AM Best Maintains Under Review with Negative Implications Status for Credit Ratings of Oregon Mutual Group Members

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has maintained the under review with negative implications status for the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Oregon Mutual Insurance Company and Western Protectors Insurance Company, which are domiciled in McMinnville, OR and collectively referred to as Oregon Mutual Group.

These Credit Ratings (ratings) were initially placed under review with negative implications on Sept. 6, 2024, following significant surplus erosion through the first half of 2024. The surplus erosion was driven by underwriting losses stemming from adverse reserve development, inclusive of personal lines business, which the group has exited. The losses negatively impacted the group’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and placed material pressure on its overall balance sheet strength assessment. In response to the surplus deterioration, the group began to pursue numerous capital solutions including, but not limited to a material capital infusion and a reinsurance agreement.

The group had additional surplus losses through the third quarter of 2024, primarily driven by additional adverse reserve development. These losses were mitigated on Dec. 5, 2024, when Yamhill County, OR, agreed to purchase Oregon Mutual Group’s home-office. This transaction provides surplus relief for the group and improves its BCAR to levels in line with when it was put under review initially, following the reporting of second quarter results.

The ratings will remain under review with negative implications while AM Best monitors the status of the transactions and fully reviews the impact once the sale is completed. If the group is unable to execute the aforementioned transactions in a timely manner, a downgrade of the balance sheet strength assessment and overall ratings is likely. Additional pressure remains on the group's business profile assessment as the overall scope of its writings has been strategically reduced with the personal lines exit; however, refinement to the risk portfolio has yet to demonstrate meaningful improvement and challenges remain.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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