March 4, 2003 by Canadian Underwriter
Montreal-based Optimum General Inc. (TSX: OGI.A) is likely relieved to see 2002 gone, as the company reported a net loss of $7.4 million, or $0.68 per share, for the year ending December 31. This compares to a loss of $2.7 million, or $0.25 per share, in 2001.
For the last quarter of the year, the net loss was $4.7 million, or $0.43 per share, versus a loss of $2.6 million, or $0.24 per share, in the last quarter of 2001.
Gross written premiums (GWP) were down as a result of the company’s withdrawal from Atlantic Canada, to suspend operations in Texas and put stricter controls on unprofitable lines. GWP for 2002 was $145.2 versus $176.4 a year earlier. In the fourth quarter, GWP was $34.3 million compared to $39.3 million for fourth quarter 2001.
Net earned premiums (NPE) were also down in 2002, to $96.7 million versus $104.5 million in 2001. But for the last quarter, NPE was up slightly to $24.7 million versus $24.5 million in fourth quarter 2001.
The claims ratio was up in 2002, to 76.3% against 75.9% a year earlier, but improved year-on-year for the fourth quarter to 88.8% from 93.3%.
“Reserves have been increased to reflect a continuous rise in claims costs principally related to automobile bodily injuries in Ontario, Alberta and the Atlantic Provinces and in claims related to “leaky” buildings in British Columbia,” the company reports.
The company’s combined ratio for 2002 came in at 120.5%, compared to 115.1% in 2001, although it was down slightly in the fourth quarter comparing year-on-year.
Underwriting continued to be a losing proposition, to the tune of $18.6 million in 2002, worse than the $15.9 million underwriting loss posted in 2001. Again, the fourth quarter represented a slight improvement with a $7.4 million underwriting loss, versus $8.9 million for the same period a year prior.
But investments were the real sore spot, with investment income declining for the year to $7.5 million from $10.4 million in 2001, and down for the fourth quarter to $1.4 million from $4.4 million in fourth quarter 2001.
“The whole insurance industry faces a difficult situation with escalating claims costs, higher reinsurance costs and lower investment income”, says president and CEO David B. Liddle. “Our own disappointing results also reflect this, but our proactive stance on rate adjustments that began in 2000 and continued throughout 2001 and 2002 as well as a reduction in exposure to unprofitable business and substantial cuts in expenses should help us return to a profitable situation in 2003”.