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Co-operators General Insurance Company reports third quarter 2008 net income of $29.3 million

Nov 3, 2008

    GUELPH, ON, Nov. 3 /CNW/ - Co-operators General Insurance Company
("Co-operators General") today announced its consolidated financial results
for the nine months ended September 30, 2008. For the third quarter,
Co-operators General reported consolidated net income of $29.3 million,
compared to $30.3 million for the same quarter in 2007. Earnings per common
share were $1.40 for the third quarter compared to $1.44 for the same period
last year.
    "Rising average claims costs have negatively impacted the Company's
results this quarter and, in particular, recent regulatory action in Alberta
related to minor injury liability caps has increased Facility Association auto
reserves. However, our net income for the third quarter is comparable to the
same period last year," commented Kathy Bardswick, president and CEO of The
Co-operators. "Revenue is up 5.3% and growth was achieved in all lines of
business, across all regions of the country. Our capital position remains
strong, and we have not been directly affected by recent U.S. liquidity and
credit events."

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

                                      3rd        3rd
                                   quarter    quarter       YTD        YTD
                                     2008       2007       2008       2007
    Gross written premium         $   589.3  $   571.9  $ 1,644.6  $ 1,593.6
    Net earned premium            $   502.3  $   487.9  $ 1,478.8  $ 1,422.7
    Net investment income         $    52.4  $    38.9  $   179.3  $   122.9
     and realized gains
    Net income                    $    29.3  $    30.3  $    80.4  $    87.4
    Earnings per common share     $    1.40  $    1.44  $    3.74  $    4.06
    Return on equity (annualized)     10.2%      11.0%       9.3%      10.8%

    Gross written premium growth       3.0%       4.1%       3.2%       0.8%
    Loss ratio                        71.3%      68.4%      72.7%      68.1%
    Expense ratio                     32.2%      31.5%      32.4%      31.8%
    Combined ratio                   103.5%      99.9%     105.1%      99.9%
    Minimum Capital Test               218%       243%       218%       243%

    Third Quarter Review

    Gross written premium in the third quarter increased 3.0% to
$589.3 million, compared to $571.9 million in the third quarter of 2007.
Co-operators General experienced growth in all lines of business, and across
all regions. Growth came through rate and inflation increases, strong client
retention and the impact of renewals on two year policies in Quebec. These
were partly offset by price reductions in the commercial line of business due
to the continuing soft market.
    Net earned premium growth for the quarter was 3.0% above the previous
year and was largely attributable to the automobile and home lines of
business, predominately in Western Canada and Ontario. Consistent with
year-to-date results, net earned premium also increased as a result of the
Company's decision to retain a greater portion of its underwriting risk by
reducing its use of reinsurance, in light of the Company's strong capital
    Third quarter net investment income from interest, dividends and real
estate rose to $36.1 million in 2008, up from $33.8 million in 2007. Net
realized gains of $16.3 million were achieved in the quarter, up $11.3 million
from the same quarter in 2007 as the Company took advantage of market
volatility to crystallize gains and continued to divest its real estate
holdings. Deferred gains relating to real estate sales with lease arrangements
were $42.1 million. Deferred gains relate to own use properties that have been
sold and leased back to the Company and will be amortized over the term of the
respective leases.
    The Company adheres to a conservative investment policy and strategy that
is based upon prudence and regulatory guidelines. 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 96.6%
rated A or higher. Our equity portfolio is 83.6% weighted to Canadian stocks,
with a further weighting to large financial institutions. We have no mortgages
in arrears. We did not have any specific losses or other than temporary
impairment write-downs on our invested assets during the quarter as we had no
direct holdings in the companies most notably impacted by the various U.S.
liquidity and credit events that took place. We hold an immaterial amount of
non-bank asset backed commercial paper in our investment portfolio.
    The loss ratio for the quarter was 71.3%, up from 68.4% during the
comparable period last year. The third quarter loss ratio was impacted
favourably by 0.8% due to asset mix changes, which improved the portfolio
yield and positively impacted the claims discount rate. Excluding this change,
the loss ratio for the quarter was 72.1%. The combined ratio of claims and
operating expenses for the quarter was 103.5%, compared to 99.9% for the third
quarter of 2007.
    The Company's capital position remains strong, as the Minimum Capital
Test for Co-operators General Insurance Company was 218% at September 30,
2008, well above the regulatory minimum requirement of 150%. The ratio was
unfavourably impacted by the decline in market values in the quarter, the
second quarter repayment of $30.0 million of subordinated debt to our parent
company and the $72.0 million in common share dividends declared year-to-date.
    During the quarter, Co-operators General declared and paid a common share
dividend to its parent company totalling $12.0 million. Dividends declared on
preferred shares were $1.3 million, compared to $1.5 million in the same
quarter last year.

    About Co-operators General Insurance Company:

    With assets of more than $4.7 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 41 Canadian co-operatives, credit unions 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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