* Co cites unfavorable economic environment, valuation
* Says delay will not impact day-to-day operations
* Has “more than adequate” capital to conduct business
* Liberty Mutual Agency Corp was overvalued-analysts
* Elster Group IPO seeing below-range demand-underwriter (Adds details on private equity portfolio companies in the U.S. IPO pipeline)
By Clare Baldwin and Jochelle Mendonca
NEW YORK/BANGALORE, Sept 29 (Reuters) - Liberty Mutual Agency Corp postponed indefinitely its planned initial public offering, quashing hopes that the planned $1.2 billion flotation could give a needed jolt to the U.S. IPO market.
The property and casualty insurer announced the delay on the day the offering, blaming a poor economy and volatile markets. It was unclear how either had gotten appreciably worse since Liberty Mutual filed to go public in May, and some analysts blamed the offering’s rich valuation instead.
It would have been the largest U.S. IPO this year.
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Liberty Mutual Agency Corp had planned to sell 64.3 million shares for $18 to $20 each. At the midpoint of that range, the business would have a price-to-tangible book value of 1.4.
By comparison, competitors Chubb Corp CB.N and Travelers Companies Inc TRV.N are trading at multiples around 1.2 and 1.1, respectively, said Michael Paisan, a managing director at Stifel, Nicolaus & Co who specializes in insurance.
“Investors saw through it,” Paisan said.
Paisan added that average valuations for property and casualty insurers have been steady since Liberty Mutual Agency Corp filed for an IPO on May 10. He said the sector has been trading at a price-to-tangible book value of around 1.
“What they are trying to do is transfer the blame for this situation to the market,” said David Menlow, president of IPOfinancial.com. “There were probably some unrealistic valuations that were put on the company to start with.”
The S&P 500 .SPX is closing the quarter with a more than 10 percent advance after falling 11.9 percent in the previous quarter, while the last five months have seen up or down swings of at least 4.7 percent each.
The benchmark index is up 2.5 percent year-to-date.
Liberty Mutual Agency Corp is the 10th largest writer of property and casualty insurance in the United States. Its parent company, Liberty Mutual Group would have retained nearly 98 percent of the voting power and a greater than 80 percent equity stake in the company after the IPO, according to the prospectus.
Liberty Mutual Group Chief Executive Edmund Kelly said in a statement that the postponement would not affect business or the daily operations of the company and that Liberty Mutual has “more than adequate” capital to conduct its business.
This week, in which nine IPOs were expected to price and trade in the United States, is seen as crucial for setting the tone for the fall U.S. IPO market.
There are a handful of large IPOs in the U.S. pipeline including automaker General Motors, which is slated for a November IPO that could raise as much as $20 billion.
Private equity-backed hospital operator HCA Inc, Toys R Us Inc, and Nielsen Holdings BV -- best known for viewership ratings that often determine the fate of TV shows -- are also in the pipeline but may not go public this year.[ID:nN27259466]
“If (Liberty Mutual Agency Corp) had priced well it would definitely have helped the other large deals thinking about going public, and improved the sentiment,” said Josef Schuster, founder of Chicago-based research firm IPOX Schuster LLC.
“In the broader perspective I don’t think it’s too big a deal though,” he said. “There’s a huge overhang with insurance company offerings globally.”
Another IPO, Elster Group SE ELT.N, which is scheduled to price after the close of U.S. markets on Wednesday, is also struggling with pricing. The German smart meter maker filed to sell 16.2 million American Depositary Shares for $16 to $18 each but investor orders are coming in around $14 to $16 an underwriter said.
Underwriters on the Liberty Mutual Agency Corp IPO were led by Citi and Bank of America Merrill Lynch. Underwriters on the Elster Group IPO are being led by Deutsche Bank, Goldman Sachs and JPMorgan. (Reporting by Clare Baldwin in New York and Jochelle Mendonca in Bangalore. Additional reporting by Rodrigo Campos and Dan Wilchins in New York. Editing by Dave Zimmerman, Robert MacMillan and Bernard Orr)