AM Best downgrades Oregon Mutual following reserve charges and wildfire losses

By Isha Marathe

June 17 - (The Insurer) - AM Best has downgraded the financial strength rating of Oregon Mutual Group from B-plus-plus to B-minus, its long-term issuer credit ratings to “bb minus” from “bbb,” and the outlooks of these ratings have been revised to negative from stable.

Oregon Mutual Group consists of Oregon Mutual Insurance Company and Western Protectors Insurance Company, which are domiciled in McMinnville, Oregon.

The downgrade reflects the continued deterioration in Oregon Mutual Group’s balance sheet metrics, which has been primarily driven by continued surplus erosion in three consecutive years that continued into first quarter 2025, AM Best said.

"The surplus decline in 2025, was a result of continued adverse loss reserve development from several large claims, impacted by economic and social inflation, in addition to smoke related claims attributed to the California wildfires," AM Best said.

Additionally, through first quarter 2025, the group’s surplus position declined by $6.5 million (12.8%), which led the overall risk-adjusted capitalization to decline to adequate levels.

AM Best said that while the company has tried to improve profitability, efforts have not gained meaningful traction and have not effectively insulated the group’s condition, which led to its ERM assessment being lowered to marginal.

Its operating performance was assessed by AM Best as marginal due to volatile underwriting results in recent years, which have been driven by economic and social inflation. Oregon Mutual Group’s underwriting and operating ratios, as well as its return-on-revenue and return-on-equity measures, compare unfavorably to the composite averages.

"California has historically had a challenging regulatory environment that has impacted the group’s results in recent years," AM Best said.

The rating agency assessed the group's business profile as limited, reflecting its focus on commercial lines, with over half its book in California on a direct written premium basis.

According to SNL, Oregon Mutual Insurance Company wrote $161.0 million of direct premiums with a 122.3% combined ratio in 2024.