Byline: The Register-Guard

Unanticipated claims from asbestos victims, losses after the 2001 terrorist attacks and criticism from financial rating agencies have spelled an unsettling couple of years for Liberty Mutual.

The costs were high: $500 million paid to Sept. 11 victims

Over the past two years, Standard & Poor's, A.M. Best and Moody's downgraded - or threatened to downgrade - the ratings of Liberty and its subsidiaries.

The rating firms cited problems ranging from a lack of capitalization to concentration in workers' compensation product line.

In response to the woes, Liberty increased premiums 17 percent. It reported a 67 percent increase in profits last year.

The company also diversified, and increased its geographic flexibility. Beginning two years ago, Liberty surprised observers by selling more individual auto than workers' comp policies.

Liberty has its sights on global growth, acquiring two or three foreign firms each year. It was the first foreign insurer to open an office in a city in western China, in Chongquing, home to 31 million people.

"China is a huge opportunity," said David DePaolo, president of the Web-based WorkCompCentral information service. "You've got several billion people there, all of them on an upwardly mobile financial (track) that are going to need some way to protect their assets."

The company is still strong relative to its peers, said John Itern, director of Standard and Poor's Insurance Ratings Group. The ratings group gives Liberty a stable "A" rating. "They're in the middle of the pack, I guess, you could say," he said.

- Diane Dietz