|[March 08, 2017]
A.M. Best Affirms Credit Ratings of Liberty Mutual Holding Company Inc. and Its Subsidiaries
A.M. Best has affirmed the Financial Strength Rating (FSR) of A
(Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of
"a" of the members of Liberty Mutual Insurance Companies (Liberty
Mutual), as well as Liberty Life Assurance Company of Boston
(Liberty Life) (Dover, NH). These entities are operating subsidiaries of
their ultimate parent company, Liberty Mutual Holding Company Inc.
Concurrently, A.M. Best has affirmed the Long-Term ICRs of "bbb" of LMHC
and Liberty Mutual Group, Inc. (LMGI), a wholly owned subsidiary
of LMHC, as well as the Long-Term Issue Credit Ratings (Long-Term IR) of
LMGI. The outlook of these Credit Ratings (ratings) is stable. In
addition, A.M. Best has affirmed the Short-Term Issue Credit Rating
(Short-Term IR) of AMB-2 of LMGI. All the above named companies are
domiciled in Boston, MA, except where specified. (See link below for a
detailed listing of the companies and ratings.)
The ratings for Liberty Mutual's members reflect the group's solid
risk-adjusted capitalization, historically favorable operating
performance, dominant market profile and strong brand-name recognition,
as the group ranked as the fourth-largest property/casualty insurer in
the United States at year-end 2015, based on net premiums written. The
ratings further acknowledge the sustainable competitive advantages of
the group's multiple distribution channels, active risk management of
its catastrophe exposures, in-house expertise in traditional and
alternative investments, and solid product and geographic
diversification. Furthermore, A.M. Best views Liberty Mutual's
enterprise risk management program as appropriately comprehensive and
sophisticated given the size and complexity of the organization.
Management's strategic objectives have been focused on improving Liberty
Mutual's financial performance through product, geographic and
distribution channel diversification, while maintaining a sustainable
competitive advantage in its core business operations. Over the past
several years, the achievement of these objectives has been evidenced by
the group's generally improved and less volatile underwriting
performance, measured acquisitions and divestitures, and proactive
strategies in the marketplace, as well as reinsurance transactions. In
addition, Liberty Mutual's extensive unbundled service capabilities,
risk management services and strategic alliances with managed care
networks provide a significant competitive advantage and a superior
The positive rating factors for Liberty Mutual's member are offset
somewhat by the group's relatively high underwriting leverage measures,
above-average higher-risk assets relative to peers (which includes
significant affiliated international insurance operations), and less
profitable operating results in the earlier years of the most recent
five-year period, largely driven by weakened underwriting results,
substantial catastrophe losses in 2011 and 2012 and unfavorable
prior-year loss reserve development in years 2011 through 2013, which
influenced underwriting results to some extent. A.M. Best views the
group's purchase of the adverse development cover for its workers'
compensation and asbestos and environmental liabilities, effective Jan.
1, 2014, as lessening the uncertainty of these liabilities going forward
and enhancing the group's risk-adjusted capitalization.
A.M. Best also anticipates that a continued competitive underwriting
environment likely will pressure the group's operating profitability and
the internal generation of surplus in the near term. The group's
above-average higher-risk assets include non-investment grade bonds;
common stocks; energy and metals and mining operations; and other
Schedule BA investments, including significant affiliate international
insurance companies. A.M. Best notes that material impairments and
unrealized losses in these potentially more volatile asset classes have
negatively impacted results in 2015 and 2016.
The ratings of Liberty Mutual's members also consider the financial
flexibility provided by LMHC, which maintains financial leverage that is
in line with its current ratings, as well as additional liquidity
through its access to capital markets and lines of credit. Additionally,
LMHC benefits from its global operations.
The ratings of Liberty Life recognize its strategic role within LMHC,
its strong risk-adjusted capitalization, positive revenue growth trends,
positive earnings trend and well-established business profile in the
individual and group insurance markets. In addition, the ratings also
reflect Liberty Mutual's explicit support in the form of an
unconditional guarantee and recent capital contributions as evidence of
the commitment to maintain favorable capital levels at Liberty Life.
Partially offsetting these positive rating factors are the competitive
nature of Liberty Life's individual life and group disability income
markets, the impact of the low interest rate environment and its
continued losses in its discontinued business lines. A.M. Best believes
that despite these challenges, Liberty Life remains well-positioned to
support its long-term profitability objectives.
For a complete listing of Liberty Mutual Holding Company Inc. and its
subsidiaries' FSRs, Long-Term ICRs and Long- and Short-Term IRs, please
Mutual Holding Company Inc.
This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best's Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best's Credit Ratings.
A.M. Best is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its
subsidiaries. ALL RIGHTS RESERVED.
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