Fitch Ratings Upgrades Liberty Mutual and Subsidiaries.

CHICAGO -- Fitch Ratings has upgraded the following ratings:

Liberty Mutual Group Inc.'s (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-';

Additionally, Fitch has 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.

Fitch has also upgraded the Insurer Financial Strength (IFS) ratings to 'A' from 'A-' of the following intercompany pools (see below for a full list of members:

--Liberty Mutual Inter-company Pool (LMIC Pool);

--Peerless Insurance Company Inter-company Pool (Peerless Pool);

--Ohio Casualty Insurance Inter-company Pool (OCAS Pool)

The Rating Outlook on the ratings is Stable.

Fitch's 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.

The ratings continue to reflect LMG's established and sustainable positions in its chosen markets.

Partially offsetting these positives is the effect on earnings and capital of LMG's recent adverse reserve development trend, including the potential for adverse development from asbestos-related claims.

Fitch notes that through the first nine months of 2007, LMG reported unfavorable reserve development of approximately $450 million, or 3.7% of prior year end surplus, including $95 million related to asbestos claims. Through Prism, Fitch's global stochastic economic capital model, LMG is below Fitch's asbestos survival ratio target of 13 times for year end 2006 at its current rating level. This shortfall is considered in Fitch's current ratings. Further, Fitch believes that any future adverse reserve development is more likely to be a moderate drag on the company's earnings than a significant strain on its capital.

Fitch's rating action also considers the effect of industry-wide softening premium rates on LMG's underwriting profitability. Fitch believes that LMG's combined ratio will likely be pressured going forward and will continue to lag those of more highly-rated peers by five to ten percentage points. However, even under those conditions Fitch would view the company's performance as supportive of its current ratings. .

Fitch's ratings also consider the company's recent acquisition of OCAS for $2.8 billion. On announcement of the transaction, May 2007, Fitch removed the Positive Outlook on LMG's ratings and upon completion of the transaction, in August 2007, Fitch downgraded OCAS' ratings to LMG's rating level due to concerns about the acquisition's operational and execution risks. While Fitch continues to believe that LMG faces such integration risk it increasingly views the acquisition as strengthening LMG's agency relationships and expanding its presence in Midwest markets. A pro-forma Prism analysis of the combined companies indicates a score that is consistent with today's rating actions.

LMG utilizes a relatively high amount of financial leverage. At Sept. 30, 2007 the company's equity adjusted ratio of debt to capital (GAAP basis) was approximately 26%. LMG's subsidiaries can pay $1.2 billion of dividends in 2007, or 3.5x Fitch's estimate of the annual cash required to fund the company's interest payments. The company's operating earnings-based coverage has been in a range of 4x-7x in recent years, a range that Fitch believes is sustainable over the near term.

Fitch has assigned ratings to certain members of the Liberty Mutual Group that cede 100 percent of their underwriting results to members of LMIC Pool or Peerless Pool (see full rating list below).

Fitch has upgraded the following ratings with a Stable Outlook:

Liberty Mutual Group, Inc.

--Issuer Default Rating (IDR) to 'BBB+' from 'BBB'

--$1 billion Commercial Paper Program affirmed at 'F2'

--$300 million 7.00% Junior Subordinated due 2067 'BBB-'

--$700 7.80% Junior Subordinated due 2067 'BBB-'

--$260 million 8.00% Notes due 2013 to 'BBB' from 'BBB-';

--$500 million 5.75% Notes due 2014 'BBB' from 'BBB-';

--$3 million 7.63% Notes due 2028 'BBB' from 'BBB-';

--$250 million 6.70% Notes due 2016 'BBB' from 'BBB-';

--$250 million 7.00% Notes due 2034 'BBB' from 'BBB-';

--$500 million 6.50% Notes due 2035 'BBB' from 'BBB-';

--$500 million 7.50% Notes due 2036 'BBB' from 'BBB-';

Ohio Casualty Corp (OCAS)

--Issuer Default Rating (IDR) to 'BBB+' from 'BBB';

--$200 million 7.30% Notes due 2014 'BBB' from 'BBB-';

Liberty Mutual Insurance Co.

--Issuer Default Rating (IDR) to 'A-' from 'BBB+'

--8.50% Surplus Notes due 2025 to 'BBB+' from 'BBB';

--7.875% Surplus Notes due 2026 'BBB+' from 'BBB';

--7.697% Surplus Notes due 2097 'BBB+' from 'BBB'.

The IFS ratings on the following members of Liberty Mutual Inter-company Insurance Pool (LMIC Pool) were upgraded to 'A' from 'A-' with a Stable Outlook:

--Bridgefield Casualty Insurance Company

--Bridgefield Employers Insurance Company

--Employers Insurance Company of Wausau

--Liberty County Mutual Insurance Company

--Liberty Insurance Corporation

--Liberty Insurance Underwriters, Inc

--Liberty Lloyd's of Texas Insurance Company

--Liberty Mutual Fire Insurance Company

--Liberty Mutual Insurance Company

--Liberty Personal Insurance Co

--LM General Insurance Company

--LM Insurance Corp

--LM Personal Insurance Company

--LM Property and Casualty Insurance Company

--The First Liberty Insurance Corp

--Wausau Business Insurance Company

--Wausau General Insurance Company

--Wausau Underwriters Insurance Company

The following members of the LMIC Pool were assigned an 'A' IFS with a Stable Outlook:

--Liberty Insurance Co of America

--Liberty Mutual Personal Insurance Company

--Liberty Surplus Insurance Corp

The IFS ratings on the following members of Peerless Insurance Inter-company Insurance Pool (Peerless Pool) were upgraded to 'A' from 'A-' with a Stable Outlook:

--America First Ins Co

--America First Lloyd's Ins Co

--American Ambassador Casualty Company

--Colorado Casualty Ins Co

--Consolidated Ins Co

--Globe American Casualty Co

--Golden Eagle Ins Corp

--Hawkeye-Security Ins Company

--Indiana Insurance Co

--Liberty Mutual Mid-Atlantic Ins Co

--Mid-America Fire & Casualty

--Montgomery Mutual Ins Co

--National Ins Assoc

--Peerless Indemnity Ins Co

--Peerless Insurance Company

--The Netherlands Ins Co

The following members of the Peerless Pool were assigned an 'A' IFS with a Stable Outlook:

--Excelsior Ins Co

--Liberty Northwest Ins Co

--North Pacific Ins Co

--Oregon Automobile Ins Co

The IFS ratings on the following members of the OCAS Pool were upgraded to 'A' from 'A-' with a Stable Outlook:

--The Ohio Casualty Ins. Co.

--American Fire & Casualty Co

--Avomark Ins. Co.

--Ohio Security Ins. Co.

--West American Ins. Co.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. The issuer did not participate in the rating process other than through the medium of its public disclosure.