Optimum General produces bleak second quarter

Tough times prevail for Montreal-based Optimum General (TSE: OGI.A), which posted a net loss of $2.3 million, or 21 a share for the quarter ending June this year. This compares with a net loss of $709,000, or 6 a share reported for the second quarter of 2001.

The company’s gross written premiums dropped to $41.9 million from the $51.5 million declared for the second quarter of 2001, partly the result of the company’s decision to stop writing new business in the troubled Atlantic market earlier this year. Net earned premiums were also down for the second quarter to $23.6 million from the $26.8 million reported 12 months previous.

Optimum has temporarily suspended writing business in Texas, and reduced its number of policies in the troubled Ontario auto market by 33%. The company increased rates by 24% in Ontario. Auto claims were partly to blame for the company’s soaring claims ratio in the second quarter of this year, which hit 87.9% versus the 73.7% in 2001. The combined ratio clocked at 129.2% for the most recent reporting period, well above the 110.8% shown for the second quarter of last year. This resulted in an underwriting loss for the latest quarter of $6.9 million, compared with a loss of $2.9 million reported a year ago. On a brighter note, the company’s investment income was up for the quarter at $2.8 million versus the $1.5 million reported at the end of the 2001 second quarter.

The company remains hopeful that changes, such as reducing its auto exposures, will pay off in the future. “Over the last year, we have adopted key strategies aimed at returning the company to profitability” says president David Liddle. “As these measures take effect, we should see an improvement in performance.”

Rating agency A.M. Best has downgraded the Optimum group’s financial rating to “C++ (marginal)” from the “B (fair)” rating the company had previously enjoyed. A.M. Best notes that, despite the corrective actions taken by Optimum, there remains uncertainty over the company’s future capital position and profitability.