AM Best has affirmed the Financial Strength Rating (FSR)
of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term
ICR) of “a” (Excellent) of the members of Liberty Mutual Insurance
Companies (Liberty Mutual). Additionally, AM Best has affirmed the
FSR of A (Excellent) and the Long-Term ICR of “a” (Excellent) of
Nationale Borg Reinsurance N.V. (NB Re) (Willemstad, Curacao.)
These entities are operating subsidiaries of their ultimate parent
company, Liberty Mutual Holding Company Inc. (LMHC) (Boston,
MA).
Concurrently, AM Best has affirmed the Long-Term ICRs of “bbb”
(Good) of LMHC and Liberty Mutual Group Inc. (LMGI) (Boston, MA), a
wholly owned subsidiary of LMHC, as well as the Long-Term Issue
Credit Ratings (Long-Term IR) of LMGI. The outlook of these Credit
Ratings (ratings) is stable. (See link below for a detailed listing
of the companies and ratings.)
The ratings of Liberty Mutual reflect the group’s balance sheet
strength, which AM Best assesses as very strong, as well as its
adequate operating performance, favorable business profile and
appropriate enterprise risk management (ERM).
Liberty Mutual’s statutory surplus increased slightly in 2023,
as investment income and unrealized gains in its investment
portfolio helped to offset underwriting losses; investment income
was augmented by proceeds of the sale of some foreign operations in
the fourth quarter of 2023. Liberty Mutual’s risk-adjusted
capitalization remains at an assessment of very strong and is
expected to be maintained at least at the very strong level, as
measured by Best’s Capital Adequacy Ratio (BCAR). The group’s
balance sheet benefits from a membership in the Federal Home Loan
Bank, which affords additional liquidity, as well as the financial
flexibility of LMHC, which has access to public capital markets.
Additionally, the group’s balance sheet strength continues to be
supported further by a comprehensive reinsurance program with
highly rated reinsurers.
AM Best views Liberty Mutual’s operating performance as adequate
as its strong level of net investment income has offset its
underwriting losses over a prolonged period of time, minimizing the
impact of those losses on surplus. These generally profitable
operating results reflect the group’s market position and the
competitive advantages achieved through scale and through multiple
distribution channels, as well as the extensive use of technology
and value-added services. However, Liberty Mutual’s reported
underwriting performance continues to trail industry benchmarks on
a five- and 10-year average basis, reflective of catastrophe and
non-catastrophe losses. These continual underwriting losses have
tempered growth of equity, a factor in the tangible debt/equity
leverage at the holding company. The group continues to face
weather losses and private passenger auto inflationary pressures as
seen throughout the property/casualty industry.
Liberty Mutual’s profile is extensive, as one of the largest
personal and commercial writers, domestically and globally, and its
brand name is recognized widely. Recent divestitures of its retail
operations in Europe and Latin America have signaled a refocus on
core operations domestically and globally.
Liberty Mutual’s risk management practices are appropriately
comprehensive and sophisticated given the size and complexity of
the organization and fully support the ratings. Managing risk is a
core competency of the group and integrated throughout its
worldwide operations and efforts to refine risk management
capabilities further are continuously under way.
LMHC’s rating is supported by adjusted and un-adjusted financial
leverage that historically has been maintained below 30%. While
LMHC’s interest coverage ratios have been variable over time, its
access to liquidity has served to offset any concerns.
The ratings of NB Re reflect its balance sheet strength, which
AM Best assesses as very strong, as well as its adequate operating
performance, limited business profile and appropriate ERM. The
ratings also reflect the explicit and implicit support received
from the Liberty Mutual enterprise via infrastructure, management,
other operational support and reinsurance coverage.
The assessment of NB Re’s balance sheet strength reflects its
risk-adjusted capitalization, which remains at the strongest level,
as measured by BCAR, and capital remains sufficient from a
regulatory perspective. This is despite declines in equity over the
past two years due to net losses. The assessment also considers the
quality of its investments as the portfolio is very conservative,
utilizing cash and fixed income investments. An offsetting factor
in the balance sheet strength assessment is the variability in
underwriting results and earnings as NB Re runs off its book of
business.
NB Re has discontinued issuance of new policies, and most
renewals are being placed on affiliated paper, resulting in the
continued adequate operating performance assessment. Based on the
historical performance of the company’s business and loss reserves,
AM Best anticipates the remaining liabilities will run off
adequately over time. However, there may be some variability in
year-over-year results as in 2022 and 2023, with adverse loss
reserve development in one overseas bond program that resulted in
significant net losses in each year. This program was settled in
2023. AM Best expects that NB Re will continue to service remaining
policies through expiration, including any renewals of multiyear
policies.
A complete listing of Liberty Mutual Holding Company Inc.’s and
its subsidiaries’ FSRs, Long-Term ICRs and Long-Term IRs is
available at the attached rating supplement link.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
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visit www.ambest.com.
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Raymond Thomson, CPCU, ARe, ARM Associate Director +1
908 882 2394 raymond.thomson@ambest.com
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908 882 2318 al.slavin@ambest.com