Ratings Recap: Liberty Mutual, Unum, Baldwin & Lyons

January 30, 2008

Fitch Ratings has upgraded the following ratings of the Liberty Mutual Group (LMG): –Issuer Default Rating (IDR) to ‘BBB+’ from ‘BBB’; –Senior Unsecured Notes to ‘BBB’ from ‘BBB-‘; Liberty Mutual Insurance Company’s (LMIC)–IDR to ‘A-‘ from ‘BBB+’; –Surplus Notes to ‘BBB+’ from ‘BBB’; Ohio Casualty Corp (OCAS)–Issuer Default Rating (IDR) to ‘BBB+’ from ‘BBB’; –Senior Unsecured Notes to ‘BBB’ from ‘BBB-‘. Fitch also assigned a ‘BBB-‘ rating to LMG’s previously issued $1 billion issue of Junior Subordinated notes and has affirmed the ‘F2’ rating on the company’s short-term IDR and $1 billion commercial paper program. In addition the rating agency has upgraded the Insurer Financial Strength (IFS) ratings to ‘A’ from ‘A-‘ of the following intercompany pools: –Liberty Mutual Inter-company Pool (LMIC Pool); –Peerless Insurance Company Inter-company Pool (Peerless Pool); –Ohio Casualty Insurance Inter-company Pool (OCAS Pool). The outlook on all of the ratings is stable. Fitch said its “rating actions reflect LMG’s continued improvements in run rate profitability and Fitch’s heightened comfort with the company’s capital adequacy. Fitch believes that these positive trends largely offset the agency’s concerns about LMG’s quality of capital, which in recent years, has constrained LMG’s ratings relative to those of competitors with similarly strong competitive positions.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Unum Group’s insurance subsidiaries. Best also affirmed Unum’s ICR of “bbb-” and all of its debt ratings. In addition Best has revised its outlook on the ratings to stable from negative. “The revised outlook reflects the positive trend in Unum’s operating results—including its core U.S. Brokerage Group Income Protection segment, favorable capitalization and improved financial flexibility over the past few years,” Best explained. “The quality of its investment portfolio also has become more conservative, further strengthening the organization. Additionally, Unum does not have any direct subprime mortgage or CDO exposure. Furthermore, Unum has recently completed its claim reassessment program with no additional charges. The company is now awaiting final sign off from regulators in charge of oversight of the program. Overall, the total cost of claim reassessment process far exceeded initial projections.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and the issuer credit ratings (ICR) of “aa” of the Baldwin & Lyons Group, including Indianapolis-based Protective Insurance Company. Best also affirmed the FSR of ‘A+’ (Superior) and the ICR of “aa” of Sagamore Insurance Company, a wholly owned, separately rated subsidiary of Protective, as well as the ICR of “a” of the group’ s publicly traded parent, Baldwin & Lyons, Incorporated (B&L). The outlook for the all ratings is stable. “The group’s ratings reflect its superior risk-adjusted capitalization, excellent operating performance and solid market position in its core commercial trucking market,” said best. “The ratings also reflect the additional financial flexibility provided by B&L.”

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