NU Online News Service, July 28, 3:45 p.m.EDT

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Liberty Mutual Group reported net income dropped 9 percent inthe second quarter of this year, which the company's chiefexecutive said was acceptable under present market conditions.

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"It is a remarkable result given the economic and competitiveenvironment," said Edmund F. "Ted" Kelly, the Boston-basedcompany's chairman, president and chief executive officer.

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He said underwriters remain disciplined and are "walking awayfrom inadequately priced business."

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Second-quarter net income was off 9 percent, or $26 million, at$274 million compared to the same period last year. Revenuesincreased 13 percent, or $882 million, to $7.83 billion. Netwritten premium stood at $6.9 billion, an increase of $625 million,or 10 percent over the same period last year.

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The company's total combined ratio was reported as 100.2, animprovement of 1.7 points compared to the same period lastyear.

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Among some of the factors negatively impacting the company'sperformance in the quarter was private equity loss of $20 million,foreign exchange translation negatively impacting earnings by $22million and realized investment losses at $27 million.

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For the first six months of the year, net income dropped 54percent compared to last year, or $358 million, to $302 million.Revenues increased 10 percent, or $1.4 billion, to $15.24 billion.Net written premium stood at $13.93 billion, an increase of 11percent or $1.4 billion. The six-month total combined ratio dropped1.5 points to 99.8.

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On the personal lines side, Mr. Kelly said the company continuesto seek rate increases for auto risks and suffered significantweather-related homeowners losses in the Midwest. He said theindustry needs to obtain rate increases in this part of the countrydue to those losses.

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Commercial lines remain competitive, he noted, with brokerspushing for more decreases and one insurer "that remains extremelyaggressive on price." However, that price competition is primarilyfocused on keeping business and new business opportunities remaindifficult to obtain.

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In the face of an anticipated hard market, Mr. Kelly said thecompany is seeing more requests for multiyear deals.

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Property prices are beginning to bottom out, he noted, andcatastrophe property exposures are getting increases of 10-to-20percent.

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"Pricing is firming up a little bit, except maybe in middlemarket; personal lines is doing very well," said Mr. Kelly. "Wewill continue to plan and hold tight on underwriting standards andpricing for a long time since we have generally a conservativeview, if not negative view of the economy."

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