Optimum falls into net loss despite underwriting action (March 05, 2002)

Montreal-based insurer Optimum General Inc. (TSE: OGI.A) which through five subsidiaries operates across Canada and parts of the U.S. posted a net loss of $2.7 million for the 2001 financial year ended December compared with earnings of $168,000 reported for the previous year. This translates to a loss of 25c a share for the latest full year reporting period against the 2c a share in earnings made for 2000.The insurer’s gross revenue and net earned premium income for 2001 also floundered year-on-year, with revenue clocking in at $176.4 million compared with the $189.4 million made a year earlier. Net premiums for 2001 amounted to $104.5 million, showing a 19% decline on the previous year’s 129.8 million. The company ascribes the decline in revenue to a "more stringent underwriting policy" introduced in the beginning of the 2001 financial year, while earned premiums were further dented by a decision to cede a greater percentage of business to reinsurance. Optimum’s claim ratio for 2001 rose by 13.5% to 75.9% compared with the previous year’s 66.9% ratio. Notably, the claims ratio for the fourth quarter of last year jumped to 93.3% against the 74.2% reported for the same period a year prior. For the year, this equals an underwriting loss of $15.9 million against 2000’s underwriting loss of $10.4 million. "Automobile insurance claims in the Atlantic provinces as well as in Ontario and Alberta largely accounted for this increase." The company’s CEO, Jean-Claude Paga, notes, "the whole insurance industry faces a difficult situation regarding automobile coverage in many provinces. Our own disappointing results also reflect this, but our proactive stance on rate adjustments that began in 2000 and continued throughout 2001 should help us come back to a profitable situation."