CO-OPERATORS GENERAL INSURANCE COMPANY REPORTS 2010 FOURTH QUARTER AND YEAR END RESULTS

GUELPH, ON, Feb. 16 /CNW/ - Co-operators General Insurance Company ("Co-operators General") today announced its consolidated financial results for the three months and year ended December 31, 2010.  For the fourth quarter, Co-operators General reported a consolidated net income of $53.9 million, compared to $82.6 million for the same quarter in 2009. Earnings per common share was $2.42 for the fourth quarter compared to $3.86 for the same period last year.

Net income for the year amounted to $80.7 million, compared to $74.0 million in 2009, resulting in earnings per common share of $3.17 compared to $3.02 in 2009.

"Our earnings were positively impacted by favourable auto insurance results outside of the Greater Toronto Area (GTA), improved results in the home insurance line of business, premium growth in British Columbia and Quebec attributable to our agency distribution expansion, and improving net investment income and investment gains. We continue to have challenges with the auto insurance product in the GTA due to escalating accident benefit costs.  In addition, increased storm activity was experienced in the second and third quarters of 2010," said Kathy Bardswick, President and Chief Executive Officer of The Co-operators. "Despite these challenges, net income year over year was up 9%, net earned premium continued to grow across all product lines and our capital position remains very strong."

CO-OPERATORS GENERAL'S FOURTH QUARTER FINANCIAL HIGHLIGHTS

($ in millions, except for earnings per share and ratios)

                                   
  4th quarter
2010
      4th quarter
2009
          YTD
2010
          YTD
2009
                                   
Key financial data                                  
Gross written premium (GWP)                           564.4       564.2           2,287.9           2,257.6
Net earned premium (NEP)                 536.4       524.4           2,099.7           2,037.8
Net income                                                               53.9       82.6           80.7           74.0
Total assets                                                     5,271.4       5,109.4           5,271.4           5,109.4
Shareholders' equity                                      1,380.6       1,262.4           1,380.6           1,262.4
Earnings per common share                                 2.42       3.86           3.17           3.02
Key success indicators                                                                      
GWP growth                                                           0.1%       4.7%           1.3%           3.4%
NEP growth                                                             2.3%       4.5%           3.0%           2.9%
Annualized return on equity                              17.5%       28.5%           6.6%           6.5%
Combined ratio - excluding MYA                   97.5%       82.8%           103.1%           101.7%
                       - including MYA                       95.4%       85.1%           103.5%           103.1%

Fourth quarter review

Fourth quarter GWP increased slightly to $564.4 million, compared to $564.2 million in the fourth quarter of 2009. This increase relates to strong retention in the home and auto lines of business as well as rate increases and policy growth.  The increase is offset by the termination of a co-insurance arrangement with a related party, which decreased GWP by $9.6 million in the quarter compared to last year.

Net investment income, which is comprised of interest and dividends less investment expenses, was down $0.8 million versus the prior year, due to the impact of declining reinvestment yields on bonds.  Net investment gains increased by $6.6 million in 2010 from the same period in 2009 as we have recognized lower impairment losses in our investment portfolio.

The combined ratio, excluding the market yield adjustment (MYA) for the quarter was 97.5%, which is an increase from 82.8% during the comparable period last year.  We benefited from favourable weather conditions in the fourth quarter of 2010 and 2009.  Fourth quarter results in 2009 were positively impacted by the Supreme Court of Canada's denial of the Leave to Appeal regarding the constitutional challenge of the Alberta minor injury cap.  Due to that decision we released reserves into income that had been held pending the Court's decision.

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 93.7% rated A or higher. Our equity portfolio is 84.1% weighted to Canadian stocks, with a further weighting to large financial institutions. Commercial mortgages make up 5.3% of our total invested assets, and are of high quality, with 0.3% in arrears over 60 days. 

Annual review

GWP increased 1.3% to $2,287.9 million, compared to $2,257.6 million in 2009. Excluding the impact of the cancellation of the related party co-insurance agreement, GWP has increased by 3.5% from 2009 levels.  The expansion of our distribution lines through acquisitions in British Columbia and through the opening of additional agency offices in Quebec have contributed to this growth.

NEP has increased by $61.9 million or 3.0% to $2,099.7 million.  The increase is seen in all of our core lines of business and across all areas of the country driven by strong retention and rate and inflation increases in premium.

Net investment income decreased to $134.4 million from $143.3 million in 2009. Lower bond yields have decreased interest income when compared to 2009.  Net investment gains of $48.1 million represent an increase from the 2009 level of $21.3 million.  Fair value increases, specifically in our collateralized debt obligations, contributed $11.6 million of the increase due to improved market conditions.  Impairment losses on stocks and bonds were $11.5 million.  This is an improvement from 2009, when we recognized $25.1 million in impairment losses.

Excluding the MYA, the combined ratio increased to 103.1% from 101.7% in 2009.  Net claims and adjustment expenses (excluding MYA) have increased by 4.2% from last year.  This deterioration can be attributed to two main factors: escalating claims costs in the auto line of business, specifically in the Greater Toronto Area; and a large number of severe weather storm losses.  Offsetting this was significant improvement in the home line of business as pricing and segmentation initiatives implemented last year have led to a reduction in the number of claims and improved profitability.

The expense ratio has increased by 0.6 percentage points due to continuing investments in our systems and increased salary and other compensation costs.

Capital

The Company's capital position remains strong, as the Minimum Capital Test (MCT) for Co-operators General Insurance Company was 241% at December 31, 2010, well above the regulatory minimum requirement of 150%.  The MCT has increased from 231% at December 31, 2009 driven by the increase in invested asset market values compared to last year.

About Co-operators General Insurance Company

With assets of over $5.2 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 47 Canadian co-operatives, credit union centrals and like-minded organizations.  Co-operators General preference shares are listed on the Toronto Stock Exchange under the trading symbols CCS.PR.C. and CCS.PR.D.  Further information can be found at www.cooperators.ca.

SOURCE The Co-operators

For further information:

P. Bruce West
Executive Vice-President, Finance and Chief Financial Officer
Telephone: (519) 767-3036   Fax: (519) 824-0599


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