Mr. Rob Wesseling reports

CO-OPERATORS GENERAL INSURANCE COMPANY REPORTS 2023 FOURTH QUARTER AND YEAR END RESULTS

Co-operators General Insurance Company has released its consolidated financial results for the three months and year ended Dec. 31, 2023. For the fourth quarter, Co-operators reported consolidated net income of $98.5-million, compared with $161.4-million for the same quarter in 2022. Earnings per common share were $3.48 for the fourth quarter, compared with $5.84 for the same period last year. Net income for the year amounted to $151.4-million, compared with $255.9-million in 2022. This resulted in earnings per common share of $5.17 compared with $9.10 in the previous year.

"This has been a challenging year for the insurance industry, but I'm proud of the work our team has done to stay focused on bringing our vision and strategic plan to life as an insurer, investor and co-operative partner," said Rob Wesseling, president and chief executive officer of Co-operators. "Continued negative trends in increased claims and inflation have led to an underwriting loss in the year, which has been mitigated by strong premium growth. Positive investment results have supported us in keeping our strong capital position, and from this position of capital strength, we will continue to invest in long-term solutions that provide financial security for Canadians."

Fourth quarter review

Fourth quarter direct written premium increased 13.9 per cent over the same period of 2022 to $1,261.0-million, while net insurance revenue grew by 10.2 per cent compared with the fourth quarter of prior year to $1,125.7-million. DWP and NIR growth over the comparative quarter was seen across all business lines and regions but particularly in the auto and commercial lines of business. The increase in auto is primarily attributable to higher vehicle growth and higher average premiums mainly in the Ontario and the West regions, while the increase in commercial is driven by higher average premium and growth in policies in force, primarily in the Ontario region.

Co-operators reported an underwriting loss, excluding discounting and risk adjustment, of $46.3-million for the fourth quarter of 2023, a decline of $74.2-million from the underwriting income of $27.9-million in the same quarter of 2022. The result was from the increase in net undiscounted claims and adjustment expenses by $204.7-million, offset by the growth in net insurance revenue of $103.9-million.

The loss ratio for the quarter, excluding discounting and risk adjustment, was 70.6 per cent compared with 57.8 per cent from the same period of 2022, a deterioration of 12.8 percentage points. The unfavourable change is driven by higher current-accident-year claims, unfavourable claims development and reserve strengthening. Fourth quarter acquisition and other expenses declined over the comparative period by $26.6-million due to overall reduced insurance operations expenses.

Net investment income and gains for the fourth quarter were $196.1-million, an increase of $114.1-million compared with the same quarter in the prior year. The increase was primarily driven by unrealized gains in both its common share and bond portfolios. Higher interest income on bonds and increased dividend distributions further contributed to the increase.

Its balance sheet, liquidity and capital positions remain strong and enable it to continue to serve and meet the needs of its clients while also supporting its strategic areas of focus. Its investment portfolio is composed of high-quality and well-diversified assets. The credit quality of its portfolio remains high with 96.1 per cent of its bond portfolio considered investment grade and 82.6 per cent rated A or higher. Its equity portfolio is 82.7 per cent weighted to Canadian stocks.

Annual review

It continued to grow proportionally across all core lines of business and in all regions in 2023 when compared with 2022. Higher average premiums and growth in policies in force led to an increase in DWP of 11.2 per cent and NIR growth of 8.1 per cent over the prior year.

Its underwriting loss, excluding discounting and risk adjustment, for 2023, was $184.9-million, a decline of $356.2-million from the underwriting gain of $171.3-million in the same period of 2022. This resulted from an increase in both the net undiscounted claims and adjustment expenses of $631.3-million and acquisition and other expenses of $43.7-million, which were offset by the growth in NIR of $318.8-million.

The increase in net undiscounted claims and adjustment expenses during the year was primarily driven by increases in current-accident-year claims and unfavourable claims development in auto, home and commercial lines of business, particularly in the Ontario region. Also contributing to the increase in claims was higher major event activity in the home line of business, particularly in the West region.

During the year, the combined ratio, excluding discounting and risk adjustment, increased by 8.8 percentage points when compared with the prior year, while the ratio that includes discounting and risk adjustment increased by 14.6 percentage points. The net impact of discounting and risk adjustment significantly declined by $234.2-million to $6.4-million during the year, an unfavourable change when compared with the net impact of $240.6-million in the comparative period. This result was mainly due to substantial increases in bond yields during 2022.

Net investment income and gains increased by $452.5-million compared with the prior year, primarily due to unrealized gains in both common shares and bond portfolios. The increase was driven by favourable movements on the common share portfolio of $164.0-million and favourable movement in unrealized gains and realized losses on its bond portfolio of $137.2-million and $30.0-million, respectively. This increase was driven by the stabilization of interest rates and subsequent strengthening of market valuations. Additionally, it experienced higher interest incomes attributable to the elevated interest rates.

Capital

Co-operators' capital position remains strong, as the minimum capital test for Co-operators was 236 per cent as at Dec. 31, 2023, well above internal and regulatory minimum requirements. It continues to closely monitor capital levels in response to the changing economic environment.

About Co-operators General Insurance Company

Co-operators is a leading Canadian multiproduct insurance company and is part of The Co-operators Group Ltd. Co-operators is a leading Canadian financial service co-operative, offering multiline insurance and investment products, services and personalized advice to help Canadians build their financial strength and security. Co-operators has more than $62-billion in assets under administration and has been providing trusted guidance to Canadians for the past 78 years. The organization is known for its community involvement and its commitment to sustainability. Achieving carbon-neutral equivalency in 2020, the organization is committed to net-zero emissions in its operations and investments by 2040 and 2050, respectively. Co-operators is also ranked as a Corporate Knights' best-50 corporate citizen in Canada.

Co-operators' Class E, Series C, preference shares trade under ticker symbol CCS.PR.C on the Toronto Stock Exchange.

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