OREANDA-NEWS. April 29, 2016. Fitch Ratings expects to assign a rating of 'BBB-(Exp)' to Liberty Mutual Group, Inc.'s (LMG) EUR750 million issuance of 10-year senior unsecured notes. Proceeds from this new issue will be used for general corporate purposes.


This new issue is rated equivalent to the ratings of LMG's existing senior debt. Financial leverage was approximately 28.3% and GAAP fixed-charge coverage 6.5x at year-end 2015. This issuance, using the current dollar/euro exchange rate, will result in pro forma financial leverage of 30.6% and GAAP fixed-charge coverage of 6.2x, which fall within Fitch's current ratings sensitivities.

Fitch affirmed LMG's and its insurance operating subsidiaries ratings on Dec. 22, 2015. The Rating Outlook is Stable. The Rating Action Commentary is available on www.fitchratings.com.


Key rating triggers that could lead to an upgrade include:

--Maintenance of improved performance in underwriting results with a combined ratio of approximately 103% or better on both an accident and calendar year basis;
--A sustained Prism score of 'Strong' category or higher;
--Financial leverage ratio below 25%;
--Continued favorable reserve development and stability in reserve position.

Key rating triggers that could lead to a downgrade include:

--A return to accident year underwriting losses that trail large multi-line peers by significant margin;
--Material weakening in the company's current reserve position, potentially indicated by a period of multiple years of unfavorable reserve development greater than 5% of prior year equity;
--Failure to maintain a fixed charge coverage ratio of 5.0x;
--A large acquisition that unfavourably changes the operating profile or is financed in a manner that adds balance sheet risk through a financial leverage ratio of 35% or higher.


Fitch expects to assign the following rating to Liberty Mutual Group, Inc.:
--EUR750 million 10-year senior unsecured notes due May 4, 2026 'BBB-(Exp)'.

Fitch currently rates LMG and its subsidiaries as follows:

Liberty Mutual Group, Inc.
--IDR at 'BBB' Outlook Stable;
--\\$249 million 6.7% notes due 2016 at 'BBB-';
--\\$600 million 5.0% notes due 2021 at 'BBB-';
--\\$750 million 4.95% notes due 2022 at 'BBB-';
--\\$1 billion 4.25% notes due 2023 at 'BBB-';
--\\$3 million 7.625% notes due 2028 at 'BBB-';
--\\$231 million 7% notes due 2034 at 'BBB-';
--\\$471 million 6.5% notes due 2035 at 'BBB-';
--\\$19 million 7.5% notes due 2036 at 'BBB-';
--\\$750 million 6.5% notes due 2042 at 'BBB-';
--\\$1,050 million 4.85% notes due 2044 at 'BBB-';
--\\$300 million 7% junior subordinated notes due 2067 at 'BB';
--\\$700 million 7.8% junior subordinated notes due 2087 at 'BB';
--\\$193 million 10.75% junior subordinated notes due 2088 at 'BB'.

Liberty Mutual Group, Inc.
--Short-term IDR at 'F2';
--Commercial paper at 'F2'.

Liberty Mutual Insurance Co.
--IDR at 'BBB+' Outlook Stable;
--\\$140 million 8.5% surplus notes due 2025 at 'BBB';
--\\$227 million 7.875% surplus notes due 2026 at 'BBB';
--\\$260 million 7.697% surplus notes due 2097 at 'BBB'.

Ohio Casualty Corporation
--IDR at 'BBB' Outlook Stable;

Fitch currently rates the IFS of the members of Liberty Mutual Second Amended and Restated Intercompany Reinsurance Agreement at 'A-' with a Stable Outlook:

--America First Insurance Company
--America First Lloyd's Insurance Company
--American Economy Insurance Company
--American Fire and Casualty Company
--American States Insurance Company
--American States Insurance Company of Texas
--American States Lloyds Insurance Company
--American States Preferred Insurance Company
--Colorado Casualty Ins. Company
--Consolidated Insurance Company
--Employers Insurance Company of Wausau
--Excelsior Insurance Company
--First National Insurance Company of America
--General Insurance Company of America
--Golden Eagle Insurance Corporation
--Hawkeye-Security Insurance Company
--Indiana Insurance Company
--Insurance Company of Illinois
--Liberty County Mutual Insurance Company
--Liberty Insurance Corporation
--Liberty Insurance Underwriters Inc.
--Liberty Lloyds of Texas Insurance Company
--Liberty Mutual Fire Insurance Company
--Liberty Mutual Insurance Company
--Liberty Mutual Mid-Atlantic Insurance Company
--Liberty Mutual Personal Insurance Company
--Liberty Personal Insurance Company
--Liberty Surplus Insurance Corporation
--LM General Insurance Company
--LM Insurance Corporation
--LM Property and Casualty Insurance Company
--Mid-American Fire & Casualty Company
--Montgomery Mutual Insurance Company
--National Insurance Association
--Ohio Security Insurance Company
--Peerless Indemnity Insurance Company
--Peerless Insurance Company
--Safeco Insurance Company of America
--Safeco Insurance Company of Illinois
--Safeco Insurance Company of Indiana
--Safeco Insurance Company of Oregon
--Safeco Lloyds Insurance Company
--Safeco National Insurance Company
--Safeco Surplus Lines Insurance Company
--The First Liberty Insurance Corporation
--The Midwestern Indemnity Company
--The Netherlands Insurance Company
--The Ohio Casualty Insurance Company
--Wausau Business Insurance Company
--Wausau General Insurance Company
--Wausau Underwriters Insurance Company
--West American Insurance Company

Fitch currently rates the IFS of the following companies that participate in a 100% quota share at 'A-' with a Stable Outlook:

--Liberty Northwest Insurance Corporation
--North Pacific Insurance Company
--Oregon Automobile Insurance Company