Fitch Bumps Up Liberty Mutual’s Ratings Outlook

August 11, 2016

Liberty Mutual Group’s ratings outlook has been bumped up to positive from stable at Fitch Ratings, reflecting an acknowledgment of improved operating performance.

Fitch also affirmed the financial strength ratings of Liberty Mutual and its subsidiaries at ‘A-‘ and its long-term issuer default rating at ‘BBB’.

“Liberty Mutual traditionally generates weaker underwriting results relative to peers; however, this differential has moderately narrowed in recent years,” Fitch explained.

Significantly, Liberty Mutual’s underwriting results have gotten much better in recent years. As Fitch noted, it reported a 98.9 consolidated ratio for the first half of 2016, and a 97.8 for the full years of 2015 and 2014.

Liberty Mutual “also reported $110 million and $309 million of favorable reserve development in first half 2016 and for full-year 2015, respectively,” benefiting greatly from reduced exposure to the poorly performing workers compensation line of business,” Fitch added.

What’s more, Liberty Mutual is apparently close to meeting a number of factors that could trigger a ratings upgrade, such as if its positive operating performance continues, its financial leverage falls below 28 percent and the company continues to maintain a ‘Strong’ Prism score.

Why were Liberty Mutual Group’s ratings affirmed? Fitch said that was “based on the company’s established and sustainable positions in its chosen markets, benefits derived from the company’s multiple distribution channels, adequate capitalization and financial performance.”

For the 2016 second quarter, Liberty Mutual reported $15 million in net income, down more than 94 percent from $254 million in net income produced during the 2015 second quarter. Liberty Mutual attributed the results to losses from energy investments.

Source: Liberty Mutual Insurance Group