Liberty Mutual Retracts Biggest IPO of 2010

Posted on Sep 30, 2010 by Sergio Ulloa (G+)  | Tags: Great Depression, Liberty Mutual Agency IPO, Liberty Mutual Group, LMAC, Property Insurance, United States

Liberty Mutual Group, based in the US state of Massachusetts, has announced the postponement of the initial public offering (IPO) of Liberty Mutual Agency Corp. (LMAC), citing the lacklustre demand from investors and the uncertain state of the US economy as main causes. Not so long ago it was heralded as the biggest IPO of 2010 in the US, Liberty Mutual Group had initially sought to raise almost US$1.3 billion (EUR 956 million) by selling 64.3 million Class A LMAC shares at an initial price of between US$18 (EUR 13.5) and US$20 (EUR 15) per share. The retraction of the LMAC IPO by Liberty Mutual joins the many other IPO postponements this year in the US; there have been at least 45 other companies that have either delayed or entirely withdrawn their listing plans, on concerns that the recovery from the longest recessionary period since the 1920s Great Depression is deteriorating. This pessimistic sentiment has already seen the S&P's 500 Index shed a significant 16 percent from its 2010 highest. Financial analysts perceive the current volatile environment in the US stock market, compounded by undervalued property-and-casualty insurance stock prices, as unfavourable and may explain why investors would prefer not to take part in the LMAC IPO. Another concern voiced by some investors was the perception that Liberty Mutual Group (LMG) would be benefited more than LMAC, since approximately US$1.2 billion (EUR 882.4 million) would be paid to LMG, as indicated in the prospectus. During the past few weeks there have been some IPO success stories, and that may have initially encouraged Liberty Mutual to believe that theirs would whet the appetites of investors. However, analysts believe that the current climate in the stock market is not the perfect environment for initial offerings of industry-specific shares, such as Liberty Mutual Agency's, since the demand for property and casualty insurance has been weakened by the prolonged recession and the persistent high unemployment rate. No further details were released by Liberty Mutual as to the anticipated length of their LMAC IPO postponement. Insurance Company mentioned: Liberty Mutual Group Liberty Mutual Group offers a wide range of insurance products and services, including personal automobile, homeowners, workers compensation, commercial multiple peril, commercial automobile, general liability, global specialty, group disability, assumed reinsurance, fire, and surety. Liberty Mutual Group employs over 45,000 people in more than 900 offices throughout the world.