KBRA Downgrades Ratings for Oregon Mutual Insurance Company and Maintains Negative Outlook
20 Nov 2025 | New York
KBRA downgrades the insurance financial strength ratings (IFSR) of Oregon Mutual Insurance Company (Oregon Mutual), and its wholly-owned subsidiary, Western Protectors Insurance Company (WesPro) to BBB- from BBB+. The Outlooks for both ratings remain Negative. The downgrades reflect the poor underwriting results reported in 2024 and for the first nine months of 2025, driven by significant adverse loss reserve development and a high expense ratio. These results have negatively impacted profitability ratios, policyholder surplus levels, risk-based capitalization, underwriting leverage metrics, and liquidity.
The Negative Outlook reflects KBRA’s continued concerns about reserve adequacy and the potential for further deterioration in profitability and capital levels. KBRA also notes that the company has failed to achieve the financial projections provided to KBRA in recent years. While KBRA acknowledges management’s expectations that profitability will improve with the new MGA and fronting agreements with the MGT MGA and MGT Insurance, respectively, and that financial results stabilized in 3Q 2025, any positive rating action is unlikely until the company demonstrates a sustained trend in improved operating performance and balance sheet metrics.
The ratings for Oregon Mutual and WesPro, reflect their strong catastrophe reinsurance program, conservative investment portfolio, and strong distribution relationships. The company has a strong reinsurance program that provides catastrophe coverage on an All Perils basis to the 1-in-500-year return period based on Verisk v10 model results, which aligns with the company’s risk tolerance to maintain coverage to at least the 250-year return period. Further, Oregon Mutual has modest earthquake risk as the company reinsures 100% of its shake damage exposure. Oregon Mutual’s investment policy is conservative and supports the company’s objective of capital preservation. The investment portfolio as of September 30, 2025, consists primarily of investment grade fixed income securities and cash and cash equivalents.
Offsetting these strengths are persistent underwriting losses reported in the last five years, reinsurance dependence and exposure to event risk, geographic concentration and execution risk associated with the company's revised business model. Oregon Mutual continued to report unfavorable underwriting results in 2024 and through the first nine months of 2025, driven by poor personal and commercial lines results, adverse prior year loss development, and an elevated expense structure. These losses have negatively impacted Oregon Mutual’s capitalization. Oregon Mutual’s RBC has deteriorated significantly over the past 5 years, declining from 525% at YE 2020 to 305% at YE 2024. OM’s exposures are concentrated in the Pacific Northwest and California, and the concentration of premiums written in California has doubled in the last five years primarily due to the exit from personal lines which was predominantly written in the Pacific Northwest as well as the higher rate levels in California compared to Oregon Mutual’s other states. KBRA notes that the increased concentration is somewhat offset by the vast and diverse geography of the region. Oregon Mutual utilizes reinsurance to mitigate earthquake losses, winter freezes and wildfires. The availability and affordability of reinsurance could have a material impact on results. The new management structure and the significant changes to Oregon Mutual's business model with a new MGA and fronting agreement give rise to execution risk.
Oregon Mutual Insurance Company is a mutual property and casualty insurer that currently insures commercial property and casualty risks in California, Idaho, Oregon and Washington. Western Protectors Insurance Company (WesPro) is a wholly owned subsidiary of Oregon and is also domiciled in Oregon. WesPro is licensed to write business in Idaho, Oregon and Washington, but is currently not actively writing business.
Factors that could positively impact the ratings include favorable capital trends over an extended period, driven by internal capital generation, sustained growth in earnings, including underwriting and expense improvements, and favorable change in risk profile.
Factors that could negatively impact the ratings include significant further decline in capitalization, failure to achieve financial projections provided to KBRA, material catastrophe losses, departure of key members of the management team, failure to maintain an effective reinsurance program, an unfavorable change in risk profile, or the termination of OM’s contractual relationship with the MGT MGA or MGT Insurance.
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