S&P puts Safeco, Liberty on watch

Standard & Poor's said it placed on CreditWatch with negative implications the BBB+ counterparty credit and senior debt ratings on Safeco Corp. and its A+ counterparty credit rating on Safeco Insurance Co. Intercompany Pool members.

S&P also placed on watch Liberty Mutual Group Inc.'s BBB counterparty credit rating, BBB senior unsecured debt rating, BB+ junior subordinated debt rating and A-1 commercial paper rating.

The watch follows Liberty's bid to buy Safeco for $6.2 billion and the assumption of $504 million of Safeco's senior debt. Liberty would finance the deal with internally generated funds.

According to S&P, the acquisition would provide Liberty with more personal insurance depth, greater competitive presence in the Western United States and larger national scale.

The acquisition for about 1.8 times its book value also will result in a significant decline in Liberty's capital adequacy because statutory capital would be reduced by the substantial amount of goodwill created and higher capital charges due to the consolidation of Safeco's assets and liabilities onto Liberty's balance sheet, the agency noted.

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