Insurers Loyalist and Optimum struggle against cost tide

Troubled Loyalist Insurance Co. has withdrawn from Ontario’s auto market. The withdrawal prompted rating agency A.M. Best to lower the company’s public data rating to “B-” from “B”. The rating agency notes that last year Ontario auto accounted for 60% of Loyalist’s direct written premiums. The company’s eroding capital position as a result of operating losses was also cited. Loyalist, an Ontario-based company, lost $770,000 last year. For the financial year ending June 2002, the company had lost $1.28 million.

Similarly, Montreal-based Optimum General has faced tough times lately and recently announced it would cut 45 jobs across its five Canadian subsidiaries. “The insurance industry is undergoing difficult times at present and our company is no exception,” says the company’s president David Liddle.

In the second quarter of 2002, Optimum reported a net loss of $2.3 million, and a claims ratio of 87.9%. This led A.M. Best to downgrade the insurer’s financial strength rating to “C++ (marginal)”. Optimum, which has about 300 employees, says the job cuts in addition to other moves such as withdrawing from Atlantic Canada, will result in annual savings of $4 million.