OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best Co. has affirmed the financial strength ratings (FSR)
of A (Excellent) and issuer credit ratings (ICR) of “a” for the members
of Liberty Mutual Insurance Companies (Liberty Mutual) and Peerless
Insurance Company Pool (PIC Pool) (Keene, NH), as well as Liberty
Mutual Insurance Europe Limited (LMIE) (United Kingdom) and Liberty
Life Assurance Company of Boston (Liberty Life). These entities are
all operating subsidiaries of their ultimate parent company, Liberty
Mutual Holding Company Inc. (LMHC).
Concurrently, A.M. Best has affirmed the ICRs of “bbb” of LMHC and Liberty
Mutual Group, Inc. (LMGI), a wholly owned subsidiary of LMHC, as
well as all debt ratings of LMGI. The outlook for all the above ratings
is stable. In addition, A.M. Best has affirmed the short-term debt
rating 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 its solid
capitalization, historically favorable operating performance, dominant
market profile and strong name recognition, as the group was ranked as
the fourth-largest in the United States at year-end 2011, based on net
premiums written. The ratings further acknowledge the organization’s
sustainable competitive advantages that are within its multiple
distribution channels, the active risk management of its catastrophe
exposures as well as solid product and geographic diversification.
Furthermore, Liberty Mutual’s enterprise risk management program has
served it well in navigating through the financial, economic and
catastrophic events of the past four years.
The positive rating factors for Liberty Mutual are somewhat offset by
its relatively high underwriting leverage measures and deterioration in
operating results in recent years, largely driven by weakened
underwriting results (mainly reflecting increased catastrophe losses and
less favorable prior year loss reserve development in 2010 and 2011) and
lower net investment income.
The ratings for PIC Pool members recognize its sound capitalization,
favorable operating performance and strong regional market presence. The
ratings further acknowledge the sustainable competitive advantages of
the PIC Pool’s strong independent agency relationships, as well as
management’s solid risk mitigation and geographic and product
diversification strategies. The PIC Pool, which consists mainly of the
Liberty Mutual Agency Corporation’s (LMAC) strategic business unit,
provides the platform for Liberty Mutual to enhance its ongoing efforts
to penetrate small commercial and personal markets through independent
agents throughout the United States. PIC Pool’s market presence has
developed through a number of acquisitions over the years, which have
provided it with strong regional brand recognition, market expertise,
increased utilization of its independent agency force, in addition to
improved geographic spread and product diversification.
The positive rating factors for the PIC Pool are somewhat offset by
elevated underwriting leverage measures, a modestly above-average
expense ratio and lower net investment income in recent years.
Furthermore, while policyholder surplus grew significantly in 2009 and
its risk-adjusted capitalization improved considerably, surplus declined
31% in 2010, largely due to a $2.8 billion intercompany dividend payment
to its parent, Liberty Mutual Insurance Company (LMIC), prior to
the postponed LMAC initial public offering. The group’s surplus rose a
modest 2% in 2011, basically reflecting significant catastrophe losses.
As a result, PIC Pool’s risk-adjusted capitalization remains well below
the year-end 2009 level, but continues to support its current rating
The ratings for Liberty Mutual and PIC Pool 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 the solid operating performance of its
The ratings of LMIE acknowledge its solid capitalization, strong
operating performance and brand recognition achieved as a strategic
member of the established global franchise led by LMIC. These positive
rating factors are partially offset by the weakened economies in its
European markets, which will likely inhibit growth in the near term.
The ratings of Liberty Life recognize its established business profile
in the individual and group markets, improved operating earnings trend
and strong risk-adjusted capital position. Moreover, the ratings also
reflect Liberty Mutual’s explicit support and its commitment to maintain
favorable capital levels at Liberty Life.
Partially offsetting these positive rating factors are Liberty Life’s
continued losses in its closed block of single payment immediate annuity
line of business and a belief that growing profitability over the near
term will be challenging, particularly given the competitive nature of
the individual life and group disability income markets and the current
low interest rate environment.
While A.M. Best believes LMHC and its operating companies’ ratings are
well positioned at their current rating levels, negative rating actions
could occur if underwriting and operating performance falls below A.M.
Best’s expectations or risk-adjusted capitalization weakens to a level
that no longer supports current ratings.
For a complete listing of Liberty Mutual Holding Company Inc. and its
subsidiaries’ FSRs, ICRs and debt ratings, please visit www.ambest.com/press/072602libertymutual.pdf.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Key criteria
utilized include: “Understanding BCAR for Property/Casualty Insurers”;
“Understanding Universal BCAR”; “Rating Members of Insurance Groups”;
“The Treatment of Terrorism Risk in the Rating Evaluation”; “Risk
Management and the Rating Process for Insurance Companies”; “Catastrophe
Analysis in A.M. Best Ratings”; “Gauging the Basis Risk of Catastrophe
Bonds”; “Insurance Holding Company and Debt Ratings”; “Equity Credit for
Hybrid Securities”; “Rating Surplus Note and Insurance Trust-Preferred
CDOs”; “Analyzing Commercial Paper Programs”; and “Understanding BCAR
for Life/Health Insurers.” Best’s Credit Rating Methodology can be found
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Co.W. Dolson Smith, CFA,908-439-2200,
ext. 5379Senior Financial Analystw.firstname.lastname@example.orgMichael
J. Lagomarsino, CFA,908-439-2200, ext. 5810Assistant
Morrow, 908-439-2200, ext. 5378Senior Manager, Public
Peavy, 908-439-2200, ext. 5644Assistant Vice President,
Source: A.M. Best Co.