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Developing potential
Delivering results
ANNUAL REPORT 2011
CONTENTS 8 ChiefExecutive’sstatement
12 Directors’report
19 StatementofDirectors’Responsibilities
20 IndependentAuditor’sReport
24 Profitandlossaccount–technicalaccount
25 Profitandlossaccount–non-technicalaccount
26 Statementoftotalrecognisedgainsandlosses
27 Balancesheet
29 Notestothefinancialstatements
Pages8to52(excluding11,18and22)representacompletereproductionoftheannualreportandfinancialstatementsoftheCompany.Allotherpagesdidnotformpartofthesefinancialstatementsandconsequentlyrepresentunauditedinformation.
GWP
+16.2%Our underwriting expertise and ability to identify and meet market needs helped us achieve strong growth in competitive markets.
PROFITS
$69mDespite difficult markets and uncertain economic conditions we continue to achieve profits according to plan.
NET ASSETS
+1.4%Following our seventh consecutive profitable year, our capital and surplus base increased to $700m.
20112010200920082007
GWP (in $000)
20112010200920082007
524,271 543,563577,382
637,404
740,931
THE FIVE YEAR RECORD
1Liberty Mutual Insurance Europe Limited Annual Report 2011
We have broadened the distribution of our products by leveraging Liberty’s global expertise to meet the needs of local markets.
InDubai,Libertycontinuedtobringnewproductstomarketin2011.ButasElieBouchaaya,SeniorVice-PresidentandGeneralManagerofLibertyMiddleEastandNorthAfricaexplains,thisisalwayspartofacarefulstrategicprocess.“Firstwefullyassessthemarket,identifyingexactlywhatcoverisneeded.Next,wedrawonLiberty’sglobaltechnicalexpertiseintheproductline.Thenwebuildthelocalresourcestodelivertheproductsuccessfully,tailoredtolocalconditions.”
Oneexampleduring2011wasthedevelopmentofEventCancellation,withourDubaiofficeworkinginpartnershipwithsistercompanyLibertySyndicates.AsElieexplains,thiswasarelativelynewcovertotheregionbutbyleveragingLibertySyndicates’technicalexpertise,theresultwasastrongproduct
thatcomplementedexistingspecialtyCasualtylines.AnotherexamplewasProfessionalLines,whichsawtheDubaiteamworkingcloselywiththeLondonspecialtyofficetodelivernewproductsintheregion.
WithpoliticalinstabilityacauseofconcernformanyclientsintheMiddleEast,aninnovativenewpackageofcoveracrosscivilcommotion,terrorismandcivilwaralsoprovedsuccessfulin2011,buildingonthegrowthinterrorismlinesintroducedin2010.
Withnewproductssettoemergein2012,theabilityofbrokersandclientstoaccessourworld-classproductsandlocalunderwritingissettocontinue,helpingLibertytogrowintheregion.
Aninnovativenewpackageofcoveracrosscivilcommotion,terrorismandcivilwaralsoprovedsuccessfulin2011.
INTERNATIONAL
EXTENDINGOUR REACH
2 LibertyMutualInsuranceEuropeLimitedAnnualReport2011
Ourproductsarebuiltonprovenunderwritingabilityandexperienceacrosssectors.
AVIATION
Ourhighlyexperiencedteamservessecond-tierandsmallerinternationalflagcarrierairlines,withaspecificfocusonstart-ups.Wealsowriteasubstantialbookofindustrialaidandrotorwingequipment.Otherspecialistareasinclude‘totallossonly’andnon-criticalproductsliabilitycover.
ENERGy/POWERGENERATION
Weofferaninnovative,flexibleservicecloselygearedtotheneedsoftheenergysectorincludingonshore,offshoreoperationalandconstruction,andpowergeneration.Ourclientsbenefitfromcross-classproductsandbespokepolicycoverfromourunderwriting,riskengineeringandclaimsteams.
CONSTRuCTION
Ourteamofconstructionengineersandunderwriterscombinestechnicalexpertisewithsignificantunderwritingcapacitytodeliverrisktransfersolutionsforawiderangeofheavyindustries,aswellasforbuildingandcivilprojects.
MARINE
Ourspecialistscoveroceancargo,projectcargowithdelayinstart-up,marineliabilities,hullandshipbuilders’risksproducts.Weprovidetailoredrisksolutions,capacityandservicetoourclientsthroughournetworkofglobalmarineprofessionals,claimsandriskengineeringservices.
CASuALTy/GENERALLIABILITy
Anextensiverangeofliabilityproductsisofferedtocommercialclientsinconstruction,manufacturing,leisure,motorsport,transportation,filmandTVproduction.Theseincludebothprimaryandexcesspublicandproductliabilityandemployers’liability.
COMMERCIALPROPERTy
Ourspecialistteamhasanin-depthunderstandingandmanyyearsofindustryexperience.Focusingonmaterialdamageandbusinessinterruptioncover,theyofferafull-servicepropositionthatcombinesunderwriting,riskengineeringandclaimsexpertise.
COMPETITIVEPRODUCT RANGE
3Liberty Mutual Insurance Europe Limited Annual Report 2011
ENVIRONMENTAL
Withgapsinpollutioncoverbecomingincreasinglyapparentundermanytraditionalliabilitypolicies,ourhighlyexperiencedteamunderwritesawiderangeofenvironmentalexposures.Ourproductsprovidebroadandcomprehensivecoverageforpollutionliabilityandenvironmentaldamageliability.
PROFESSIONALINDEMNITy
Ourmarket-leadingunderwriterscanarrangecoveronaprimaryorexcessbasisforbothtraditionalandemergingprofessions.Theseincludeaccountants,architects,brokers,designers,estateagents,propertymanagers,solicitorsandindependentfinancialadvisers.
FINANCIALINSTITuTIONS
Asaleadinginsurerinthissector,weoffertailor-madecoverforfinancialinstitutions.Productsinclude:blanketbondsforbankingorganisations;specialistcoverageforcrime,includingelectronicandcomputercrime;andprofessionalindemnityforalltypesoffinancialinstitutions.
DIRECTORS&OFFICERS
Bothbrokersandclientsbenefitfromourfirst-classservice.Areascoveredincludedirectors’&officers’liability,pensiontrusteeliability,employmentpracticeliability,commercialcrime,andpublicofferingofsecuritiesinsurance.
CRISISMANAGEMENT
Wehelpclientstoavoidor,ifnecessary,manageamajorcrisisandmitigatetheriskofproductcontaminationandproductrecall.Ourkidnapandransomcoverprovidesgovernments,internationalcorporationsandprivateindividualsaroundtheworldwithprevention,trainingandresponseservices.
SuRETy
Weprovidesuretybondsandguaranteespredominantlyforlargequotedorlargeprivately-ownedorganisations.Wespecialiseinservingtheconstruction,engineering,manufacturing,electronics,defence,shipbuilding,oilandgas,transportationandretailindustries.
TRADECREDIT/POLITICALRISk
Weinsuretradecreditandpoliticalrisksinemergingmarkets.Ourfocusisoninsuranceagainstdefaultbyindividualbuyersorsuppliers.Wealsoprotectagainstthenon-honouringoflettersofcreditandcoverpre-shipmentrisk,currencyinconvertibility,expropriation,andunfairbondcalling.
STRATEGICASSETS
Modernbusinessesareincreasinglydependentonintangibleassetsandnon-physicalperils.Ourhighlyexperiencedteamoffersinnovative,flexiblesolutionsinareassuchasreputation,intellectualproperty,cyberandprivacyprotection,andnon-damagebusinessinterruption.
4 Liberty Mutual Insurance Europe Limited Annual Report 2011
FLEXIBILITYAND INNOVATION
New products that meet the needs of brokers and clients are key to success in competitive markets. One example is Integrale, which continued to grow in 2011, being offered in new territories and through an online underwriting platform.
IntegralewasdesignedinFrancetosolveaproblem:theDirectors&Officersmarketforsmallandmedium-sizedcompanieswascrowded,competitiveandkeenlypriced.Thesolutionwasanewpackagethatstoodoutfromthecrowd.AswellasDirectors&Officers,IntegraleofferedCrimeandEmploymentPracticesLiabilityInsurancepluskeyManandThreatcover.Policyholderscouldalsoaccessaconsultancyservicecoveringtaxandlegaladviceaswellascrisismanagementsupport.“Asaresult,
byansweringjustafewmorequestionsthanfortheirDirectors&Officerscover,brokersandclientscouldgainvaluableadditionalproductsspecificallytailoredtomeetmiddle-marketneeds,withlimitsandexceptionsthatkeptpricesto,typically,aboutjust30%morethanstandaloneDirectors&Officers”,explainsOlivierMuraire,GeneralManager,SouthernEurope.
Thevalueofsuchanapproachwasquicklyrecognisedbytheindustry:IntegralewontheArgusD’Orawardforinnovationin2008,wassuccessfullyrolledoutinFrancein2009,crossedintoSpainin2011andwaslaunchedasanonlineunderwritingtoolthesameyear.Asaresult,asSeniorunderwriterChristinePujoandunderwriterNadiaGhribexplain,“Integralenowrepresents50%ofournewproductssoldand45%ofourmiddle-marketportfolio.”Andwithitsplannedroll-outintoSwitzerlandexpectedin2012,Integrale’sgrowthlookssettocontinue.
IntegralewontheArgusD’Orawardforinnovationin2008,wassuccessfullyrolledoutinFrancein2009,andcrossedintoSpainin2011.
EuROPE
5LibertyMutualInsuranceEuropeLimitedAnnualReport2011
Aswecontinuedtowidenourproductrangesandstrengthenourteamsacrosstheworld,revenuesincreasedineveryregioninwhichweoperate.
GLOBAL DISTRIBUTIONLOCAL KNOWLEDGE
Liberty Mutual Insurance Europe Limited Annual Report 20116
UK AND IRELAND COMMERCIALBIRMINGhAM|BRISTOL|ChELTENhAM|DuBLIN|LEEDS|LONDON|MANChESTER|SOuThEAST
Ourinvestmentinexpandingourbranchnetwork,strengtheningourunderwritingcapabilitiesandimprovingthequalityandaccessibilityofourservicesmeanswearestronglypositionedtosupportbrokersandclients.Weprovideawiderangeofcommercialinsuranceproductsthroughindependentandnationalbrokers.
+37%BUSINESS VOLUME
LONDONhEADOFFICELONDONMARkET
ActingasagatewaytotheLondonmarketandthebaseforsomeofthemosthighlyskilledinsuranceprofessionalsinEurope,ourheadofficeoffersafullrangeofspecialtyproductsandtheflexibilityrequiredtomeettheneedsofourbrokers.OurcommitmenttotheLondonmarketmeansthatwehavethecapacityandexpertisetounderwritethemostcomplexrisks.
+11.5%BUSINESS VOLUME
INTERNATIONAL DuBAI|hONGkONG|MALAySIA|SINGAPORE
Ourextensivenetworkgiveslocalbrokersandinsurancecompaniesthecapacitytomeetdemandfromsomeoftheworld’sfastestgrowingmarkets.Withexperienceofthelocaltradingenvironmentandawideproductoffering,ourhighlyqualifiedteamshavetheunderwritingauthorityandexpertisetomeetcustomerneedsinavarietyofsectors.
+22%BUSINESS VOLUME
+24.3%BUSINESS VOLUME
CONTINENTAL EUROPE COLOGNE|ThEhAGuE|hAMBuRG|MADRID|PARIS|zuRICh
ThroughindependentandaffiliatedbrokeragefirmsweofferagrowingsuiteofinsuranceproductsinEurope’skeystrategicmarkets.Ourcustomersaremediumandlarge-sizedcompaniesoperatinginawiderangeofindustrysectors,whobenefitfromourtechnicalexpertiseanddeepunderstandingoftheirneeds.
7Liberty Mutual Insurance Europe Limited Annual Report 2011
“Iamthereforeverypleasedtoreportthatcommercialactivitiesarealreadyshowingsubstantialtoplinegrowth,withmorescopeaheadtosecureandexpandourpositioninthemarket.”
CHIEF EXECUTIVE’S STATEMENT
STRATEGICGROWTh
Ourbusinessperformedstronglyin2011,withGrossWrittenPremiumup16%at$741mandpre-taxprofitsat$69m.Againstabackdrop
ofhighlycompetitivemarketsandanumberofnaturalandman-madecatastrophesthatimpactedtheinsuranceindustryduring2011,thiswasallthemorecreditable.
Ourperformancewasbuiltonthecombinationofourconservativeapproachtorisk,deepunderwritingexpertiseandtheabilitytoidentifyandrealisegrowthopportunities.Strategicinvestmentsoverpastyearsinnewteams,newproductsandbroadeninggeographicaldistributionarepayingoff,whilenewinvestmentsinthemid-marketsectorarecreatingfurthergrowthpotential.OurpositionintheindustryasarespectedproviderwithstrongtechnicalknowledgeanddeepunderstandingofbrokerneedswasdemonstratedintheInsurance360FinancialandProfessionalLinesInsightReport2011,whichplacedLibertyfourthoutof16majorcarriersforoverallservicequalityandsecondforclaimshandling.
Onceagainwewereabletobuildthestrengthofourcapitalbase,withnetassetsrisingto$700mduring2011.Wemaintainedaconservativestanceonthemanagementofourinvestments,withacontinuedfocusonhigh-qualityfixedintereststocksleadingtototalinvestmentsreturnsinexcessof4%.Asaresultofthisstrongoverallfinancialperformance,wearepleasedtoannouncedividendpaymentstotalling$42mthisyear(for further details please see the directors’ report).
MARkETS
Theyearwascharacterisedbyahighnumberofcatastrophesandrisklosses,withtheJapanesetsunami,Australianfloods,ThaifloodsandNewzealandearthquakealltakingplacein2011,aswellascivilunrestintheeurozoneandMiddleEast.Althoughthecompany(“LMIE”)inevitablyhadsomeexposuretothesetragicevents,therewasnomajorimpactonourbusiness.
Therewascontinuingevidenceofoversupplyandweakpricinginthebroadermarketthroughout2011.Althoughsomepocketssawrateincreasesduringtheyear,theseweresector-specificandpatchy:forexampleenergy,wherestrongdemandfirmedprices,andfinancialandcreditlines,whereeurodebtanddouble-dipfearsimpactedrates.
8 Liberty Mutual Insurance Europe Limited Annual Report 2011
Wecontinuetobewellreservedagainstthestill-emergingeffectsofthe2007/8globalfinancialcrisisandhavesufferedlittleimpactfromthemorerecentsovereigndebtcrisisinEurope.
REGIONS
AllourregionsgrewrevenueduringtheyearaswecontinuedtoachieveourobjectiveofdiversifyingawayfromourLondonspecialtybusiness.WecontinuedtostrengthenourcontinentalEuropeandInternationaloperations,intermsofbothunderwritingexpertiseandwideningourproductdistribution.Forexample,weintroducedtradecreditlinesinFranceandaddedterrorismlinesinDubai.WehiredanenergyteaminMadridaswellasbuildingourcasualtyandprofessionalindemnitycoverinGermanyandFrance.In2011ourcontinentalEuropeoperationssawrevenuesriseby24%andourInternationalregionsawgrowthof22%.
PRODuCTS
RecentlylaunchedproductssuchasEnvironmentalImpairmentLiability,CrisisManagementandStrategicAssetsexceededplanandwerewellreceivedbybrokers.Infactthelattertwowererecentlycitedbyindustrysourcesaskeyfuturegrowthareas,demonstratingourabilitytopositionourselvesaheadofthecurve.Ourpropertyteam,newin2010,alsogrewrapidly,playingakeyroleinourcommercialoperations.
Therobustnessofourfinanciallinesbusinesswasdemonstratedduringtheyearwhen,despitemanagementturnover,wewereabletomaintainourmarketpositionandinfactgrowrevenues.Thisunderlinedthestrengthanddepthoftheteam,which,asmentionedearlier,achievedahighrankinginthe2011Insurance360financialandprofessionallinesreport.
COMMERCIAL
Thiswasayearofintenseactivityinthecommercialarena,inwhichwestrengthenedourfoundations,almostdoublingstafflevelsduring2011.Iamthereforeverypleasedtoreportthatcommercialactivitiesarealreadyshowingsubstantialtoplinegrowth,withmorescopeaheadtosecureandexpandourpositioninthemarket.
Ournew,muchlargerofficeinBirminghamwasopenedin2011.WealsosetupabranchoperatingfromLondonandcoveringtheSouthEastregion,andanewofficeinLeedswillbeopenedshortly.Webroadeneddistributionofproducts,mainlyourproperty,casualtyandfinanciallinesbutalsoprovidedfurtheropportunitiesforspecialistlines.
Inordertomanagethesechangesefficiently,anumberoforganisationalchangeswerenecessary.Firstly,wecreatedadistinctmid-marketbusinessunitpresentlylocatedwithinourLondonheadquarters.Wealsosetupadedicatedbusinessdevelopmentteamtorefineourapproachtomarketandgeneratebusiness,andappointedaChiefunderwritingOfficersolelyforourcommercialoperations.
Duringthereportingperiod,ourparentcompany,LibertyMutual,acquiredtheIrishbusinessofQuinnInsurance.ThiswillstrengthentheLibertybrandinIrelandandfacilitatefurthergrowthinourDublinoperations.Asaresultoftheacquisition,ChiefOperatingOfficerPatrickO’BrienleftLMIEtotakeonthepositionofChiefExecutive,LibertyInsuranceIreland.JohnMcCammon,formerlyLMIEheadofClaims,wasappointedtoreplacePatrickasChiefOperatingOfficer.
9Liberty Mutual Insurance Europe Limited Annual Report 2011
EfficiEncy and sErvicE
We continue to use technology to drive business efficiency and customer service. Examples include the development of a new financial mini-lines portal that provides access to quotes and products, and a new claims platform. We also continue to play an active role in industry technology initiatives and support our staff in achieving professional training accreditation.
The emphasis we place on claims handling was demonstrated in 2011 both by our high ranking in the industry survey mentioned earlier and by our major investment in claims technology referenced above.
sponsorship
in terms of sponsorship we are supporting four British athletes during 2012. We are also continuing our support for up-and-coming racing drivers sam Brabham and alex Brundle which provides a natural fit with our provision of motorsport liability insurance.
ouTlook
in the broader market, we expect conditions to remain much the same in 2012, with oversupply mitigating rate increases and forcing some capacity out of the market.
our primary focus will be on consolidating existing opportunities rather than expanding into new countries or sectors. We will therefore continue to broaden our distribution of current products through existing branches. at the same time, we will remain watchful of opportunities available in the market: where these are attractive, we will launch new products and open new offices to take advantage.
as a result, we anticipate further growth in 2012, although this is unlikely to be at as high a rate as 2011 – a year in which we rapidly expanded our mid-market offering from a low base. Given the strength of our performance in what was a difficult year in the broader market and the global economy in general, i would like to thank all management and staff for their hard work and their expertise in achieving so much during 2011.
sEan p rocks cEo | 29 March 2012
liberty Mutual insurance Europe limited
“strategic investments over past years in new teams, new products and broadening geographical distribution are paying off, while new investments in the mid-market sector are creating further growth potential”
10 Liberty Mutual Insurance Europe Limited Annual Report 2011
ThestrengthofLibertyMutualInsuranceEurope’sLondonspecialtyteamisbuiltonitsunderstandingofclientneeds.AgoodexampleisourrelationshipwithNationalGrid,wherewehavegonefromofferingasinglelineinoneproductareatosupplyingthemwithtailoredsolutionsthatcrossproductareasandregions.
Therelationshipbeganin2003withNationalGrid’smainLNGimportterminalinIsleofGrain,kent.Impressedbythehigh-qualitymanagementanddesignoftheproject,Libertytookaleadroleincoveringitsexpansionin2005.TherelationshipwasfurthercementedbyinvolvementintheNationalGridpropertyprogramme.Beginningbywritingasmallpartofanexcesslayer,weprogressedtowritingaquota-shareline,taking10%ofa£500mlimit.Whentheclientlaterrequestedalong-termdealforthepropertypolicy,thestrengthofourrelationshipandourclose-upunderstandingoftherisksinvolvedmeantwewereabletodevelopastand-alone,
tailor-madedealinvolvinguniquepaymenttermsandlong-termstability.
havinggraduallyincreasedourinvolvementintheNationalGridengineeringprogramme,Libertywrote100%oftheirrecentLNGcryogenicpipelineconstructionproject.WealsoledunderwritingtermsfortheLondonCableReplacementTunnelproject,amajorinfrastructuredevelopmentthatwillhelppowerLondonforthefuture.
TherelationshipcontinuestogrowandnowincludesSurety,CasualtyandDirectors&Officerslines,plusashareofNationalGrid’spowergenerationassetsintheuS.
LONDONSPECIALTy
WORKINGTOGETHER
11LibertyMutualInsuranceEuropeLimitedAnnualReport2011
Ourstrategyofdiversifyingbothgeographicallyandbyproductlinecontinuestodelivergrowth
DIRECTORS’ REPORT
Boardofdirectors (top left to bottom right):SeanRocks(ChiefExecutiveLMIE),GordonMcBurney(PresidentLIu),DanielForsythe(CEOLIu),DavidPrince,DavidOates,DrJonathanSpencer(non-executive),MalcolmMckenzie(non-executive).
12
Thedirectorshavepleasureinsubmittingtheirreport,togetherwiththeauditedfinancialstatementsofthecompany,fortheyearended31December2011.
PRINCIPALACTIVITyANDREVIEWOFThEBuSINESS
Thecompanyunderwritesmarine,non-marineandaviationinsuranceandreinsurancebusinessfromitsheadofficeinLondonanditsbranchesacrossEurope,theMiddleEastandAsia.
During2011thecompany’sprincipalbusinesslineswereCasualty,SpecialtyCasualty,Aviation,Property,TradeCredit,SuretyandMarine,EnergyandEngineering.CompanystrategycontinuestobetoofferthroughtheindependentbrokernetworkadiverseandgrowingrangeofspecialtyinsuranceproductstomarketsinEurope,theMiddleEastandtheFarEast.During2011,thecompanyfocuswasonextendinggeographicalpresence,broadeningtheproductrange,anddevelopingthecompany’spositionintheukandIrelandmid-marketcorporatesector.
Thecompany’skeyfinancialperformanceindicatorsduringtheyearwereasfollows:
2011 2010 Change$’000 $’000 %
Grosswrittenpremiums 740,931 637,404 16.2
Profitbeforetaxation 69,112 82,358 (16.1)
Netassets 700,147 690,348 1.4
Combinedratio 97.4% 96.4%
12 Liberty Mutual Insurance Europe Limited Annual Report 2011
Theincreaseinthegrosswrittenpremiumsreflectsorganicgrowthacrossthebusiness,furtherincreasedby$20m(3%)asaresultofpositiveexchangerateeffects,withaverageuSDratesagainstGBPandtheeuroaround3%higherin2011thantheprioryear.however,thepositiveeffectofthisonprofitbeforetaxationwasoutweighedbythecorrespondingincreaseintheuSDvalueofthecompany’sexpenses,whicharepredominantlyGBPandeurodenominated.Thecombinedratioiscalculatedastotaltechnicalchargesexcludingchangeintheequalisationprovision/earnedpremiums,netofreinsurance.Thecombinedratioreflectsabenefittakenfromprioryearclaimoverprovisionsof2.1%(2010: 3.1% benefit),asfurtherexplainedinnote29.
Investmentincome,excludingnetgainsandlossesontherealisationofinvestments,wasconsistentwiththepreviousyear,drivenbylowerinvestmentyields,butoffsetbyhigherinvestedassetvaluesarisingfromstrongoperationalcashflows.Totalinvestmentreturnsof4%reflectedfurtherincreasesinthemarketvalueofthecompany’sbondinvestmentsasmarketyieldscontinuedtodecline.
Thecompanymadenetrealisedgainsonitsinvestmentportfolioof$6.43m(2010: gain of $7.47m).
Thecompanyoperatesininternationalmarketsandrecordednetgainsof$2,613,000during2011(2010: losses of $5,068,000)onthetranslationofnon-uSDcurrenciesintouSD.Inaccordancewiththecompany’saccountingpolicies,againof$2,084,000 (2010: loss of $10,640,000),beingthatpartofthetotalgainrelatingtotheretranslationofthecompany’sprincipaloperatingcurrenciesGBP,euroanduSD,isreflectedintheStatementofTotalRecognisedGainsandLosses,andnotintheprofitandlossaccount.
Netassetsincreasedby$9,799,000,attributabletotheprofitfortheyearof$47,991,000,otherrecognisednetgainsof$4,293,000fortheyear,andaninterimdividendof$42,485,000paidduringtheyear.Thedirectorsdonotrecommendpaymentofafinaldividend(2010: Nil).
PRINCIPALRISkSANDuNCERTAINTIES
TheBoardsetsriskappetiteannuallyaspartofthecompany’sbusinessplanningprocess.
Riskmanagementiscurrentlyundertakenonthreelevels:
• Riskownership–riskownersidentifyrisksandareresponsibleforestablishingandmaintainingappropriatecontrolsoverthoserisks
• Riskcontrol–exercisedbytheRiskCommitteewhichisresponsibleforoversightoftheoperationoftheriskmanagementstrategy;andbytheExecutiveCommittee,whichisresponsibleforthemanagementofriskinaccordancewiththeriskappetitessetbytheBoard.Measuresofriskaremonitoredagainstriskappetiteonaquarterlybasis.TheRiskCommitteeisassistedbytheadvisoryandmonitoringfunctionsofRiskManagementandCompliance.RiskManagementdefinesandprescribesthefinancialandoperationalriskassessmentprocessesforthebusiness,maintainstheriskregisters,andundertakesregularreviewsoftheseriskswiththeriskowners.Complianceadvisesonallareasofregulatoryprinciples,rulesandguidance,andundertakesmonitoringactivityonkeyareasofregulatoryrisk
• Riskassurance–conductedbytheInternalAuditfunctionunderthecontrolanddirectionoftheAuditCommittee.Internalauditconductsaprogrammeofauditscoveringallaspectsofriskownershipandriskcontrol.
1313Liberty Mutual Insurance Europe Limited Annual Report 2011
Theprincipalrisksanduncertaintiesfacingthecompanyareasfollows:
INSuRANCERISk
Insuranceriskincludestherisksthatapolicywillbewrittenfortoolowapremiumorwillprovideinappropriatecover(underwritingrisk),thatthefrequencyorseverityofinsuredeventswillbehigherthanexpected(claimsrisk),andthatestimatesofclaimssubsequentlyprovetobeinsufficient(reservingrisk).TheBoardmanagesinsuranceriskbyagreeingitsappetitefortheserisksannuallythroughthebusinessplan,whichsetsouttargetsforvolumes,pricing,linesizesandretentionbyclassofbusiness.
TheExecutiveCommitteeoftheBoardthenmonitorsperformanceagainstthebusinessplanmonthlythroughtheyear.ReserveadequacyismonitoredbytheReservingCommitteewhichmeetsquarterlytoestablishandreviewtheheldreserves.Akeyelementofthisconsiderationisreviewofthequarterlyreportbythecompany’sactuary,whichincludestheactuarialestimateofrequiredreservestogetherwithdocumentationsupportingthematerialjudgementsandassumptionsmadeinarrivingatthisestimate.
CREDITRISk
Thecompany’sprincipalcreditriskexposureistheriskofnon-performancebyoneormoreofthecompany’sreinsurers.
Akeypartofthecompany’sriskmanagementstrategyisthepurchaseofeffectivereinsuranceacrossalllines.Thecompanypurchasesbothproportionalandnon-proportionalreinsurancelocallyandthroughparticipationinLibertyMutualInsuranceGroupglobaltreaties.Therearealimitednumberofreinsurersworldwidewiththecapacityorcapabilitytoparticipateinthese
globaltreaties.Aconsequenceofthisisadegreeofconcentrationofexposurewiththemajorreinsurers.
ThecompanyhasestablishedaReinsuranceCommitteewhichapprovesallreinsurancetreatiesandassessesandisrequiredtoapproveallnewreinsurersbeforebusinessisplacedwiththem.CarriersmustbeAratedorbetter.Reinsurerexposureisreviewedquarterly.Thecompanyusesadefaultriskmodeltodetermineaneedforspecificprovisionsagainstreinsurernon-performancewhichareadjustedonaquarterlybasis.Changesintheamountoftheprovisionsarereflectedintheprofitandlossaccount.
MARkETRISk
Marketriskisdefinedastheriskoflosstothecompanyarisingfromfluctuationsinthevaluesofitsassets,theamountofitsliabilities,ortheincomefromitsassets.Sourcesofmarketriskforthecompanyincludemovementsininterestrates,equityvalues,andexchangerates.Suchmovementswouldpotentiallyaffectthevalueofthecompany’scashandinvestmentportfolioandtheincometherefrom.Thecompanyunderwritesinsurancepoliciesinseveralcurrenciesandconsequentlyhasanexposuretoretranslationgainsandlossesarisingfromtheimpactofchangesinexchangeratesontechnicalassetsandliabilitiesdenominatedinforeigncurrencies.
ThecompanyhasdelegatedmanagementofitsinvestmentportfoliotoLibertyMutualGroupAssetManagementInc.,thespecialistinvestmentmanagementarmofLibertyMutualInsuranceGroup.TheportfolioismanagedinaccordancewithinvestmentguidelinesestablishedonbehalfofthecompanybytheInvestmentCommittee.Theseguidelinessetoutlimitsonassetquality,counterpartyexposure,assetconcentration,andgeographicalconcentration,compliancewith
14 Liberty Mutual Insurance Europe Limited Annual Report 2011
which,alongsideinvestmentperformance,ismonitoredbytheCommitteeonaquarterlybasis.
Theportfoliocomprisesabroadspreadofinvestmentgradeinstruments,includingbondsissuedbyeurozonesovereignstatescollectivelyknownasthe“PIIGS”states.TotalvalueofexposuretoPIIGSsovereigndebtislessthan$50mwithinanoverallportfoliovaluedatinexcessof$1.8bn.TheperformanceofPIIGSbondsiscurrentlysubjecttomonthlyreviewandreportingtotheExecutiveCommitteeoftheBoard,andtoformalreviewatastrategiclevelwiththeinvestmentmanagersthroughtheInvestmentCommittee.
Thecompanyfollowsapolicyofmatchingforeigncurrency-denominatedassetsandliabilitiessoastominimisetheimpactofexchangeratemovements.ShareholdersurplusiscurrentlyheldinuSD.
Thus,overall,thecompanyholdslimitednetassetsinnon-uSDcurrenciesandconsequentlyhasnosignificantbalancesheetexposurestoexchangeratemovements.
LIQuIDITyRISk
Liquidityriskistheriskoflosstothecompanyarisingfromthecompanybeinginsufficientlyliquidtomeetallcashflowcommitmentsasandwhentheyfalldue.Itiscompanypolicythatallfundsareheldincashorinreadilymarketableinstruments.
Thisrequirementisreflectedintheinvestmentguidelines.Thedurationofinvestmentinstrumentsismatchedtotheanticipateddurationofliabilitiestopolicyholders;andthecurrencyofinvestmentinstrumentsismatchedtothecurrencyofanticipatedliabilitiestopolicyholders.Shortertermneedsareanticipatedthroughaprocessofcashflowforecastingwiththebackingofabank
loanfacilitywhichcanbedrawnuponifneededtocoverimmediaterequirements.
Thedirectorsbelievethattheseactionsprovideassurancethatthecompanywillbeabletocontinuetomeetitsobligationsasandwhentheyfalldue.Inmakingthisassessment,thedirectorshavefullyconsideredtheeffectofcurrentmarketconditionsonassetvaluesandassetmarketability.
OPERATIONALRISk
Operationalriskisdefinedastheriskoflosstothecompanyarisingfrominadequateorfailedinternalprocesses,people,andsystems.Thecompanymanagesoperationalriskthroughthethreemechanismsofriskownership,riskcontrolandriskassurancedescribedabove.
FuTuREDEVELOPMENTS
Thecompanyfocusfor2012willbeonconsolidatingrecentgrowthandbuildingontheinfrastructureputinplaceoverthepastfewyears.Thecompanyintendstocontinuetobroadentherangeofprofitableinsuranceproductsofferedandtofurtherdevelopthecompany’spositionintheukandIrelandmid-marketcorporatesector.
15Liberty Mutual Insurance Europe Limited Annual Report 2011
DIRECTORS’INTERESTS
Thedirectorsofthecompanyduringtheyearanduptothedateofsigningthefinancialstatementswere:
SPRocks Chairman-ChiefExecutiveOfficer
PJO’BrienDirector-ChiefOperatingOfficer(resigned2December2011)
DROates Director
DJPrince Director-ChiefFinancialOfficer
GMVanLoon Director(resigned4January2011)
DTNForsythe(uSA) Non-ExecutiveDirector
GJMcBurney(uSA) Non-ExecutiveDirector
JPSpencer Non-ExecutiveDirector
MGMckenzie Non-ExecutiveDirector
AccordingtotheRegisterofDirectors'Interests,nodirectorhasanybeneficialinterestintheissuedsharecapitalofthecompany.
FIxEDASSETS
Thechangesinthecompany'sfixedassetsfortheyeararesetoutinNote12.
DONATIONS
Duringtheyearthecompanymadecharitabledonationsof$30,435(2010: $32,372)andmadenopoliticaldonations(2010: nil).
EMPLOyEES
Duringtheyearanaveragenumberof454(2010: 402)staffwereemployed.Thetotalaggregateremunerationofemployeesamountedto$84.0m(2010: $71.2m).
ThecompanyoperatesaframeworkforemployeeinformationandconsultationwhichcomplieswiththerequirementsoftheInformationandConsultationofEmployeesRegulations2004.
Thepolicyisprincipallyoperatedthroughthecompany’sintranet,fromwhichemployeesareprovidedwithregularinformationregardingthecompany’sperformance,andareencouragedtopresentsuggestionsandraisequestionsregardingthecompany’sperformance.Inaddition,periodicmeetingsareheldwithmanagement.Thecompanyoperatesdiscretionaryperformance-relatedremunerationschemeswhichenableemployeestoshareinthesuccessofthecompanyandtoberewardedforgoodserviceandincentivisedforfutureperformance.Thecompanyinvestsinstafftrainingtodeveloptheskillsofemployeestomaximisetheservicelevelsprovidedtocustomersandbusinesspartners.
Fullandfairconsiderationisgiventotherecruitmentofdisabledpeopleandtotheofferingofpropertraining,careerdevelopmentandpromotionopportunitiesforthem.Everyeffortismadetoretain,insuitableemployment,anymemberofstaffwhobecomesdisabledwhilstemployedbythecompany.Wherethisisnotpossible,apermanenthealthinsuranceschemeisinplaceforthosestaffwhoareunabletoreturntosuitableemployment.
GOINGCONCERN
Thefinancialstatementshavebeenpreparedonagoingconcernbasis.Inassessingwhetherthegoingconcernbasisisappropriate,thedirectorshaveconsideredtheinformationcontainedinthefinancialstatements,thecompany’slatestbusinessplan,andthecompany’scurrentsolvencycalculations.Thedirectorsaresatisfiedthatthecompanyhasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.Accordingly,theycontinuetoadoptthegoingconcernbasisinpreparingtheannualreportandfinancialstatements.
16 Liberty Mutual Insurance Europe Limited Annual Report 2011
disclosurE of inforMaTion To ThE audiTors
so far as each person who was a director of the company at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with its report, of which the auditor is unaware. having made enquiries of fellow directors of the company and the company’s auditor, each director has taken all the steps that he/she is obliged to take as a director in order to make himself/herself aware of any relevant audit information and to establish that the auditor is aware of that information.
audiTors
Ernst & young llp are deemed to be reappointed in accordance with an elective resolution made under section 485 of the companies act 2006. consequently, the company has dispensed with the requirement to hold an annual General Meeting and re-appoint the auditors. Ernst & young llp have expressed their willingness to continue in office and so have been invited to do so.
approved by the Board of directors and signed on behalf of the Board by:
sEan p rocks, cEo | 29 March 2012coMpany nuMBEr: 1088268
liberty Mutual insurance Europe limited
Registered office and advisers
Directors s p rocks d r oates d J prince d T n forsythe G J McBurney J p spencer M G Mckenzie
Company Secretary n J davenport
Registered Office 3rd floor, Two Minster court Mincing lane london Ec3r 7yE
Company Number 1088268
Corporate Bankers lloyds Banking Group plc city office po Box 72 Gillingham Business park Gillingham kent ME8 0sl
Independent Auditors Ernst & young llp 1 More london place london sE1 2af
17liberty Mutual insurance Europe limited annual report 2011
Significant investment in the commercial mid-market sector was a key feature of 2011, and has been well received by brokers and clients.
Apositioninthemid-marketwasnothingnewforLiberty,butpreviouslyithadbeenbuiltaroundspecialtycasualty.AdecisiontomovetoabroadercommercialpropositionwastakenbecausetherewasanappetiteforLiberty’stechnicalunderwritingcapabilityandanopportunitytobuildonourbrand,evenincompetitivemarkets.Strategically,italsomeantLibertycouldbuildamorediversifiedportfolio.
Thedecisionmeantexpandingandstrengtheningourbranchnetwork.AnewbranchwasopenedintheSouthEastandoneplannedforLeeds,whileouroperationsinourexistingbrancheswereexpanded.Webroadenedourlinestooffercombinedproperty/casualtyaswellasaccesstoother,morespecialistlines.Anotherkeyelementwaschangingnewandexistingbrokers’perceptionofLiberty,whichwas
seenmoreasaspecialtythanacommercialprovider.Adedicatedrelationshipmanagementteamledthiswork,whileunderwriting,riskmanagementandclaimsteamsfocusedonbringingthebestofLiberty’sexpertisetothemid-market.
Asaresult,weenter2012withnewofficesintheSouthEastandLeeds,amuchstrongernetworkallovertheukandDublin,andexcellentbrokerrelationships.Commercialrevenuesrosesubstantiallyin2011andwithanew,bespokeunderwritingplatformindevelopmentandfurtherbranchopeningsanticipated,weexpectfurthermid-marketgrowthin2012andbeyond.
ukANDIRELAND
POWERFULSTRATEGY
Weenter2012withnewofficesintheSouthEastandLeeds.
18 LibertyMutualInsuranceEuropeLimitedAnnualReport2011
ThedirectorsareresponsibleforpreparingtheAnnualReportandthefinancialstatementsinaccordancewithapplicablelawandregulations.
Companylawrequiresthedirectorstopreparefinancialstatementsforeachfinancialyear.underthatlawthedirectorshaveelectedtopreparethefinancialstatementsinaccordancewithunitedkingdomGenerallyAcceptedAccountingPractice(unitedkingdomAccountingStandardsandapplicablelaw).Thefinancialstatementsarerequiredbylawtogiveatrueandfairviewofthestateofaffairsofthecompanyandoftheprofitorlossofthecompanyforthatperiod.Inpreparingthosefinancialstatements,thedirectorsarerequiredto:
• selectsuitableaccountingpoliciesandthenapplythemconsistently;
• makejudgementsandestimatesthatarereasonableandprudent;
• statewhetherapplicableukAccountingStandardshavebeenfollowed,subjecttoanymaterialdeparturesdisclosedandexplainedinthefinancialstatements;
• preparethefinancialstatementsonthegoingconcernbasisunlessitisinappropriatetopresumethatthecompanywillcontinueinbusiness.
ThedirectorsareresponsibleforkeepingproperaccountingrecordsthatdisclosewithreasonableaccuracyatanytimethefinancialpositionofthecompanyandtoenablethemtoensurethatthefinancialstatementscomplywiththeCompaniesAct2006.Theyarealsoresponsibleforsafeguardingtheassetsofthecompanyandhencefortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities.
Thedirectorsareresponsibleforthemaintenanceandintegrityofthecorporateandfinancialinformationincludedonthecompany’swebsite.Legislationintheunitedkingdomgoverningthepreparationanddisseminationoffinancialstatementsmaydifferfromlegislationinotherjurisdictions.
Statement of directorS’ reSponSibilitieS
19Liberty Mutual Insurance Europe Limited Annual Report 2011
WehaveauditedthefinancialstatementsofLibertyMutualInsuranceEuropeLimitedfortheperiodended31December2011whichcomprisetheProfitandLossAccount,theStatementofTotalRecognisedGainsandLosses,theBalanceSheet,andtherelatednotes1to32.ThefinancialreportingframeworkthathasbeenappliedintheirpreparationisapplicablelawandunitedkingdomAccountingStandards(unitedkingdomGenerallyAcceptedAccountingPractice),havingregardtothestatutoryrequirementforinsurancecompaniestomaintainequalisationprovisions.Thenatureofequalisationprovisions,theamountssetasideat31December2011,andtheeffectofthemovementinthoseprovisionsduringtheyearonshareholders’funds,thebalanceonthegeneralbusinesstechnicalaccount,andprofitbeforetax,aredisclosedinnote30.
Thisreportismadesolelytothecompany’smembers,asabody,inaccordancewithChapter3ofPart16oftheCompaniesAct2006.Ourauditworkhasbeenundertakensothatwemightstatetothecompany’smembersthosematterswearerequiredtostatetotheminanauditor’sreportandfornootherpurpose.Tothefullestextentpermittedbylaw,wedonotacceptorassumeresponsibilitytoanyoneotherthanthecompanyandthecompany’smembersasabody,forourauditwork,forthisreport,orfortheopinionswehaveformed.
RESPECTIVERESPONSIBILITIESOFDIRECTORSANDAuDITOR
AsexplainedmorefullyintheDirectors’ResponsibilitiesStatementsetoutonpage19,thedirectorsareresponsibleforthepreparationofthefinancialstatementsandforbeingsatisfiedthattheygiveatrueandfairview.OurresponsibilityistoauditthefinancialstatementsinaccordancewithapplicablelawandInternationalStandardsonAuditing(ukandIreland).ThosestandardsrequireustocomplywiththeAuditingPracticesBoard’sEthicalStandardsforAuditors.
SCOPEOFThEAuDITOFThEFINANCIALSTATEMENTS
Anauditinvolvesobtainingevidenceabouttheamountsanddisclosuresinthefinancialstatementssufficienttogivereasonableassurancethatthefinancialstatementsarefreefrommaterialmisstatement,whethercausedbyfraudorerror.Thisincludesanassessmentof:whethertheaccountingpoliciesareappropriatetothecompany’scircumstancesandhavebeenconsistentlyappliedandadequatelydisclosed;thereasonablenessofsignificantaccountingestimatesmadebythedirectors;andtheoverallpresentationofthefinancialstatements.Inaddition,wereadallthefinancialandnon-financialinformationintheAnnualReportandFinancialStatementstoidentifymaterialinconsistencieswiththeauditedfinancialstatements.Ifwebecomeawareofanyapparentmaterialmisstatementsorinconsistenciesweconsidertheimplicationsforourreport.
independent auditor’S report to the memberS of liberty mutual inSurance europe limited
20 Liberty Mutual Insurance Europe Limited Annual Report 2011
OPINIONONFINANCIALSTATEMENTS
Inouropinionthefinancialstatements:
• giveatrueandfairviewofthestateofthecompany’saffairsasat31December2011andofitsprofitfortheyearthenended;
• havebeenproperlypreparedinaccordancewithunitedkingdomGenerallyAcceptedAccountingPractice;and
• havebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006.
OPINIONONOThERMATTERPRESCRIBEDByThECOMPANIESACT2006
InouropiniontheinformationgivenintheDirectors’Reportforthefinancialyearforwhichthefinancialstatementsarepreparedisconsistentwiththefinancialstatements.
Mattersonwhichwearerequiredtoreportbyexception
WehavenothingtoreportinrespectofthefollowingmatterswheretheCompaniesAct2006requiresustoreporttoyouif,inouropinion:
• adequateaccountingrecordshavenotbeenkept,orreturnsadequateforouraudithavenotbeenreceivedfrombranchesnotvisitedbyus;or
• thefinancialstatementsarenotinagreementwiththeaccountingrecordsandreturns;or
• certaindisclosuresofdirectors’remunerationspecifiedbylawarenotmade;or
• wehavenotreceivedalltheinformationandexplanationswerequireforouraudit.
Stuart Wilson (Senior Statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London
29th March 2012
21Liberty Mutual Insurance Europe Limited Annual Report 2011
SUPPORTING SUCCESS
Our commitment to outstanding performance is reflected in Liberty Mutual Insurance Europe’s support for four British athletes aiming for success at London 2012.
ThewholeworldislookingtoLondonin2012asathletesfromover200countriescompeteforthechanceofwinninggold.Butwhatcansometimesbeforgottenisthelonganddifficultjourneytheseathletesundertaketogetthere.Sointherunuptotheworld’sbiggestsportingevent,wearesupportingthehardwork,talentandcommitmentoffourBritishathletes.BoxerLukeCampbell,paralympiandiscusthrowerDanGreaves,longjumperChrisTomlinsonandgymnasthannahWhelanallbenefitfromfinancialsupportfromLibertytoassisttheirpreparationsduringandbeyondtheLondon2012selectionprocess.
JustasLiberty’soperationsspanukregions,theathletesarefromalloverthecountry–fromtheMidlandsandSouthtotheNorthWestandNorthEast.Ourstaffandbrokersarealsosettobenefitfromtheexperience,withtheathletesgettinginvolvedinLibertyeventsandtakingpartinquestionandanswersessions.
AsSeanRocks,LMIE’sCEOexplains,“ItwillbeavaluableopportunitytosupportBritishathletesandforstaffandbrokerstomeetthesesportspeople,andlearnaboutthewayinwhichtheypreparethemselvesandfocustheirenergies.”
DANGREAVES
LUKECAMPBELL
CHRISTOMLINSONwith CEO SEAN ROCKS
Libertyissupportingthehardwork,talentandcommitmentoffourBritishathletes.
HANNAH WHELAN
FINANCIAL STATEMENTSfor the year ended 31 december 2011
Technical Account - General Business NOTES2011 $000
2010 $000
Grosspremiumswritten 3 740,931 637,404
Outwardreinsurancepremiums (341,138) (298,938)
Netpremiumswritten 399,793 338,466
Changeintheunearnedpremium
-grossamount 2 (60,474) (43,678)
-reinsurers’share 2 28,307 43,468
-netamount 2 (32,167) (210)
Earnedpremiums,netofreinsurance 2 367,626 338,256
Allocatedinvestmentreturntransferredfromthenon-technicalaccount
51,426 49,416
Total Technical Income 419,052 387,672
Claimspaid
-grossamount (196,124) (308,037)
-reinsurers’share 72,863 150,198
-netofreinsurance (123,261) (157,839)
Changeintheprovisionforclaims
-grossamount 28 (234,382) 52,018
-reinsurers’share 28 144,942 (88,165)
-netofreinsurance 28 (89,440) (36,147)
Claimsincurrednetofreinsurance (212,701) (193,986)
Netoperatingexpenses 4 (149,521) (132,161)
Changeintheequalisationprovision 30 (7,871) (5,828)
Total Technical Charges (370,093) (331,975)
Balance on the Technical Account for General Business 48,959 55,697
profit and loSS account for the year ended 31 december 2011
24 Liberty Mutual Insurance Europe Limited Annual Report 2011
Non-technical Account NOTES2011 $000
2010 $000
Balance on the Technical account for General Business 48,959 55,697
Investmentincomeandgainsonrealisationofinvestments 5 73,383 72,754
Investmentexpensesandcharges 6 (2,333) (2,249)
Foreignexchangegains 529 5,572
Allocated investment return transferred to the general businesstechnicalaccount
(51,426) (49,416)
Profit on ordinary activities before tax 7 69,112 82,358
Taxonprofitonordinaryactivities 8 (21,121) (17,249)
Profit on ordinary activities after tax 21 47,991 65,109
Alltheamountsaboveareinrespectofcontinuingoperations.
Thenotesonpages29to52formpartofthesefinancialstatements.
profit and loSS account for the year ended 31 december 2011 (continued)
25Liberty Mutual Insurance Europe Limited Annual Report 2011
Statement of total recogniSed gainS and loSSeS for the year ended 31 december 2011
NOTES2011 $000
2010 $000
Profitonordinaryactivitiesaftertax 21 47,991 65,109
Gains/(losses)arisingfromtheeffectofretranslationofassetsandliabilitiesdenominatedinGBPandEuro
21 2,084 (10,640)
Pensionscheme–Actuarialgain/(loss),netoftax 21 2,209 (606)
Total recognised gains relating to the year 22 52,284 53,863
Thenotesonpages29to52formpartofthesefinancialstatements.
26 Liberty Mutual Insurance Europe Limited Annual Report 201126 LibertyMutualInsuranceEuropeLimitedAnnualReport2011
balance Sheet aS at 31 december 2011
ASSETS Notes2011 $000
2011 $000
2010 $000
2010 $000
Investments
Investmentsinsubsidiaryundertakings 11 1,846 1,812
Otherfinancialinvestments 13 1,769,928 1,591,099
Depositswithcedingundertakings 19,089 2,942
1,790,863 1,595,853
Reinsurers’ share of technical provisions
Provisionforunearnedpremiums 2 202,374 176,400
Claimsoutstanding 28 841,484 696,928
1,043,858 873,328
Debtors
Debtorsarisingoutofdirect
insuranceoperations 15 226,279 200,427
Debtorsarisingoutof
reinsuranceoperations 38,174 36,146
Otherdebtors 10 10,057 12,318
274,510 248,891
Other assets
Tangibleassets 12 3,556 2,160
Cashatbankandinhand 61,302 110,080
64,858 112,240
Prepayments and accrued income
Accruedinterest 22,686 21,886
Grossdeferredacquisitioncosts 4 56,486 49,022
Otherprepayments 16 2,888 2,576
82,060 73,484
Total assets excluding pension assets 3,256,149 2,903,796
Pensionasset 26 1,302 -
Total assets 3,257,451 2,903,796
Thenotesonpages29to52formpartofthesefinancialstatements.
27Liberty Mutual Insurance Europe Limited Annual Report 2011 27LibertyMutualInsuranceEuropeLimitedAnnualReport2011
balance Sheet aS at 31 december 2011 (continued)
LIABILITIES Notes2011 $000
2011 $000
2010 $000
2010 $000
Capital and reserves
Calledupsharecapital 20 290,225 290,225
Profitandlossaccount 21 409,922 400,123
700,147 690,348
Technical provisions
Provisionforunearnedpremiums 2 457,486 400,625
Grossclaimsoutstanding 28 1,798,001 1,564,803
Equalisationprovision 30 27,981 19,740
2,283,468 1,985,168
Creditors
Creditorsarisingoutofdirectinsuranceoperations 15 3,376 2,772
Creditorsarisingoutofreinsuranceoperations 107,209 80,523
Othercreditorsincludingtaxationandsocialsecurity 18 86,453 80,285
197,038 163,580
Accrualsanddeferredincome 19 76,798 63,480
Total liabilities excluding pension liability 3,257,451 2,902,576
Pensionliability 26 - 1,220
Total liabilities 3,257,451 2,903,796
ThefinancialstatementswereapprovedbytheBoardofDirectorson29thMarch2012andweresignedonitsbehalfby:
SPRocksDirector–ChiefExecutiveOfficer
Thenotesonpages29to52formpartofthesefinancialstatements.
28 Liberty Mutual Insurance Europe Limited Annual Report 2011
1 ACCOUNTING POLICIES
(a) Disclosure requirementsThefinancialstatementshavebeenpreparedincompliancewiththespecialprovisionsrelatingtoinsurancecompaniesinSchedule3oftheLargeandMedium-sizedCompaniesandGroups(AccountsandReports)Regulations2008.
(b) Standard accounting practiceThefinancialstatementscomplywithapplicableaccountingstandardsandtherevisedABIStatementofRecommendedPracticeissuedinDecember2005asamendedinDecember2006.
The company has adopted FinancialReportingStandardNo.1 (Revised 1996), and is therefore exempt from therequirement toprepareacashflowstatementas it isa100%ownedsubsidiaryofLiberty InternationalholdingsIncorporated,and itscashflowsare includedwithin theconsolidatedcashflowstatementofLiberty InternationalholdingsInc.AsallowedunderFinancialReportingStandardNo.8,thecompanyhasnotdisclosedallrelatedpartytransactionswithgroupundertakingsonthebasisthatthecompanyisasubsidiaryundertakingwith100%votingrightscontrolledwithinagroupwhichproducespubliclyavailableconsolidatedfinancial statements inwhich thecompanyisincluded.
(c) Basis of accountingTheannualbasisofaccountinghasbeenappliedtoallclassesofbusinesswrittenbythecompany.
(d) Subsidiary undertakingsThecompanyhasclaimedexemptionfromtheproductionofconsolidatedfinancialstatementsundertheCompaniesAct2006s.400asitisasubsidiaryundertakingwhoseultimateparentcompanyproducesconsolidatedaccountsinamannerequivalenttofinancialstatementsdrawnupundertheprovisionsoftheEu7thCouncilDirective83/349/EECof13June1983basedonArticle54(3)goftheTreatyonConsolidatedAccounts.
Investmentsinsubsidiaryundertakingsareheldatcostlessaccumulatedimpairmentlosses,ifany.
(e) PremiumsGrosswrittenpremiumsrepresentpremiumsreceivableforthewholeperiodofcoverundercontractsinceptingduringthe financial year, together with adjustments arising in the financial year to business written in previous financialyearsandarestatedbeforecommissionsbutnetoftaxes,dutiesleviedonpremiumsandotherdeductions.Outwardreinsurancepremiumsareaccountedforinthesameaccountingperiodasthepremiumsfortherelateddirectinsuranceorinwardsreinsurancebusiness.
(f) Unearned premiumsForbusinessaccountedforonanannualbasis,theproportionofthepremiumswritteninayearrelatingtotheperiodof risk from1January to thesubsequentdatesofexpiryofpolicies iscarried forwardasaprovision forunearnedpremiums.Theprovision iscalculatedon the365thsmethod,or, in respectofengineering /courseofconstructionbusiness,iscalculatedusinganearningsprofilebasedontheconstructionandmaintenanceperiodofspecificpolicies.
(g) Unexpired risksProvisionismadeforanyanticipatedshortfalloftheprovisionforunearnedpremiumsforclaimsandadministrativeexpenseslikelytoariseaftertheendoftheyearfromcontractsconcludedbeforethatdate.Theoverallassessmentofwhetheraprovisionisnecessaryismadeonthebasisofallcategoriesofbusiness.Noaccountistakenoffutureinvestmentincome.
(h) Deferred acquisition costs Commissioncostswhichvarywith,andareprimarily relatedto, theacquisitionofnew insurancecontractsandtherenewalofexistinginsurancecontractsaredeferredtotheextentthattheyareattributabletopremiumsunearnedatthebalancesheetdate.
(i) InvestmentsInvestments, other than debt securities and other fixed interest securities, are stated at their current value. Listedinvestmentsarestatedatbidpricemarketvalueatcloseofbusinessonthebalancesheetdate,oronthelaststockexchangetradingdaybeforethebalancesheetdate.
Redeemablefixedinterestsecurities,heldasaportfolioofsuchsecuritiesintendedtobeheldonanongoingbasis,are
noteS to the financial StatementS
29Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
1 ACCOUNTING POLICIES (continued)
(i) Investments (continued)valuedatamortisedcost.Theamortisationiscalculatedsoastowriteoffthedifferencebetweenthepurchasepriceandthematurityvalueoverthelifeofthesecurity.
Redeemablefixedinterestsecuritiesarereviewedforanypermanentdiminutioninvalueperiodicallyonaholdingbyholdingbasis.Whereapermanentdiminutionisidentified,thecarryingvalueofthesecurityisadjustedtoitsfairvalueatthattimeandthedifferencebetweenthisvalueandthesecurity’samortisedcostisrecordedasarealisedinvestmentlossintheprofitandlossaccount.
(j) Investment income, expenses and chargesInvestment income and expenses are accounted for on an accruals basis. In accordancewith FinancialReportingStandard16“CurrentTax”,dividendsarerecognisedattheamountreceivablewithoutanyattributabletaxcredit.
Investmentincome(whichincludestheamortisationchargeinrespectofinvestmentscarriedatamortisedcost),realisedgainsandlossesarisingfromthedisposalofinvestments,andunrealisedgainsandlossesaredealtwiththroughthenon-technicalaccountandthenreallocatedinparttothetechnicalaccounttoreflectthatproportionoftheinvestmentreturnarisingontechnicalprovisions.
Realisedgainsorlossesrepresentthedifferencebetweennetsalesproceeds(orfairvalueinthecaseofimpairments)andpurchaseprice,orinthecaseofdebtsecuritiesandotherfixedinterestsecurities,amortisedcost.
(k) Unrealised gains and losses on shares and other variable yield securities and units in unit trustsunrealisedgainsandlossesonsharesandothervariableyieldsecuritiesandunitsinunittrustsrepresentthedifferencebetweenthemarketvalueatthebalancesheetdateandtheirpurchaseprice,oriftheyhavebeenpreviouslyrevalued,thevaluationatthelastbalancesheetdate.
Themovement in unrealisedgainsand losseson sharesandother variable yield securities andunits in unit trustsdisclosedintheprofitandlossaccount includesanyreversal forpreviouslyrecognisedunrealisedgainsandlossesonsharesandothervariableyieldsecuritiesandunitsinunittrusts,whichweredisposedofintheaccountingperiod.
(l) Outstanding claims Full provision ismade on an individual case basis for the estimated cost of claims notified but not settled by thebalancesheetdateaftertakingintoaccounthandlingcostsandsettlementtrends.Aprovisionforclaimsincurredbutnotreported isestablishedfromstatisticalanalysisundertakenbythecompany’sactuaries.Themethodsusedandtheestimatesmadearereviewedregularly.Whilst thedirectorsconsider that thegrossprovisionforclaimsandtherelatedreinsurancerecoveriesarefairlystatedonthebasisoftheinformationcurrentlyavailabletothem,theultimateliabilitywillvaryasaresultofsubsequentinformationandevents.Anydifferencesbetweenprovisionsandsubsequentsettlementsaredealtwithinthetechnicalaccountsoflateryears.
Incalculatingtheestimatedcostofunpaidclaimsthecompanyusesavarietyofestimationtechniques,generallybaseduponstatisticalanalysesofhistoricalexperience,whichassumesthatthedevelopmentpatternofcurrentclaimswillbeconsistentwithpastexperience.Allowanceismade,however,forchangesoruncertaintieswhichmaycreatedistortionsintheunderlyingstatisticsorwhichmaycausethecostofunsettledclaimstochangewhencomparedwiththecostofpreviouslysettledclaimsincluding:
• changesincompanyprocesseswhichmightaccelerateorslowdownthedevelopmentand/orrecordingofpaidorincurredclaimscomparedwiththestatisticsfrompreviousperiods
• changesinthelegalenvironment
• theeffectsofinflation
• changesinthemixofbusiness
• theimpactoflargelosses
• movementinindustrybenchmarks
30 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
1 ACCOUNTING POLICIES (continued)
(l) Outstanding claims (continued) Acomponentof theseestimationtechniques isusuallytheestimationof thecostofnotifiedbutnotpaidclaims. Inestimatingthecostofthesethecompanyhasregardtoclaimcircumstancesasreported,andinformationavailablefromlossadjustersandinformationonthecostofsettlingclaimswithsimilarcharacteristicsinpreviousperiods.
Largeclaimsimpactingeachrelevantbusinessclasswereassessedseparatelywhereappropriate,beingmeasuredonacase-by-casebasisorprojectedseparatelyinordertoallowforthepossibledistortiveeffectofthedevelopmentandincidenceofthelargeclaims.
Theprovisionforclaimsoutstandingisbasedoninformationavailableatthebalancesheetdateanditisestimatedtogivearesultwithinanormalrangeofoutcomes.Totheextentthattheultimatecostfallsoutsidethisrange,forexamplewhereassumptionsoverclaimsinflationmayalterinfuture,thereisacontingentliabilityinrespectofthisuncertainty.Provisionsarecalculatedallowingforreinsurancerecoveriesandaseparateassetisrecordedforthereinsurers’share,havingregardtocollectability.
(m) Claims management expensesClaimsmanagementexpenseshavebeendeterminedbyanapportionmentofemploymentcosts.
(n) Equalisation provisionsEqualisationprovisionshavebeenestablishedinaccordancewiththerequirementsofthePrudentialSourcebookforInsurersandincludedastheequalisationprovisionwithintechnicalprovisions.
(o) Deferred taxationFinancialReportingStandard19“DeferredTax”requiresfullprovisiontobemadefordeferredtaxassetsandliabilitiesarising from timing differences between the recognition of gains and losses in the financial statements and theirrecognitioninataxcomputation.
Deferredtaxisrecognisedasaliabilityorassetifthetransactionsoreventsthatgivetheentityanobligationtopaymoretaxinthefutureorarighttopaylessorreceivemoretaxinthefuturehaveoccurredbythebalancesheetdate.Deferredtaxassetsarerecognisedtotheextentthatitisregardedasmorelikelythannotthattheywillberecovered.
(p) Exchange ratesAssetsandliabilitiesaretranslatedintouSdollarsattheexchangeratesprevailingatthebalancesheetdate.Incomeandexpensetransactionsaretranslatedusingtherateprevailingatthedateoftransactionsoranappropriateaveragerate.
Principalexchangeratesusedwereasfollows:
Average Closing
uSD:GBP 1.60412 1.56850
uSD:EuR 1.39264 1.30650
ThecompanymaintainsseparatecurrencyledgersforuSdollars,£sterlingandEurobusiness.Theseseparateforeigncurrency ledgersareconsideredbymanagement to represent foreignbranches.Exchangegainsand lossesarisingfromtheretranslationintouSdollarsofthebalancesheetsofthesebranchesusingtheratesofexchangeprevailingatthebalancesheetdate,andtheretranslationintouSdollarsoftheprofitandlossaccountsofthesebranchesusingtheaverageratesofexchangefortheyear,havebeenrecordedinthestatementoftotalrecognisedgainsandlosses.
LedgersareheldinuSdollarsinrespectoftheoverseasbranchesintheFarEastandEurosinrespectoftheoverseasbranchesinEurope.ExchangegainsandlossesarisingfromtheretranslationoftheEuropeanoverseasbranchestouSdollarscontinuetoberecordeddirectlyinthestatementoftotalrecognisedgainsandlosses.
Allotherforeignexchangegainsandlossescontinuetoberecordedinthenon-technicalaccount.
31Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
1 ACCOUNTING POLICIES (continued)
(q) Fixed assetsExpenditureon leasehold improvements,software,computerequipment,motorvehicles,fixtures,fittingsandofficeequipmentiscapitalisedanddepreciatedovertheestimatedusefuleconomiclivesoftheassetsonastraightlinebasis.
Theperiodsusedtodepreciatesuchassetsareasfollow:-
Leaseholdimprovements Remainingleaseterm
Software 1year
ComputerEquipment 1year
MotorVehicles 4years
Fixture,fittingsandofficeequipment 5-10years
Depreciationisincludedaspartofadministrativeexpenses.
(r) Pension costsThecompanyparticipatesinagroupcontributorypensionscheme.Contributionstotheschemearechargedtotheprofitandlossaccountsoastospreadthecostofpensionsoveremployees’workingliveswiththecompany.Variationsarisingfromactuarialsurplusesarespreadovertheaverageremainingservicelivesofmemberstotheextentthattheresultingcreditdoesnotexceedtheregularcost.
Defined Benefit Pension SchemeThecompanyhasfullyadoptedaccountingstandardFRS17“RetirementBenefits”.
Thedifferencebetween the fairvalueof theassetsheld in thecompany’sdefinedbenefitpensionschemeand thescheme’sliabilitiesmeasuredonanactuarialbasisusingtheprojectedunitmethodarerecognisedinthecompany’sbalancesheetasapensionschemeassetorliabilityasappropriate.
Thecarryingvalueofanyresultingpensionschemeassetsisrestrictedtotheextentthatthecompanyisabletorecoverthesurpluseitherthroughreducedcontributionsinthefutureorthroughrefundsfromthescheme.Thepensionschemebalanceisrecognizednetofanyrelateddeferredtaxbalance.
Changes in the defined benefit pension scheme asset or liability from factors other than cash contribution by thecompany are charged to the Profit and Loss account or the Statement of Total RecognisedGains and Losses inaccordancewithFRS17“RetirementBenefits”.
Employeesjoiningonorafter1January2002becamemembersofthecompanydefinedcontributionpensionschemes.Contributionsarechargedintheprofitandlossaccountastheybecomepayableinaccordancewiththerulesoftheschemes.
(s) LeasesAssetsheldunderfinanceleasesandhirepurchasecontractsarecapitalisedattheirfairvalueontheinceptionoftheleasesanddepreciatedovertheirestimatedusefullives.Thefinancechargesareallocatedovertheperiodoftheleaseinproportiontothecapitalamountoutstanding.
Rentalsunderoperatingleasesarechargedtotheprofitandlossaccountinequalannualinstalmentsovertheperiodofthelease.
(t) Salvage and subrogation recoveriesAnticipated salvage and subrogation recoveries are calculated on an individual case basis. The level of recoveryestimatedissetonthebasisofinformationwhichiscurrentlyavailable,includingpotentialoutstandingclaimsadvicesandcaselaw.Salvageandsubrogationrecoveriesareincludedinclaimsincurredintheprofitandlossaccount.
32 Liberty Mutual Insurance Europe Limited Annual Report 2011
2 EARNED PREMIUMS NET OF REINSURANCE
2011Gross
$000Reinsurance
$000Net
$000
Premiumswritten 740,931 (341,138) 399,793
unearnedpremiumscarriedforward (457,486) 202,374 (255,112)
unearnedpremiumbroughtforward 400,625 (176,400) 224,225
Exchangedifferenceonbroughtforward (3,613) 2,332 (1,281)
MovementperTechnicalAccount (60,474) 28,307 (32,167)
Premiumsearned 680,457 (312,831) 367,626
2010Gross
$000Reinsurance
$000Net
$000
Premiumswritten 637,404 (298,938) 338,466
unearnedpremiumscarriedforward (400,625) 176,400 (224,225)
unearnedpremiumbroughtforward 360,676 (133,988) 226,688
Exchangedifferenceonbroughtforward (3,729) 1,056 (2,673)
MovementperTechnicalAccount (43,678) 43,468 (210)
Premiumsearned 593,726 (255,470) 338,256
noteS to the financial StatementS (continued)
33Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
3 ANALYSIS OF PREMIUMS WRITTEN, CLAIMS, OPERATING EXPENSES AND REINSURANCE BALANCE
InformationrequiredbytheCompaniesAct2006byclassofbusinessisasfollows:
2011
Gross premium
written $000
Gross premium
earned $000
Gross claims
incurred $000
Gross operating expenses
$000
Reinsurance balance
$000Total $000
Net technical provision
$000
Direct
Marine,Aviation&Transport 194,050 183,277 (166,127) (62,580) 42,801 (2,629) 219,200
PrimaryDirect&FacProperty 61,479 47,467 (60,513) (14,833) 22,582 (5,297) 61,747
PrimaryDirectCommercialLiability 396,363 368,398 (135,341) (115,988) (90,752) 26,317 772,574
PrimaryDirectCommercialFinancial 86,591 78,886 (72,550) (28,030) 2,111 (19,583) 88,962
TotalDirect 738,483 678,028 (434,531) (221,431) (23,258) (1,192) 1,142,483
TotalNon-Prop&PropR/ITreatyBusiness 2,448 2,429 4,025 (587) 729 6,596 61,691
Totals 740,931 680,457 (430,506) (222,018) (22,529) 5,404 1,204,174
2010
Gross premium
written $000
Gross premium
earned $000
Gross claims
incurred $000
Gross operating expenses
$000
Reinsurance balance
$000Total $000
Net technical provision
$000
Direct
Marine,Aviation&Transport 168,221 159,067 (48,279) (50,535) (41,970) 18,283 190,319
PrimaryDirect&FacProperty 40,537 38,385 (16,151) (8,999) (9,781) 3,454 50,246
PrimaryDirectCommercialLiability 351,919 333,524 (181,639) (105,607) (67,323) (21,045) 708,492
PrimaryDirectCommercialFinancial 77,527 63,557 (12,034) (23,692) (18,576) 9,255 66,152
TotalDirect 638,204 594,533 (258,103) (188,833) (137,650) 9,947 1,015,209
TotalNon-Prop&PropR/ITreatyBusiness
(800) (807) 2,084 (468) 1,353 2,162 68,725
Totals 637,404 593,726 (256,019) (189,301) (136,297) 12,109 1,083,934
34 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
Thecompanyoperatesitsbusinessinthefollowingdivisions:
2011
Gross premium
written $000
Gross premium
earned $000
Gross claims
incurred $000
Gross operating expenses
$000
Reinsurance balance
$000Total $000
Net technical provision
$000
LondonMarket 374,619 365,303 (248,345) (101,005) (2,555) 13,398 773,214
ukandIrelandCommercial 130,697 107,935 (65,308) (41,224) (8,063) (6,660) 155,565
ContinentalEurope 126,150 115,958 (66,848) (39,507) (9,721) (118) 160,362
International 109,465 91,261 (50,005) (40,282) (2,190) (1,216) 115,033
Totals 740,931 680,457 (430,506) (222,018) (22,529) 5,404 1,204,174
2010
Gross premium
written $000
Gross premium
earned $000
Gross claims
incurred $000
Gross operating expenses
$000
Reinsurance balance
$000Total $000
Net technical provision
$000
LondonMarket 379,717 360,043 (130,892) (104,865) (102,224) 22,062 744,519
ukandIrelandCommercial 66,786 60,990 (31,131) (21,100) (10,014) (1,255) 117,463
ContinentalEurope 101,471 96,904 (54,853) (30,994) (9,032) 2,025 127,152
International 89,430 75,789 (39,143) (32,342) (15,027) (10,723) 94,800
Totals 637,404 593,726 (256,019) (189,301) (136,297) 12,109 1,083,934
Commissions payable in respect of direct insurance amounted to $73,266,000 (2010: $59,497,000). Net TechnicalProvisionsincludeGrossDeferredAcquisitionCostsandDeferredReinsuranceCommissions.
3 ANALYSIS OF PREMIUMS WRITTEN, CLAIMS, OPERATING EXPENSES AND REINSURANCE BALANCE (continued)
35Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
4 NET OPERATING EXPENSES
2011Gross
$000Reinsurance
$000Net
$000
Acquisitioncosts 95,899 (81,286) 14,613
Deferredacquisitioncostscarriedforward (56,486) 49,031 (7,455)
Deferredacquisitioncostsbroughtforward 49,022 (40,856) 8,166
Exchangedifferenceonbroughtforward (627) 614 (13)
Changeindeferredacquisitioncosts (8,091) 8,789 698
Incurredacquisitioncosts 87,808 (72,497) 15,311
Administrativeexpenses 134,210
149,521
2010Gross
$000Reinsurance
$000Net
$000
Acquisitioncosts 78,913 (69,830) 9,083
Deferredacquisitioncostscarriedforward (49,022) 40,856 (8,166)
Deferredacquisitioncostsbroughtforward 43,179 (28,363) 14,816
Exchangedifferenceonbroughtforward (260) 86 (174)
Changeindeferredacquisitioncosts (6,103) 12,579 6,476
Incurredacquisitioncosts 72,810 (57,251) 15,559
Administrativeexpenses 116,602
132,161
5 INVESTMENT INCOME AND GAINS ON REALISATION OF INVESTMENTS
2011 $000
2010 $000
Incomefromotherfinancialinvestments 66,953 65,284
Netgainsontherealisationofinvestments 6,430 7,470
73,383 72,754
36 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
6 INVESTMENT EXPENSES AND CHARGES
2011 $000
2010 $000
Investmentmanagementexpensesincludinginterest 2,333 2,249
7 PROFIT AND LOSS ACCOUNT
Profitonordinaryactivitiesbeforetaxisstated:
2011 $000
2010 $000
After charging
Depreciation 1,270 1,348
Operatingleaserentals:
Motorvehiclesandequipment 878 899
Landandbuildings 7,969 8,103
2011 $000
2010 $000
Auditors’remuneration:
Statutoryauditofcompany’sfinancialstatements 660 636
Otherservicespursuanttolegislation 121 154
Otherservicesrelatingtotax 323 310
Allotherservices–additionalgroupreportingauditrequirementsnotpursuanttolegislation
168 159
Auditofgrouppensionscheme 11 10
37Liberty Mutual Insurance Europe Limited Annual Report 2011
2011 $000
2010 $000
Directors’ Remuneration
Emoluments 4,419 5,249
2011 2010
Numberofdirectorswhoaremembersofadefinedbenefitpensionscheme 1 1
2011 2010
highestpaiddirector’sremuneration
Aggregateofemolumentsandawardsunderlongtermincentiveschemes,including$44,938ofpensioncontributions 1,406 1,668
8 TAXATION
(a) Analysis of charge in period
2011 $000
2010 $000
Currenttax:
Currentyear:
Overseastaxation (449) (762)
uktaxation (18,798) (22,829)
Priorperiods (785) 4,483
Totalcurrenttax(seeNote8(b)) (20,032) (19,108)
Deferredtax:
Originationandreversaloftimingdifferences (548) 2,062
Ratechangeadjustment (541) (203)
Totaldeferredtax (1,089) 1,859
Taxchargeonprofitonordinaryactivities (21,121) (17,249)
7 PROFIT AND LOSS ACCOUNT (continued)
38 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
(b) Factors affecting tax charges for periodThe tax charged for the period is higher than the standard effective rate of corporation tax in the uk (26.5%).Thedifferencesareexplainedbelow:
2011 $000
2010 $000
Profitonordinaryactivitiesbeforetax 69,112 82,358
Profitonordinaryactivitiesmultipliedbystandardeffectiverateofcorporationtaxintheukof26.5% (2010: 28%) (18,315) (23,061)
Effectsof:unrelievedoverseastaxlossesandwithholdingtaxes (449) -
Effectofdisallowableitems (479) (530)
Tax(under)/overprovidedinpreviousyears (789) 4,483
Currenttaxchargeforyear(seeNote8(a)) (20,032) (19,108)
(c) Factors that may affect future tax chargesOn22June2010theChancellorannouncedthatthemainrateofukcorporationtaxwouldreducefrom28%to27%witheffectfrom1April2011.ThistaxchangebecamesubstantivelyenactedinJuly2010andthereforetheeffectoftheratereductionwasreflectedinthedeferredtaxbalancesat31December2010.
TheChancellorsubsequentlyannouncedafurtherreductioninthemainrateofukcorporationtaxto26%witheffectfrom1April2011,andto25%tobeeffectedfrom1April2012.Theseratechangeswereenactedin2011andthereductionshavethereforebeenreflectedinthedeferredtaxbalancesat31December2011.
Themainrateofcorporationtaxisnowintendedtobereducedfurtherbyonepercentperannumto22%by1April2014.Thesechangeshavenotyetbeensubstantivelyenactedandarethereforenotreflectedintheclosingdeferredtaxbalances.Itisexpectedthattheimpactofthesefutureratechangeswouldreducetheclosingdeferredtaxbalancebyapproximately$533,000.
Basedoncurrentbusinessplans,thecompanyexpectstomakesufficienttaxableprofitsinthenextthreefinancialyearstosupporttherecoverabilityofthedeferredtaxassetrecognisedat31December2011.
8 TAXATION (continued)
39Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
9 STAFF NUMBERS AND COSTS
Theaveragenumberofpersonsemployedbythecompany(includingexecutivedirectors)duringtheyear,analysedbycategory,wasasfollows:
2011 2010
underwriting 289 262
Claims 49 46
Administration 116 94
454 402
Theaggregatepayrollcostsofthesepersonswereasfollows:
2011 $000
2010 $000
Wagesandsalaries 68,445 58,238
Socialsecuritycosts 8,346 6,778
Otherpensioncosts 6,566 6,230
83,357 71,246
IncludedinOtherpensionscostsare$308,000 (2010: $171,000 credit)inrespectofthedefinedbenefitschemeand$6,258,000(2010: $6,401,000)inrespectofdefinedcontributionschemes.
10 OTHER DEBTORS
2011 $000
2010 $000
Deferredtaxation(seeNote17) 6,623 7,534
Amountsduefromgroupundertakings 65 827
Otherdebtors 3,369 3,957
10,057 12,318
40 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
11 INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
Detailsofthecompany’sinvestmentsinsubsidiaryundertakings,allofwhichproducetheirfinancialstatementsat31Decembereachyear,areasfollows:
NameType of Business
Class of Shares Held (all held directly)
Percentage of nominal value and voting rights held by the company
Country of incorporation and operation
VisionunderwritingLimited underwritingAgency
Ordinary 100% uk
VisionEmploymenthealthandSafetyLimited healthandSafetyServices
Ordinary 100% uk
VisionRiskManagementLimited RiskManagement
Ordinary 100% uk
12 TANGIBLE ASSETS
Leasehold Improvements
$000
Fixtures, fittings &
equipment $000
Motor Vehicles $000
Total $000
Cost:
At1January2011 2,110 9,166 50 11,326
Revaluation 27 321 - 348
Additionsduringtheyear 1,197 1,575 - 2,772
Disposalsduringtheyear - (351) (50) (401)
At31December2011 3,334 10,711 - 14,045
Accumulateddepreciation:
At1January2011 1,504 7,614 48 9,166
Revaluation 128 324 (2) 450
Chargefortheyear 400 866 4 1,270
Disposalsduringtheyear - (347) (50) (397)
At31December2011 2,032 8,457 - 10,489
Netbookvalueat31December2011 1,302 2,254 - 3,556
Netbookvalueat31December2010 606 1,552 2 2,160
41Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
13 OTHER FINANCIAL INVESTMENTS
2011 $000
2010 $000
Market valuations
Debtsecuritiesandotherfixedincomesecurities 1,684,824 1,555,801
Depositswithcreditinstitutions 155,996 105,111
TotalMarketValueofOtherFinancialInvestments 1,840,820 1,660,912
Original Cost
Debtsecuritiesandotherfixedincomesecurities 1,623,201 1,497,774
Depositswithcreditinstitutions 155,996 105,111
TotalOriginalCostofOtherFinancialInvestments 1,779,197 1,602,885
Carrying Value
Debtsecuritiesandotherfixedincomesecuritiesatamortisedcost 1,613,933 1,485,988
Depositswithcreditinstitutionsatoriginalcost 155,996 105,111
TotalCarryingValueofOtherFinancialInvestments 1,769,929 1,591,099
Includedintheabovemarketvaluationswereinvestments:
2011 $000
2010 $000
ListedontheukStockExchange 222,169 208,876
Listedonotherinvestmentexchanges 969,009 892,619
1,191,178 1,172,695
Thematurityvalueofdebtsecuritiesandotherfixedincomesecuritiesis$1,591,886,410(2010: $1,469,449,790)andtheunamortisedpremiumamountsto$22,046,382(2010: $18,553,771).
42 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
14 AMOUNTS DUE TO AND FROM GROUP UNDERTAKINGS
Thefollowingamountsdue(to)andfromgroupundertakingsareincludedwithin:
2011 $000
2010 $000
Depositswithcedingundertakings 16,329 -
Reinsurers’shareoftechnicalprovisions 106,884 54,547
Debtorsarisingoutofreinsuranceoperations 995 689
Grossdeferredacquisitioncosts 561 309
Technicalprovisions (27,747) (3,173)
Creditorsarisingoutofreinsuranceoperations (9,085) (6,852)
Accrualsanddeferredincome (4,046) (2,927)
Othercreditors (33,982) (33,399)
49,909 9,194
15 DEBTORS AND CREDITORS ARISING OUT OF DIRECT INSURANCE OPERATIONS
Allamountsareowedtoorduefromintermediaries.
16 OTHER PREPAYMENTS
2011 $000
2010 $000
Prepayments 2,888 2,576
43Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
17 DEFERRED TAXATION
2011 $000
2010 $000
Othertimingdifferences 6,189 7,986
Assetatstartofyear 7,986 6,241
Timingdifferencesarisinginperiod (548) 2,062
Effectofreductionintaxrate (541) (203)
Deferredtax(charge)/creditinprofitandlossaccount (1,089) 1,859
Effectofforeigncurrencytranslation 28 (326)
TaxationrecognisedintheStatementofTotalRecognisedGainsandLosses (736) 212
Assetatendofyear 6,189 7,986
DeferredtaxassetincludedinOtherdebtors 6,623 7,534
Deferredtax(liability)/assetdeductedfromPensionliability (434) 452
6,189 7,986
18 OTHER CREDITORS INCLUDING TAXATION AND SOCIAL SECURITY
2011 $000
2010 $000
Premiumtaxespayable 23,291 24,379
Corporationtaxespayable 11,245 17,097
Socialsecurity 2,394 967
Othercreditors 49,523 37,842
86,453 80,285
19 ACCRUALS AND DEFERRED INCOME
2011 $000
2010 $000
Deferredreinsurancecommissions 49,031 40,856
Otheraccruals 27,767 22,624
76,798 63,480
44 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
20 SHARE CAPITAL
2011 $000
2010 $000
Authorised:
629,187,000(2010: 629,187,000) ordinarysharesof$1each 629,187 629,187
Issuedandfullypaid:
290,225,000(2010: 290,225,000)ordinarysharesof$1each 290,225 290,225
21 RESERVES
Profit & loss Account
Excluding Pension Liability
$000
Pension Liability
$000
Total Profit & loss
Account $000
Balanceat1January2011 401,343 (1,220) 400,123
Profitforfinancialyear 47,593 398 47,991
Interimdividendpaidinthefinancialyear (42,485) - (42,485)
ChangeinFRS17“RetirementBenefits”,netoftax - 2,209 2,209
Gains and losses arising from the retranslation of assets andliabilitiesdenominatedinGBPandEuR 2,169 (85) 2,084
Balanceat31December2011 408,620 1,302 409,922
22 RECONCILIATION OF MOVEMENTS IN SHAREHOLDER’S FUNDS
2011 $000
2010 $000
Totalrecognisedgainsrelatingtotheyear 52,284 53,863
Openingshareholder’sfunds 690,348 666,485
Dividendpaid (42,485) (30,000)
Closingshareholder’sfunds 700,147 690,348
45Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
23 COLLATERAL DEPOSITS
Debtsecuritiesanddepositswithcreditinstitutionsamountingto$79,326,619(2010: $62,915,537)havebeenpledgedassecurityinconnectionwithcertainofthecompany’soverseasliabilities.
24 OTHER COMMITMENTS
Annualcommitmentsat31Decemberundernon-cancellableoperatingleasesareshownbelow:
2011 Land and Buildings
$000
2010 Land and Buildings
$000
Operatingleasesexpiringwithinoneyear - -
Operatingleasesexpiringwithintwotofiveyears 6,723 5,366
Operatingleasesexpiringafterfiveyears 81 550
25 CONTINGENT LIABILITY
Thecompanyhasentered intoa letterofcredit in favourof the InstituteofLondonunderwriters (“ILu”) forcertainpotentialliabilitiesinrespectoftheInstitute’sbuildinginLeadenhallStreet,LondonEC3.During2011drawingsontheletterofcreditamountedto$78,425(2010: $19,246)anditsvalueat31December2011was$524,871(2010: $592,063).
On14February2008,thecompanyprovidedaguaranteeonbehalfofafellowgroupundertaking,LibertySyndicateManagementLimited,inrespectofthatcompany’sfinancialobligationsrelatedtoapropertytenancyexpiringon22February2017.Themaximumpotentialobligationofthecompanyundertheguaranteeisdependent,interalia,onfuturerentreviewsbutisestimatedbythecompanytobe$9,643,000.
The company has provided to the Labuan Offshore Financial Services Authority an irrevocable and unconditionalguaranteethatitwillmeetallofthecompany’sobligationsrelatingtoitsinsuranceoperationsinLabuan,Malaysia.
46 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
26 DEFINED BENEFIT PENSION SCHEME
Thecompanyparticipates ina fundedgroupdefinedbenefitscheme in theuk, togetherwith fellowsubsidiariesofLibertyMutualholdingCompanyInc.Theschemeisclosedtonewparticipants.TheinformationdisclosedbelowisinrespectofLibertyMutualInsuranceEuropeLimited’sparticipationinthescheme.RegularemployercontributionstotheSchemefortheyearstartingon1January2012areestimatedtobe$684,000.
ThevaluationusedforFRS17disclosureshasbeenbasedonafullassessmentoftheliabilitiesoftheSchemeasat1July2010.ThepresentvaluesoftheSchemeliabilities,therelatedcurrentservicecostandanypastservicecostsweremeasuredusingtheprojectedunitcreditmethod.
Actuarialgainsandlosseshavebeenrecognisedintheperiodinwhichtheyoccur,throughtheStatementofRecognisedGainsandLosses(STRGL).
Following theukGovernment’s announcement in summer 2010, the inflation index to be used to derive statutorypensionincreaseswaschangedfromtheRetailPricesIndex(RPI)totheConsumerPricesIndex(CPI).Duetoanumberofdifferencesbetweentheindices,includingbothconstituentsandconstruction,CPIisexpectedtobelessthanRPIoverthe long-term,whichmeansthattheSchemeliabilitiesreduced.ThechangewasrecognisedatOctober2010,followingthepensiontrustees’decisiontoadoptCPIinthedeterminationofSchemeliabilities.Followingdiscussionswithourpensionsadvisors,werecognisedthereductionasanegativepastservicecost-thatis,asachangetotheconstructiveobligationtoprovidecertainbenefitstoSchememembers.
TheprincipalassumptionsusedbytheindependentqualifiedactuariestocalculatetheliabilitiesunderFRS17aresetoutbelow:
At 31 December2011
%2010
%2009
%
Rateofincreaseinsalaries 4.1 4.5 4.6
RateofincreaseinpensionsinpaymentwhereLimitedPriceIndexation(LPI)applies 2.9 3.3 3.4
Discountrate 4.9 5.3 5.6
Inflationassumption(RPI) 3.1 3.5 3.6
Inflationassumptions(CPI) 2.2 2.7 N/A
Themortalityassumptionsarebasedonstandardmortalitytableswhichallowforfuturemortalityimprovements.Theassumptionsarethatamemberwhoretiresin2024aged60willliveonaverageforafurther29.3yearsafterretirementiftheyaremaleandforafurther30.5yearsiftheyarefemale.
TheCompanyemploysabuildingblockapproachindeterminingthelong-termrateofreturnonpensionschemeassets.historicalmarketsarestudiedandassetswithhighervolatilityareassumedtogeneratehigherreturnsconsistentwithwidelyacceptedcapitalmarketprinciples.TheoverallexpectedrateofreturnonassetsisthenderivedbyaggregatingtheexpectedreturnforeachassetclassovertheactualassetallocationfortheSchemeat31December2011.
47Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
Theassetsintheschemeandtheexpectedreturnwere:
At 31 December
Long-term rate of return
expected at 2011
%
Value at 2011 $000
Long-term rate of return
expected at 2010
%
Value at 2010 $000
Long-term rate of return
expected at 2009
%
Value at 2009 $000
Equities 7.8 6,501 8.2 11,112 8.2 10,417
Bonds 4.6 10,707 5.3 7,067 5.2 8,206
Other(property,cashetc) 4.2 12,981 6.1 8,242 4.9 6,316
Totalmarketvalueofassets 30,189 26,421 24,939
Presentvalueofschemeliabilities (28,453) (28,093) (26,783)
Surplus/(deficit)inthescheme 1,736 (1,672) (1,844)
Netpensionasset/(liability)(afteradjustmentfordeferredtax) 1,302 (1,220) (1,327)
Analysis of the amount charged to operating profit
2011 $000
2010 $000
Currentservicecost 563 713
Analysis of the amount credited / (charged) to net investment income
2011 $000
2010 $000
Expectedreturnonpensionschemeassets 1,815 1,571
Interestonpensionschemeliabilities (1,560) (1,480)
Netreturn 255 91
26 DEFINED BENEFIT PENSION SCHEME (continued)
48 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
Analysis of amount recognised in statement of total recognised gains and losses (“STRGL”)
2011 $000
2010 $000
Actualreturnlessexpectedreturnonpensionschemeassets 955 375
Experiencegainsandlossesarisingontheschemeliabilities 1,391 214
Changesinassumptionsunderlyingthepresentvalueoftheschemeliabilities 599 (1,409)
Actuarialgain/(loss)recognisedinSTRGL 2,945 (820)
Changes to the present value of the defined benefit obligation
2011 $000
2010 $000
Openingdefinedbenefitobligation 28,093 26,783
Movement in year:
2011 $000
2010 $000
Currentservicecost 551 702
Interestcost 1,525 1,458
Contributionsbyparticipants 61 86
Actuarial(gains)/lossesonliabilities (1,945) 1,176
Netbenefitspaidout (358) (377)
Pastservicecosts - (781)
Re-translationofopeningbalance 526 (954)
Closingdefinedbenefitobligation 28,453 28,093
26 DEFINED BENEFIT PENSION SCHEME (continued)
49Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
Changes to the fair value of Scheme assets
2011 $000
2010 $000
Openingfairvalueofassets 26,421 24,939
Movementinyear:
Expectedreturnonassets 1,774 1,547
Actuarialgain/(losses)onassets 933 370
Contributionsbytheemployer 864 745
Contributionsbyparticipants 61 86
Netbenefitspaidout (358) (377)
Re-translationofopeningbalance 494 (889)
Closingfairvalueofassets 30,189 26,421
History of experience gains and losses
2011 $000
2010 $000
2009 $000
2008 $000
2007 $000
Totalmarketvalueofassets 30,189 26,421 24,939 19,370 25,476
Presentvalueofschemeliabilities (28,453) (28,093) (26,783) (20,310) (26,881)
Surplus/(deficit)inthescheme 1,736 (1,672) (1,844) (940) (1,405)
Difference between the expected and actual return on scheme assets:
Amount 955 375 2,013 (1,798) 1,711
Percentageofschemeassets 3% 1% 8% (9%) 7%
Experience gains and losses on scheme liabilities:
Amount 1,391 214 (34) (172) 108
Percentageofthepresentvalueoftheschemeliabilities 5% 1% 0% (1%) 0%
Total amount recognised in statement of total recognised gains and losses:
Amount 2,864 (820) (1,070) (408) 4,732
Percentageofthepresentvalueoftheschemeliabilities 10% (3%) (4%) (2%) 17%
Defined Contribution SchemeThecompanyoperatesadefinedcontributionpensionscheme,theCompanyPensionScheme,foritsemployees.Theassetsoftheschemeareheldseparatelyfromthoseofthecompanyinanindependentlyadministeredfund.Theunpaidcontributionsoutstandingattheyearend,includedinOthercreditors(Note18)are$430,950(2010: $405,646).
26 DEFINED BENEFIT PENSION SCHEME (continued)
50 Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
27 TRANSACTIONS WITH DIRECTORS AND OFFICERS
Feesof$61,172(2010: $47,963)inrespectofMrMGMckenziewerepaidtoMckenzieConsultingLimited,acompanycontrolledbyMrMGMckenzie.TherewerenoothertransactionsrequiringdisclosurebetweenLibertyMutualInsuranceEuropeLimitedanditsdirectorsandofficersduringtheyearended31December2011.
28 CHANGE IN THE PROVISION FOR CLAIMS
2011Gross
$000Reinsurance
$000Net
$000
Claimsoutstandingcarriedforward (1,798,001) 841,484 (956,517)
Claimsoutstandingbroughtforward 1,564,803 (696,928) 867,875
Exchangedifferenceonbroughtforward (1,184) 386 (798)
MovementperTechnicalAccount (234,382) 144,942 (89,440)
2010Gross
$000Reinsurance
$000Net
$000
Claimsoutstandingcarriedforward (1,564,803) 696,928 (867,875)
Claimsoutstandingbroughtforward 1,642,998 (792,835) 850,163
Exchangedifferenceonbroughtforward (26,177) 7,742 (18,435)
MovementperTechnicalAccount 52,018 (88,165) (36,147)
29 PRIOR YEARS CLAIMS
Anover-provisionofreservesnetofreinsuranceof$7,799,000(2010: Over-provision $10,373,000)arosebetweentheoutstandingclaimsprovisionatthebeginningoftheyear,paymentsmadeduringtheyearandtheprovisionattheendoftheyear.Theoverprovisionaroseprincipallyasaresultofareviewoftherecognitionofreinsurancerecoveriesunderwholeaccountpolicies,andreservesforCasualtybusinessinthecompany’sAsiabranches.
30 EqUALISATION PROVISION
Theseprovisions,whichamountto$27,981,000asattheyearend(2010: $19,740,000),areinadditiontotheprovisionsrequiredtomeettheanticipatedultimatecostofsettlementofoutstandingclaimsatthebalancesheetdate,andarerequiredbySchedule3oftheLargeandMedium-sizedCompaniesandGroups(AccountsandReports)Regulations2008 to be includedwithin technical provisions in the balance sheet, notwithstanding that it does not represent aliabilitiesatthebalancesheetdate.Thishashadthecumulativeeffectofreducingshareholders’fundsby$20,146,000netoftax(2010: $14,213,000).Themovementinequalisationprovisionsduringtheyearresultedinadecreaseinthegeneralbusinesstechnicalaccountresultof$7,871,000(2010: decrease of $5,828,000)andadecreaseinthenetassetsof$8,241,000(2010: decrease of $6,341,000).
51Liberty Mutual Insurance Europe Limited Annual Report 2011
noteS to the financial StatementS (continued)
Designedbybrett-lesage.comPhotographypages8&12byAidanMcCarthy
31 PARENTAL GUARANTEE
On 15 February 2002 the board of Liberty Mutual Insurance Company agreed to grant a guarantee covering thecompany’sinsuranceobligations.ThiswasratifiedbytheMassachusetts’DepartmentofInsuranceon10May2002.Theoriginalguaranteewasupdatedandre-issuedon13April2006.
32 ULTIMATE PARENT COMPANY
TheultimateparentcompanyisLibertyMutualholdingCompanyInc.ofBoston,
175BerkeleyStreet,Boston,Massachusetts02117,u.S.A.acompanyincorporatedintheunitedStatesofAmerica.ThesmallesthighergroupofcompaniesforwhichgroupaccountsaredrawnupandofwhichthiscompanyisamemberisLibertyInternationalholdingsIncorporated,acompanyincorporatedandregisteredintheu.S.A.
TheimmediateparentcompanyofLibertyMutualInsuranceEuropeLimitedisLibertyITBukandEuropeLtd.
CopiesofthegroupaccountsofLibertyInternationalholdingsIncorporatedandofLibertyMutualholdingCompanyInc.ofBostonareavailablefromthecompanies’registeredoffice,175BerkeleyStreet,Boston,Massachusetts02117,u.S.A.
52 Liberty Mutual Insurance Europe Limited Annual Report 2011
LONDON OFFICE:
Head office3rdFloor,TwoMinsterCourtMincingLaneLondonEC3R7yETel:+44(0)2078606600Fax:+44(0)2078606290mailbox.london@libertyiu.com
UK OFFICES :
Birmingham7thFloor45ChurchStreetBirminghamB32RTTel:+44(0)1212142100Fax:+44(0)1212369878mailbox.birmingham@libertyiu.com
Bristol4thFloor11-12QueenSquareBristolBS14NTTel:+44(0)1179307320Fax:+44(0)1173763205mailbox.bristol@libertyiu.com
CheltenhamStJameshouseStJamesSquareCheltenhamGloucestershireGL503PRTel:+44(0)1242244499Fax:+44(0)1242244445info@visionunderwriting.co.uk
Leeds 5thFloor2BondCourtLeedsLS12JzTel:+44(0)1132368280Fax:+44(0)1133912962
Manchester15thFloorLowryhouse17MarbleStreetManchesterM23AWTel:+44(0)1618387900Fax:+44(0)1618191962mailbox.manchester@libertyiu.com
INTERNATIONAL OFFICES :
DubaiOffice8,Floor4GateVillageBuilding5,DIFCDubai,unitedArabEmiratesTel:+97143028000Fax:+97143230231mailbox.dubai@libertyiu.com
Hong KongSuites2401-04CityplazaOne1111king’sRoadTaikooShing,IslandEasthongkongTel:+85236552600Fax:+85236552699mailbox.hongkong@libertyiu.com
MalaysiaSuite9-7WismauOADamansaraIINo.6JalanChangkatSemantanDamansaraheights50490kualaLumpurTel:+60320824000Fax:+60320824050
SingaporeOneRafflesQuay#37-02NorthTowerSingapore048583Tel:+6566229160Fax:+6566229168mailbox.singapore@libertyiu.com
EUROPEAN OFFICES:
CologneImMediaPark850670köln,GermanyTel:+4922150052201Fax:+4922150052299mailbox.cologne@libertyiu.com
DublinThirdFloorkestrelhouseClanwilliamPlaceDublin2,IrelandTel:+35318180505Fax:+35318180528mailbox.dublin@libertyiu.com
The Haguekoninginnegracht222514ABDenhaagNetherlandsTel:+31703028650Fax:+31703634700mailbox.denhaag@libertyiu.com
HamburgNeuerWall80D-20354hamburg,GermanyTel:+4940360989800Fax:+4940360989811
MadridPaseodelaCastellana,31-8ºB28046Madrid,SpainTel:+34914442867Fax:+34914442876mailbox.madrid@libertyiu.com
Paris5boulevarddelaMadeleine75001Paris,FranceTel:+33153059059Fax:+33153059058mailbox.paris@libertyiu.com
ZurichLintheschergasse23Ch–8001zürichSwitzerlandTel:+41442851000Fax:+41442851009mailbox.zurich@libertyiu.com
53Liberty Mutual Insurance Europe Limited Annual Report 2011
about liberty Mutual insurance europe limited Liberty Mutual Insurance Europe Limited is a wholly owned subsidiary of Liberty Mutual Insurance Group writing both Commercial Lines, trading as Liberty Mutual Insurance (LMI) and Specialty Lines, trading as Liberty International Underwriters (LIU).
about liberty international underwriters (liu) Established in 1999, Liberty International Underwriters (www.libertyiu.com) provides a diverse range of specialty products distributed exclusively through the independent broker network. The LIU staff of over 1,300 professionals offers core products in marine, aviation, energy, engineering, global crisis management, property, casualty, professional liability, directors & officers, environmental, strategic assets (including cyber), construction, surety bonds, legal expenses and trade credit insurance. Worldwide offices include North America, Europe, the Middle East, and Asia Pacific.
LIU is part of Liberty Mutual Insurance Group’s International operations, which reported net written premium of $8.2 billion in 2011, an increase of 13.3 per cent over 2010. This constituted 26.3 per cent of Liberty Mutual Insurance Group’s $31.183 billion in net written premium for the year ended December 31, 2011.
about liberty Mutual insurance group“Helping people live safer, more secure lives” since 1912, Boston-based Liberty Mutual Insurance Group is a diversified global insurer and the third largest property and casualty insurer in the U.S. based on A.M. Best Company’s report of 2010 net written premium.
Liberty Mutual Insurance Group also ranks 84th on the Fortune 500 list of largest corporations in the U.S. based on 2011 revenue. As of December 31, 2011, Liberty Mutual Insurance Group had $117.1 billion in consolidated assets, $99.3 billion in consolidated liabilities, and $34.7 billion in annual consolidated revenue.
Liberty Mutual Insurance Group offers a wide range of insurance products and services, including personal automobile, homeowners, workers compensation, property, commercial automobile, general liability, global specialty, group disability, reinsurance and surety.
Liberty Mutual Insurance Group (www.libertymutualinsurance.com) employs over 45,000 people in more than 900 offices throughout the world.
GEN257-05-12© 2012 Liberty Mutual Insurance Europe Limited. All rights reserved.
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