Liberty Mutual Not Pleased With Downgrade

Liberty Mutual Group is protesting Standard & Poor’s lowering of the company’s financial strength rating from “A”to “A-” with a stable outlook, following Liberty’s completion of its acquisition of Safeco. The company called the action a “both a surprise and disservice to Liberty Mutual and our policyholders.” In a bulletin, the insurer also noted that S&P’s rating action was in “contradiction of prior announcements.”

According to Liberty Mutual, S&P said in April when the Safeco deal was announced that it “expected to affirm Liberty’s ratings if its capitalization was not materially below what is required for the current rating and were satisfied with Liberty’s integration efforts of Safeco.” S&P had also indicated on July 23 that it “expected to affirm Liberty’s ratings ‘if capital and earnings remain strong;’ but could lower ratings, ‘if pro forma capital and earnings were materially below the appropriate level for the rating.'”

Liberty Mutual pointed out that its reported pre-tax operating income was nearly $900 million in the first six months of 2008, which was “approximately 3 percent higher than the same period in 2007. In addition, Liberty said its “pro forma capital adequacy using Standard & Poor’s published criteria indicates Liberty’s capital is adequate to maintain our ‘A’ rating.”