Edmund “Ted” Kelly says he never dreamed of being a CEO, but he ended up becoming one of the most successful—and outspoken—leaders ever of an insurance company.

Kelly’s reinvention of Liberty Mutual is nothing short of remarkable: He transformed a super-regional player into a highly diversified and global powerhouse—the third-largest insurer by net premiums written on NU’s Top 100 list last year, behind only State Farm and Allstate.

Kelly’s personal story starts on a farm in Ireland as the fifth of 10 children born to a “very, very poor family,” he recently told a group of students at the Massachusetts Institute of Technology, where he graduated with a doctorate in mathematics.

His professional life ends amid a cloud of controversy and negative newsprint in Liberty Mutual’s hometown of Boston over Kelly’s annual $50 million compensation during his last four years with the company. (He retired a year ago as the insurer’s CEO but remains the chairman.)

Beyond an argument about ethical pay, Kelly’s accomplishments since he signed on with Liberty Mutual in 1992 as its president and chief operating officer are undeniable.

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Liberty Mutual was not in good shape at the time. Kelly said then-CEO Gary Countryman told him during the job interview: “We are in deep trouble. If we don’t do something, the last man out is going to have to turn out the lights.”

Costs, driven by medical inflation, were far exceeding estimations in Liberty Mutual’s core line of business, Workers’ Compensation.

But Kelly, (who, after several teaching opportunities, started his insurance career in the mid-1970s as an actuary with Aetna), said he liked Countryman and “liked the challenge of turning a company around.”

Among his first observations: Liberty Mutual was “too committed to the U.S.”

And only about a year into his time with the carrier, the company went international—and in an aggressive way. Liberty Mutual now operates in countries across the planet, including China, Japan, India, Brazil, Argentina, Venezuela, Australia, Vietnam, Poland and Turkey.

Domestic acquisitions during Kelly’s tenure also diversified the company. Liberty Mutual bought OneBeacon, Prudential’s P&C operations and Ohio Casualty.

And then its $6.2 billion buy of Safeco Corp. in 2008 gave Liberty Mutual a strong presence on the West Coast—an emphatic exclamation point on the company’s growth into a carrier with a true cross-country footprint.

“These weren’t moves for the sake of making moves,” observes Chuck Chamness, CEO of the National Association of Mutual Insurance Companies. “[Kelly] brought in a unique skill set and put together a great team—and they prudently grew the company, organically and through acquisitions.”

When Kelly was appointed CEO in 1998, total assets at Liberty Mutual were $26.25 billion. At the end of 2010, total assets stood at $63.14 billion. Net premiums written more than tripled to $21.48 billion during the same time and policyholder surplus grew from about $7 billion to about $16 billion.

Kelly’s “famously blunt approach,” says Chamness, along with his distinct Irish brogue, added to his appeal.

“No one ever walked away from a meeting wondering what he thought,” Chamness says.

Among Kelly’s most quotable moments: He has predicted North American-only insurers will eventually be “totally irrelevant.” He has called Workers’ Compensation a “time bomb on the balance sheet of the industry” and has attached the phrase “patent nonsense” to describe commercial-insurance pricing.

When Liberty Mutual Agency Corp. in late 2010 backed off plans to raise about $1.2 billion through an initial public offering, Kelly said, memorably: “Insurance stocks stink.”

Kelly’s legacy lives on in the company’s “Responsibility” advertising campaign. It was a cornerstone characteristic of a set of standards he says he sought in all employees, from the very bottom of the pay scale to C-suite executives.

“I don’t believe in values,” Kelly told the MIT students. “Values are an existentialist cop-out for standards of behavior.”

Special Reports /

#9 Ted Kelly: Extending Liberty

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