MOODY'S RATES MEMBERS OF LIBERTY MUTUAL GROUP Aa3 FOR INSURANCE FINANCIAL STRENGTH.
Moody's Investors Service announced today that it has extended its insurance financial strength rating of Aa3 to include all members of the Liberty Mutual Intercompany Reinsurance Pool. The rating was extended to six, previously unrated members of the pool, including: CUMIS, Colorado Casualty, Summit - Bridgefield Employers, Summit - Bridgefield Casualty, Liberty Insurance Underwriters, Inc., and Merchants and Businessmen's Ins. Company. Moody's noted that the outlook for the insurance financial strength rating of the members of the Liberty Mutual Pool, including the lead company -- Liberty Mutual Insurance Company -- remains negative.
Ratings on members of the Liberty Mutual Group are based on Liberty,s leadership position in the US workers compensation market and its profitable personal lines franchise, as well as the group,s strong capitalization, above-average liquidity, diversified earnings mix, and cost-effective distribution system. These strengths are tempered by the group,s increased leverage profile and debt utilization, by deteriorating operating results in its core commercial lines business and stiff competition in the workers, compensation line, and by risks associated with its rapid growth through acquisitions. The Liberty Mutual Group's consolidated statutory surplus ended the year virtually unchanged, at $7.05 billion. Pretax income of $604 million -- which was largely supported by realized capital gains -- was mostly absorbed by the write-off of goodwill stemming from the acquisition of GRE (US). The group's consolidated combined ratio climbed to 116.8%, up from 114% and 111% in 1998 and 1997 respectively.
Moody's noted that Liberty Mutual has taken several concrete actions to address the gradual deterioration in its operating earnings. These actions include material expense reductions, rate increases in the high single and low double digits, and extensive reunderwriting actions. Moody's added that it believes Liberty's reserve adequacy to be adequate, albeit with a lower cushion than the company has maintained in the past. The company's rating outlook will be revisited later in 2000 after these initiatives have had the opportunity to take hold.
Liberty Mutual Insurance Company, based in Boston, is engaged in property and casualty insurance in the USA and internationally, and in diversified personal financial services through its majority-owned Liberty Financial Companies affiliate. Liberty Mutual had approximately $13 billion of revenue in 1999, and has policyholders, surplus of approximately $7.05 billion
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