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Insurer’s ex-CEO reveals 2011 pay

Kelly got nearly $50m from Liberty Mutual; Remained among top paid executives

Edmund F. Kelly retired as Liberty Mutual’s CEO last year. During his tenure, revenues more than tripled.

Liberty Mutual chairman Edmund F. “Ted’’ Kelly, who earned close to $50 million a year from 2008 to 2010, said Wednesday that he collected a similar amount last year when he retired as chief executive of the insurance company.

The disclosure means Kelly remained one of the nation’s highest paid executives last year, earning more than the heads of Bank of America Corp., General Electric Co., and other major corporations. Equilar, a California compensation research firm, recently found just three chief executives among 300 of the largest US publicly held companies earned more than $45 million last year.

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“There are few public CEOs who make that much on a consistent basis,’’ said Aaron Boyd, director of research for Equilar. Boyd said the only chief executive he could think of who typically earns more is Larry Ellison, founder of Oracle Corp., the Silicon Valley technology firm.

Liberty Mutual is required to report executive pay to state regulators once a year, but omitted Kelly’s 2011 compensation from the annual filing. Company officials said they did not include Kelly because he stepped down as chief executive in June, even though he remains chairman of the board.

But Kelly, 66, in response to a Globe reporter’s question during the company’s annual meeting in Boston, said his 2011 earnings were “about the same as the last several years.’’ Kelly earned an average of $49.4 million a year from 2008 to 2010, state filings show. His 2011 pay included long-term incentives.

Revenues more than tripled to nearly $35 billion during Kelly’s 13-year tenure as chief executive. Liberty Mutual, best known for its auto and home insurance, ranks 82d on the list of Fortune 100 companies and has more than 45,000 employees, including 2,900 in Boston.

As with other companies, Liberty Mutual’s board of directors sets the chief executive’s pay. The board includes Thomas May, the chief executive of Northeast Utilities, which this week merged with NStar, and William C. Van Faasen, chairman of Blue Cross Blue Shield of Massachusetts Inc. Kelly said board members earn about $200,000 a year each, in line with what directors earn at companies of similar size.

But Kelly’s paycheck raised eyebrows, both because of its sheer size and because Liberty Mutual is owned by its policyholders, rather than shareholders. Any surplus profits are supposed to go to policyholders, rather than executives, or be reinvested in the company.

Massachusetts Insurance Commissioner Joseph Murphy said the state could take action against the company if it determines Kelly’s pay was excessive. In the past, the state has ordered some financially troubled insurers to reduce their executive pay or make management changes. But he said the state generally gives healthy firms wide latitude to determine how much to pay their executives. “It’s not our role to tell companies how to run their business,’’ Murphy said.

Liberty Mutual’s annual meeting in Boston was attended by hundreds of employees, but only about 10 policyholders. Like many other insurers, Liberty Mutual was hit hard last year after a series of disasters, including Hurricane Irene and a swarm of tornadoes, required it to pay large amounts of damage claims.

Liberty Mutual’s revenue rose nearly 5 percent to $34.7 billion last year, but its profit plummeted 72 percent to $365 million.

“Ted stepped down at the right time,’’ Liberty Mutual chief executive David H. Long, who succeeded Kelly last June, joked at the annual meeting. “2011 will long be remembered for its unprecedented number of catastrophes and severe weather events.’’

Three members of the board of directors also retired Wednesday, including former Sovereign Bank New England chairman John P. Hamill, former Liberty Mutual chief Gary L. Countryman, and former United Technologies Corp. chief financial officer Stephen F. Page.

Liberty Mutual is halfway through construction of a new $300 million building near its Back Bay headquarters. The company received roughly $46.5 million in state and local tax breaks to help pay for the building in exchange for a pledge to create 600 new jobs.

Todd Wallack can be reached at twallack@globe.com. Follow him on Twitter @twallack.
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