Liberty is quietly running two successful syndicates. Managing director Sean Dalton tells Eloïse Haigh why he dumped motor and is focusing on more volatile risks
Liberty Syndicates is an enigma. It runs two profitable syndicates with a strong team of underwriters and even ran the most profitable syndicate at Lloyd's for 1999 - so why do we know so little about it?
Managing director Sean Dalton admits Liberty has hidden its light under a bushel. Dalton says: "Generally people who know us like us, but not that many people know us."
Dalton has run Liberty Syndicates since 1999. He joined Lloyd's underwriting agents department in 1988, then moved to Marchant as compliance officer before becoming director. He joined Liberty in 1996 as compliance officer.
But things have changed. "Now we have two good syndicates and a lot more strength and depth than we used to," Dalton says.
The syndicates' results look good. Syndicate 282 made a 23% return on capacity for the1999 year of account - the top result in Lloyd's. Syndicate 190 made a 3.5% return.
Better ratios
Liberty Syndicates is owned by US giant Liberty Mutual and was established in 1994. The company has run Syndicate 190 since 1995 and Syndicate 282 since 1996.
Liberty hit the headlines in June for selling its motor syndicate, Liberty Motor, to a new group of investors called Jubilee led by former Lloyd's vice chairman Ian Agnew.
Why? Dalton says Liberty had decided it needed a motor syndicate early on due to the small size of Syndicates 190 and 282 and the volatility of their accounts.
It was hoped that motor would produce stability so Liberty Motor was set up in 1997.
"But it became a lot more work than we thought it would be because we misjudged the cycle's upturn," Dalton says.
Liberty Motor started making a profit in 1999 and is now writing to combined ratios well under 100%.
Higher risk reward
But Syndicates 190 and 282 had grown enough that the volatility was now relatively small. So selling the motor syndicate became attractive, he says.
"The other reason was that we were seeking something with a higher risk reward ratio," he adds. He explains that, in a decent year, Liberty might have made up to £7.5m on its £50m book of motor business. This required 50 people and a lot of Dalton's time. But in a class of business like treaty casualty the potential return on its £45m book of business is £20m and requires only two members of staff.
That's the history lesson over. So what can we expect to see from the company over the next year?
Since 11 September, Dalton says, Liberty has concentrated on more volatile risks where there is a capacity shortage. As a result it is now moving into personal accident in 2003.
Current plans also include increasing capacity on the two syndicates from £422m to £430m next year. But this could change any moment, depending on reinsurance which is its current focus.
"We think the conditions are still very good for reinsurance and we are quite happy to take big risk transfer in this area," he says.
"If, come December, we think there is opportunity we will do more. We think people want to buy it, but what we are concerned about is that people have spent a lot of money on reinsurance this year and so far there has been no major event."
He says Liberty would like to write more terrorism business, but it is keeping an eye on the legislative changes taking place.
He adds: "We want Syndicate 190 to have one of the best property teams in the market. I think we are in the top three or four property syndicates, but we have to work hard to stay there."
As for this year, business is good. "So far 2002 is far better than anything we have seen for five years. You still have to work very hard and it has not reached the kind of levels of 1992, but it is a good market. Everybody should make a profit out of it."
When asked about what he thinks are the major challenges facing the market, Dalton does not cite common concerns like capacity crises or Bermuda usurping Lloyd's. Instead he thinks gaining confidence is the key issue. "Everything is too defensive. Let's start believing we are good and telling people so."
Franchise fears
He also raises the issue on everybody's lips at the moment - the franchise at Lloyd's.
"In my view the big challenge for the franchise is to make sure the variety and the ability to do business remains. You do not want to manage it down to a homogenous marketplace of average."
Despite any challenges facing Lloyd's, Dalton is keen to point out the level of Liberty's commitment to Lloyd's.
"Everybody tells me we are lucky because we can leave Lloyd's as we are owned by Liberty Mutual. Actually, we are as committed to it as anybody else in the market. That was proven last year after 11 September.
"We are all Lloyd's people. Liberty is committed to its Lloyd's operation with the usual caveat - that we keep making money."
