Moody's may cut Safeco

Moody's Investors Service said it placed the Baa1 senior debt rating of Safeco Corp. on review for downgrade. The review follows Liberty Mutual Insurance Co.'s offer to acquire all outstanding shares of Safeco's common stock for $6.2 billion and assume $504 million in Safeco debt.

The review is prompted largely by the lower existing ratings of the acquiring company, Liberty Mutual, reflecting relatively higher operating and financial leverage profile, and consequently its somewhat more constrained capital adequacy and financial flexibility, according to the agency.

Ratings reflect the group's solid franchise in personal lines and small business insurance, as well as its brand recognition, the agency said.

The company also has good geographic diversification, strong risk adjusted capitalization and improved profitability, Moody' said.

These strengths are tempered by the operating risks stemming from changes at the company, including shifts in product mix, ongoing efforts to re-engineer operations to increase efficiency and senior level management turnover, the agency said.

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