Best Affirms Liberty Mutual’s ‘A’ Rating; Outlook Stable

March 7, 2008

A.M. Best Co. has affirmed the financial strength ratings (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Liberty Mutual Insurance Companies and Liberty Insurance Holdings and their members. All of the companies are subsidiaries of Liberty Mutual Group, Inc. (LMGI).

LMGI recently acquired the former operating subsidiaries of Ohio Casualty Corporation, which are now members of the LIH pool. “As a result,” Best said it has also affirmed their FSR of ‘A’ (Excellent) and ICRs of “a”. In addition Best has assigned the LIH pool ratings to Ohio Casualty of New Jersey, Inc. and has affirmed the FSR of ‘A’ (Excellent) and the ICR of “a” of Liberty Life Assurance Company of Boston.

Best has also affirmed the ICRs of “bbb” and the debt ratings of LMGI and Ohio Casualty Corporation, and has assigned a debt rating of “bbb” to LMGI’ s $2.45 million senior unsecured notes, due 2028 and affirmed the ICR of “bbb” of Liberty Mutual Holding Company Inc. The outlook for all of the ratings is stable.

“These ratings reflect Liberty Mutual’s strong global franchise, excellent capitalization, successful risk mitigation and ongoing diversification, both domestically and globally,” Best explained. “Liberty Mutual is the nation’ s fifth-largest property/casualty insurer based on direct premiums written and operates four sizeable business units: Personal Markets, Commercial Markets, Agency Markets and International.

“The group’s diversified franchise benefits from its well regarded service reputation, strong client relationships and effective, low-cost distribution network.

“Personal lines business continues to rank high among Liberty Mutual’s top performing underwriting segments, with new markets focused on countries with an emerging middle class. 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 market profile.”

Best also singled out Liberty Mutual’s policyholder surplus, which, it noted has “experienced strong growth over the last five years, driven by solid operating income derived from improved underwriting performance, realized gains and capital contributions related to various debt offerings by LMGI. Given Liberty Mutual’s objective to secure proper pricing through cycle management while achieving additional profitable diversification, A.M. Best believes profitability will remain solid and overall capitalization will more than support the ratings going forward.”

Best indicated that its “primary concern has been the potential for additional adverse loss reserve development and the resulting earnings drag associated with this development.” However, the rating agency indicated that this “concern has diminished somewhat in recent calendar years with the improvement in accident year development, combined with declining levels of adverse loss reserve development. Notwithstanding these reserve charges, while the group’ s pre-tax operating profitability has improved with underwriting performance in recent years, return measures continue to trail its peer composite.

“The affirmation of the ratings of Liberty Life recognizes its established market profile strong risk-adjusted capital position and improved statutory operating results. Furthermore, the ratings acknowledge LMGI’ s explicit capital support and its commitment to maintain favorable capital levels at Liberty Life.”

For a complete listing of Liberty Mutual Group, Inc.’ s FSRs, ICRs and debt ratings, go to:

Source: A.M. Best

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