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AM Best Affirms Credit Ratings of Liberty Mutual Holding Company Inc. and Its Subsidiaries
[June 26, 2020]

AM Best Affirms Credit Ratings of Liberty Mutual Holding Company Inc. and Its Subsidiaries


AM 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). These entities are operating subsidiaries of their ultimate parent company, Liberty Mutual Holding Company Inc. (LMHC) (Boston, MA).

Concurrently, AM Best has affirmed the Long-Term ICRs of "bbb" of LMHC and Liberty Mutual Group, Inc. (LMGI) (Boston, MA), 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. (See link below for a detailed listing of the companies and ratings.)

The ratings of Liberty Mutual reflect the group's balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.

Liberty Mutual's rating unit's statutory surplus rose $743 million, or 3.8%, in 2019, driven by $2.0 billion investment income that more than offset the $1.3 billion of underwriting losses.

Liberty Mutual's risk-adjusted capitalization has exceeded the threshold consistently for the very strong categorization, as measured by Best's Capital Adequacy Ratio (BCAR). The group's balance sheet benefits from the use of a comprehensive reinsurance program with highly rated reinsurers, and financial flexibility achieved through its ultimate parent, LMHC, which has access to public capital markets. Membership in the Federal Home Loan Bank affords additional access to liquidity. Loss reserve development was unfavorable in 2019, which continues a pattern of modest adverse loss reserve development. Liberty Mutual maintains an elevated level of high-risk assets versus its personal insurance peers, which is driven by a high level of affiliated investment leverage. Additionally, LMHC has a weaker level of risk-adjusted capital than the operating companies when given no equity credit for its long-term debt in the calculation.

AM Best views Liberty Mutual's operating performance as adequate given the relatively strong investment income over the most recent five-year period, which has been able to more than offset underwriting losses in most years. Liberty Mutual has reported positive statutory operating income in seven of the past 10 calendar years. The generally solid results reflect the group's competitive advantages achieved through multiple distribution capabilities, as well as the extensive use of technology and value-aded services. Nevertheless, Liberty Mutual's underwriting performance continues to trail industry benchmarks on a five- and 10-year average basis. The persistent underwriting losses have limited growth of equity and have resulted in above-average tangible debt/equity leverage at the holding company.



AM Best views Liberty Mutual's business profile as a favorable rating factor. Liberty Mutual is engaged principally in underwriting virtually all lines of personal and commercial property/casualty (P/C) business and ranks as the fourth-largest P/C insurance group in the United States and the sixth-largest P/C insurer globally, based on 2019 direct premiums written and gross premiums written, respectively. Additionally, the group is highly diversified by product and geography, with approximately 55% of net written premiums derived from personal lines and 45% derived from commercial lines. Liberty Mutual currently operates in 29 countries and economies around the globe.

Liberty Mutual benefits from its name recognition, customer service, technological advantages and strategic alliances in managed care, as well as the diversification of its products and value-added services. Insurance products and services are distributed primarily through independent agents and a direct sales force that enhances the group's overall franchise value.


Liberty Mutual's risk management practices are appropriately comprehensive and sophisticated given the size and complexity of the organization and fully supports the ratings. Managing risk is a core competency of the group and integrated throughout its worldwide operations.

LMHC's rating is supported by adjusted and unadjusted financial leverage that is maintained consistently below 30%.

A complete listing of Liberty Mutual Holding Company Inc.'s and its subsidiaries' FSRs, Long-Term ICRs and Long-Term IRs also is available.

This press release relates to Credit Ratings that have been published on AM 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 AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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