Liberty Mutual Group receives bbb rating on new $750 million senior notes
Liberty Mutual Group has secured a new credit assessment on its planned long-term debt as the insurer adds funding due in 2036 to its capital structure. The $750 million senior unsecured notes carry a stable outlook, while the group’s existing issuer and subsidiary insurance ratings remain unchanged.
Highlights
- AM Best assigned a 'bbb' long-term issue credit rating with stable outlook to Liberty Mutual Group Inc.'s $750 million, 5.25% senior unsecured notes due 2036.
- The new debt issuance leaves Liberty Mutual's financial leverage at approximately 20%, with strong interest coverage, and proceeds will be used for general corporate purposes.
- Liberty Mutual Group Inc.'s overall 'bbb' issuer credit rating and its subsidiaries' ratings remain unchanged, signaling stable debt-servicing and balance-sheet tolerance.
Debt issuance terms and rating rationale
As reported by AM Best, the ratings agency assigned a long-term issue credit rating of "bbb" to Liberty Mutual Group Inc.'s $750 million, 5.25% senior unsecured notes due 2036. The notes are guaranteed by Liberty Mutual Holding Company Inc. and LMHC Massachusetts Holdings, Inc., and the outlook on the rating is stable.AM Best said the new issuance leaves financial leverage at about 20% under its calculation, with strong interest coverage. The agency expects those measures to remain within the tolerance of the assigned long-term issue rating, and said proceeds from the offering are expected to be used for general corporate purposes.
Implications for Liberty Mutual's credit profile
Beyond the new notes, AM Best said Liberty Mutual Group Inc.'s long-term issuer credit rating of "bbb" is unchanged. Existing long-term issue credit ratings and the ratings of the group's operating insurance subsidiaries also remain unchanged.That outcome indicates the new debt does not alter AM Best's broader view of the insurer's balance-sheet tolerance and debt-servicing capacity. For the insurance sector in the U.S., the decision suggests the agency continues to view Liberty Mutual's capital management and funding profile as consistent with its current credit standing.
In our earlier report on AM Best’s downgrade of NASW Insurance Company (Arrow Mutual Liability Insurance Company), we covered how the insurer’s Financial Strength Rating was cut to B++ from A- and its Long-Term Issuer Credit Rating was lowered to bbb+ from a-. The action was driven by deteriorating underwriting results and ongoing execution and regulatory risks tied to plans around a risk retention group, even as the company maintained very strong capitalization and liquidity.
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