A.M. Best Affirms Liberty Mutual's Ratings; Revises Outlook to Stable.OLDWICK, N.J. -- A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength ratings of A (Excellent) of Liberty Mutual Insurance Companies (Liberty Mutual), Liberty Insurance Holdings (Keene, NH) and Liberty Northwest Group (Portland, OR). Additionally, A.M. Best has affirmed the financial strength rating of A- (Excellent) of Liberty Life Assurance Company of Boston (Liberty Life). Concurrently, A.M. Best has affirmed the debt ratings of "bbb" for senior notes of Liberty Mutual Group, Inc. (LMGI), "bbb+" for surplus notes of Liberty Mutual Insurance Company (LMIC LMIC Land Management Information Center (Minnesota) LMIC Labor Market Information Center LMIC Livestock Marketing Information Center LMIC Liberty Mutual Insurance Company LMIC Low or Middle-Income Countries LMIC Left Message for Incoming Call ) and "a-" for medium-term notes Medium-term note (MTN) A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from maturity bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc. as well as AMB-1 for commercial paper of Liberty Mutual Capital Corporation. All companies are located in Boston, MA, except where specified. The rating outlook has been revised to stable from negative for all the property/casualty companies. The rating outlook for Liberty Life is stable. These rating affirmations reflect Liberty Mutual's strong global franchise, improved capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. and underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. trends and successful risk mitigation and business diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. strategies. As the nation's eighth-largest property/casualty insurer based on net premiums written, Liberty Mutual's franchise benefits from its well-regarded service reputation, strong client relationships and effective, low-cost distribution network. The franchise was further enhanced by the acquisition of Prudential Financial, Inc.'s (Newark, NJ) personal lines operations in 2003. Personal lines business continues to rank high among the group's top performing underwriting segments. 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 market profile. In 2003, Liberty Mutual's capitalization improved considerably as net income, unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. and contributed capital combined to increase policyholders' surplus by almost $1.5 billion. In March 2004, LMGI, the direct parent of LMIC also raised $750 million of new debt, of which the proceeds were used in April 2004 to repay a portion of the group's existing debt and make capital contributions to the insurance companies. Given the group's business plan and growth expectations, A.M. Best believes capitalization will remain supportive of the group's ratings through 2004, which is contemplated in the rating outlook. As in the past, A.M. Best's primary rating concern is the adequacy of Liberty Mutual's loss reserves and the potential impact of further adverse loss reserve development on earnings. Adverse development of prior accident year loss reserves continued to dampen earnings in 2003 following a comprehensive "ground-up" review of the group's exposure to asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. claims that led to an increase in asbestos reserves of $331 million, including a $158 million allowance for uncollectible reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. . Adverse loss reserve development related to rising medical cost inflation and higher than expected utilization of medical services has impacted the group's workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. results over the last few years as well. Notwithstanding these reserve charges, the group's operating profitability continues to improve, although further improvement is expected. In its review of Liberty Mutual's capital adequacy, A.M. Best has considered further adverse loss reserve development. Separately, the rating affirmation A solemn and formal declaration of the truth of a statement, such as an Affidavit or the actual or prospective testimony of a witness or a party that takes the place of an oath. An affirmation is also used when a person cannot take an oath because of religious convictions. of Liberty Life recognizes the strong capital guarantee provided by LMIC. Additionally, Liberty Life possesses a conservative investment portfolio consisting of some high credit quality investments. The company maintains fair liquidity and continues to receive both implicit and explicit support from LMIC. For a complete listing of Liberty Mutual Holding Company, Inc.'s financial strength and debt ratings, please visit www.ambest.com/press/061702libertymutual.pdf. For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/debtratings/. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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