2011 was a year marked by unprecedented catastrophes and severe weather events. It was the second-worst year on record for insured global catastrophic losses, and the litany is long: floods in Australia and Thailand, earthquakes in New Zealand and Japan and, in the U.S., a record 875 tornadoes in one month, Hurricane Irene, and a very unusual late-October Northeast snowstorm.
As an insurer, the costs to us were high, but the real damage was incurred by those whose lives were lost, whose loved ones were hurt, and whose homes, businesses and possessions were damaged or destroyed. At just the time when our customers needed us most, we responded, and I am extremely proud of how we did so. As you will see in the pages of this Annual Review, our personal and commercial lines claims professionals across the globe responded to this seemingly endless barrage of events with compassion and professionalism in helping our policyholders put their lives and businesses back together.
This extraordinary but expected service to our customers in 2011 is a fitting prelude to our 100th Anniversary, which we celebrate in 2012. Ever since we issued our first policy in Massachusetts in 1912, keeping our promises has been the cornerstone upon which this great company has been built.
Not surprisingly, the $2.7 billion impact of these catastrophes and weather events was reflected in our earnings. Pre-tax operating income decreased $1.7 billion from the prior year to $249 million. We did, however, end the year with $365 million in net income, a testament to the solid core earnings within each of our business units and outstanding investment results in a very challenging environment. The underlying strength of our businesses was further demonstrated by a healthy 4.5 percent increase in revenues to $34.7 billion, and an $880 million increase in equity to $17.9 billion. Total assets increased $4.8 billion over 2010 to $117.1 billion.
Operationally, we continued to build each of our businesses for the future.
Personal Markets, which distributes its products and services under the Liberty Mutual Insurance brand, remained among the top three personal lines carriers in terms of auto and property direct written premium growth. Its multichannel distribution strategy and market leadership in affinity relationships continued to fuel this growth. In fact, in 2011 our largest affinity relationship—CUNA Mutual—surpassed the $1 billion premium mark, a key milestone in our 13-year partnership.
Commercial Markets continued to diversify its book of business to include more property and liability risks and to improve its profitability through better risk selection and more sophisticated pricing techniques. It is critical that we attain an appropriate price for each risk assumed in order to build a solid foundation for future profitability.
Liberty Mutual Agency Corporation, which sells personal and commercial lines through independent agents, made significant progress integrating systems and enhancing business processes. Efforts included the rollout of a new policy administration system for our eight regional companies, new product and marketing advancements at Safeco and enhancements to Liberty Mutual Surety’s agency Internet portal. I am confident LMAC is on solid footing for future profitable growth with independent agents.
Liberty International continued to perform well despite experiencing major catastrophes through both its country operations and our Lloyd’s Syndicate. We continued to expand our global footprint with an acquisition in Ireland, the approval of a joint venture partnership in India, and the opening of a new branch in Guangdong Province in China, a market of more than 100 million people.
On a personal note, Helen Sayles, formerly head of Human Resources and Administration, retired in February 2012, after a 36-year career with Liberty Mutual. Under her guidance and steady leadership, Liberty Mutual has policies, processes and procedures for compensation and benefits, talent and performance management, and real estate and administrative services that are among the best in the industry. We thank her, and wish Helen and her husband DuWayne the very best in retirement.
Looking ahead, we will continue to diversify our business across lines, products, geographies and distribution channels. We expect to be a leader in each market we enter, to differentiate ourselves with quality service and to obtain appropriate prices for risk assumed.
I am extremely confident in our company’s prospects as we look to our second century. I draw this confidence from the more than 45,000 Liberty Mutual employees hard at work across the globe. It’s their integrity, enthusiasm, commitment and dedication that have brought us to where we are today, and I have no doubt they will continue to drive this success—for our Company and our policyholders—in the future.
I thank our Board of Directors for their continued guidance, and I am particularly grateful to retiring directors Gary Countryman, John Hamill and Stephen Page. Their insights, advice and support have been invaluable to Liberty Mutual and to me personally, and each will be missed. I also thank our many distribution partners—affinity, independent agents and brokers—for your support.
Finally, I thank our policyholders and customers for your business, and for continuing to place your confidence in us.
David H. Long
President and Chief Executive Officer