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Optimum General results lead to downgrade


August 19, 2002   by Canadian Underwriter


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Continuing poor financials have induced A.M. Best to lower the rating of Quebec-based Optimum General’s p&c insurance subsidiaries. Optimum’s five subsidiaries, previously rated as B (fair) now have a financial strength rating of C++ (marginal).
The subsidiaries include Quebec-based Optimum Farm Insurance and Optimum Insurance Company, Ontario’s Optimum Frontier and B.C.’s Optimum West. The action also includes a Texas-based U.S. operation, Optimum Property and Casualty, although the company has already temporarily stopped writing new business there.
Optimum recently reported a net loss of $2.3 million for the second quarter of 2002, and a soaring claims ratio of 87.9%. “Based on A.M. Best’s assessment of capital adequacy, the company’s current level of capitalization is marginally able to support various risks,” states a press release from the rating agency. It acknowledges that exposure to troubled auto markets is largely to blame. The company also recently decided to pull out of Atlantic Canada due to losses there, although these conditions continue to impact its most recent financial results.
“Despite recent actions taken by management, continued uncertainties related to future profitability and capital position remain,” the release goes on to say, “Further, these plans will require time and Optimum’s trends do not exhibit any evidence these plans will adequately bolster its capital position in the near term.”