is negotiating to buy a majority stake in the captive management subsidiary of Argus Insurance Ltd.

The planned purchase is the first step in the Fortune 500 insurer's plans to make Bermuda the centre of its international operations.

Liberty will probably end up holding an 80 percent stake in Argus International Management Ltd., Argus managing director and chief executive officer John Sainsbury said yesterday.

"Liberty International has an aggressive expansion policy,'' Mr. Sainsbury said. "They are moving into South America and Mexico and are keen to include Bermuda. The group eventually hopes Bermuda would become a financial hub of Liberty International.'' Argus has had a 15-year relationship with the multi-line property and casualty insurer. Argus International manages Liberty Mutual Management, Liberty Mutual (Bermuda) Ltd., and it's rent-a-captive operation Lexco Ltd.

In a joint venture with Liberty and other companies, Argus also owns Stuart Insurance Group Ltd,, a non-controlled foreign corporation.

Mr. Sainsbury said Liberty had been planning on expanding its presence in Bermuda and Argus decided it was better to continue the relationship even if it was in a minority position. Argus International is profitable and currently manages 35 companies. The subsidiary has a staff of seven headed by Michael Hardy.

"It's not a major part of our business but it's an important part,'' he said.

He added: "It's not a fire sale. It's a sensible business decision to work with Liberty. In this business you have to grow and bend and reshape or else you break.'' Liberty has about $40 billion in consolidated assets, and $50 billion under management. The company ranks 126th among Fortune 500 companies. In the last financial year Liberty Mutual had $8.7 billion in consolidated revenue. It is a leading provider of group disability insurance, and is one of the largest multi-line insurers in property and casualty.

In August, Liberty paid about $1 billion for San Diego-based Golden Eagle Insurance Co. after a legal battle with American International Group Inc., which has its headquarters in Bermuda.

Liberty's property arm also developed the St. James Court and Village development in Flatts in the 1980s after the collapse of the Coral Island Club.

HIGHLY RATES -- A.M. Best Co. regional manager James Wynn (left) this week gave Argus Insurance Co. Ltd. chief executive officer John Sainsbury a certificate confirming the company's "A'' (Excellent) rating. Argus is the first local insurance company to be rated by Best.