Activity Report 2014-2015

Activity
Report
Table
of
Contents
1
2
3
5
Message from Optimum Group Inc.
Optimum General Inc. and Highlights
2014 Overview and Perspectives for 2015-2016
Our regions
8
9
12
13
Independent Auditor’s Report
Summary Consolidated Financial
Statements
Management
Boards of Directors and
General information
Une version française de ce rapport d’activité est disponible sur demande.
® Trademark of Optimum Group Inc. used under license.
Message
Optimum Group
from
The year 2014 was very profitable for Optimum Group as a whole, especially for our property
and casualty insurance companies. In this sector, for both revenue growth and profitability,
we have maintained a stable growth and achieved results that exceeded our annual targets.
We are privileged to count on strong leadership, effective business strategies as well as a talented
and competent team that knows how to take advantage of market opportunities to develop
innovative business solutions.
In keeping with the principles that have been guiding our business approach since our foundation,
more than forty-five years ago, we always give priority to rigorousness, risk management, good
corporate governance, as well as the financial security of our customers and partners.
We have made minor changes to Optimum General’s activity report this year: in addition to an
overview of the property and casualty insurance sector for the past year, as well as our perspectives
for the coming months, we now highlight particular successes in each of our regional branches.
We hope that you will enjoy this new format.
Gilles Blondeau
Chairman of the Board
Optimum Group Inc.
Jean-Claude Pagé
Vice-Chair
of the Board and
Chief Executive Officer
Optimum Group Inc.
Anabelle Blondeau
President and
Chief Operating Officer
Optimum Group Inc.
is a Canadian-owned, private international financial group. Founded over 45 years ago,
the group is active in property and casualty insurance, life insurance, life reinsurance,
actuarial consulting and asset management.
Optimum General
Subsidiary of Optimum Group Inc.
Provide industry leading insurance
solutions through customized
products and personalized services
to achieve profitable growth
and sustainability.
LOSS
RATIO
Martin Carrier
Paul Tremblay
Louise Frankland
Véronique Bouchard
J.-Sébastien Lagarde
Executive Vice President
Senior Vice President,
Finance
Assistant Vice President,
Rating and Underwriting
Assistant Vice President,
Actuarial and Appointed Actuary
Vice President, Corporate Strategy
and Business Development
Noella Anthony
COMBINED
RATIO
$79M
2014
$73M
2013
$67M
2012
$8.5M
$8.2M
2013
NET
INCOME
2014
$8.3M
2012
95.7%
2014
93.6%
92.5%
Senior Vice President
Claims and Branch Operations
2012
55.7%
2014
52.0%
49.3%
2012
2013
$156M
2014
$140M
2013
$129M
DIRECT WRITTEN
PREMIUMS
Odile Goyer
Vice President, Actuarial
Achieve efficient growth at a faster
rate than market as a preferred
Property & Casualty Insurance
company known for:
Our excellent service
Our staff’s knowledge and expertise
Our proactive approach to meeting
market opportunities through
innovative solutions
2012
2014
Highlights
Our
Vision
From left to right
2013
Our
Mission
EVOLUTION OF
SHAREHOLDERS’ EQUITY
The year 2014 was
characterized as
historical in terms
of low investment
returns and modest
profit margins for
the property and
casualty insurance industry, in spite
of the fact that natural disasters were
fairly infrequent and less severe than
previous years. In fact, since 2013,
market loss and combined ratios
improved only slightly, with a modest
increase in written premiums.
At Optimum, we were able to produce
an enviable loss ratio that was much
better than that of the industry. We
continued to generate some of the best
results amongst the insurance sector, as
reflected by our combined ratio of 95.7%,
which is slightly higher than in 2013,
but remains excellent when considering
that written premiums rose by more than
11%. In addition, we have reduced our
expense ratio by over 1.5 points, taking
a step further in producing increasingly
stable results. The combined effects
of growth in investment income and
excellent underwriting results generated
our greatest ever net profit in 2014 with
8.5 million dollars.
The severity of worlwide catastrophes
in 2014 was at its lowest level of
the past five years, and the Canadian
marketplace was no exception, with
levels that sank well below the tenyear rolling average. However, the
potential for sizable catastrophe related
costs remains the principal concern for
insurers. Important losses still occurred
following hailstorms in Alberta, and last
winter’s extremely harsh conditions are
proving to be costly throughout Eastern
Canada. Frequent natural disasters in
recent years are forcing insurers to
review rate adequacy and underwriting
criteria to mitigate some of the impact.
The Optimum team has accordingly
proceeded with an extensive review
of hail and water damage coverages
in provinces presenting the highest risk
potential for our residential products.
This new assessment, combined with
our successful segmentation strategy,
helped to minimize the impact from
such catastrophes.
In Ontario, automobile insurers are
reluctant to reduce premium levels, as
market profitability is barely improving.
Nonetheless, insurance companies have
proceeded with marginal reductions, but
the overall change still remains far from
the government-mandated 15% target.
Perspectives for
2015-2016
We expect that the industry will continue
to undergo many changes in 2015. The
arrival of internationally based insurers
in the Canadian market will definitely
transform the landscape for insurers
and brokers alike. Automobile and
residential insurance will undoubtedly
continue to face hardening pressure
in many areas because of the experience
in recent years. Competition for market
share will nonetheless intensify, and
we might see some insurers focus
increasingly on commercial lines in
order to reduce their dependency on
personal products.
Telematics in insurance is a phenomenon
that is attracting growing interest
amongst Canadian providers, as
evidenced by the expanding offer
for this service. However, it is not
proven that all telematics approaches
will find their niche in the marketplace.
Optimum is attentively observing and
monitoring market developments while
considering policyholder and broker
interests and needs.
As severe weather conditions can quickly
deteriorate underwriting results, we are
expecting insurers to target areas most
at risk with increasingly stringent
guidelines and significant rate increases.
Moreover, some major players are
actually working on a new residential
flood coverage that will surely motivate
others to come up with their own review
of this natural disaster.
At Optimum, having gone through the
first months of 2015, premiums have
continued to grow, and are in line with
our estimated budget. A large part of this
is due to a significant increase in volume
for our commercial line, as well as a
successful launch of new products, such
as the residential glass coverage offered
in British Columbia. Based on our product
innovation, prompt response to market
opportunities as well as the constant
support from our broker partners, we
can expect favourable results for the
remainder of the year.
Finally, we cannot overlook the impact of
further consolidations between insurers
and between brokers. Based on recent
activity and the high number of broker
mergers in recent years, such transactions
will likely continue or even increase
in the near future. Furthermore,
when considering the draft guidelines for demutualization issued by
Our Team
the government, the potential for
additional insurance mergers remain
high in the short term. Acquisitions
made by large insurance companies
have the effect of limiting the scope
of supply to the consumers and
therefore act on market behaviour.
In 2014, two positive changes were
made at the management level. Firstly,
Mr. Lavjit Singh, formerly British
Columbia’s Manager of Commercial
Business Development, was appointed
Branch Manager for Manitoba and
Saskatchewan.
Our management team has been
keeping a close eye on acquisition
opportunities that could further
solidify Optimum’s positioning in
the current marketplace. Given our
company’s solid capitalization and
growth aspirations, the conditions
could be excellent for us to move
forward with this endeavour.
Also, Mr. J.-Sébastien Lagarde accepted
new challenges in addition to his
function as Vice President, Corporate
Strategy and Business Development.
In the spring of 2014 he was appointed
Executive Vice President of Optimum
Farm Insurance Inc., and more recently,
he assumed the role of Regional Vice
President for the Montreal branch.
Acknowledgements
We are very proud to work with a team of talented and committed professionals
who care to do a good job. We also have the privilege of being supported
by partners and experienced external directors who have been providing
their guidance for several years.
We have at heart to sincerely thank our teams, from all over the country.
Thanks to their commitment, we have achieved remarkable results again in 2014.
In addition, the trust and confidence brokers have placed in our teams is essential
to us. We want to continue developing this partnership, maintain our strong
relationships with each broker, and offer them high standards of service,
on a daily basis. Undeniably, the bond we continue to build with our partners
is at the heart of our business. Thank you for your support.
Anabelle Blondeau
President and
Chief Executive Officer
Optimum General Inc.
Regions
Our
Greg Carre, Manager, Commercial Lines
Jeremy Green, Regional Vice President and Vice President, Business Strategy (Optimum West)
Beth Trisko, Assistant Vice President, Claims
Early in 2014, the insurance regulator of British Columbia
determined that from then onwards, glass insurance contracts
had to be regulated and distributed as an insurance product.
Seeing that this new rule left brokers with no alternative,
Optimum West was proactive in meeting the urgent needs of its
clients. In collaboration with our head office, the Vancouver team
researched, built and released in a short period of time, a glass
insurance product that received praise from the industry. Thus,
in keeping with our new Mission & Vision, we were able to react
swiftly to a new market opportunity with an innovative solution.
As a result, we generated excellent results that contributed to
our overall financial success.
Bernice Majcher, Personal Lines Underwriter
Derri Thomas, Regional Vice President
Shawn Dentman, Personal Lines Underwriter
This past year was one of substantial growth for the Edmonton
branch, due mainly to the sustained efforts put towards our
residential and commercial business lines. Our growth in the
residential sector stemmed from a strategy that targeted
specific geographical areas of the province. As for commercial
business, we focused on our OptiPak program for which we
have more than doubled our sales volume from 2013. We have
apparently succeeded in filling a gap in the market by efficiently
meeting the needs of particular segments. In addition, it’s
worth mentioning that the increase in volume did not affect
sustainability, as we have experienced our lowest loss ratio
in the last three years.
Regions
Our
Cont’d
Vikki Hedderson, Commercial Lines Underwriter
Noella Anthony, Senior Vice President, Branch Operations and Claims
Cinthia Giesler, Personal Lines Underwriter
In 2014, in a market where many insurers were struggling to
balance profitability and regulatory requirements, the North
Bay branch has successfully set itself apart from competitors
by producing an enviable loss ratio for our automobile line of
business. This was achieved, in large part, through strategic
market segmentation and a global risk reduction initiative
taken years ago. In addition, the efforts made to develop
residential and commercial volumes have helped us diversify
and stabilize the branch’s portfolio. These great results are
a testimony to the competence, knowledge and dedication of
our team, as made evident by the very good results achieved
in our 2014 Broker survey.
Michael Stewart, Commercial Lines Underwriter
Brent Helm, Vice President, Commercial Lines - Ontario
Alan Hotta, Commercial Lines Underwriter
During 2014, the Toronto Branch concentrated its efforts on
solidifying and improving the relationships with our broker
partners while reiterating our commercial appetite. This
was achieved through completing over 180 broker visits, the
promotion of our comprehensive OptiPak products, as well as
the development and delivery of RIBO accredited commercial
seminars. This product promotion along with our renewed
relationships with our broker network resulted in a substantial
increase in the number of commercial property submissions
and new business. Both were beyond our target and allowed
us to exceed our yearly premium budget by a large margin,
while maintaining a loss ratio well below what was anticipated.
Olena Sharaburak, Commercial Lines Underwriter
Lavjit Singh, Branch Manager
Jeanna Domingo, Receptionist and administrative assistant
Winnipeg achieved excellent results in 2014. Organic growth
and portfolio transfers allowed us to grow at a greater rate than
the industry, and also, helped us increase our market share. This
favorable development was brought about by the actions we
have taken to become more competitive, adapt our insurance
solutions to specific needs, and strengthen our connections with
our broker partners. Our latest satisfaction survey showed very
positive results and was a testimonial to the quality of service
provided by our team. It is through these relationships and
feedback that we continue to improve our product offerings
and service standards.
Regions
Our
Cont’d
Nicole Denis, Commercial Lines Underwriter
J.-Sébastien Lagarde, Regional Vice President
Sylvie Rousseau, Manager, Claims
All lines of business grew significantly in Montreal in 2014,
especially our commercial and automobile portfolios. In
particular, the strong relationships we have developed with our
brokers, the quality of service offered and our competitively
priced products made these satisfactory results possible. Our
team’s efforts can be clearly observed by the increase in our
retention levels and the doubling of new business. Furthermore,
our special risks segment showed very good results. Now, as we
are well into 2015, our overall growth continues, and is paving
the way to an expansion of our market share.
Line Normandin, Farm Underwriter
J.-Sébastien Lagarde, Executive Vice President
Chantal Landry, Team leader, Underwriting
In 2014, Optimum Farm Insurance implemented a development
strategy that aimed to improve its offer to brokers. Our action
plan included identifying segments with potential, reviewing our
current rating practices as well as creating innovative discounts
to help support our focus on these targeted areas. Our sustained
efforts were well received by our broker partners and this lead to
increased retention rates, growth in the number of new business
and excellent profitability.
Lyette Racine, Commercial Lines Technical Assistant
Alain Lepage, Regional Vice President
Marie-Michèle Fiset, Personal Lines Underwriter
The Quebec City branch has, once again in 2014, produced
enviable results for its special risks portfolio. Our success for this
book of business is the fruit of a long term plan, put together by
a team of experts with an extensive knowledge of their market.
By the same token, we have continued to develop relations
based on proximity with our broker partners by visiting them
on a regular basis. At Optimum, we set ourselves apart from
the competition, mainly with two elements, which are our
teams’ rigorousness, and its expertise in niche products.
Independent
Auditor’s
Report
on Summary Consolidated Financial Statements
To the Shareholder of Optimum General Inc
The accompanying summary consolidated financial statements, which
comprise the summary consolidated statement of financial position as at
December 31, 2014 and the summary consolidated statements of net income
and of changes in equity for the year then ended, are derived from the audited
consolidated financial statements of Optimum General Inc. for the year ended
December 31, 2014. We expressed an unmodified audit opinion on those
consolidated financial statements in our report dated April 23, 2015. Those
consolidated financial statements, and the summary consolidated financial
statements, do not reflect the effects of events that occurred subsequent
to the date of our report on those consolidated financial statements.
The summary consolidated financial statements do not contain all the
disclosures required by International Financial Reporting Standards (IFRS).
Reading the summary consolidated financial statements, therefore, is not a
substitute for reading the audited financial statements of Optimum General Inc.
Management’s responsibility for the summary consolidated financial statements
Management is responsible for the preparation of a summary of the audited
consolidated financial statements on the basis described in Note 1.
Auditor’s responsibility
Our responsibility is to express an opinion on the summary consolidated
financial statements based on our procedures, which were conducted in
accordance with Canadian Auditing Standard (CAS) 810, “Engagements
to Report on Summary Financial Statements”.
Opinion
In our opinion, the summary consolidated financial statements derived
from the audited consolidated financial statements of Optimum General
Inc. for the year ended December 31, 2014 are a fair summary of those
consolidated financial statements, on the basis described in Note 1.
Montréal
April 23, 2015
1
CPA auditor, CA public accountancy permit no. A120795
Summary
Consolidated
statement of net income
Year ended December 31, 2014
(Canadian dollars)
Income
2014
2013
$$
Direct premiums written
156,179,828 Net premiums written
123,694,618 111,639,443
Net premiums earned
117,437,925 108,321,583
Net investment income
4,522,618 3,210,336
121,960,543 111,531,919
140,381,236
Expenses
Claims and adjustment expenses
65,428,510 56,360,550
Commissions and premium taxes
23,310,572 21,315,203
Underwriting expenses
23,596,090 23,757,949
112,335,172 101,433,702
Underwriting result
9,625,371 10,098,217
588,467 -
Net gain on disposal of a subsidiary
Income before income taxes
Income taxes
Net income
10,213,838 10,098,217
1,719,195 1,910,201
8,494,643 8,188,016
Summary
Consolidated
statement of financial position
As at December 31, 2014
(Canadian dollars)
Assets
Cash and cash equivalents Investments
Investment income receivable
and other accounts receivable
Income taxes receivable
Premiums receivable from policy holders
Premiums receivable from brokers
Due from reinsurers Due from affiliated companies
Reinsurers’ share of
Unearned premiums
Unpaid claims and adjustment expenses
Deferred acquisition costs
Other assets
Deferred income tax assets
2014
2013
$$
14,317,50312,483,808
172,769,925154,388,570
2,259,1662,306,999
117,898881,855
25,443,39023,468,292
9,538,4088,494,374
418,582617,476
9,6578,917
16,556,07314,801,730
17,742,97817,066,162
19,613,64017,655,656
13,038,40513,044,177
240,130237,591
292,065,755
265,455,607
Liabilities
Unearned premiums Unpaid claims and adjustment expenses Unearned reinsurance commissions Accounts payable and other liabilities Due to reinsurers
Due to parent company
Due to affiliated companies
Deferred leasehold inducements Income taxes payable Deferred income tax liabilities
79,229,45671,227,125
112,914,744102,727,183
5,661,5954,652,813
7,867,9767,329,909
6,450,7716,619,048
11,79911,910
6,55129,084
155,885204,345
439,1471,828
418,045
19,594
213,155,969192,822,839
Shareholders’ equity
Capital stock
Retained earnings Accumulated other comprehensive income
30,525,38730,525,387
47,977,29341,948,650
407,106
158,731
78,909,786
72,632,768
292,065,755
265,455,607
Summary
Consolidated
statement of changes in equity
Year ended December 31, 2014
(Canadian dollars)
2014
Capital- stocks
$
Retained earnings
$
Accumulated other
comprehensive
income
Total
$
$
Balance as at December 31, 2013
30,525,387
41,948,650 158,731
72,632,768
8,494,643
Net income
-
8,494,643 - Other comprehensive income
-
- 248,375 248,375
Total comprehensive income
-
8,494,643 248,375 8,743,018
Dividends paid
-
(2,466,000)
-
(2,466,000)
30,525,387
47,977,293 407,106 78,909,786
Balance as at December 31, 2014
2013
Capital- stocks
$
Retained earnings
$
Accumulated other
comprehensive
income
Total
$
$
Balance as at December 31, 2012
30,525,387
36,226,634 146,709 66,898,730
Net income
-
8,188,016 -
8,188,016
Other comprehensive income
-
- 12,022
12,022
Total comprehensive income
-
8,188,016 12,022
8,200,038
Dividends paid
-
(2,466,000)
-
(2,466,000)
30,525,387
41,948,650 158,731 72,632,768
Balance as at December 31, 2013
NOTE 1 – Basis of presentation
The summary consolidated financial statements include the major subtotals
and totals from the related complete consolidated financial statements.
Management
of Optimum General Inc. and its Subsidiaries
OPTIMUM GENERAL INC.
Anabelle Blondeau
President and Chief Executive Officer
Martin Carrier
Executive Vice President
Noella Anthony
Senior Vice President,
Claims and Branch Operations
Paul Tremblay
Senior Vice President, Finance
Louis Fontaine
Vice President, Legal Affairs
and Secretary
Odile Goyer
Vice President, Actuarial
J.-Sébastien Lagarde
Vice President, Corporate Strategy
and Business Development
Véronique Bouchard
Assistant Vice President, Actuarial
Services and Appointed Actuary
Louise Frankland
Assistant Vice President,
Rating and Underwriting
Jamie Morin
Assistant Vice President, Claims
Jean-Marie Villemure
Assistant Vice President,
Information Technology
Pierre St-Laurent
Assistant Secretary
SUBSIDIARIES
Martin Carrier
President and Chief Operating
Officer
Optimum Insurance Company Inc.,
Optimum West Insurance Company
and Optimum Farm Insurance Inc.
J.-Sébastien Lagarde
Executive Vice President,
Optimum Farm Insurance Inc.
Regional Vice President, Montreal
Optimum Insurance Company Inc.
Jeremy Green
Regional Vice President,
British Columbia
Vice President, Business Strategy,
Optimum West Insurance Company
Brent Helm
Vice President, Commercial Lines,
Ontario
Optimum Insurance Company Inc.
Alain Lepage
Regional Vice President,
Quebec City
Optimum Insurance Company Inc.
Derri Thomas
Regional Vice President,
Alberta and Yukon
Optimum West Insurance Company
Lavjit Singh
Branch Manager,
Manitoba/Saskatchewan
Optimum Insurance Company Inc.
Beth Trisko
Assistant Vice President, Claims
Optimum West Insurance Company
- Vancouver
OPTIMUM
GENERAL INC.
OPTIMUM FARM
INSURANCE INC.
OPTIMUM INSURANCE
COMPANY INC.
OPTIMUM WEST
INSURANCE COMPANY
Directors Directors Directors
Directors Gilles Blondeau
Chairman of the Board
Jean-Claude Pagé
Chair of the Board
Jean-Claude Pagé
Chair of the Board
Jean-Claude Pagé
Chair of the Board
Jean-Claude Pagé
Vice Chair of the Board
Anabelle Blondeau
Vice Chair of the Board and
Chief Executive Officer
Anabelle Blondeau
Vice Chair of the Board and
Chief Executive Officer
Anabelle Blondeau
Vice Chair of the Board and
Chief Executive Officer
Jacques Auger
Jacques Auger
Anne Joli-Cœur
Anne Joli-Cœur
Robert Lévesque
Robert Lévesque
Martin Carrier
President and
Chief Operating Officer
Marcel Marcoux
Marcel Marcoux
Michel Plécy
Michel Plécy
Jacques Proulx
Jacques Proulx
Paul Raymond
Paul Raymond
Robert Williamson
Robert Williamson
OPTIMUM FARM
INSURANCE INC.
OPTIMUM INSURANCE
COMPANY INC.
Trois-Rivières Branch
25 des Forges Street
Suite 422
Trois-Rivières, Quebec
G9A 6A7
Phone: 819 373-2040
Fax: 819 373-2801
Montreal Branch
425 de Maisonneuve Blvd. West
Suite 1500
Montreal, Quebec H3A 3G5
Phone: 514 288-8711
Fax: 514 288-8269
Anabelle Blondeau
President and
Chief Executive Officer
Martin Carrier
Executive Vice President
Louis Fontaine
Vice President, Legal Affairs
and Secretary
Paul Tremblay
Senior Vice President, Finance
and Treasurer
Claude Fontaine
Anne Joli-Cœur
Kenneth R. Sherk
Dean Wenborne
Henri Joli-Cœur
Nathalie Blondeau
Anne Joli-Cœur
Claude Lamonde
HEAD OFFICE
425 de Maisonneuve Blvd. West
Suite 1500
Montreal, Quebec H3A 3G5
Phone: 514 288-8725
Fax: 514 288-0760
www.optimum-general.com
Quebec City Branch
825 Lebourgneuf Blvd.
Suite 408
Quebec City, Quebec G2J 0B9
Phone: 418 522-4757
Fax: 418 522-6494
North Bay Branch
147 McIntyre Street West
P.O. Box 1288
North Bay, Ontario P1B 8K5
Phone: 705 476-4814
Fax: 705 476-8694
Toronto Branch
80 Bloor Street - Suite 402
Toronto, Ontario M5S 2V1
Phone: 416 922-2882
Fax: 416 922-9586
Winnipeg Branch
191 Lombard Avenue, 15th floor
Winnipeg, Manitoba R3B 0X1
Phone: 204 943-6885
Fax: 204 956-1709
OPTIMUM WEST
INSURANCE
COMPANY
Vancouver Branch
600-4211 Kingsway
Burnaby, British Columbia
V5H 1Z6
Phone: 604 688-1541
Fax: 604 688-1527
Edmonton Branch
10050 – 112 Street
Suite 505
Edmonton, Alberta T5K 2J1
Phone: 780 414-1826
Fax: 780 414-2021
optimum-general.com