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MEXICO CITY-International insurers and would-be international insurers should focus on their core strengths when they expand their operations outside existing markets, an insurer executive says.

The overall success of an international expansion program is possible only if insurers are clear about their strengths and weaknesses and build an expansion model well-aligned to those features, said Gary L. Countryman, chairman and chief executive officer of Liberty Mutual Insurance Co. in Boston.

But insurers still can expand internationally into a variety of product lines as long as those product lines are related to the main business of the insurer, said Jose Manuel Martinez Martinez, chairman of the executive committee and chief executive officer of Corporacion Mapfre S.A. in Madrid.

Core competencies are aspects of businesses that set an insurance company apart from the rest of the market that competitors cannot easily replicate, Mr. Countryman said.

"Some examples of core competencies include Intel's ability to manufacture a superior computer chip, GE's ability to manage unrelated business units, and Fidelity's ability to sustain its marketing and distribution excellence," he said.

Companies face further challenges in maintaining the advantage in their core competencies when they expand internationally, Mr. Countryman said.

First, a company must be able to transfer its competency to another country in a faster and more effective way than the local competition is able to create it. Second, the target market must understand the value of the competency and be willing to pay a reasonable price for it, he said.

Liberty Mutual has tried to export what it sees as its core competencies, Mr. Countryman said.

For example, Liberty Mutual set up a workers compensation operation in Argentina last year when the state compensation system was privatized.

"The skill and capability transfer was executed reasonably well. Developing a market understanding of and an appreciation for the unique skills we bring to the market has taken longer. The market clearly understands lowest price, but it has less understanding of value," Mr. Countryman said.

Liberty Mutual has successfully exported its occupational health and safety services to several other countries, he said.

"In the scale of Liberty Mutual, given the nature of the safety consulting business, it will never be a major revenue or profit source for the group. It will, however, serve a genuine need and serve as a first-step entry into selected emerging markets," he said.

The method used to expand those competencies also is important and can range from large acquisitions, through joint ventures with established companies, to setting up a new operation, he said.

While Liberty Mutual has set up some new operations, it usually chooses to enter a new country by acquiring an established insurer, Mr. Countryman said. The main reasons for this strategy are:

An acquisition provides name recognition and a market position.

In several emerging markets, barriers to foreign ownership are lifting, and this creates a unique and limited opportunity to buy well-established properties.

Liberty Mutual is seeking to quickly build revenues and profits to take advantage of attractive markets ahead of its competitors.

In most cases, acquisitions provide early and superior returns on capital.

While Liberty Mutual largely has followed the strategy of exporting its core competencies to overseas operations, in some cases it has abandoned that business theory when opportunities arise, Mr. Countryman said.

"From time to time we have succumbed to the temptation of being opportunistic. More time will judge the wisdom of those off-strategy choices," he said.

For example, in December 1994 it bought Ontario Blue Cross, a health insurer in Toronto. This took place about eight months after Liberty Mutual had sold its health insurance operation in the United States.

"Some Liberty Mutual employees were puzzled by that transaction," he said.

The reason for the purchase is that Liberty Mutual thinks Canada may eventually privatize its workers comp system, and if Liberty Mutual is to take advantage of that situation when it arises, it will already have health care resources in the country, Mr. Countryman said.

International expansion needs to be conducted professionally and efficiently, but that need not limit an insurer to expanding in only a few directions, according to Mapfre's Mr. Martinez.

For example, since 1985, Mapfre has:

Increased its range of insurance products to include health insurance, death and burial insurance, pensions and credit insurance.

Offered financial services products, such as investment funds and banking services.

Diversified geographically, mainly into Latin America.

An insurer must adhere to certain fundamental business principles to successfully run such a diverse and international operation, Mr. Martinez said.

Some examples of Mapfre's business principles are independence; high-quality customer service; openness and easily accessible information; the maintenance of ethical conduct throughout the company; and the institution of an international vision throughout the management of the company, he said.

Roger J. Taylor, executive deputy chairman of Royal & Sun Alliance Insurance Group P.L.C. in London, chaired the session.