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Co-operators General Insurance Company reports first quarter 2008 net income of $10.5 million

May 5, 2008
10:31am

    GUELPH, ON, May 5 /CNW/ - Co-operators General Insurance Company
("Co-operators General") today announced its consolidated financial results
for the three months ended March 31, 2008. For the first quarter, Co-operators
General reported consolidated net income of $10.5 million, compared to
$8.2 million for the same quarter in 2007. The increase over 2007 was due to
improved core underwriting results and higher investment returns which were
partially offset by the impact of lower interest rates and regulatory changes
on our claims reserves. Earnings per common share were $0.46 for the first
quarter compared to $0.34 for the same period last year.
    "Lower interest rates had a negative short-term impact on our results, as
did changes in the Alberta auto regulatory situation related to minor injury
claims," commented Kathy Bardswick, president and CEO of Co-operators General.
"However, the company's performance during the first quarter demonstrated its
continued underlying strength."

          Co-operators General's First Quarter Financial Highlights
               ($ in millions, except for earnings per share)

                                                   1st quarter    1st quarter
                                                        2008           2007

    Gross written premium                             $ 440.4        $ 423.1
    Net earned premium                                $ 484.2        $ 462.4
    Net investment income and realized gains          $  58.6        $  45.0
    Net income                                        $  10.5        $   8.2
    Earnings per common share                         $  0.46        $  0.34
    Return on equity (annualized)                         3.6%           2.6%

    Gross written premium growth                          4.1%          -1.3%
    Loss ratio                                           76.9%          74.4%
    Expense ratio                                        32.4%          33.1%
    Combined ratio                                      109.3%         107.5%
    Minimum Capital Test                                  255%           236%
    -------------------------------------------------------------------------

    First Quarter Review
    --------------------
    Gross written premium in the first quarter increased 4.1% to
$440.4 million, compared to $423.1 million in the first quarter of 2007.
Growth in personal automobile and home lines of business, primarily in the
Western and Ontario regions, was partly offset by declines in the commercial
line of business and the Quebec region.
    Net earned premium growth for the quarter was 4.7% above the previous
year and was largely attributable to the automobile and home lines of
business, predominately in the Western and Ontario regions. This was partially
offset by declines seen in the commercial line of business due to continued
softening of the market. Net earned premium also increased as a result of our
decision to retain a greater portion of our underwriting risk by reducing our
use of reinsurance, in light of our strong capital position.
    First quarter net investment income from interest, dividends and real
estate rose to $34.7 million in 2008, up from $32.6 million in 2007 due to a
shift to higher yielding corporate bonds and a larger invested asset base. Net
realized gains of $23.9 million were achieved in the quarter, up $11.5 million
from the same quarter in 2007 as we took advantage of market volatility to
crystallize additional gains, and began divesting real estate holdings.
    The credit quality of our portfolio remains high with 96.9% of our bonds
rated A or higher. We did not have any credit losses or write-downs on our
invested assets during the quarter. We do not hold any non-bank asset backed
commercial paper in our investment portfolio.
    The loss ratio for the quarter was 76.9%, up from 74.4% during the
comparable period last year due to the impact of lower interest rates on our
claims reserves and regulatory changes in Alberta. The combined ratio of
claims and operating expenses for the quarter was 109.2%, compared to 107.5%
for the first quarter of 2007, due to the higher loss ratio. Excluding the
impact of lower interest rates and regulatory changes in Alberta, our loss
ratio was 72.6% and our combined ratio was 105.0%.

    Capital
    -------
    Co-operators General's capital position remains very strong, as the
Minimum Capital Test for Co-operators General Insurance Company was 255% at
March 31, 2008, well above the regulatory minimum requirement of 150% and an
increase over the 2007 year end level of 249%.
    Subsequent to the end of the quarter, Co-operators General repaid
subordinated debt to its parent company totalling $30 million, and declared
and paid a dividend of $60.0 million to its parent company. If these
transactions had taken place prior to the end of the quarter, our MCT ratio
would have been 241%.

    About The Co-operators:

    With assets of more than $4.6 billion, Co-operators General is a leading
Canadian-owned multi-product insurance company. Co-operators General Insurance
Company is part of The Co-operators Group, a national group of companies owned
by 42 Canadian co-operatives, credit union centrals and like-minded
organizations that focus on insurance and investment products. Co-operators
General preference shares are listed on the Toronto Stock Exchange under the
trading symbol CCS.PR.C.
For further information: P. Bruce West, Senior Vice-President and Chief
Financial Officer, Telephone: (519) 767-3036, Fax: (519) 824-0599

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