AM Best Affirms Credit Ratings of Liberty Mutual Holding Company Inc. and Its Subsidiaries

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, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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