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Co-operators General Insurance Company reports 2008 fourth quarter and year end results

Feb 20, 2009

    GUELPH, ON, Feb. 20 /CNW/ - Co-operators General Insurance Company
("Co-operators General") today announced its consolidated financial results
for the three months and year ended December 31, 2008. For the fourth quarter,
Co-operators General reported a consolidated net loss of ($18.3) million,
compared to net income of $60.8 million for the same quarter in 2007. Earnings
per common share were ($1.06) for the fourth quarter compared to $2.88 for the
same period last year.
    Net income for the year amounted to $62.1 million, compared to $148.2
million in 2007, resulting in earnings per common share of $2.68 compared to
$6.95 in 2007.
    "In the midst of unprecedented market volatility, our conservative
investment strategy has served us well. Our capital position remains strong,
as the company's Minimum Capital Test is 204%, well above the regulatory
minimum of 150%," commented Kathy Bardswick, President and CEO of The
Co-operators. "Our strong position allows the company to continue with
strategic investments in staff and infrastructure that support our strategy of
broadening product relationships with our clients and keep us moving toward
our long-term growth goals."

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

                                   4th         4th
                                 quarter     quarter       YTD         YTD
                                   2008        2007        2008        2007
    Gross written premium      $   539.1   $   523.1   $ 2,183.7   $ 2,116.7
    Net earned premium         $   501.4   $   485.6   $ 1,980.2   $ 1,908.3
    Net investment income
     and realized gains        $    24.2   $    58.6   $   203.5   $   181.5
    Net income (loss)          $   (18.3)  $    60.8   $    62.1   $   148.2
    Earnings (loss) per
    common share               $   (1.06)  $    2.88   $    2.68   $    6.95
    Return on equity
     (annualized)                  (6.4%)      21.4%        5.5%       13.5%

    Gross written premium
     growth                         3.1%        0.8%        3.2%        0.8%
    Loss ratio                     76.1%       61.7%       73.6%       66.5%
    Expense ratio                  33.3%       31.9%       32.6%       31.8%
    Combined ratio                109.4%       93.6%      106.2%       98.3%
    Minimum Capital Test            204%        250%        204%        250%

    Fourth Quarter Review

    Gross written premium in the fourth quarter increased 3.1% to $539.1
million, compared to $523.1 in the fourth quarter of 2007 primarily due to
growth in auto policy counts and premium increases on home and farm.
    Net earned premium growth for the quarter was 3.3% above the previous
year due to growth in all lines of business, but primarily driven from auto
and home results.
    Net investment income, which is comprised of interest, dividends and rent
less investment expenses, was down $1.7 million versus the prior year, despite
investment in higher yielding mortgages. Net realized investment gains were
down $32.6 million from 2007. Negatively impacting net realized investment
gains in the quarter was a write-down of $14.2 million relating to a
collateralized debt obligation (CDO) deemed to be other-than-temporarily
impaired due to the weakening of underlying collateral.
    The Company adheres to a conservative investment policy and strategy that
is based upon prudence and regulatory guidelines and, in a broad sense, on
claims settlement patterns by product line. We focus on maximizing long-term
returns while taking advantage of current market opportunities. This is
achieved by investing in a diversified mix of securities and by shifting
between asset classes as trends in the market evolve. The Company's portfolio
composition is conservative and the assets are high quality and well
diversified. The credit quality of our bond portfolio remains high with 96.4%
rated A or higher. Our equity portfolio is 82.0% weighted to Canadian stocks,
with a further weighting to large financial institutions. We have no mortgages
in arrears.
    The combined ratio for the quarter was 109.4%, up from 93.6% during the
comparable period last year due to an increase in current accident year
claims, an increase in property losses due to storm activity, a decrease in
the interest rate used to discount claims liabilities, a significant Facility
Association loss as well as the Alberta and Nova Scotia legislation challenges
relating to the cap on minor bodily injury claims.

    Year-to-Date Review

    Gross written premium increased 3.2% to $2,184 million, compared to
$2,117 million 2007. Growth was experienced across all lines of business and
across all regions with the most significant dollar increases coming from the
Western Canada and Ontario regions. Western Canada growth is from all product
lines, while Ontario growth mainly relates to auto.
    Net earned premium growth was 3.8% above the previous year and was
largely attributable to the automobile and home lines of business,
predominately in Western Canada and Ontario.
    Net investment income from interest, dividends and real estate increased
to $145.5 million from $142.3 million in 2007 mainly related to investment in
higher yielding mortgages and corporate bonds. Net realized investment gains
of $58.0 million were ahead of the 2007 level of $39.2 million. Much of the
increase in gains relates to the disposal of our real estate portfolio that
occurred during 2008, partially offset by the fourth quarter other than
temporary impairment write-down of $14.2 million.
    The year-to-date combined ratio increased to 106.2% from 98.3% in 2007.
Claims were impacted unfavourably by an increase in current accident year
claims, a decrease in the interest rate used to discount claims liabilities,
Facility Association results as well as the Alberta and Nova Scotia
legislation challenges relating to the cap on minor bodily injury claims. In
addition, we continued to experience severe weather related losses in our
habitational portfolio.


    The Company's capital position remains strong, as the Minimum Capital
Test for Co-operators General Insurance Company was 204% at December 31, 2008,
well above the regulatory minimum requirement of 150%. The ratio was
unfavourably impacted by the decline in market values in the year, the second
quarter repayment of $30.0 million of subordinated debt to our parent company
and the $92.0 million in common share dividends declared and paid during the
year. Dividends declared and paid on preferred shares were $8.4 million,
compared to $8.9 million in 2007.

    About Co-operators General Insurance Company:

    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 46 Canadian co-operatives, credit union centrals and like-minded
organizations. The Co-operators group of companies provides 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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