Schiff Questions Liberty Demutualization – Heads Group Offering $4.2 Billion

July 2, 2001

In the Friday edition of Schiff’s Insurance Observer editor David Schiff announced the formation of the Liberty Mutual Defense Fund (LMDF) whose goal is “to acquire Liberty on better terms than those offered to Liberty’s policyholders” under the present demutualization plan.

Schiff, a longtime foe of insurer demutalizations, which he feels undervalue policyholders’ interests, formed LMDF in the editorial offices of his newspaper, but there’s nothing frivolous in his proposal. An open letter to Liberty President and CEO Edmund F. Kelly sets out a detailed plan for the company’s 660,000 policyholders to become the owners of any shares issued.

Schiff estimates Liberty’s value as at least $4.2 billion by calculating the value of policyholders’ surplus, and his offer proposes exchanging shares in LMDF for Liberty shares at an average value of 2.8 times annual policyholder premiums, which works out to around $6,363 each.

The letter to Kelly states that the present officers directors and employees will be kept in place, but would add three new members to the board: Schiff, James Hunt, former Vermont Banking & Insurance Commissioner, and Robert Hunter, a former Federal and Texas Insurance Commissioner.

So far there’s been no comment from Liberty.

Copies of the Insurance Observer can be obtained from the company by telephone request at : 212 724 2000.

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