KBRA Downgrades Insurance Financial Strength Ratings of Oregon Mutual Insurance Company

KBRA downgraded the insurance financial strength ratings (IFSR) of Oregon Mutual Insurance Co. and its wholly owned subsidiary, Western Protectors Insurance Co. to BBB+ from A-.

The outlooks for both ratings remain negative. The downgrades reflect the continued deterioration in OM’s underwriting results, which have negatively impacted profitability ratios, policyholder surplus levels, underwriting leverage metrics and liquidity measures, according to a KBRA report.

KBRA said the negative outlook reflects concerns about reserve adequacy and the potential for future deterioration in profitability and capital levels.

“The potential benefits and expected improvement in operating performance from the decision to exit personal lines has not translated to improved financial metrics as expected in management projections provided to KBRA,” it said in an announcement on the downgrade.

The ratings for OM and WesPro reflect a strong reinsurance program, conservative investment portfolio and strong local market knowledge with many longstanding agency relationships. OM also has adequate but deteriorating risk-adjusted capitalization. The company has a strong reinsurance program that provides catastrophe coverage between one-in-250 and one-in-500 year return periods, according to KBRA.

OM also has modest earthquake risk because the company reinsures 100% of its shake damage exposure. OM’s investment policy is conservative and it supports the company’s objectives of capital preservation. The investment portfolio as of September 30 consists primarily of investment-grade fixed-income securities and cash and cash equivalents. Although the RBC ratio improved to 461% in 2023 from 369% the prior year, the levels are below the historical range of 500% to 600% maintained by OM in the years prior to 2022, according to KBRA.