TEXT - S&P revises Liberty Mutual Insurance Group outlook

Overview
-- In our view it will take longer to turn around Liberty's commercial
insurance business that has hurt overall operating performance.
-- We are affirming our ratings on Liberty and revising the outlook to
stable from positive.
-- Liberty's reserve profile will change more gradually than its business
mix.

Rating Action
On Nov. 30, 2012, Standard & Poor's Rating Services affirmed its 'BBB-'
counterparty credit and senior debt ratings on Liberty Mutual Group Inc.
(Liberty) and affirmed its 'A-' counterparty credit and financial strength
ratings on Liberty's operating companies. At the same time, we revised the
outlook to stable from positive.

Rationale
The revised outlook reflects our view that Liberty still needs significant
work to improve its commercial insurance segment performance, particularly in
workers' compensation, which has hurt overall operating results. For the first
nine months of 2012, Liberty's commercial insurance segment produced a
combined ratio (excluding catastrophes and prior-year development) of 107.0%
compared with 106.8% during the same period in 2011. We recognize that
management's strategies to improve performance within commercial lines,
including enhanced use of predictive modeling, increasing rates significantly,
allowing retentions to drop on underperforming accounts, and expanding its
domestic personal and international insurance businesses. We view the
declining proportion of workers' compensation premiums relative to the overall
book as a significant step in the right direction--we expect it to comprise
about 11% of net premiums written in 2012, down from 18.5% in 2008.
Nonetheless, we expect Liberty's reserve profile to change more gradually.
Accordingly, we expect workers' compensation to represent more than 30% of the
company's total reserves, which still is above industry averages, and still
poses some risks in terms of potential reserve volatility during the next few
years.

The ratings affirmation reflects Liberty's leading position in the U.S.
property/casualty insurance market and selected international markets. The
ratings also reflect the group's strong and well-diversified business mix by
product and geographic region. Liberty benefits from strong investments and
very strong liquidity, as well as favorable expense differentiation. Partially
mitigating these favorable factors are Liberty's weak underwriting results in
commercial lines (mainly related to workers' compensation), susceptibility to
potential prior-year adverse reserve development, and its limited financial
flexibility stemming from its relatively low fixed-charge coverage.

Outlook
The outlook is stable. As the company shifts its business allocation, we
expect its prospective earnings to become more diversified. We anticipate that
this will support better operating performance. Nonetheless, it may take a few
years for the reserve profile to change. In the interim, the company remains
susceptible to prior-year reserve development, particularly in workers'
compensation.

We expect Liberty's overall net premium growth to be in the mid-single digits
in 2012 and 2013, led by rate increases in its domestic personal lines and
commercial lines, as well as new business generation within its international
segment. This will be somewhat offset by lower renewal retention levels within
Liberty's domestic commercial business as the company focuses on underwriting
discipline, particularly improving profitability in its workers' compensation
segment.

For 2012, we expect a GAAP (generally accepted accounting principles)
calendar-year combined ratio of about 104%-105%, including catastrophe losses
during the first nine months of 2012, losses from super storm Sandy, and a
normal level of catastrophe losses for the remainder of the year. In full-year
2012 and 2013 we expect a return on revenue of 4%-6%. In 2013, we expect a
GAAP combined ratio of about 101%-104%, including four to five percentage
points of normalized catastrophe losses. We also expect Liberty's capital
adequacy to remain strong for the next couple of years. We expect consolidated
financial leverage of about 25% to remain moderate and fixed-charge coverage
of about 5x for full-year 2012.

We could raise the ratings during the next 24 months if Liberty's performance
compares favorably to the industry overall and if management's efforts to
improve commercial operations (particularly workers' compensation) gain
momentum. We also expect Liberty to continue to enhance its risk management
practices as its risk profile changes, maintain its strong competitive
position, and demonstrate capital adequacy above the rating level. However, we
could lower the ratings during the next 24 months if Liberty's overall
operating performance deteriorates significantly, with a combined ratio of
more than 110% (including three to four percentage points of normalized
catastrophe losses); if its workers' compensation line performs worse than the
industry and peers; if its strong enterprise risk management capabilities
deteriorate; if material adverse reserve development ensues; or if its capital
adequacy declines below the rating level.

Related Criteria And Research
-- For The U.S. Property/Casualty Industry, Making Workers' Compensation
Profitable May Be Mission Impossible, Jan. 23, 2012
-- Interactive Ratings Methodology, April 22, 2009

Ratings List
Ratings Affirmed

Liberty Mutual Group Inc.
Senior Unsecured BBB-
Junior Subordinated BB
Commercial Paper A-2

Liberty Mutual Insurance Co.
Subordinated BBB

Ohio Casualty Corp.
Senior Unsecured BBB-

Ratings Affirmed; Outlook Action
To From
Liberty Mutual Group Inc.
Counterparty Credit Rating BBB-/Stable/-- BBB-/Positive/--

America First Insurance Co.
West American Insurance Co.
Wausau Underwriters Insurance Co.
Wausau General Insurance Co.
Wausau Business Insurance Co.
Safeco National Insurance Co.
Safeco Insurance Co. of IL
Safeco Insurance Co. of America
Peerless Insurance Co.
Peerless Indemnity Insurance Co.
Ohio Security Insurance Co.
Ohio Casualty Insurance Co.
Netherlands Insurance Co.
Montgomery Mutual Insurance Co.
Midwestern Indemnity Co.
Liberty Surplus Insurance Corp.
Liberty Personal Insurance Co.
Liberty Mutual Mid-Atlantic Insurance Co.
Liberty Mutual Fire Insurance Co.
Liberty Insurance Underwriters Inc.
Liberty Insurance Corp.
LM Property & Casualty Insurance Co.
LM Insurance Corp.
Indiana Insurance Co.
Hawkeye-Security Insurance Co.
Golden Eagle Insurance Corp.
General Insurance Co. of America
First National Insurance Co. of America
First Liberty Insurance Corp.
Excelsior Insurance Co.
Employers Insurance Co. of Wausau
Consolidated Insurance Co.
Colorado Casualty Insurance Co.
Bridgefield Employers Insurance Co.
Bridgefield Casualty Insurance Co.
American States Preferred Insurance Co.
American States Insurance Co.
American Fire & Casualty Co.
American Economy Insurance Co.
Counterparty Credit Rating
Local Currency A-/Stable/-- A-/Positive/--

America First Insurance Co.
West American Insurance Co.
Wausau Underwriters Insurance Co.
Wausau General Insurance Co.
Wausau Business Insurance Co.
Safeco National Insurance Co.
Safeco Insurance Co. of IL
Safeco Insurance Co. of America
Peerless Insurance Co.
Peerless Indemnity Insurance Co.
Oregon Automobile Insurance Co.
Ohio Security Insurance Co.
Ohio Casualty Insurance Co.
North Pacific Insurance Co.
Netherlands Insurance Co.
Montgomery Mutual Insurance Co.
Midwestern Indemnity Co.
Liberty Surplus Insurance Corp.
Liberty Personal Insurance Co.
Liberty Northwest Insurance Corp.
Liberty Mutual Mid-Atlantic Insurance Co.
Liberty Mutual Insurance Europe Ltd.
Liberty Mutual Insurance Co.
Liberty Mutual Fire Insurance Co.
Liberty Life Assurance Co. of Boston
Liberty Insurance Underwriters Inc.
Liberty Insurance Corp.
LM Property & Casualty Insurance Co.
LM Insurance Corp.
Indiana Insurance Co.
Hawkeye-Security Insurance Co.
Golden Eagle Insurance Corp.
General Insurance Co. of America
First National Insurance Co. of America
First Liberty Insurance Corp.
Excelsior Insurance Co.
Employers Insurance Co. of Wausau
Consolidated Insurance Co.
Colorado Casualty Insurance Co.
Bridgefield Employers Insurance Co.
Bridgefield Casualty Insurance Co.
American States Preferred Insurance Co.
American States Insurance Co.
American Fire & Casualty Co.
American Economy Insurance Co.
Financial Strength Rating
Local Currency A-/Stable/-- A-/Positive/--

Liberty Mutual Insurance Co.
Counterparty Credit Rating
Local Currency A-/Stable/A-2 A-/Positive/A-2

Ohio Casualty Corp.
Counterparty Credit Rating
Local Currency BBB-/Stable/-- BBB-/Positive/--

Safeco Corp.
Counterparty Credit Rating
Local Currency BBB-/Stable/A-3 BBB-/Positive/A-3