mutual advantage brand, we think we’ve behaved really well over the course of 2020, at a time when the industry is going through a bit of a rough time reputationally.”

Being a mutual insurance company has a lot of upsides, Moore noted, but the main beneficiary of these upsides is the end consumer, who rests at the very heart of the business model’s strategic direction. This has paid off for the business over the last year as he has seen a “flight to quality” by consumers looking for trusted carriers and LSM has worked very hard to make sure it is on the right side of that drive.

“I think for us as a whole industry, there has to be a flight to quality because the market was just underpriced for too long,” he said. “And you can’t just grow your way out of an underpriced market. So I think all organisations just have to keep making some very thoughtful decisions to make sure that their business gets the right return to their shareholders and that their portfolio’s resilient. Then when a big shock event like this comes along we can pay our policyholders, and do a nice job for them and still get a nice result for our capital.”

Among the key results issued by Syndicate 4472, the business delivered a combined ratio of 98.6%, down from 2019’s 107.6% and, excluding losses attributable to COVID, the combined ratio was 89.3%. Meanwhile, GWP was up to $1.75 billion (approx. £1.27 billion) while net written premium increased 7.1% to $1.116 billion (approx. £0.81 billion) from 2019’s $1.042 billion (approx. £0.75 billion).

Looking at these results, Moore noted that a combination of factors contributed to them including rate improvements in the portfolio and across the market. The Syndicate achieved an average rate increase of 10.0%, up 5.8% from last year’s 4.2%. In addition, he highlighted that through 2018 and 2019, the business worked hard to align its portfolio around quality rather than growth. 2020 was an above-average natural catastrophe year for the industry and COVID hit some of the Syndicate’s key portfolio areas but, because the business had worked on its portfolio, its risk management and its pricing, this impact was mitigated.

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The Syndicate also enjoyed strong performance across several standout lines, he said, including its retrocession book, and its reinsurance book, both on the property and specialty side. Also rolled up into the successful result was good performances across sectors including international property, terrorism, aviation and professional indemnity.

“But we’re not complacent,” he said. “There’s still a number of lines where I think we have to work harder on getting an adequate rate of return for the risk that we’re taking on… Across the Syndicate, the portfolio really is about quality so we are trying to be very thoughtful about our exposure to long-tail lines. We’ve worked hard in terms of improving the portfolio, and in terms of getting ahead of the reserving. We still think there’ll be significant rate rises in 2021, if you look across the industry results in aggregate, there still needs to be a repricing of risk.”

Broker relationships will continue to be essential to LSM, he said, as brokers’ job is to solve problems for their customers which means they need to be highly connected to their markets. The mutual insurer has worked hard to engage with its broker partners through a number of initiatives but it has also needed to thoughtfully outline its risk appetite so that the market is cooperating as efficiently as possible to solve customers’ problems. This goes back to putting the customer at the heart of its proposition, something that being mutual enables the business to do as it means it’s not distracted by the next earnings call or activist investors.

Moore paid tribute to the work his team carried out over the last 12 months. There’s a lot of longevity at Liberty, he said, and high levels of trust which means that even a switch to remote working hasn’t stopped the team from operating at the highest possible level.

“[Looking to the future], I’m not going to make any concrete predictions,” he said. “This time last year we had COVID and this year, we had Texas winter storms in the middle of February. If anything has been learnt, it is that the market is full of surprises. But, in terms of what we can control, our portfolio management, our customer relationships, our broker relationships, our brand and the engagement of our own people, and where the market is in terms of rates improvements - we’re feeling optimistic about 2021.”