Even by the generous standards of executive pay, Edmund F. “Ted’’ Kelly’s paycheck looms large.
Liberty Mutual’s longtime chief earned an average of nearly $50 million a year from 2008 to 2010, making him one of the highest-paid corporate executives in the country, according to state insurance filings reviewed by the Globe.
But the Boston insurance giant has declined to say how much Kelly earned in 2011, when he retired as chief executive, or how much he continues to be paid as chairman of the board. The company omitted Kelly’s compensation from its latest annual financial report, filed with state regulators last month.
The decision raises new questions over Kelly’s pay package as the company holds its annual meeting Wednesday in Boston and shines a spotlight on how mutual insurance companies handle executive pay.
“The lack of transparency is a major issue,’’ said Joseph M. Belth, editor of The Insurance Forum, an independent publication that follows the insurance industry, and a professor emeritus of insurance at Indiana University.
Kelly helped the company grow through a series of acquisitions during his 13-year reign. Kelly, 66, has been richly rewarded, earning far more than the CEOs of every public company in Massachusetts and most of his peers across the country from 2008 to 2010.
For instance, the top executive at MetLife, the country’s largest life insurance company, earned an average of $16 million, a third of what Kelly collected, during the period. The head of Allstate Corp., which is similar in size to Liberty Mutual, earned an average of $9.2 million during that span.
Kelly out-earned almost all of the CEOs at S&P 500 companies, including iconic corporate giants like General Electric Co. and Walmart Stores Inc.
A Liberty Mutual spokesman, John Cusolito, said Kelly’s pay was based on an analysis by an executive compensation firm and included long-term incentive awards earned during his long career with the company.
“Although Liberty Mutual Holding Co. Inc. is not a publicly traded company, we emulate many of the best practices used by public companies,’’ he said.
The spokesman suggested the company did not include Kelly’s compensation in the 2011 annual report because he retired as CEO in June. Liberty Mutual did disclose the pay for his successor, David H. Long, the former president; he earned $5.3 million last year.
Because it is not publicly traded, Liberty Mutual is not required to report executive pay to the Securities and Exchange Commission. Its insurance subsidiaries are required to disclose the pay for their CEOs and other top paid executives to regulators in several states, including Massachusetts, which in turn make the data public.
According to state insurance filings, Kelly earned an average of $8.5 million a year in salary and bonuses from 2008 to 2010, plus $40.8 million a year in “all other compensation.’’
The filings do not provide details on the “other compensation,’’ but Cusolito said it consisted of long-term deferred compensation, modeled after the stock awards public companies use.
Some observers say Kelly’s pay package is notable because Liberty Mutual was founded in 1912 as a mutual insurance company owned by its customers, rather than by shareholders - a tradition it says continues. Any extra money it earns is supposed to go back to policyholders, not executives.
“It’s really outrageous,’’ said J. Robert Hunter, director of insurance for the Consumer Federation of America in Washington, D.C. “Mutual companies should be run for the benefit of the policyholders.’’
Massachusetts regulators have asked Liberty Mutual why it did not report Kelly’s pay and could order the company to do so.
Insurance Commissioner Joseph Murphy said the state has the authority to take action against the company if it determines Kelly’s pay was excessive, hurt the company’s financial condition, or forced it to charge policyholders higher rates.
As at other companies, Liberty Mutual’s directors are charged with setting chief executive pay. Board members include NStar chief executive Thomas J. May, Blue Cross Blue Shield of Massachusetts Inc. chairman William C. Van Faasen, and former Sovereign chairman John P. Hamill. None could be reached for comment. Liberty Mutual does not disclose how much it pays directors.
In theory, policyholders elect board members. In practice, board members are typically picked by other directors and executives, limiting customers’ influence, critics say.
“The problem with mutuals is there is no way for policyholders to exercise any control,’’ said Hunter, the consumer advocate. “It is run by management.’’
Kelly, who came to the United States from Ireland to earn his doctorate in mathematics at the Massachusetts Institute of Technology, has long been the public face of the company. After 18 years with Aetna Life and Casualty Co., he became Liberty Mutual’s president in 1992 and chief executive in 1998.
A Weston resident, he also serves on at least two other corporate boards and is chairman of the Boston Symphony Orchestra’s board of trustees.
Under Kelly’s tenure, Liberty Mutual grew significantly through acquisitions, including buying Safeco of Seattle for $6.2 billion in 2008.
Liberty Mutual reported $34.7 billion in revenue last year, triple the tally when he became CEO, and has remained profitable.
Kelly’s most controversial move was creating a holding company for Liberty Mutual a decade ago, paving the way for the company to sell a minority stake in the subsidiaries to outside investors, without compensating policyholders.
The change also made it more difficult to track Liberty Mutual’s pay. Its insurance units file annual reports with state regulators detailing executive pay, but the holding company does not.
“There is no disclosure for mutual holding companies,’’ said Belth, the publisher. “It’s not just a lack of transparency. It’s invisible.’’
Kelly’s pay began to skyrocket shortly after the company set up the holding company in 2002. It climbed from $3 million that year to $53 million in 2008, Belth said. In 2010, the latest year for which data are available, Kelly earned $45 million in total.
“Those are very big numbers,’’ said Fred Whittlesey of Compensation Venture Group, a Seattle-area consulting firm.
Still, Whittlesey said, it is difficult to say whether the pay was justified without knowing details about how Kelly’s pay was structured and how the company performed, compared to its peers - something that is harder to measure because Liberty Mutual is not publicly traded.Todd Wallack can be reached at email@example.com. Follow him on Twitter @twallack.