Optimum: prudent management drives business growth

By Alain Thériault | June 20 2011 05:58PM

Optimum Group sales soared by 28% from 2008 to 2009. The insurer’s secret: prudent investment management.

Return on shareholder’s equity was 12.8%, mirroring the average performance of the last ten years. Since the early 2000s, sales growth at Optimum has slowed, stunted by the variation in the Canadian dollar compared with the U.S. and European currencies, and by a voluntary decrease in operations in the P&C sector because of a sluggish market.

Based in Montréal, Optimum offers life insurance, P&C insurance, life reinsurance, actuarial consulting and asset management in Canada, the United States and France. Jean-Claude Pagé, President and CEO of Optimum Group, attributes the company’s strong results to the portfolio management of its subsidiary Optimum Asset Management, along with the Group’s rigorous risk management.

André Gaudreault, Senior Vice President, Development, of the life reinsurance subsidiary Optimum Re, says they had a good start of the year and projects that reinsured premium volumes in life should rise considerably. He points out that the growth in individual and group life premiums should “total 7% to 8%” in Q1 2010, but is localized for now. “The bulk of the increase presently comes from Barbados, where we began our activities from scratch.”

Mr. Gaudreault describes the growth in individual life insurance premium volume in the Canadian market in 2009 as modest. The past year was marked by consolidation, he says. “It’s a relatively stable market. Pricing is very competitive and is adjusted to the increase in life expectancy, or to better mortality rates. Prices are falling slowly but surely. But our premium volumes are up in all our lines of business,” he points out.

At Optimum Re, total income advanced by 25.8% between 2008 and 2009, to reach almost $175.7 million. All the same, the reinsurer’s net earnings slipped by 5.7%.

Like Optimum Group, Optimum Re is growing organically by developing business in its life reinsurance niches. The reinsurer avoids investment business. “Our market is largely based on mortality risk. We generally don’t share investment risk because we cannot compete with the giants that already occupy this market,” Mr. Gaudreault explains.

Optimum Re is as prudent as its parent company. “In risk management, we have taken measures to avoid the impact of volatility on our investment results. We have done a lot of matching. Also, we took well controlled risks in our reinsurance activities, mainly in mortality and disability,” he says.

Alain Thériault