Co-operators General Insurance Company
Annual Report
2019
Our mission
The Co-operators: financial security for Canadians and their communities.
Our vision
The Co-operators is valued by Canadians as…
> a champion of their prosperity and peace of mind
> a trusted leader in the financial services industry, distinct in its co-operative character
> a catalyst for a sustainable society
Statement of values
At The Co-operators, we:
> act with integrity
> treat our members and clients with respect
> inspire and support our employees in their achievement of excellence
> give life to co-operative principles and values
> balance our economic goals with concern for the environment and the welfare of society
Global co-operative principles
1. Voluntary and open membership
2. Democratic member control
3. Member economic participation
4. Autonomy and independence
5. Education, training and information
6. Co-operation among co-operatives
7. Concern for community
Table of
contents
02
Mission, vision, statement of values and
co-operative principles
04 Company profile
04 Corporate governance/Annual statement
05 Management’s Discussion and Analysis
40 Glossary of terms
42 Responsibility for financial reporting
43
Independent auditor’s report
46 Appointed actuary’s report
47 Consolidated financial statements
52 Notes to the consolidated financial statements
105 Corporate directory
106 Board of Directors
107 Member organizations
Company profile
Co-operators General Insurance Company (CGIC) is a leading Canadian-owned multi-product insurance and
financial services organization with assets of more than $7.4 billion.
CGIC has 4,072 employees and is supported by a dedicated Financial Advisor network with 2,530 licensed
insurance representatives throughout Canada.
Under its primary line of business, Property and Casualty insurance, CGIC protects 896,000 homes,
1.5 million vehicles, 40,000 farms and 269,000 businesses.
Corporate governance
Co-operators General Insurance Company is a member of The Co-operators group of companies.
As such, we approach best practices in corporate governance from an enterprise perspective.
We disclose our corporate governance practices in significant detail in the Annual Information Form
we file on SEDAR (sedar.com) at the end of March each year, and in our Integrated Annual Report.
Annual statement
This Annual Report constitutes the Annual Statement of Co-operators General Insurance Company
(“CGIC”), which CGIC is required to deliver to its shareholders in accordance with s.334(1) of the
Insurance Companies Act (Canada).
The following list sets out the sections of this Annual Report, which are delivered to shareholders in
accordance with s.334(1) of the Insurance Companies Act (Canada) and the page numbers on which
such sections are located within the Annual Report:
Responsibility for financial reporting 42
The report of CGIC’s auditor 43
The report of CGIC’s actuary 46
CGIC’s consolidated financial statements 47
A list of CGIC’s subsidiaries 52 (note 1)
CGIC’s percentage of the voting rights for each of its subsidiaries 52 (note 1)
The carrying amount of the shares of each of CGIC’s subsidiaries 103 (note 27)
The address of each of CGIC’s subsidiaries’ head office 105
Management’s
Discussion & Analysis
For the year ended December 31, 2019
February 13, 2020
This Management’s Discussion and Analysis (MD&A) comments on Co-operators General Insurance Company’s operations and financial
condition for the year ended December 31, 2019.
Unless otherwise stated or the context otherwise indicates, in this report, “Co-operators General”, “we”, “us” and “our” refers to the
Consolidated Co-operators General Insurance Company including its wholly owned subsidiaries: The Sovereign General Insurance
Company (Sovereign), COSECO Insurance Company (COSECO), CUMIS General Insurance Company (CUMIS General), Co-operators
Investment Limited Partnership (CILP), Co-operators Strategic Growth Corporation (CSGC) and Co-operators Insurance Agencies Limited
(CIAL). CGIC refers to the non-consolidated Co-operators General Insurance Company. CGIC acquired CUMIS General on April 1, 2018;
refer to the Related Party Transaction section for additional details.
The information in this discussion should be read in conjunction with our consolidated financial statements and notes. References to “Note”
refer to the Notes to the consolidated financial statements. All amounts are expressed in Canadian dollars, unless otherwise specified, and
are based on consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB). Additional information relating to Co-operators General, including our Annual
Information Form, can be found on SEDAR at www.sedar.com.
We use certain financial performance measures which do not have any standardized meaning prescribed by IFRS and are therefore
unlikely to be comparable to similar measures presented by other issuers. They should not be viewed as an alternative to measures of
financial performance determined in accordance with IFRS. Such measures are defined in this document in the Key Financial Measures
(Non-IFRS) section.
The information in this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from these forward-looking statements as a result of various factors, including those discussed below or in our Annual
Information Form. Please read the cautionary note which follows.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This MD&A may contain forward-looking statements and forward-looking information, including statements regarding the operations,
objectives, strategies, financial situation and performance of Co-operators General. These statements, which appear in this MD&A
(including the documents incorporated by reference herein), generally can be identified by the use of forward-looking words such as “may”,
“will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “plan”, “would”, “should”, “could”, “trend”, “predict”, “likely”, “potential” or
“continue” or the negative thereof and similar variations. These statements are not guarantees of future performance and involve known
and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the
forward-looking statements or information. In addition, this MD&A may contain forward-looking statements and information attributed to
third party industry sources. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and
uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-
looking statements will not occur. Such forward-looking statements and information in this MD&A speak only as of the date of this MD&A.
Forward-looking statements and information in this MD&A include, but are not limited to, statements with respect to: our growth
expectations; the impact of changes in governmental regulation on our company; possible changes in our expense levels; changes in tax
laws; and anticipated benefits of acquisitions and dispositions.
With respect to forward-looking statements and information contained in this MD&A, we have made assumptions regarding, among other
things: growth rates and inflation rates in the Canadian and global economies; the Canadian and U.S. housing markets; the Canadian and
global capital markets; the strength of the Canadian dollar relative to the U.S. dollar; employment levels and consumer spending in the
Canadian economy; and impacts of regulation and tax laws by the Canadian and provincial governments or their agencies. Some of the
assumptions we have made are described in Outlook, Business Developments and Operating Environment.
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Management’s Discussion & Analysis
Although we believe that the expectations reflected in the forward-looking statements and information are reasonable, there can be no
assurance that such expectations will prove to be correct. We cannot guarantee future results, levels of activity, performance or
achievements. Consequently, we make no representation that actual results achieved will be the same in whole or in part as those set out
in the forward-looking statements and information. Some of the risks and other factors, some of which are beyond our control, which could
cause results to differ materially from those expressed in the forward-looking statements and information contained in this MD&A and the
documents incorporated by reference herein include, but are not limited to: our ability to implement our strategy or operate our business as
we currently expect; our ability to accurately assess the risks associated with the insurance policies that we write; unfavourable capital
market developments or other factors which may affect our investments; the cyclical nature of the property and casualty insurance
industry; our ability to accurately predict future claims frequency; the frequency and severity of weather related events; climate change;
government regulations; litigation and regulatory actions; periodic negative publicity regarding the insurance industry; intense competition;
our reliance on advisors to sell our products; our ability to successfully pursue our acquisition strategy; actions to be taken in connection
with the sale of L’Union Canadienne, Compagnie d’assurances to Roins Financial Services Limited; our participation in the Facility
Association (a mandatory pooling arrangement among all industry participants); terrorist attacks and ensuing events; the occurrence of
catastrophic events; our ability to maintain our financial strength ratings; our ability to alleviate risk through reinsurance; our ability to
successfully manage credit risk (including credit risk related to the financial health of reinsurers); our reliance on information technology
and telecommunications systems; impacts of new or changing technologies, including those impacting personal transportation; breaches
or failure of information system security and privacy, including cyber terrorism; our dependence on key employees; and general economic,
financial and political conditions.
Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements and information contained in this
MD&A are expressly qualified by this cautionary statement. We are not under any duty to update any of the forward-looking statements
after the date of this MD&A to conform such statements to actual results or to changes in our expectations except as otherwise required by
applicable legislation.
CORPORATE OVERVIEW
ABOUT US
As a leading Canadian-owned multi-line insurer, Co-operators General plays a vital role in providing home, automobile, farm and
commercial insurance products to individuals and businesses through a diverse distribution network. We are one of the largest providers of
property and casualty (P&C) insurance in Canada with a national market share of approximately 6.1%1. Our multi-channel distribution
model operates under our four main operating companies:
CGIC - Distributes both personal and commercial insurance products through a dedicated financial advisor network with 2,530 licensed
insurance representatives throughout Canada. CGIC also distributes the life insurance and wealth management products of Co-operators
Life Insurance Company, an affiliated company. Customers may also obtain quotes for our suite of insurance products by visiting
www.cooperators.ca.
Sovereign - Writes complex commercial and specialty risks for Canadian businesses.
COSECO - Provides home and auto insurance to employer, association and affinity groups across Canada.
CUMIS General – Provides personal and commercial insurance products for credit unions and their members.
Co-operators General’s parent company is Co-operators Financial Services Limited (CFSL) and its ultimate parent company is
The Co-operators Group Limited (CGL), a Canadian-owned co-operative with 45 members. Significant associated companies under
common control include Co-operators Life Insurance Company (CLIC), CUMIS Life Insurance Company (CUMIS Life), Addenda Capital
Inc. (Addenda), Federated Agencies Limited (FAL), H.B. Group Insurance Management Ltd. (HB Group), Premier Managers Holdings
Corporation (PMHC), and The Edge Benefits Limited. “The Co-operators” refers to CGL and its direct and indirect subsidiaries. The
majority of Co-operators General’s investment portfolio is managed by Addenda, an investment management firm. We also share many
other corporate services with affiliated companies in order to maximize synergies amongst the group of companies.
CORPORATE STRATEGY
Our strategy continues to be rooted in The Co-operators’ mission: financial security for Canadians and their communities. As we end the first
year of our four-year strategy, we reflect on the progress we have made against our goals. We have made significant strides in executing on
our strategic areas of focus (Client Engagement, Co-operative Identity, Competitiveness, Create the Future and Workforce Capability) and
over the next three years, we will continue to build on this foundation as we strive to further enhance and protect the financial security of our
members and clients, resiliency of our communities, and the social well-being of Canadians. We are committed to delivering competitive and
client focused solutions; delivering relevant, contemporary and compelling solutions to our members; and being the financial services provider
of choice to co-operatives and like-minded organizations.
Becoming the industry leader in client engagement within the financial services industry
Our clients are a dynamic range of individuals, families, co-operatives, credit unions, non-profits, corporations and more. The quality of our
client engagement depends on our ability to understand and respond to their diverse needs, while providing effective products and solutions
that protect their financial security, community resiliency and social well-being.
A cornerstone of our strategy is a commitment to create a guided omni-channel experience for our clients. A guided omni-channel experience
tailors our clients’ experience based on our understanding of each individual client and their needs. Clients can choose how, when, and where
they do business with us, as well as move seamlessly across the channels as they wish. Client engagement will be enhanced through the
expansion of our digital capabilities which supports our guided omni-channel approach.
Client engagement encompasses more than ‘how’ clients interact with us; it also reflects the value, quality and completeness of the products
and services they choose to obtain from our group of companies. We will offer advice and customized solutions to truly engage our clients.
Our continued investment in advancing our business intelligence capabilities and segmentation allows us to better understand our clients’
needs, price our products, and align our pricing with the insurance risks we take. This information will support our distribution channels with
actionable information and will contribute to an outstanding experience for our clients.
How our clients view us is critical to our client engagement success. Each year, we closely monitor our performance to measure the two-way
creation of value with our clients across all lines of business. In the 2019 J.D. Power study of client satisfaction for Home and Auto insurance,
we were honoured to rank first in the Atlantic/Ontario region for Home and first in the Alberta, Ontario, and Atlantic regions for Auto. Our high
ranking is a positive indication that we are meeting clients’ needs.
Demonstrating a commitment to bring the co-operative principles to life
Our parent, CGL, is a co-operative and this is core to our identity and to our business. We will continue to be an invaluable part of the co-
operative system and to champion for its advancement. We offer Co-op Guard™ and Garde-coopMC (in Quebec), a suite of products and
services tailored to the co-operative sector that are the only nationwide products of their kind.
Commitment to our co-operative identity and sustainability principles means not only serving the needs of the co-operative community, but
extending the value system through integration and embedment of these principles into our actions, decision making, and business processes
as well as the products and services we deliver to all of our clients. Health, wellness, loss prevention and financial literacy are areas where our
values as a co-operative financial service provider allow us to take a unique view of advice and advocacy for all our clients.
Developing financial solutions and services that provide access for underserved Canadians is an important part of demonstrating our co-
operative identity. Climate change will continue to challenge our industry, and we will remain ahead of this trend by advancing our underwriting
capabilities and providing products and advice-based services to inform and educate clients to enhance their resilience. As an example,
Comprehensive Water is our answer to what has quickly become Canada's most significant property insurance need. Since our initial
deployment in 2015, clients have benefitted from the additional coverage following flooding events that would not otherwise have been
covered. Our leadership on flood insurance and community resiliency will be demonstrated by continuing our existing efforts on infrastructure
resiliency and other unmet needs with governments at the federal, provincial and municipal levels. We have also contributed to the Canadian
Co-operative Investment Fund to further advance co-operative enterprises within Canada.
1 As of December 31, 2018, the latest information available by MSA Research.
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Management’s Discussion & Analysis
We continue to demonstrate our commitment to co-operative principles through our investment policy and practices by applying an
investing approach that intentionally seeks to create financial return as well as positive social and/or environmental impact that is actively
measured. We have committed to focus our impact investing in three main areas: mitigation and adaptation to climate change; health and
wellness; and food, agriculture and natural resources. Implementing and continuously improving our sustainable and impact investing
practices will support our long-term vision. In 2018, CGL set an ambitious goal to invest twenty per cent of invested assets into impact
investments by the end of 2022 and we are on track to achieve this target with more than 19.4 per cent invested as of 2019. These
investments provide capital for the world’s most pressing environmental and social challenges while generating a competitive risk adjusted
financial return. The impact of our investments is being actively measured and reported annually. Refer to Climate-related financial
disclosures for additional details on this metric.
Enhancing our competitive position in the marketplace
Operational excellence is key to achieving our goals, and our efforts will focus on continued and committed pursuit of profitable operations.
We will seek to drive consistent profitability and growth across all business lines, while ensuring efficiency throughout all aspects of our
operations. The efficiency of our operations will be supported by enhancing our digital capabilities and refinement of our operating
structure. Close management of our expenses is a priority, along with enhancing our organizational agility, speed to market and leveraging
our capabilities for business intelligence. A disciplined eye on operational excellence will nurture an environment in which Co-operators
General can enhance competitiveness, grow profitably and capture market share.
We will capture, analyze and act on accurate and comprehensive data to improve our decision-making capacity and product service
solutions. We are building data and reporting capabilities within our business intelligence unit using leading-edge tools and technologies,
which will strengthen our underwriting and decision-making capabilities.
Creating the future we want to see
The pace of change within our industry, and adjacent industries, continues to influence consumer behaviours and create new demands.
Digitization, technological advancements and unprecedented connectivity are fueling client behaviour and their expectations are driving the
emergence of new business models. We have dedicated resources in place to explore and invest in this area. To illustrate this, The
Co-operators has partnered with Slice Labs Inc. (Slice) to deliver a unique value proposition within the emerging digital economy to
address unmet needs. In an exclusive arrangement with Slice, The Co-operators will create new insurance products to meet growing
customer desires for easy, on-demand insurance solutions that satisfy emerging digital economies. Launched under the brand name duuo
by Co-operatorsTM in 2018, the first product provides pay-per-use homeshare insurance for hosts using home sharing platforms like
Airbnb®, HomeAway® and VRBO®. Three more products were launched in 2019, including event insurance reimagined for clients to
make it simple, inexpensive and timely to obtain on-demand event coverage. The products are underwritten by CGIC. The duuo by Co-
operatorsTM brand reflects The Co-operators commitment to working together with clients to provide peace of mind in a way that is easy,
fast, fair and affordable – a commitment made possible through the Slice platform.
Empowering an adaptable and change ready workforce
We recognize that in this time of unprecedented change, our people are the core source of our long-term competitive advantage. Having a
dynamic and diverse workforce that can excel in a rapidly changing environment is of paramount importance. We will continue to ensure
we have the structures and practices in place to support this, while ensuring a healthy and inclusive work environment that encourages
innovative thinking, cross-collaboration and experimentation.
SUMMARY OF KEY FINANCIAL DATA AND RESULTS OVERVIEW
(in millions of dollars except ROE, EPS and ratios)
Key financial data1
Direct written premium (DWP)
Net earned premium (NEP)
Net income (loss)
Total assets
Total liabilities
Shareholders' equity
Key success indicators1
Direct written premium growth
Net earned premium growth
Underwriting loss - excluding market yield adjustment (MYA)
Earnings (loss) per share (EPS)2
Return on equity (ROE)
Combined ratio - excluding MYA
Combined ratio - including MYA
Minimum Capital Test (MCT)
2019
3,752.4
3,274.7
174.0
7,488.0
5,640.7
1,847.3
13.9%
13.4%
(37.3)
$6.40
10.8%
101.1%
102.0%
209%
20183
3,295.9
2,886.9
(37.1)
6,698.7
5,048.8
1,649.9
20.3%
12.8%
(152.5)
($2.03)
(2.5%)
105.2%
105.0%
208%
2017
2,740.4
2,559.1
121.1
5,922.1
4,391.0
1,531.1
6.5%
6.6%
(81.7)
$5.17
8.5%
103.2%
102.4%
216%
1 Refer to Key Financial Measures (Non-IFRS) Section
2 All of the common shares of CGIC are owned by CFSL
3 Amounts presented include the results of operations and the balance sheet of CUMIS General from the date of acquisition, April 1, 2018
We experienced continued growth in our core lines of business and in all regions in 2019. Higher average premiums coupled with growth in
policies and vehicles in force led to an increase in DWP of 13.9% and an increase in NEP of 13.4% over the prior year. This represents a
decrease of 6.4 percentage points from the DWP growth experienced in 2018, reflecting our continued focus on achieving profitable
growth. Prior year growth had also been impacted by the acquisition of CUMIS General on April 1, 2018.
Excluding MYA, our underwriting loss of $37.3 million for 2019 improved from our underwriting loss of $152.5 million in 2018. This was
primarily the result of premium growth across all lines of business, with our auto and home lines of business being the largest contributors.
While our overall net claims and adjustment expenses increased over the prior year, a reduction in major loss events in 2019 from 2018
contributed to our improved underwriting performance.
Our net investment income and gains of $272.1 million increased by $205.4 million compared to the prior year. This was mainly attributable
to a rebound in the equity markets from the weakness that was experienced in late 2018, as well as declining long-term interest rates in the
current year.
FINANCIAL PERFORMANCE REVIEW
NET RESULTS
Net income (loss) ($ millions)
Return on equity (ROE)
2019
174.0
10.8%
2018
(37.1)
(2.5%)
2017
121.1
8.5%
We earned net income of $174.0 million for the year, an increase of $211.1 million from the prior year’s net loss of $37.1 million. The
increase in our net results improves our ROE to 10.8% as compared to (2.5%) in 2018. Our 2019 results were driven by sustained policy
growth across all lines of business, fewer major loss events and an increase in investment returns resulting from rebounding equity
markets and declining long-term interest rates.
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CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 9
Management’s Discussion & Analysis
DIRECT WRITTEN PREMIUM AND NET EARNED PREMIUM
INVESTMENT INCOME AND GAINS
$ millions
Direct written premium
Net earned premium
2019
3,752.4
3,274.7
2018
3,295.9
2,886.9
% change
13.9%
13.4%
2017
2,740.4
2,559.1
During 2019, DWP increased by 13.9% or $456.5 million over the prior year. The increase in DWP was primarily attributable to higher
average premiums across all lines of business and geographical regions and to a lesser extent, increases in policies and vehicles in force
in Ontario. NEP growth of 13.4% or $387.8 million over the prior year is also seen across all our lines of business and across all regions.
Refer to Note 22 of the consolidated financial statements for a reconciliation of DWP to NEP.
NEP by line of business
$ millions
Auto
Home
Commercial
Farm
Travel and other
Total
2019
1,603.8
902.7
551.4
143.4
73.4
2018
1,388.5
811.2
490.4
130.5
66.3
3,274.7
2,886.9
% change
15.5%
11.3%
12.4%
9.9%
10.7%
13.4%
2017
1,219.2
730.2
447.5
126.7
35.5
2,559.1
The auto line of business remains our largest line by NEP, increasing by 15.5% or $215.3 million from 2018. This was driven by higher
average premiums and to a lesser extent, growth in vehicles in force across all regions, particularly within the Western region and Ontario.
The home line of business experienced an increase in NEP of 11.3%. Growth was attributed to higher average premiums in the Ontario
and the Western regions. The commercial line of business experienced NEP growth of 12.4% over the prior year. Rate adjustments
coupled with policy growth, particularly in Ontario and the West, drove the increases seen in these regions. NEP in the farm line of
business increased by 9.9% compared to the prior year and was primarily the result of rate adjustments in the Western and Ontario
regions. The travel and other line of business experienced NEP growth of 10.7% over the prior year. Growth over the prior year was mainly
driven by the addition of CUMIS General’s results for the full year in 2019, as compared to 2018 when CUMIS General contributed the last
8 months of its results to Co-operators General upon its acquisition by CGIC on April 1, 2018.
$ millions
Interest income
Dividend income
Other investment income
Investment expense
Net investment income
Net realized gains
Net foreign exchange gains (losses)
Changes in fair value
Impairment losses
Net investment gains (losses)
Net investment income and gains
2019
97.9
78.2
0.3
(6.8)
169.6
86.6
14.0
5.8
(3.9)
102.5
272.1
2018
86.1
51.1
0.2
(6.4)
131.0
11.3
(9.0)
(46.3)
(20.3)
(64.3)
66.7
2017
77.0
47.8
0.2
(6.3)
118.7
47.0
19.8
24.9
(8.4)
83.3
202.0
Net investment income and gains increased by $205.4 million in 2019 as compared to the prior year. This was mainly the result of net
investment gains recognized in the current year as compared to losses incurred in the prior year. The increase was further supported by an
increase in net investment income earned in 2019.
Net investment gains of $102.5 million in the current year contrasts with the net investment losses of $64.3 million incurred in the prior
year. Net realized gains on common shares increased by $35.0 million over the prior year, which was driven by strength in the equity
markets and a higher turnover in the portfolio. Net realized gains on bonds increased by $42.9 million over the prior year as a result of
tightening credit spreads. The $23.0 million favourable change in net foreign exchange gains was primarily driven by strength in the
Canadian dollar relative to the U.S. dollar, which appreciated by 7.3% in 2019. The $52.1 million positive change in fair value was mainly
caused by an absence of a market correction which adversely impacted the prior year portfolio and was not seen in the current period.
Impairment losses were $16.4 million lower in the current year than in the prior year, due to strength in the global equity markets in 2019
as compared to the prior year when the markets corrected in the latter part of 2018.
Net investment income was $38.6 million higher than in the prior year and was primarily driven by higher income distributions from limited
partnership and pooled fund investments.
NEP by geographic region
Our invested assets mix is discussed in the Invested Assets section of the MD&A.
$ millions
West
Ontario
Quebec
Atlantic
Total
2019
1,155.7
1,649.0
161.4
308.6
3,274.7
2018
1,050.0
1,426.5
128.4
282.0
2,886.9
% change
10.1%
15.6%
25.7%
9.4%
13.4%
2017
956.2
1,241.7
110.4
250.8
2,559.1
NEP grew in the Western region and in Ontario by $105.7 million and $222.4 million, respectively, over the prior year. The growth in both
regions was driven by higher average premiums and policies growth across all lines of business. Higher average premiums in Quebec led
to an increase in NEP of $33.0 million. NEP grew in the Atlantic region by $26.6 million as a result of higher average premiums combined
with an increase in policies in force over the prior year.
OTHER COMPREHENSIVE INCOME (LOSS)
$ millions
Items that may be reclassified subsequently to the statement of income:
Net unrealized gain (loss) on available-for-sale financial assets
Net reclassification adjustment for (gains) losses included in income
Items that may be reclassified before income taxes
Income tax expense (recovery) relating to items that may be reclassified
Items that will not be reclassified to the statement of income:
Remeasurement of the retirement benefit obligations
Income tax (recovery) expense related to items that will not be reclassified
Other comprehensive income (loss)
2019
203.5
(86.9)
116.6
32.3
84.3
(3.2)
(0.8)
(2.4)
81.9
2018
(66.6)
3.3
(63.3)
(18.7)
(44.6)
11.4
3.1
8.3
(36.3)
2017
48.0
(42.2)
5.8
1.7
4.1
(11.0)
(3.0)
(8.0)
(3.9)
Our other comprehensive income was $81.9 million in the year, a favourable change from the $36.3 million other comprehensive loss in
2018. Driving this result was $203.5 million of unrealized gains from a turnaround in the global equity markets as well as declining long-
term interest rates. Of this amount, $144.9 million in unrealized gains on our common share portfolio was consistent with a 19.1% increase
in the S&P/TSX common share index and the 22.8% increase in the S&P 500. This result was partially offset by reclassification
adjustments of $86.9 million to the consolidated statement of income for the year.
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Management’s Discussion & Analysis
EXPENSES
Claims and adjustment expenses – Loss ratio
$ millions, except ratios
Undiscounted net claims and adjustment expenses
Effect of MYA
Net claims and adjustment expenses
Loss ratio (excluding MYA)
Loss ratio (including MYA)
2019
2,243.8
30.0
2,273.8
68.5%
69.4%
2018
2,117.3
(7.9)
2,109.4
73.3%
73.1%
change
126.5
37.9
164.4
(4.8)
pts
(3.7)
pts
2017
1,794.8
(20.9)
1,773.9
70.1%
69.3%
Undiscounted net claims and adjustment expenses increased by $126.5 million over the prior year. This was primarily driven by client
growth within our auto line of business and large losses in our specialty commercial line of business. The increase was partially offset by
our home and farm lines of business, which collectively experienced a reduction in claim expenses through fewer accident year claims and
major loss events. While there was an overall increase in our net claims and adjustment expenses, NEP outpaced this and led to an
improvement in our loss ratio of 4.8 percentage points.
Unpaid claims and adjustment expenses are discounted using the portfolio market yield of our bond and mortgage portfolios with
consideration provided for the Government of Canada 5-year bond rate plus a credit spread. Fluctuations in the portfolio market yield
impact the unpaid claims and adjustment expenses and are included within the MYA. The portfolio market yield on bonds and commercial
mortgages decreased in the year which decreased the discount rate. This impact was further exacerbated by an increase in unpaid claims
and combined, led to a net unfavourable impact to MYA of $30.0 million compared to a favourable impact in 2018 of $7.9 million.
Loss ratio by line of business
% excluding MYA
Auto
Home
Commercial
Farm
Travel and other
Total
2019
78.1
58.2
63.4
61.3
39.4
68.5
2018
change
78.5
69.9
68.6
74.9
38.9
73.3
(0.4)
pts
(11.7)
pts
(5.2)
pts
(13.6)
pts
0.5
pts
(4.8)
pts
2017
74.0
67.1
63.4
84.1
33.3
70.1
In 2019, we experienced an improvement in our loss ratio across all lines of business, except travel and other, which remained largely
consistent with the prior year. The overall improvement was the result of premium growth outpacing claims and adjustment expenses,
coupled with fewer major event losses through 2019.
Our auto loss ratio improved by 0.4 percentage points over the prior year and was driven by higher average premiums and vehicles in
force, offset by an increase in the frequency and severity of current accident year claims in Ontario and Western regions where client
growth has been significant. Our home loss ratio improved by 11.7 percentage points over the prior year and was primarily driven by a
decrease in current accident year claims and major loss events. The prior period was impacted by multiple severe wind and ice storms in
Ontario which did not reoccur in 2019. Higher average premiums and favourable claims development in the Western and Ontario regions
resulted in an improvement in our commercial loss ratio by 5.2 percentage points from the prior year. This was partially offset by instances
of severe weather in the Atlantic and Quebec regions. NEP growth from higher average premiums and a decrease in the frequency and
severity of current accident year claims led to an improvement in our farm loss ratio of 13.6 percentage points. Our loss ratio in our travel
and other line of business deteriorated slightly by 0.5 percentage points as a result of an increased frequency in current accident year
claims.
Loss ratio by geographic region
% excluding MYA
West
Ontario
Quebec
Atlantic
Total
2019
65.9
67.8
78.3
76.9
68.5
2018
change
67.5
76.4
78.9
77.0
73.3
(1.6)
pts
(8.6)
pts
(0.6)
pts
(0.1)
pts
(4.8)
pts
2017
69.2
69.8
83.2
69.6
70.1
The Western region’s loss ratio improved by 1.6 percentage points compared to the prior year. The improvement is attributable to higher
average premium and policies in force, which outpaced an increase in the frequency of current accident year claims specifically within the
auto and commercial lines of business.
The improvement in the loss ratio of 8.6 percentage points in Ontario was primarily driven by higher average premium and policies in force
across all lines of business. This was partially offset by an increase in the frequency of current accident year claims concentrated mainly
within the auto line of business.
Quebec’s loss ratio improved over the prior year by 0.6 percentage points. NEP growth in the current period grew at a faster rate than
increases in the frequency and severity of accident year claims, which were concentrated in the auto and commercial lines of business.
The loss ratio in the Atlantic region remained consistent with that in the prior year, as NEP growth was offset by the impact of severe
weather and an increase in current accident year claims across all lines of business.
Other operating expenses – Expense ratio
%, except total other operating expenses ($ millions)
Total other operating expenses
Expense ratio
Components of expense ratio
Premium and other taxes
Net commissions and advisor compensation
General expenses
Expense ratio
2019
1,068.1
32.6%
3.5
17.0
12.1
32.6
2018
922.2
31.9%
3.5
17.0
11.4
31.9
change
145.9
0.7
pts
-
-
0.7
0.7
pts
pts
pts
pts
2017
846.0
33.1%
3.5
17.1
12.5
33.1
Other operating expenses are comprised of premium and other taxes, net commissions and advisor compensation and general expenses.
These expenses have increased by $145.9 million in the year, contributing to an expense ratio of 32.6%, which is an increase of 0.7
percentage points from 2018. Expenses related to premium and other taxes as well as net commissions and advisor compensation
increased over the prior year in line with premium growth. In addition, net commissions and advisor compensation was also impacted by
an increase in the advisor transition obligation. The general expense ratio increased by 0.7 percentage points as a result of increased
staffing costs coupled with higher project spend in the year.
INCOME TAXES
In 2019, the enacted statutory income tax rate of 27.0% did not change from the prior year. The effective tax rate for the year ended
December 31, 2019 was 18.7%, representing a tax expense of $40.1 million. Refer to Note 11 of our consolidated financial statements for
the income tax reconciliation between the statutory tax rate and our effective tax rate.
12 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 13
Management’s Discussion & Analysis
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
INVESTED ASSETS
Invested asset mix
% based on fair value
Bonds
Stocks
Mortgages
Pooled Funds
Limited Partnerships
Other
2019
54.9%
25.5%
9.8%
3.7%
3.5%
2.6%
2018
57.2%
23.7%
9.4%
3.8%
2.9%
3.0%
2017
51.4%
28.4%
9.6%
4.3%
2.2%
4.1%
100.0%
100.0%
100.0%
We have a high quality, well diversified investment portfolio consisting primarily of bonds, equities and commercial mortgages.
The bond portfolio makes up $2,925.7 million or 54.9% of our total invested assets. Our investment in bonds is diversified both
geographically and by sector, with a large portion invested in Canadian government debt instruments. The credit quality of our bond
portfolio is presented below.
% based on fair value
AAA
AA
A
BBB
Below BBB
Not rated
2019
37.2%
31.2%
17.9%
10.2%
2.8%
0.7%
2018
40.3%
26.4%
19.7%
10.4%
2.5%
0.7%
2017
34.7%
26.0%
23.8%
12.1%
3.4%
-
100.0%
100.0%
100.0%
Our equity portfolio makes up $1,359.2 million or 25.5% of our total invested assets and consists largely of publicly traded common and
preferred stocks. It is diversified by industry sector and issuer, with 86.4% of the portfolio in Canadian holdings. We hold mortgages with a
carrying value of $521.9 million on Canadian commercial and residential properties. Mortgages make up 9.8% of our total invested assets
and are of high credit quality with 99.8% considered investment grade based on Addenda’s internal rating system. Pooled funds and
limited partnerships collectively make up 7.2% of our total invested assets. Pooled funds consist of units invested in fixed income and
equity securities, while our limited partnership units represent investments in multi-residential infrastructure and real estate assets.
We adhere to a conservative investment policy and strategy that is based upon prudence in accordance with regulatory guidelines and, in
a broad sense, on premium cash flows and claims settlement patterns by product line. We focus on achieving 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 credit quality of our portfolio remains high with 96.4% of our bonds considered
investment grade and 86.2% rated A or higher. Investment grade bonds are those rated BBB and above. Note 5 of the consolidated
financial statements provides an extensive breakdown of invested assets.
The Risk Management section and Note 6 of the consolidated financial statements provide information on related credit and interest rate
risks.
UNPAID CLAIMS AND ADJUSTMENT EXPENSES
Our underwriting objectives are to write business on a prudent and diversified basis and to achieve profitable underwriting results. We
underwrite automobile business after a review of the client’s driving record and claims experience. We underwrite property lines based on
physical condition, property replacement values, claims experience and other factors affecting risk of loss. Advisors and brokers are
compensated, in part, based on the claims experience of their portfolio.
Our unpaid claims and adjustment expenses liability is management’s best estimate of the amount required to settle all outstanding and
unreported claims incurred. The estimate is determined using accepted actuarial practices. Our approach in calculating our unpaid claims
liability is to establish adequate provisions at the original valuation date in a sufficient amount such that the risk of the liability being
inadequate in any one year is low.
The initial estimate of unpaid claims and adjustment expenses is made on an undiscounted basis. This process is described in Significant
Accounting Judgments, Estimates and Assumptions. The discount rate applied to measure the value of unpaid claims and adjustment
expenses is based upon the portfolio market yield of assets supporting the claims liabilities as well as considerations for the timing of the
relative cash flows of the assets and liabilities.
Net unpaid claims liability
$ millions
Balance, beginning of year
Less: effect of discounting at prior year-end
Undiscounted unpaid claims and adjustment
expenses at prior year-end
Paid on prior years
Change in estimate on prior years
Incurred on current year
Paid on current year
Acquisition of a subsidiary from related party
Undiscounted unpaid claims and adjustment
expenses at current year-end
Effect of discounting
Unpaid claims and adjustment expenses (net)
2019
2,613.6
103.3
2,510.3
(813.8)
(6.7)
2,251.7
(1,235.4)
-
2,706.1
133.3
2,839.4
2018
2,340.7
105.2
2,235.5
(733.4)
(50.7)
2,169.0
(1,206.8)
96.7
2,510.3
103.3
2,613.6
2017
2,232.4
126.1
2,106.3
(635.5)
(88.2)
1,883.0
(1,030.1)
-
2,235.5
105.2
2,340.7
Unpaid claims and adjustment expenses reflect the cost of paying and settling claims and include estimates for the cost of claims not yet
settled and claims incurred but not yet reported. Claims and adjustments expenses incurred during the year include development, which is
the difference between the prior year’s estimate of unpaid claims and adjustment expenses and the claims costs actually paid plus any
change in estimates for claims still open or unreported. We experienced favourable discounted claims development in 2019 of $139.1
million on prior years’ claims. For more information refer to Note 7 of the consolidated financial statements.
Refer to Emerging Legislation and Regulatory Events section for a summary of legislative, judicial and regulatory events that have an
impact on both current and future years’ estimates.
SHAREHOLDERS’ EQUITY
$ millions
Common shares
Preferred shares
Public issue
Private issue
Contributed capital
Retained earnings
Accumulated other comprehensive income
Total
2019
359.8
100.0
85.0
100.9
1,029.4
172.3
1,847.4
2018
229.8
100.0
83.7
100.9
1,045.1
90.4
1,649.9
2017
48.1
100.0
79.8
10.1
1,169.4
123.7
1,531.1
Our consolidated balance sheet as at December 31, 2019 includes over $1.8 billion in shareholders’ equity, reflecting continued financial
strength. Overall, our shareholders’ equity position increased by $197.5 million in 2019 compared to 2018. Contributing to the increase in
our shareholders’ equity was comprehensive income earned of $255.9 million. Partially offsetting the increase was dividends declared of
$58.3 million.
Capital is a critical strategic resource. It reflects the financial well-being of the organization and enables us to pursue strategic business
opportunities. A strong capital position also acts as a safety net for possible losses or catastrophic events and provides a basis for
confidence in our financial strength by regulators, shareholders, policyholders and others. For more information on capital management
refer to Note 21 of the consolidated financial statements.
A summary of our shares both issued and outstanding is included below. For terms and a complete list of all authorized shares refer to
Note 17 to the consolidated financial statements.
14 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 15
Management’s Discussion & Analysis
2019
Class A preference shares, series A
Class A preference shares, series B
Class B preference shares
Class D preference shares, series A
Class D preference shares, series B
Class D preference shares, series C
Class E preference shares, series C
Class F preference shares, series A
Class G preference shares, series A
Common shares
Authorized
1,440,000
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Issued
-
790,177
412
13,803
42,535
43,184
4,000,000
488,624
14,984
26,620,395
Our publicly issued preferred shares include our Class E preference shares, Series C; these shares are listed on the Toronto Stock
Exchange (TSX) and trade under the symbol CCS.PR.C.
DIVIDENDS AND EARNINGS PER SHARE (EPS)
Dividends declared
$ per share
Class A preference shares
Series A
Series B
Class B preference shares
Class D preference shares
Series A
Series B
Series C
Class E preference shares
Series C
Class F preference shares
Class G preference shares
Common shares
Earnings per share (EPS)
$ millions, except share data and EPS
Net income (loss)
Less dividends on preference shares
Net income (loss) available to shareholders
Weighted average number of outstanding common shares1
Earnings (loss) per common share
1 All of the common shares of CGIC are owned by CFSL
MINIMUM CAPITAL TEST
MCT
2019
2018
2017
-
5.00
2.50
5.00
5.00
5.00
1.25
1.88
2.50
1.81
2019
174.0
10.3
163.7
1.88
5.00
2.50
5.00
5.00
5.00
1.25
1.88
2.50
-
2018
(37.1)
10.3
(47.4)
1.88
5.00
2.50
5.00
5.00
5.00
1.25
1.88
2.50
7.45
2017
121.1
10.2
110.9
25,560,160
23,359,013
21,463,047
6.40
(2.03)
5.17
2019
209%
2018
208%
2017
216%
Co-operators General’s MCT of 209% represents $233.5 million of capital in excess of our 180% internal minimum (2018 - $198.0 million).
The MCT is impacted by various factors including interest rates, changes in our share capital, equity market performance and the results of
our operations.
THIRD PARTY RATINGS
Rating agencies issue several types of ratings. A Financial Strength Rating (FSR) provides guidance to policyholders of an insurance
company’s ability to meet its payment obligations to policyholders. An Issuer Credit Rating (ICR) provides guidance to investors of a
company’s ability to meet its senior obligations. A Preferred Share Rating (PSR) provides guidance on the credit worthiness of the
preferred shares issued by a company.
Standard & Poor’s ratings
Co-operators General - FSR
Co-operators General - ICR
Co-operators General - PSR
A.M. Best ratings
Co-operators General - FSR
Co-operators General - ICR
Sovereign - FSR
Sovereign - ICR
DBRS ratings
Co-operators General - FSR
Co-operators General - ICR
Co-operators General - PSR
Outlook
Stable
Stable
n/a
2019
A-
A-
P-2
2018
A-
A-
P-2
2017
A-
A-
P-2
Outlook
2019
2018
2017
Stable
Stable
Stable
Stable
Outlook
Stable
Stable
Stable
A-
a-
A-
a-
A-
a-
A-
a-
A-
a-
A-
a-
2019
A (low)
A (low)
2018
A (low)
A (low)
2017
A (low)
A (low)
Pfd-2 (low)
Pfd-2 (low)
Pfd-2 (low)
CASH FLOWS
$ millions
Cash provided by operating activities
Investing activities
Sales (purchases) of investments, net
Purchases of interest in associates and joint ventures
Purchases of intangibles and property and equipment, net
Acquisition of subsidiary from related party, net of cash acquired
Assets held for sale, net
Cash flows used in investment activities
Financing activities
Preference shares issued, net
Common shares issued
Contribution of capital
Lease liabilities paid
Dividends paid
Cash flows provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
2019
547.2
(403.6)
-
(28.5)
-
-
(432.1)
(0.3)
-
-
(10.8)
(58.4)
(69.5)
45.6
2018
222.0
(340.3)
-
(6.8)
(176.8)
-
(523.9)
4.1
181.7
100.0
-
(10.2)
275.6
(26.3)
2017
142.0
40.5
(0.3)
(9.9)
-
0.5
30.8
5.6
-
-
-
(170.0)
(164.4)
8.4
Cash generated from insurance operations and investment returns normally exceeds our claims and operating expense requirements, and
sufficiently funds our commitments and growth initiatives. Our commitments consist primarily of unfunded capital contributions, as
disclosed in the Off-Balance Sheet Arrangements and Contractual Commitments section.
16 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 17
Management’s Discussion & Analysis
KEY FINANCIAL MEASURES (NON-IFRS)
We measure and evaluate the performance of the consolidated operations using several financial measurements. These measurements
help the reader understand business volumes, the quality of risk underwriting, management reserving practices, and the financial strength
and financial leverage of Co-operators General.
These measures are non-IFRS measurements but are derived from elements of the IFRS consolidated financial statements, and are
consistent with financial measures used in the P&C insurance industry.
Direct written premium (DWP) is a component of revenue which represents the insurance sales transactions in the year written directly
by the insurer. DWP does not include reinsurance policies assumed or ceded and it does not represent premium earned during the year
which is referred to as net earned premium. Measuring DWP growth year-over-year is useful in assessing business volume trends.
Loss ratio (also referred to as the claims ratio and a component of the combined ratio) is the ratio of net claims and adjustment expenses
to net earned premium, expressed as a percentage.
Expense ratio, also a component of the combined ratio, is the ratio of the total premium and other taxes, commissions and advisor
compensation and general expenses to net earned premium, expressed as a percentage.
Combined ratio is the ratio of total expenses to net earned premium, expressed as a percentage. In the insurance business, the
combined ratio is used to understand a company’s profitability from underwriting insurance risks. The combined ratio is the sum of the loss
ratio and the expense ratio.
Underwriting gain or loss is the profit or loss from the activity of taking on insurance risks, excluding the impact of the MYA.
Market yield adjustment (MYA) is the impact of changes in the discount provision on claims liabilities. It includes the impact of changes in
the discount rate used to discount claims liabilities based on the change in the market-based yield of the underlying assets. MYA also
includes adjustments made to the provisions for adverse deviation (PFADs) and other discounting assumptions.
Claims development is essential to understanding the reasonableness of a company’s claims reserving practices. It represents the
difference between any prior estimates in the claims costs and the claims costs actually paid on closed claims, plus any change in
estimates for claims still open or unreported. Favourable claims development contributes positively to net income, while unfavourable
development contributes negatively. Consistent favourable claims development generally indicates strength in a company’s reserving
practices.
Return on equity (ROE) is the ratio of net income to the average of opening and closing shareholders’ equity excluding accumulated other
comprehensive income.
Minimum Capital Test (MCT) is a regulatory defined, formula-driven, risk-based test of capital available over capital required. The formula
looks at the various elements of assets and liabilities on the balance sheet and assigns risk weightings to establish a required capital level.
Capital available is total shareholders’ equity plus or minus certain adjustments as prescribed by the Office of the Superintendent of
Financial Institutions (OSFI). The supervisory target capital ratio established by OSFI for the industry, which we are expected to operate
above, is 150% of capital required.
UNDERWRITING RESULTS
$ millions, except ratios
Net earned premium, before reinstatement premiums
Reinstatement premiums expense (recovery)
Net earned premium, as reported
Undiscounted net claims and adjustment expenses (excluding MYA)
Loss ratio (excluding MYA)
Other operating expenses
Expense ratio
Underwriting loss
Combined ratio (excluding MYA)
2019
3,274.3
(0.4)
3,274.7
2,243.8
68.5%
1,068.2
32.6%
(37.3)
101.1%
2018
2,891.0
4.1
2,886.9
2,117.3
73.3%
922.1
31.9%
(152.5)
105.2%
2017
2,557.3
(1.8)
2,559.1
1,794.8
70.1%
846.0
33.1%
(81.7)
103.2%
CLAIMS DEVELOPMENT
$ millions
Unpaid claims and adjustment expenses (net)
Add: investment income on unpaid claims
Less: net paid claims
Less: re-estimate of unpaid claims at December 31
Claims development - favourable
1st year
2nd year
Claims development - favourable
1 Amount includes CUMIS General's net unpaid claims and adjustment expenses
RETURN ON EQUITY (ROE)
$ millions, except ratios
Net income (loss)
Average shareholders' equity excluding accumulated other comprehensive
income
20191
2,839.4
2018¹
2,613.6
122.2
813.8
1,782.9
139.1
139.1
139.1
2017
2,340.7
83.2
1,104.1
1,162.7
157.1
111.4
45.7
157.1
2019
174.0
20181
(37.1)
2017
121.1
1,617.3
1,483.5
1,429.4
Return on equity (ROE)
1 Amounts presented include the results of operations and balance sheet of CUMIS General, acquired as of April 1, 2018
10.8%
(2.5%)
8.5%
QUARTERLY RESULTS
The quarterly results reflect the seasonality of our business. Premiums are generally written in annual renewal cycles, most often in the
second quarter, and extreme weather conditions historically impact the loss ratio in the first and third quarters.
The timing of claims can be difficult to predict due to uncontrollable factors, such as governmental regulatory actions, weather, or changes
in estimates related to investment provisions. Results are also affected by more predictable factors such as the timing of major
expenditures, changes in estimates related to claims reserves, and purchase and sale decisions made with respect to our investment
portfolio.
(in millions of dollars except EPS and ratios)
2019
Direct written premium
Net earned premium
Net income
Other comprehensive income (loss)
Key statistics
Earnings per share (EPS)
Loss ratio (excluding MYA)
Expense ratio
Combined ratio (excluding MYA)
2018
Direct written premium
Net earned premium
Net income (loss)
Other comprehensive income (loss)
Key statistics
Earnings (loss) per share (EPS)
Loss ratio (excluding MYA)
Expense ratio
1st Qtr
757.6
763.0
21.8
95.3
$0.84
71.9%
32.5%
104.4%
1st Qtr1
599.7
658.1
(27.8)
(7.8)
($1.35)
74.5%
33.0%
2nd Qtr
1,049.8
804.6
79.1
(3.0)
$2.84
62.3%
33.1%
95.4%
3rd Qtr
4th Qtr
999.7
840.6
12.4
14.7
$0.42
70.8%
32.2%
103.0%
945.3
866.5
60.7
(25.1)
$2.30
64.5%
32.7%
97.3%
2nd Qtr
3rd Qtr
4th Qtr
941.7
717.4
(4.0)
21.5
($0.35)
75.7%
32.1%
909.1
750.6
12.9
(14.1)
$0.48
73.4%
30.7%
845.4
760.8
(18.2)
(35.9)
($0.81)
70.0%
32.1%
102.2%
Annual
3,752.4
3,274.7
174.0
81.9
$6.40
68.5%
32.6%
101.1%
Annual
3,295.9
2,886.9
(37.1)
(36.3)
($2.03)
73.3%
31.9%
105.2%
Combined ratio (excluding MYA)
107.5%
1 Amounts presented do not include the results of CUMIS General, acquired on April 1, 2018
107.8%
104.1%
18 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 19
Management’s Discussion & Analysis
In 2019, our quarterly DWP results followed a consistent pattern with 2018 results, with the second quarter representing the largest
quarter, followed by the third quarter. In the first quarter of 2019, we saw a 2.6 percentage point improvement in the loss ratio to 71.9%
compared to the same quarter in 2018. This was the result of lower frequency and severity of current accident year claims in the Western
and Atlantic regions. The second quarter loss ratio improved by 13.4 percentage points due to the non-recurrence of ice and windstorms in
Ontario and Quebec that occurred during the prior period. The third quarter loss ratio improved by 2.6 percentage points and was driven
primarily by premium growth; this impact was partially offset by an increase in claims expenses and adjustments resulting from the impact
of severe weather.
Review of fourth quarter 2019 results
Net income for the quarter amounted to $60.7 million, in contrast to a net loss of $18.2 million in the same quarter of last year. This
produced an earnings per common share in the quarter of $2.30 as opposed to a loss per common share of $0.81 in 2018. The turnaround
in results was largely attributable to strong NEP growth, which grew by 13.9% or $105.7 million from the prior quarter. This was driven by
strong policy growth and higher average premiums and retention within the auto line of business. Partially offsetting this impact was rising
claims costs attributable to higher current accident year claims in the Western and Ontario regions within the auto line of business.
Fourth quarter DWP increased 11.8% over the same period of 2018 to $945.3 million while NEP grew by 13.9% compared to the fourth
quarter of prior year to $866.5 million. DWP and NEP growth was attributable to higher average premiums and sustained policy growth in
all lines of business and across all regions, particularly in Ontario for the auto line of business where client growth has significantly
increased.
The loss ratio for the quarter, excluding MYA, was 64.5% compared to 70.0% from the same period of 2018, an improvement of 5.5
percentage points. This was a result of NEP growth outpacing an increase in the frequency and severity of accident year claims in the
quarter, particularly for the auto line of business.
Fourth quarter operating expenses increased by $18.1 million over the same quarter of last year, the result of higher commissions and
advisor compensation attributed to premium growth and movements in the advisor transition obligation, coupled with higher staffing costs
and project spend.
The fourth quarter of 2019 saw strong performance from our investments, recording net investment income of $74.7 million and
representing a $90.2 million favourable change from the same quarter of last year. This result was mainly driven by unrealized preferred
share gains of $8.6 million and realized net foreign exchange gains of $5.0 million in the current quarter, in contrast with losses of $37.9
million and $8.9 million, respectively, recognized in the same quarter of last year.
We recognized an other comprehensive loss for the quarter of $25.1 million, an improvement of $10.8 million compared to the comparative
quarter in 2018. Much of the quarter’s loss can be attributed to unrealized losses in our bond portfolio of $58.3 million as interest rates rose
in the period, coupled with $12.4 million in reclassification adjustments to the consolidated statement of income. In addition, adverse
changes in the discount rate and other actuarial assumptions resulted in a $3.1 million remeasurement of our retired benefit obligation.
This was partially offset by unrealized gains on our common shares of $12.0 million as a result of continued strength in the S&P/TSX and
S&P 500 common share indexes.
OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL COMMITMENTS
Securities lending
We lend securities in our investment portfolio to other institutions for short periods to generate additional fee income. We receive securities
of superior credit quality and value as collateral for securities loaned. As at December 31, 2019, the value of the securities on loan
consisted of $75.7 million in stocks and $715.7 million in bonds. Securities with a fair value of $849.5 million were received as collateral.
The collateral received has not been recorded in Co-operators General’s consolidated balance sheet.
Investment commitments
We have entered into commitments with private equity funds to invest additional funds of $71.7 million and US$177.5 million into limited
partnership structures. The timing and the amount of capital contributions that are called is determined by the General Partner. As at
December 31, 2019, we had provided capital contributions of $162.5 million towards these commitments.
Structured settlements
In the normal course of claims adjudication, we settle certain obligations to claimants through the purchase of annuities from third party life
insurance companies under structured settlement arrangements. This business is placed with several licensed Canadian insurance
companies. Our net risk is the credit risk related to the life insurance companies the annuities are purchased from. To manage this risk, we
enter into structured settlements with life insurance companies with a credit rating of A or higher. This risk is further reduced to the extent
of coverage provided by Assuris, the life insurance compensation plan that funds most policy liabilities of an insolvent Canadian life
insurer. As at December 31, 2019, we have guaranteed the life insurers’ obligations under these annuities, totaling $794.8 million, based
on the net present value of the projected future cash flow of these guarantees. No default has occurred, and we consider the possibility of
default to be remote.
CONTINGENCIES
We are subject to litigation arising in the normal course of conducting our insurance business. We are of the opinion that current litigation
will not have a significant effect on the financial position, results of operations, or cash flows of Co-operators General. As at December 31,
2019, no other material contingencies have been identified.
RELATED PARTY TRANSACTIONS
On May 27, 2019, CGIC entered into an agreement with a company under common control, H.B. Group Insurance Management Ltd., to
acquire a line of business that provides brokerage services for group home and auto insurance across Canada. Both parties to the
agreement are owned 100% by CFSL. CGIC applied the predecessor accounting method and recorded the acquisition at the carrying
values of the net assets. The difference between the carrying value and the consideration exchanged was recorded through shareholders’
equity in our consolidated financial statements. The fair value of the consideration exchanged of $130.0 million was funded by CGIC
through the issuance of common shares to its immediate parent, CFSL. The carrying value of net assets acquired was $nil. The acquisition
provides CGIC with direct access to HB’s customer base.
In the normal course of business, we obtain services from our ultimate and immediate parent companies as well as from related
companies that are under the common ownership of our ultimate parent company. Note 25 of the consolidated financial statements
provides additional information on related party transactions.
Services we receive:
Corporate services from Co-operators Financial Services Limited (2019 - $151.6 million, 2018 - $126.6 million)
Corporate services are provided by the parent company, CFSL. CFSL recovers the cost for services including corporate procurement,
human resources, costs related to the Board of Directors, annual meeting, senior executives, general counsel, compliance, enterprise risk
management, corporate actuarial, corporate reinsurance, strategic planning, enterprise project portfolio office, corporate finance, financial
accounting services, tax, audit, marketing and corporate communications, enterprise information technology and workplace services. The
management fee charges are set on a cost-recovery basis and are shared amongst the various subsidiaries of the parent company based
on estimated usage of services provided. This contract renews annually.
Executive services from The Co-operators Group Limited (2019 - $8.7 million, 2018 - $8.3 million)
Executive services are provided by certain senior executives of the ultimate parent company, CGL. The executive fee charges are
allocated to the various subsidiaries of the parent company based on the compensation costs incurred by CGL related to these employees.
This contract renews annually.
Product distribution from HB Group Insurance Management Ltd. (2019 - $73.3 million, 2018 - $67.3 million)
HB Group is the primary distribution channel for COSECO and provides distribution for CUMIS General as well. HB Group charges a
commission for its distribution services. This contract renews annually.
Product distribution from Premier Managers Holdings Corporation (2019 - $23.9 million, 2018 - $19.1 million)
Premier is one of the distribution channels for Sovereign. Premier charges a commission for its distribution services. This contract renews
annually.
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CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 21
Management’s Discussion & Analysis
Reinsurance from Co-operators Life Insurance Company (premiums: 2019 - $68.3 million, 2018 - $86.7 million; commissions: 2019 -
$36.9 million, 2018 - $45.1 million)
CUMIS General cedes a portion of the accident and sickness premium and the related commission expense within the travel line of
business to CLIC. The reinsurance contract is set at terms and conditions similar to those of other third-party reinsurance contracts.
Employee and retiree benefits administration from Co-operators Life Insurance Company (2019 - $9.1 million, 2018 - $7.1 million)
The respite on the trade front has improved the likelihood that the global economy, particularly the North American economies, will
continue to expand in 2020. In addition to the geopolitical risks that could alter this view, accommodative monetary policy in economies
operating at or above capacity could push inflation higher. The reaction of central banks will determine how much longer this economic
cycle can last.
We consulted with our investment management company, Addenda, to create these assumptions and we include them in our planning
process. We also work within the parameters of our investment policy to take advantage of the opportunities and mitigate the threats in the
market to deliver an adequate return on our invested assets while protecting our capital.
Employee life and long-term disability benefits are insured and medical and dental benefits are provided for under an administrative
services only contract. These contracts are set at terms and conditions similar to those CLIC establishes for its third-party client base. This
contract renews annually.
PROPERTY AND CASUALTY INDUSTRY
Investment management services from Addenda Capital Inc. (2019 - $5.1 million, 2018 - $5.1 million)
Addenda provides investment management services for our portfolio of invested assets. The fees are charged in a manner that is
consistent with Addenda’s external clients. This contract renews annually.
Members and members of members service agreement with Federated Agencies Limited (2019 - $2.3 million, 2018 - $2.6 million)
Federated Agencies Limited holds applicable licenses to provide products and services to CGL’s members and members of CGL’s
members. A commission is charged for broker and underwriting services. This contract renews annually.
Services we provide:
We provide product distribution services (2019 - $44.0 million, 2018 - $42.4 million) and marketing services (2019 - $8.8 million, 2018 -
$8.7 million) to CLIC for insurance and wealth management products. We compensate the advisors directly and receive payments based
on the production level from CLIC. The compensation rate is negotiated on a fair and equitable basis by using industry comparatives. We
also charge CLIC for the portion of the marketing program deemed to benefit the life insurance business. This contract is periodically
renegotiated.
CUMIS General assumes a portion of the accident and sickness business premium (2019 - $3.8 million, 2018 - $3.6 million) and the
related commission expense (2019 - $2.2 million, 2018 - $2.2 million) within the travel line of business from CLIC. The reinsurance contract
is set at terms and conditions similar to those of other third-party reinsurance contracts.
OUTLOOK, BUSINESS DEVELOPMENTS AND OPERATING ENVIRONMENT
GENERAL BUSINESS AND ECONOMIC CONDITIONS
The last year of the 2010 decade was an eventful one. Financial markets’ fears fueled by geopolitical and economic uncertainty triggered
varying approaches to monetary policy. In Canada, the economy expanded at a 1.7% pace after three quarters without the benefit of
monetary policy support. Indeed, the rate of inflation in Canada has matched, even exceeded the central bank’s 2% target, leading the
Bank of Canada to leave its policy rate unchanged at 1.75%. We expect the Canadian central bank to leave its policy rate unchanged in
2020 and the economy to expand by 1.8% this year.
The Federal Reserve of the United States reversed part of the 100 basis points increase in the Fed’s funds target rate in 2018 by lowering
it by 75 basis points in 2019. This “mid-cycle adjustment” was needed, according to the US central bank, to offset the potential hurdles of a
trade war and their impact on economic activity. The Fed’s change in approach weighed on the bond market, leading to the inversion of the
yield curve in August and bringing many market participants to discount an imminent recession. As the second half of the year unfolded,
progress was made on the trade front with the United States and China seemingly agreeing on a trade war truce. Economic data
invalidated the markets’ fears of an impending recession and the yield curve steepened and bond yields generally increased at year-end.
Most central banks across the world have followed in the Fed’s easing footsteps to ensure that this long business cycle extends throughout
2020. Additionally, uncertainties surrounding trade seem to be taking a back seat alleviating the fears of a global slowdown. Even the
European economy, in the midst of Brexit, is showing signs of stabilization. After three quarters in 2019, the US economy has expanded by
2.3% and we are expecting that the “mid-cycle adjustment” will result in a 2.1% growth rate in 2020. The US central bank is keen to see
the rate of inflation and inflation expectations move up towards its 2% target. We expect the Fed to keep monetary policy accommodative
and to remain on the sidelines in this US electoral year, enhancing the probabilities of reaching its inflation target in the context of a low
unemployment rate.
Outlined below are some of the issues expected to affect the industry in 2020 and beyond, as well as our strategic response.
Climate change and severe weather events - The frequency and severity of climate change related weather events has been steadily
increasing. As a result of this trend, insurers have experienced a marked increase in extreme weather-related payouts. The costs of
rebuilding have increased as a result of more frequent extreme weather events, inadequate infrastructure and rising property values.
However, addressing this extreme weather trend has also brought about a better understanding of how changing weather patterns impact
the risks we face, along with innovative solutions to help everyone deal with them (from both a risk mitigation and indemnification
perspective). We have been proactive in further segmenting our policy base to provide our clients with the coverage they need and priced
at a level to ensure competitiveness and profitability.
Severe weather events can often result in flooding, leaving our cities and homes increasingly vulnerable to uninsured risks. The existing
government policy places too much emphasis on recovery at the expense of mitigation. We are dedicated to finding sustainable solutions
that better protect our communities and our economy. We will continue to support efforts to engage governments and other stakeholders to
help identify solutions to manage, mitigate, and transfer risks associated with overland flooding.
New approaches to distribution - The dominant retail distribution model for home and auto insurance has historically existed between
P&C manufacturers and small independent retail brokers. This is now shifting as independent brokers are increasingly either
amalgamating or being purchased by manufacturers. Manufacturers are looking to new channels to distribute, either through digital
offerings or through other partnerships. We are committed to delivering an guided omni-channel distribution model for our clients to give
them the flexibility to choose when, where and how they interact with us. We will also expand client relationships through partners who
complement our core competencies, and/or provide us with a competitive advantage. We intentionally pursue market segments that
position us to provide the best offerings and are equally intentional about building partnerships where better offerings or capabilities are
available.
Investing in digitization - Insurers are increasingly investing in the channels, tools and platforms to enhance all areas of the insurance
value chain. Clients are increasingly turning to digital tools for self-service. Digitization also allows carriers to offer new products, such as
top-ups to existing insurance products and other more simplified products. Increasing automation and technology-assisted decision-making
is helping insurers streamline their back-office functions, from underwriting to claims. Enhancing our digital capabilities is a core element of
building our guided omni-channel distribution model.
Diversifying the product portfolio - P&C insurers, especially those with a concentration in the auto market, are increasingly looking to
diversify their portfolio to transform their business and operating models, and to gain access to innovation capabilities and emerging
technologies. Insurers are looking to grow outside their core portfolio, either through organic growth or acquisition. Insurers who have
historically concentrated on the retail market are increasingly looking to the commercial insurance market as an area of expansion.
Increased concentration on underwriting profit - Claims costs are rising as the result of climate change, rising house prices, and
increased vehicle repair costs as a result of new technology. On the other hand, new safety technologies in cars should drive down auto
accident frequency and new houses are increasingly resistant to fires, theft and other perils. In the face of these opposing forces, as well
as a decline in the returns from investments and increased market volatility, insurers are increasingly focused on achieving profitability
from their underwriting activities. We have placed significant effort on achieving underwriting profitability through 2019 initiatives and this
will continue to be a primary focus for us over our four-year strategy.
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CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 23
Management’s Discussion & Analysis
Emerging technologies and cyber dependency - Industry trends are increasingly driven by heightened consumer expectations and
emerging technological capabilities. There is potential for transformation of our business through artificial intelligence, the internet of things,
big data and analytics to bolster underwriting, pricing, claims, regulatory compliance and client experience. There is also a potential growth
opportunity because as more data is tracked and analyzed, it may be possible to underwrite new products and price risks more accurately.
The number of connected devices, and the amount of data transmitted, is projected to rise drastically. Data generated from the internet of
things has potential application across the full range of products and lines of business.
The emergence of autonomous vehicle technology is compounding the uncertainty around the auto insurance market. The economic and
social impacts of autonomous, connected and electric vehicles will be transformative. A key component of this evolution is the transition
from personally owned modes of transport to the concept of mobility as a service. There are still unknowns with respect to the speed at
which the technology will be developed and adopted, and how regulations will respond.
Auto insurance reform
Over the last year, we have engaged with government and regulators to advocate on the urgent need for auto insurance reform to address
the significant challenges within the system. We are pleased with the recent announcement that the government has established an auto
insurance advisory committee and will be sharing our reform recommendations with committee members. Legislative changes have not yet
been introduced.
Auto insurance system review in Newfoundland and Labrador
This year, two pieces of auto insurance reform legislation were introduced, which notably increased the deductible for bodily injury claims,
announced treatment protocols for common injuries as the primary payer, and introduced direct compensation for property damage
(DCPD). Regulations on DCPD coverage were released in the fall of 2019, coming into effect at the beginning of 2020. The treatment
protocol section of the legislation has not yet been brought into force. We do not expect these changes to have a significant impact on loss
costs associated with accident benefit or bodily injury claims.
As the dependency on technology and connectivity increases, cyber risk is becoming a growing risk that impacts all Canadians in their
personal and corporate lives. While this introduces operational risks for our business, it also presents an opportunity to provide innovative
product solutions for this emerging risk exposure.
RISK MANAGEMENT
EMERGING LEGISLATION AND REGULATORY EVENTS
Legislative, judicial and regulatory events have an impact on our claims reserving practices. Changes to legislation which occurred in
previous periods will likely have an ongoing impact in our business in future periods. Legislative and regulatory changes, both current and
future, are discussed below.
Ontario auto
Auto insurance is heavily regulated by the Financial Services Regulatory Authority of Ontario (FSRA). FSRA administers the Insurance Act
and its regulations, and approves any auto rate changes. We actively monitor legislative developments and seek to engage with the
government and its agencies on important issues. An update on several current issues is as follows:
Financial Services Regulatory Authority
In June, the Financial Services Regulatory Authority of Ontario (FSRA) assumed regulatory duties, replacing the Financial Services
Commission of Ontario (FSCO). FSRA intends to take a principles-based approach to regulation, and recently implemented a new “file-
and-use” standard rate filing process that is intended to streamline the rate regulation process. We continue to engage with FSRA,
participating on several advisory committees related to property and casualty insurance.
Auto insurance reform
In the 2019-20 budget, the Ontario government released its Putting Drivers First blueprint, a framework for auto insurance reform focused
on affordability and accessibility. We have actively participated in several government consultations and advisory groups related to the
blueprint. To date, no reform legislation has been introduced.
Alberta auto
Auto insurance is heavily regulated by the Office of the Superintendent and the Automobile Insurance Rate Board (AIRB). The former
administers the Insurance Act and its regulations, while the AIRB approves all auto rate changes. Alberta’s market has presented
challenges, and we have actively engaged with the government and regulators to address these issues.
Rate regulations
In September 2019, following two separate periods where cumulative rate increases were capped at 5% in each period, the second-rate
cap expired without the introduction of a third. We filed and were approved for a rate increase above the previous cap amount. This was an
important step towards addressing the profitability challenges facing the company and the industry at large. However, cost pressures
persist, and results continue to deteriorate, leaving rate increases as a short-term solution only. We remain committed to working with the
government and the AIRB to achieve common auto insurance reform objectives that will benefit drivers.
Effective risk management is vital to making and executing sound business decisions, both strategically and operationally. It involves
identifying and understanding the risks that the organization is exposed to, making an assessment as to its materiality and taking
measures to manage the risks within acceptable tolerances. We recognize the importance of a strong risk management culture where the
efficient and effective assessment of material risks forms the basis of all decision-making and strategic planning.
The Co-operators has an enterprise-wide approach to the identification, assessment, quantification, monitoring, reporting and mitigation of
risks across the organization which also applies to Co-operators General. The Board of Directors, directly or through the Risk and
Compensation Committee (RCC) of the Board, ensures that senior management has put appropriate risk management policies in place
and that risk management processes are effective. Regular reports on our risk profile relative to our Board-approved risk appetite are
provided to the RCC and senior management by our Chief Risk Officer (CRO).
We have identified and considered a variety of risk issues when engaging in our organizational activities. We also monitor emerging risks
that are evolving in uncertain ways, have been forgotten in their dormancy, or are new. We continuously assess our risk environment and
the potential impact on our corporate strategy, business plan, competitive position, operational results, reputation and financial condition.
The risks identified within our risk universe are not presumed to be exhaustive and previously unidentified risks or material changes in the
exposure to a known risk may occur resulting in a re-assessment of their relative effect on Co-operators General.
At least annually we conduct an Own Risk and Solvency Assessment (ORSA). ORSA is a tool used to enhance our understanding of the
interrelationships between our risk profile and capital needs. It is designed to be congruent with our business strategy and operational
business plan. As part of the ORSA process, we consider all reasonably foreseeable and relevant material risks. ORSA incorporates stress
testing over the business planning period in order to be forward-looking and reflect the dynamic nature of our business and operating
environment. As an output of the assessment, we determine the level of capital needed to cover our risks, including those risks covered in
the regulatory capital guidelines.
RISK MANAGEMENT STRUCTURE
Board of Directors: Most of the Enterprise Risk Management (ERM) Board oversight is delegated to the RCC of the CGL Board.
However, the full Board maintains responsibility for approving the ERM Framework and the Risk Appetite Framework after reviewing the
RCC’s recommendations. The Board also reviews and approves the results of the ORSA annually and approves CGIC’s minimum internal
capital target.
Risk and Compensation Committee of the Board: The RCC is comprised of a subset of members of the CGL Board of Directors. RCC’s
mandate includes setting the “tone at the top” for a strong ERM culture, and oversight of our ERM Framework. The RCC monitors ERM
processes to ensure their effectiveness by approving risk limits for significant risks, reviewing regular reporting on our risk profile relative to
our Board-approved risk appetite, and understanding action taken by management in response to identified issues. In addition, the RCC
oversees the strategy for the use of risk and capital modelling methods and tools as well as our stress testing program. The RCC is also
responsible for determining risk impacts of climate change within ORSA and stress testing.
Management Risk Committee (MRC): The MRC includes all members of the Co-operators Management Group (CMG, which includes
the Chief Executive Officer and his direct reports), the CRO, and the VP Strategic Planning. The MRC meets at least quarterly and is a
strategic decision-making body responsible for planning, directing and controlling the impact of all significant risks faced by the
organization. The MRC also helps to set the tone for a strong ERM culture, supports the ERM vision across the organization and acts as
the authoritative escalation body for risk-related issues.
24 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 25
Management’s Discussion & Analysis
Management Capital Committee (MCC): The MCC is a subcommittee that monitors, evaluates, and recommends capital allocation and
strategy decisions to CMG. The MCC ensures capital management practices align with all regulatory expectations and requirements. Its
responsibilities include understanding the impact of stress events on capital and ensuring adequate capital contingency plans are in place
to deal with remote but plausible stress scenarios.
Management Investment Committee (MIC): The MIC is a subcommittee that reviews and advises management on the lending and
investment programs. MIC develops and recommends adoption of the lending and investment risk management policies and provides risk
measurement, assessment, monitoring and reporting of investment policies.
Reinsurance & Insurance Counterparty Standards Committee (RICS): The RICS is a subcommittee that sets and communicates
standards to be applied in assessing counterparties with whom we currently, or may in the future, engage in financial business
relationships. The RICS is also accountable for monitoring counterparties' credit and default risk against these standards.
Functional and Business Unit Risk Management: Functions that operate across the group of companies and business units that
operate within their respective companies are responsible for managing the risks related to their own operations. While these risks may be
specific to their function or business unit, the ERM framework provides a common language and common tools to identify, assess, quantify
and manage these risks.
Oversight Functions: Areas with independent oversight accountabilities reside in functions such as ERM, Compliance, Corporate
Governance, Financial Controllership, Legal, Human Resources, Tax, Information Technology, Corporate Actuarial and other areas within
control and group functions. They are not actively involved in the management of the business. They provide oversight of risks, provide
guidance in their area of expertise, and help to build and monitor risk controls.
Audit Services: Audit Services performs periodic risk-based reviews to ensure adherence to risk policies and practices thereby providing
independent assurance that risk controls are in place and are operating effectively.
RISK APPETITE
Our purpose in setting our risk appetite is to define the types and amount of risk we are willing and able to responsibly accept in the pursuit
of earning an appropriate return and fulfilling our strategic goals. Our risk appetite statements describe, at a broad level, the risks we will
avoid, the risks we are prepared to assume and the limits we will place on those risks.
Our risk appetite is informed by these principles:
• We cannot be in business without taking risks;
•
•
The risks we take must further our mission and be consistent with our vision and values;
As a co-operative, we have limited access to new capital. To develop and sustain our business, we must earn a reasonable return
on the capital we have;
• We must manage risk in a way that balances short and long-term objectives in order to allow us to compete in the marketplace
and ensure our sustainability;
• We desire to both evaluate opportunities for appropriate risk-taking and prevent excessive risk-taking; and
•
The risks we face are multiple, complex and often inter-related. Some are readily measurable, others are not. While models
provide a useful means for understanding our risks, and controls provide valuable mitigation in the management of risks, they do
not eliminate the need for the application of informed judgment and common sense.
The development and establishment of our risk appetite is a dynamic and iterative process that requires ongoing dialogue throughout our
organization. Our risk appetite may change over time in line with our changing capabilities for managing risk. Our actual risk profile relative
to our desired risk appetite is monitored and reported quarterly to senior management, the RCC and the Board.
Our risk appetite shapes our organization’s risk profile, influences the development and implementation of our strategy, and determines the
risks we undertake in relation to our organization’s risk capacity.
RISK UNIVERSE
We categorize our risks using a common taxonomy referred to as our risk universe:
•
•
Investment Risk – The risk of loss resulting from the quality of invested assets, movements in the capital markets, and/or the
relationship between insurance assets and liabilities. It includes credit, liquidity, market and real estate risk.
Insurance Risk – The risk of potential financial loss that may arise where the amount, timing and/or frequency of benefit and/or
premium payments under insurance or reinsurance contracts is different than what was expected at the time of pricing and/or
reserving for the insurance contract. Insurance risk is distinct from investment, operational, strategic or reputation risk where
those risks are ancillary to or accompany the risk transfer.
• Operational Risk – The risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or
from external events. It includes legal and regulatory risk but excludes strategic and reputation risk. External events include
global issues such as climate change risk.
Strategic Risk – The risk arising from our inability to adopt and execute effective business plans and tactics, to allocate resources
appropriately, and to adapt to changes in our business environment. We research and consider the implications of emerging
strategic trends in our strategic planning processes and build our plans accordingly.
•
• Reputation Risk – The risk of loss resulting from an activity of CGL or its representatives that impairs our image in the
community, or public confidence. This may result in loss of business, legal action, an increased cost of capital, and/or additional
regulatory oversight. We conscientiously influence our reputation by being authentic to who we are, by assuming responsibility
for our actions, and by proactively communicating and conducting our business activities in an ethical, fair, honest and
transparent manner.
The sections that follow highlight some of the risks that fall within these categories.
INVESTMENT (FINANCIAL) RISKS
Credit risk
Credit risk is the risk resulting from the failure of a counterparty/debtor to honour its obligation to us.
Our credit risk exposures include mortgage default, reinsurance counterparty and other asset impairments (for example, relating to short-
term investments, bonds, limited partnerships, mortgages, loans and receivables). Our RICS sets and monitors adherence to standards for
counterparties so that The Co-operators is not exposed to excessive or unacceptable counterparty risk. Our Investment Policies put limits
on the bond portfolio including portfolio composition limits, issuer type limits, bond quality limits, single issuer limits, corporate sector limits
and general guidelines for geographic exposure. Co-operators General also has a comprehensive mortgage investment policy which
includes, among other factors, single loan limits, diversification by type of property limits, and geographic diversification limits. For more
information on credit risk refer to Note 6 to the consolidated financial statements.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk includes credit spread, equity, foreign exchange and interest rate risk. There are several strategies that we employ to ensure
that our market risk remains within our risk appetite including: limiting our exposure to certain types of assets, reducing or exiting
businesses with unacceptable levels of market risk, managing net duration with asset liability management (ALM) strategies, using
derivative instruments, or placing limits on the credit quality of fixed-income assets.
Credit spread risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of movements in credit
spreads. Credit spread risk is distinct from the risk of default of a counterparty or debtor.
Equity risk results from movements in and/or the volatility of equity markets, including equity prices and indices. Diversification techniques
are employed to minimize risk. Our Investment Policies limit total investment in any entity or group of related entities to a maximum of 5%
of our assets. Our stock portfolio is benchmarked to the indices noted in the table below. A 10% movement in the indices, with all other
variables held constant, would have the following estimated effect on the fair values of our stock holdings as at December 31, 2019.
$ millions
Stock Portfolio
Benchmark
Canadian common
U.S. equities
Foreign equities1
1Co-operators General divested its foreign equity portfolio in December 2018
S&P/TSX Composite Index
S&P 500 Index (CDN $)
MSCI EAFE Index (CDN $)
2019
69.7
18.8
-
2018
54.1
15.9
0.4
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CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 27
Management’s Discussion & Analysis
Our foreign exchange risk is primarily related to our investment holdings. Our policies limit investments in foreign denominated securities to
a maximum value of 15% of invested assets. We partially mitigate this currency risk by buying or selling foreign exchange forward
contracts. Foreign exchange forward contracts are commitments to buy or sell foreign currencies for delivery at a specified date in the
future at a fixed rate. For more information on currency risk refer to Note 6 to the consolidated financial statements.
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of movements in and/or
the volatility of interest rates. When asset cash flows do not coincide with the cash flows arising from the liabilities, this may result in the
need to either sell assets to meet policy obligations or reinvest excess asset cash flows in unfavourable interest rate environments.
Historical data and current information are used to profile the ultimate claims settlement pattern by class of insurance, which is then used
to develop an Investment Policy and strategy. To mitigate a portion of our interest rate risk, Co-operators General deploys an ALM
strategy. A portion of the assets backing our unpaid claims and adjustment expenses are designated as FVTPL under the fair value option
with the objective of offsetting a targeted portion of the financial impact of interest rate changes and avoiding an accounting mismatch.
While interest rate increases tend to have a positive effect on our net income, they tend to weaken our overall financial position due to the
impact on bond values. A 1% movement in the interest rate, with all other variables held constant, would have the following estimated
effect on the fair values of our holdings as at December 31, 2019:
$ millions
Bonds
Canadian preferred stocks
Pooled funds
Liquidity risk
December 31, 2019
December 31, 2018
AFS
131.9
-
17.7
FVTPL
7.1
16.9
-
AFS
120.9
-
14.6
FVTPL
6.3
16.0
-
The increasing incidence and severity of extreme weather-related events is a growing challenge faced by the insurance industry. This
challenge is intensified by aging municipal infrastructures that are unable to cope with intense storms, greater concentrations of people
living in vulnerable areas and higher property values at risk. As an organization whose mission is to provide financial security for
Canadians and their communities, it is our duty to continue to enhance our understanding of the potential impacts of climate change and its
associated risks, while striving to develop and promote solutions that offer protection to our clients and enhance their financial resiliency.
While many of the impacts associated with climate change are beyond our direct control, we have an opportunity to incentivize sustainable
behaviour amongst our clients, mitigate risks through pricing and product development, and promote sustainable decision-making in our
communities through various advocacy efforts. Refer to the Climate-related financial disclosures section of the MD&A for additional
information on this topic.
We write business that is broadly diversified in terms of lines of business and geographic location. There is no guarantee that a
catastrophe would not result in claims in excess of our maximum reinsurance coverage; however, based on our catastrophic loss models
our protection is in excess of regulatory guidelines and at a level that management considers prudent and in line with our risk appetite.
Reinsurance risk
Reinsurance risk is the risk that the organization’s reinsurance program (ceded and/or assumed) does not operate as intended.
Reinsurance is purchased to limit our exposure to an individual risk, category of risk or geographic risk area. We review our reinsurance
limit and scope of cover requirements annually. After these requirements have been determined, we carefully negotiate reinsurance
contract terms with selected entities. The availability and cost of this reinsurance is subject to prevailing market conditions. In managing
reinsurance risk, we also assess and monitor the financial strength of our reinsurers on a regular basis. There have been no material
defaults with reinsurers in the past ten years. Refer to Note 9 of the consolidated financial statements for further information regarding
reinsurance.
Liquidity risk refers to the risk resulting from holding inadequate liquid assets to meet our obligations as they come due. It includes
operational and strategic liquidity.
Product Design and Pricing risk
Liquidity risk can arise from adverse conditions in financial markets that could negatively affect our ability to convert invested assets into
cash in a timely and cost-effective manner, or policyholder behavior in the form of cash demands as a result of claims, contractual
commitments, or other outflows. Claims payments are funded by current revenue cash flow which normally exceeds cash requirements.
Refer to the Off Balance Sheet Arrangements and Contractual Commitments section of the MD&A for a discussion of our commitments.
We do not have other material liabilities that can be called unexpectedly at the demand of a lender or client. We do not have material
commitments for capital expenditures, and there is no need for such expenditures in the normal course of business. In addition, we
measure our liquidity needs under both normal and stressed conditions ensuring that we have a sufficient level of liquid invested assets at
all times. We have $19.0 million in available credit facilities as well as access to financial support from our parent company. For more
information on liquidity risk refer to Note 6 to the consolidated financial statements.
INSURANCE RISKS
For P&C insurers, this represents the risk that policyholders will experience a higher frequency and/or severity of auto, home, commercial
business and/or travel related losses. This results in higher than expected claims payments for bodily injury, liability coverages and/or
coverages related to the damage to, or loss of, a physical asset. This includes catastrophe, claims, product design and pricing,
reinsurance, reserve valuation, and underwriting risks. For more information on insurance risk refer to Note 7 to the consolidated financial
statements.
Product design and pricing risk is the risk resulting from the pricing or features of our products, where revenues and/or costs experienced
differ from those expected at the time of pricing.
We price our products taking into account numerous factors including historical claims frequency and severity trends, product line expense
ratios, cashflow payment patterns, special risk factors, the capital required to support the product line, and the investment income earned
on that capital. Our pricing process is designed to ensure an appropriate return on equity while also providing long-term rate stability.
These factors are reviewed and adjusted periodically to ensure they reflect the current environment.
We strive to ensure our pricing will produce an appropriate return on invested capital; however, various external factors like market realities
or regulations can have an impact on our ability to do so. For example, in provinces that mandate pricing for automobile insurance, pricing
must be submitted to each provincial government regulator. It is possible that, in spite of our best efforts, regulatory decisions may impede
automobile rate increases or other actions that we may wish to undertake. Also, during periods of intense competition for any product line,
our competitors may price their products below the rates we consider acceptable, which would have an impact on our ability to maintain
our rates where we want them. Additionally, changes in our natural environment exacerbated by climate change are making it more difficult
to rely on historical claims frequency and severity as a predictor of future claims patterns. In order to continue to develop and offer
products that meet the needs of Canadians and their communities, we have invested in the development of internal business intelligence
and predictive models to provide us with further insight into hazard-prone areas.
Underwriting risk
Catastrophe risk
Underwriting risk is the risk resulting from the selection and approval of risks to be insured.
Catastrophe risk is the risk that a catastrophic event severely impairs our financial position.
P&C insurers are subject to catastrophes which are a series of property and automobile physical damage claims arising from a single
event. Catastrophes are caused by various perils such as earthquake, tornado, wind, hail, winter storm, flood or fire. Catastrophes can
have a significant effect on our operating results and financial condition. The incidence and severity of catastrophes are inherently
unpredictable. To limit our potential impact, we purchase reinsurance which will reimburse us for claims related to a single occurrence
event, up to a maximum of $1.4 billion. The deductible and maximum limit for catastrophe reinsurance applies to all P&C operations on a
group-wide basis. After the application of the catastrophe program, Co-operators General retention is $70.0 million in incurred claims,
which represents approximately 4.2% of our capital. For the purpose of capital management, we define capital as shareholders’ equity
excluding AOCI.
Our underwriting objective is to develop business with sufficient scale within our target market on a prudent and diversified basis and to
achieve profitable underwriting results. We underwrite automobile business based on annual reviews of the client’s driving record and
claims experience. We underwrite property lines based on location, physical condition, property replacement values, claims experience
and other relevant factors. Highly trained and experienced underwriters manually underwrite complex risks using comprehensive
underwriting manuals which detail the practices and procedures used in the determination of the insurance risk and the decision of whether
to offer coverage. We also leverage our business intelligence system which gives us the tools to better segment and underwrite. All
employees in the underwriting area are trained and their work is audited on a regular basis. Advisors and brokers are compensated, in
part, based on the profitability of their portfolio.
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Management’s Discussion & Analysis
Claims risk
Claims risk is the risk that the level of actual ultimate claims paid on settlement is different from what was expected.
We employ more than 1,000 claims personnel across Canada, with the majority of claims being handled internally and the remainder
handled through independent adjusters. Each employee has an authority limit, which is based on related education, skills and work
experience. They are supported by training and comprehensive reference materials which have been compiled to identify investigations
and information required before a claim can be paid. Our claims handling approach results in an appropriate control of claims costs.
Reserve Valuation risk
Reserve valuation risk is the risk of misestimating reserve liabilities, where actual cashflows experienced differ from those expected at the
time of reserve valuation. It is dependent on the actuarial reserve valuation, as well as claims reserving practices.
We maintain provisions for unpaid claims and adjustment expenses to cover our estimated ultimate liability for claims. There is the
potential for significant variability in the amount of ultimate settlement from the current amounts recorded. Our practice is to maintain an
adequate margin to ensure future years’ earnings are not negatively affected by prior years’ claims development and other variable factors,
such as inflation. We also monitor fluctuations in reserve adequacy on an ongoing basis, and periodically seek an external peer review of
reserve levels. We are subject to some exposure in the fluctuation of long-term portfolio yield rates in the valuation of our discounted
unpaid claims. Our claims development table and sensitivity analysis are in Note 7 to the consolidated financial statements.
OPERATIONAL RISKS
Business Continuity and Resilience risk
Business continuity and resilience risk is the risk of a prolonged interruption in the business operations or the ability to restore operations
after a disruption.
There are many events that could result in the interruption of our business operations. These can range from sudden catastrophes, such
as power outages, cyber-attacks, earthquakes, floods and hurricanes, to slower moving events such as pandemics. We have plans and
actions in place to maintain resilience and maintain service standards to our clients as much as possible. We have building evacuation
procedures in place that are evaluated and tested on a regular basis, as well as inclement weather guidelines, telework guidelines, crisis
communications procedures and a staff emergency line. Business Continuity and Infectious Disease Plans are created, maintained and
tested to a set of established standards. Compliance with these standards is monitored and reported to Senior Management and the Board
of Directors at least annually.
Financial Accounting risk
The risk of failing to record, maintain and present financial information and accounting transactions in accordance with IFRS, professional
and/or industry requirements.
IFRS 17 “Insurance Contracts” along with IFRS 9 “Financial Instruments” will become effective on January 1st, 2022. These new standards
bring with them an unprecedented wave of new financial reporting and regulatory requirements that will significantly impact the actuarial,
risk, and accounting data, processes and systems within our organization. We are preparing for and managing this transition and
implementation risk through an integrated operating model and technology platform for finance and actuarial that enables us to work as
one unified team with one seamless calculation and reporting system.
For additional information on these standards as well as other financial accounting changes expected to impact our business, refer to
Future Accounting Changes section.
Global Issues risk
Global issues risk is the risk of global trends and external issues that impact our clients and their communities, affect the nature of the
insurance industry overall and/or affect our ability to remain relevant to our member organizations and clients. It includes the natural,
political, legal, regulatory and social environment, as well as systemic risks.
We consider the implications of potential changes to our natural, political, legal and regulatory, economic and social environment in our
strategic planning processes to understand the impacts and adjust our plans if necessary. Risks present in our natural environment as a
result of changing climate patterns have long-term implications in our operating environment. Consistent with our vision of The
Co-operators as a catalyst for a sustainable society, we aspire to provide insurance and investment management solutions for individuals
and businesses who wish to exert a positive influence on the social or natural environment. We advocate for sustainable behaviour and
strive to incorporate sustainable practices within our own organization through impact investments and carbon emissions reduction. Refer
to the Climate-related financial disclosures section of the MD&A for a discussion of our commitment to manage this risk.
Regulatory Compliance risk
Regulatory compliance risk is the risk of failing to comply with applicable laws and regulations, including bribery, business conduct,
consumer protection, employment practices, market conduct, privacy and tax.
P&C insurance companies are subject to significant regulation by governments. We monitor our compliance with all relevant regulations for
the jurisdictions in which we operate. As in any regulated industry, it is possible that future regulatory changes or developments may
prevent us from raising rates or taking other action to enhance our operating results. As well, future regulatory changes, novel or
unexpected judicial interpretations or political developments could fundamentally change the business environment in which we operate.
We actively participate in discussions with regulators, governments, and industry groups to ensure we are well-informed of contemplated
changes and that our concerns are understood.
For regulatory changes expected to impact our business, refer to Emerging Legislation and Regulatory Events section of the MD&A above.
Information Technology risk
Information technology risk is the risk that we cannot secure, develop, adopt, operate and support the technology required to meet current
and future business objectives and client expectations. It includes risks related to access security, computer operations, resolution
management, and IT system changes.
The cyber threat landscape is continually evolving and new vulnerabilities are being identified across all aspects of the technology
spectrum. As a member of the financial services industry, our organization is exposed to threat agents looking for technical weaknesses
and exploitable vulnerabilities. A cyber-incident has the potential to result in material consequences for our organization and our clients
including loss of system availability, loss of data or data integrity, breaches or distribution of confidential information, as well as impacts to
our overall reputation and brand. Our goal is to maintain strong control processes and a resilient technological environment that can
safeguard our systems and client information.
To mitigate and manage our exposure to a cyber breach, our organization has implemented a security risk management program with both
governance and operational components, including training and awareness at all levels. Our internal technology governance has been
designed to meet both regulatory requirements and industry best practices. Our program is designed to protect systems with consideration
of confidentiality, integrity, and availability of information. Key activities include monitoring our systems for events to detect and prevent
system intrusions, as well as conducting scans of the internal and external environments to identify and remediate vulnerabilities. Along
with an extensive business continuity management program, we continually assess our cyber security program to ensure we continue to
be well-positioned to meet the needs of our business and clients.
Third-Party and Outsourcing risk
Third-party and outsourcing risk is the risk of failure to effectively manage service providers (third-party or intra-group).
We recognize that these relationships present both risk and opportunity. Through our third-party relationships and outsourced
arrangements, the nature of the risk of a potential failure in processes or controls (e.g. cyber breaches, business continuity issues) is
changing. Through our Vendor Risk Management Program, we assess third parties and the quality of their risk controls. We also
deliberately engage third parties for their subject matter expertise and/or superior controls, to mitigate other risks that we are exposed to
and to meet the needs and preferences of our clients.
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Management’s Discussion & Analysis
STRATEGIC RISKS
Client Preferences and Behaviours Risk: The risk of not understanding and adapting to our clients’ needs and expectations.
Competition Risk: The risk of the organization’s relative market position being impacted by our strategic choices and those of our
competitors in the same markets. Competition risk can arise within or outside the financial or insurance sector, and from traditional or non-
traditional competitors. This risk includes diseconomies of scale and inefficiencies that threaten our ability to provide cost-effective, quality
products and services in a timely and efficient manner.
Business Landscape Risk: The risk of not understanding and adapting to fundamental changes in the financial services operating
environment, e.g., the emergence of autonomous vehicles and the ensuing transformation of the transportation service platform.
We research and consider the implications of emerging strategic trends in our strategic planning processes and build our plans
accordingly.
CLIMATE-RELATED FINANCIAL DISCLOSURES
Canadians, our communities, and our businesses will bear the impacts of a changing climate. A recent Canadian study has shown that
Canada, on average, is experiencing warming at twice the rate of the rest of the world. These warming effects are causing greater volatility
in weather patterns and affecting the livability of many regions across the country. We can already see the effects within the property and
casualty industry with stark increases in catastrophic losses in recent decades, fuelled primarily by the increasing risk of extreme weather
and natural disasters.
In 2015, the Financial Stability Board (FSB), a UK-based international body that monitors and makes recommendations about the global
financial system, established an industry-led Task Force for Climate-related Financial Disclosures (TCFD). The TCFD develops voluntary,
consistent climate-related financial disclosures that may be useful to lenders, insurers and investors in understanding material risks and
building climate risk into their decision-making. In June 2017, the TCFD released its final report, which we publicly endorsed. Our
organization welcomes the new disclosure recommendations and developed a three-year roadmap to fully adopt the TCFD
recommendations which cover the areas of governance, strategy, risk management, and metrics and targets. These disclosures cover a
reporting period from January 1, 2019 to December 31, 2019, representing the second disclosure under the framework and provide an
overview of our organization’s approach to identifying and managing climate-related risks and opportunities.
These disclosures have the support of our Executive Vice-President, Finance and Chief Financial Officer (CFO) and the Executive Vice-
President of Member Relations, Governance and Corporate Services, along with other senior leaders at the company. Our ultimate parent
company, CGL, will be releasing its inaugural standalone TCFD report in April 2020.
GOVERNANCE
At The Co-operators, climate change is a shared area of concern with our members and accordingly, our active engagement of the Board
of Directors on this topic has been well supported. At the Board level, the Risk Management Committee (RCC) and the Sustainability and
Citizenship Committee (SCC) oversee our management of climate-related risks and strategy. The process of understanding climate risk,
which is integral to these efforts, is overseen by the Sustainability & Citizenship and Risk & Compensation Committees, who have
amended their terms of reference to include monitoring climate-related issues. To build additional capacity around the Board table, climate-
related knowledge and skills have been added to the Board Skills Matrix and the Board’s 2019 governance assessment. Annually, the
RCC and SCC hold a joint half-day meeting to review our status on climate risk and progress on the TCFD recommendations as well as
understand external developments. The Board also receives updates on the topic of climate change at each Board meeting through the
SCC and RCC chairperson updates.
The Co-operators Management Group is accountable for maintaining our overall risk policy framework, which include specific climate
change considerations. The TCFD Advisory Group, consisting of leaders across the organization, was formed in 2017 to review the
recommendations from the TCFD and to develop an action plan for implementation. The advisory group provides insight into strategic
business decisions and overall direction on the TCFD. Our President and CEO participates in an annual Joint Sustainability Meeting with
the Chairperson of the Board of Directors, the SCC, and the senior sustainability management committee, which provides an opportunity
for shared learning, cross-organizational collaboration, strategic planning and monitoring of our sustainability practice.
Our first Climate Commitment, published in November 2018, may be found on our website at www.cooperators.ca/en/About-Us/about-
sustainability/our-climate-commitment. The Commitment provides information on our approach to prioritizing actions we will take to
address these challenges further.
STRATEGY
Co-operators General has a long-term 2030 strategy which was developed through the lens of sustainability. As a subsidiary of CGL, we
are committed to honouring that strategy which reflects our commitment to integrate sustainability into our thinking and strategy. The
strategy expresses the outcomes that we aim to realize by 2030 which include supporting the United Nations Sustainable Development
Goals (SDGs) where meaningful and relevant. Co-operators General endorses all 17 SDGs, with a focus on 9 SDGs, including Climate
Action, among others. Dedicated resources towards the Climate Action SDG will allow us to:
• Develop and set clear company-wide climate objectives addressing key parts of our organization that reflect our future
goals – Our 2019 to 2022 corporate strategy has been finalized and includes climate considerations, with the Board and
management currently working to identify and define key performance indicators and associated targets/metrics to measure our
progress.
• Continue to develop innovative products and services to address gaps in climate-related coverage – As part of our
Climate Change Adaptation Project, we will position Co-operators General as an early mover and innovator developing tangible,
insurance-specific expertise on climate-related risks and perils.
•
Strengthen our investment policies by explicitly including the consideration of climate-related risks and opportunities –
In collaboration with Addenda, we employ an impact investing strategy which is regularly reviewed and use company disclosures
and third-party research to assess our investments’ exposure to climate-related risks and opportunities.
• Help our clients understand and manage their climate-related risks – We will continue to expand our efforts to inform and
equip Canadians with the tools they need to adapt to a changing climate. This includes using our distribution channels, including
public documents such as CGL’s Integrated Annual Report as well as social media, to highlight the economic and social impacts
of a changing climate. We also partner with not-for-profit organizations and contribute funding to communities across the country
to build resiliency.
•
To be a strong leader and effective steward and advocates of climate change – We are proud of our history as a leader in
climate advocacy and environmental stewardship. We have advocated for carbon pricing since 2015, played an instrumental role
in supporting the creation of a national flood advisory council, and joined the United Nations Environment Programme Finance
Initiative (UNEP-FI) TCFD pilot group for investors to build relevant and reliable scenario testing tools.
Below is a summary of climate-related risks and opportunities, both physical and transition, that we have identified:
Risks
Increase in frequency and
severity of extreme weather
events
Type
Physical
Asset depreciation and lower
investment returns
Transition
Regulatory
Transition
Response
Climate change is leading to rising claims and uncertainty in our P&C insurance
portfolio. These trends will inevitably lead to an increasing gap between insured and
total economic losses. Closing this protection gap by passing these additional
costs on to policyholders is not a sustainable business model. Therefore, our
ability to generate positive returns is highly dependent on our ability to accurately
estimate and price for these weather-related events and to mitigate them
effectively.
Climate change may impact the value of our investment portfolio, as investee
companies are further impacted by climate-related changes in technology,
consumer preferences or regulation. This may directly lead to adverse financial
performance for those companies and by extension, ourselves.
Despite the slow development of carbon policy in Canada and globally, the
adequate pricing of carbon will eventually lead to higher direct and indirect costs.
Over time, these costs will increase pressure on our ability to generate positive
returns.
Time Horizon
Short-term (1-3
years) and
ongoing
Long-term (5+
years)
Long-term (5+
years)
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Management’s Discussion & Analysis
Opportunities
Innovative product solutions Product
Type
offering
Developing new tools to
mitigate climate-related risks
for clients
Client
resiliency
Advance advocacy and
enhance involvement by
government stakeholders
Client
resiliency
Response
Designing innovative product solutions to enable and empower community
resilience is mandated through our Climate Commitment. We developed Canada’s
first and only comprehensive water product that covers all Canadians, despite their
level of flood risk. This product includes storm surge coverage, and is available to
all risk types and property types (including cottages and seasonal dwellings,
apartments and condos).
In 2018, we launched the Climate Change Adaptation Project to assess and
mitigate climate-related risks over the lifetime of our P&C products to clients. This
initiative encompasses several programs, including accurately tracking wildfire
progression to enable more timely underwriting actions; expanding and targeting
our efforts to notify users of impending extreme weather events; and building tools
to more precisely monitor risk accumulation to identify clients at a high-risk of
being impacted by climate change.
As part of an ongoing effort to build resilient communities, we have partnered
across sectors to create a community-based Disaster Risk Reduction Program.
This program will empower people to prepare and act ahead of climate-related
events like floods and wildfires. We also play a key role in convening industry
peers and advocating for improvement of flood resiliency as part of Public Safety
Canada’s Advisory Council on Flood.
One of the TCFD recommendations involves describing the resilience of a company’s strategy under different climate-related scenarios,
including one of a 2°C increase or less. We are currently taking action to address this requirement and are committed to continuing our
efforts on this front in order to achieve disclosures in line with industry developments with the goal of being a leader amongst similar-sized
insurers. Through our active participation and thought leadership in the UNEP-FI pilot groups for insurers and asset managers, we aim to
contribute to the development of consistent practices and disclosures to better quantify the impact of this scenario.
RISK MANAGEMENT
Climate-related issues have large-scale and broad implications across the financial services industry and permeate the insurance,
investment, strategic, reputation and operational risks that influence our risk profile. We view climate change as a complex risk issue but
one that is also a source of opportunity for us to meet the needs of Canadians and their communities.
To support our climate commitment, we have an integrated climate change strategy that focuses activity across three key areas:
Portfolio evaluation – testing the resilience of our insurance portfolio and strategy
•
• Mitigation – reducing the risks presented by climate change impacts
•
Adaptation – building the resilience of our operations, communities and ecosystems to climate change impacts
Portfolio Evaluation
We continually monitor and analyze the potential impacts of climate-related risks in our property and casualty (P&C) portfolio. We stress
test the resilience of our products for plausible future economic, political and environmental states. We proactively evaluate the financial
impacts and our strategic response if the climate change scenario were to materialize. For example, we monitor our geographical risk
accumulations to better understand and manage our property risk concentration across the country.
Climate change has increased our insurance risk as it affects our ability to appropriately price, underwrite and reserve for claims by
rendering our historical patterns as no longer predictive of future experience. Our stress testing program includes scenarios that
contemplate an increased frequency and severity of claims that could be caused by extreme weather events or other drivers.
Mitigation
The insurance industry will be impacted by climate change in ways that are complex and difficult to predict. We continue to dedicate
resources to anticipate and prepare for the many impacts of climate change.
We preserve our capital by managing our risk exposure through group reinsurance risk transfer mechanisms. We minimize our credit risk
exposure by spreading our program across many trusted partners and setting robust financial standards for eligibility. We have designed a
robust and resilient capital management framework which allows us to maintain the strength of our balance sheet by ensuring climate-
related impacts are accounted for.
Material climate-related risks and opportunities are incorporated into investment decisions, considering companies’ exposure to climate-
related risks and how those risks are being managed.
Time Horizon
Current
Adaptation
In the medium to long-term time horizon, climate change is likely to have an impact on both our insurance and investment portfolios. We
are developing methods to identify how our business and our clients can deploy adaptative measures to combat the growing physical and
transition threats of climate change.
Medium-term (3-
5 years)
Our extensive innovation work with subject matter experts has provided valuable insight into climate change risk management knowledge
and practices. Our data scientists and expert catastrophe modelers have developed a risk accumulation geospatial tool to help
management understand and effectively manage our geographical risk accumulations.
As a co-operative, we are committed to community engagement, and advocate for societal and behavioural change and adaption. We
proudly participate in various community awareness days and social media campaigns to inform and empower Canadians and their
communities.
Current
For additional information regarding our risk management practices, refer to the Risk Management section of our MD&A.
METRICS AND TARGETS
There are several metrics that we have implemented and targets we have set to help us manage our climate-related risks and
opportunities relating to our business operations, our investing activities and our community activities.
Metric
Target
Explanation
2019
2018
2017
Carbon intensity (tCO2e per
employee)1
n/a
Tonnes of CO2 equivalent emitted per employee
1.5 t CO2e
1.6 t CO2e
1.7 t CO2e
Net carbon emissions reduced from
2010 levels (as a %)
100%2 by the
end of 2020
Tonnes of CO2 equivalent we have reduced from
2010 baseline levels
Impact investing (as a %)
20%3 by the
end of 2022
Invested assets in securities which focus on
climate change, health and wellness among others
80.0%
81.0%
81.0%
19.4%
14.8%
7.7%
Major event loss claims
Number of major event claims
recorded
n/a
n/a
Includes extreme weather and other significant
natural disasters
111.4 million
179.5 million
137.1 million
The number of claims triggering a major event loss
29
17
36
Number of comprehensive water
endorsements4
1Tonnes of CO2 equivalent emitted per employee
2Tonnes of CO2 equivalent as a percentage we have reduced from 2010 levels - metric is calculated at CGL
The number of home policies with comprehensive
water coverage
n/a
483,879
295,733
250,297
3The percentage of our invested assets in securities that have both compelling investment returns and a measurable, positive environmental and/or social impact. This
demonstrates our commitment to embedding co-operative and sustainability principles into our investment decisions, and helps build resilient, sustainable communities for
future generations
4Our Comprehensive Water product is Canada's only flood product to cover overland flooding, storm surge, and sewer back up, even for those at the highest risk of
flooding.
Scope 1, Scope 2 and Scope 3 GHG Emissions and Related Risks
Greenhouse gas (GHG) emissions are a prime driver of rising global temperatures and, as such, are a key focal point of policy, regulatory,
market and technology responses to limit climate change. As a result, organizations with significant emissions are likely to be more
strongly impacted by transition risk than other organizations.
At The Co-operators, we track, monitor and report on the carbon footprint of our investments to better understand the investment
implications of climate change. Our invested assets impact and influence global carbon emissions and climate-related risk. In 2014, we
were the first Canadian Insurance company to sign onto the Montreal Carbon Pledge, and Addenda became the first Canadian asset
manager to sign the pledge and disclose the carbon impact of all its equity pooled funds in 2015.
The carbon footprint of our investments represents the GHG emissions of our owned equity, preferred share and corporate bond portfolios,
which is calculated in tonnes of C02 equivalent. We include both Scope 1 emissions (direct GHG emissions) and Scope 2 emissions (GHG
emissions from electricity, steam, heat and cooling). Scope 3 emissions, which are all indirect emissions not included in Scope 2, do not
apply to us.
Our Scope 1 and Scope 2 GHG emissions in 2019 were 5,299 t C02e (2018 – 5,117 t C02e; 2017 – 4,856 t C02e).
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Management’s Discussion & Analysis
CONTROLS AND PROCEDURES
Disclosure controls and procedures
Management is responsible for designing and maintaining adequate disclosure controls and procedures to provide reasonable assurance
that all relevant information is gathered and reported to senior management, including the President and CEO and the Executive Vice-
President, Finance and CFO, on a timely basis so that appropriate decisions can be made regarding public disclosure.
As at December 31, 2019, an evaluation of the effectiveness of our disclosure controls and procedures, as defined under National
Instrument 52-109, was carried out with management’s participation and under the supervision of the CEO and CFO. Based on that
evaluation, the CEO and CFO concluded that the design and operation of our disclosure controls and procedures were effective.
Internal control over financial reporting
Management is responsible for designing and maintaining adequate internal control over financial reporting to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance
with IFRS. However, due to inherent limitations, these controls may not prevent or detect all material misstatements on a timely basis.
Projections of any control effectiveness evaluation to future periods are subject to the risk that the controls may become inadequate due to
potential changes in conditions or possible deteriorations in the degree of compliance with policies or procedures.
No changes were made to our internal control over financial reporting during the year that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
As at December 31, 2019, an evaluation of the effectiveness of our internal control over financial reporting, as defined under National
Instrument 52-109, was carried out with management’s participation and under the supervision of the CEO and CFO. Based on that
evaluation, the CEO and CFO concluded that the design and operation of our internal control over financial reporting was effective.
ACCOUNTING MATTERS
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND
ASSUMPTIONS
The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the year. The following accounting estimates are considered particularly significant
to understanding our financial performance. We have established detailed policies and control procedures that are intended to ensure
these judgments are controlled, independently reviewed and consistently applied. Actual results could differ from these estimates and
changes in estimates are recorded in the accounting period in which they are determined.
Use of estimates and judgments
Unpaid claims and adjustment expenses
We make estimates for the amount of unpaid claims and the timing of future claims payments based on assumptions that reflect the
expected set of economic conditions and planned courses of action. Uncertainty exists on reported claims in that all information may not be
available at the reporting date. In addition, claims may not be reported to us immediately, therefore estimates are made as to the value of
claims incurred but not yet reported, a value which may take years to finally determine. In establishing the provision for unpaid claims, we
also take into account estimated recoveries relating to salvage and subrogation.
The initial actuarial estimate of unpaid claims and adjustment expenses is an undiscounted amount. In order to determine the
undiscounted liability, assumptions are developed considering the characteristics of the class of business, historical trends, the amount of
data available on individual claims and any other pertinent factors. This estimate is then discounted to recognize the time value of money.
The interest rate used to discount the liabilities for CGIC, Sovereign and COSECO is 2.49% (2018 - 2.84%) and for CUMIS General is
2.33% (2018 – 2.79%) based on our projected rate of return on the investment portfolios supporting these liabilities. The discount rate is
adjusted on a regular basis based on changes in the projected rate of return. If the discount rate increases, the result would be a reduction
in total unpaid claims and adjustment expenses, which would have a positive impact on our underwriting income, with all else being equal.
A decrease in the discount rate would have the opposite effect. A 1.0% increase in the discount rate would have an approximate impact on
after-tax net income of $41.7 million (2018 - $37.0 million).
The discounted unpaid claims and adjustment expenses incorporates assumptions concerning future investment income, projected cash
flows, and appropriate PFADs. As the estimates for unpaid claims are subject to measurement uncertainty and the variability could be
material in the near term, we include PFADs in our assumptions for claims development, reinsurance recoveries and future investment
income. The incorporation of PFADs is in accordance with accepted actuarial practice in order to ensure that the actuarial liabilities are
adequate to pay future benefits. The selected PFADs are within the ranges recommended by the Canadian Institute of Actuaries.
In 2019, our discounted claims development experience was $139.1 million favourable, indicating that our unpaid claims reserves were
more than adequate to cover the actual losses that were settled. For more information refer to the Key Financial Measures (Non-IFRS)
section of this document and also Note 7 of the consolidated financial statements for our claims development table and sensitivity analysis.
Advisor transition commissions
Co-operators General’s advisors are eligible for a transition commission payout upon a qualifying termination. The transition commission is
based upon the number of years of service as an advisor and the average trailing commission volume of their book of business. Payments
to terminated advisors are funded in part from reduced commission payments which are made to new advisors acquiring the book of
business during the first 3 years of their agency relationship. Our accounting policy is to recognize the cost of transition commissions
payable to active advisors over their estimated working lives and to recognize the benefit of reduced commissions payable to new advisors
at the time when reduced commissions are paid. The obligation to active advisors is determined by accruing for the benefits earned to date
on a present value basis assuming the cash flows associated with the earned benefits are paid out at the expected termination date.
Significant assumptions used in the calculation of advisor transition commissions are the discount rate of 2.80% (2018 - 3.67%) and an
average termination age of 56 (2018 - 57). A 1.0% decrease in the discount rate would increase the provision for advisor transition
commissions by $9.0 million (2018 - $8.1 million) and decrease net income by $6.5 million (2018 - $5.9 million). A two-year decrease in the
average termination age would increase the provision for advisor transition commissions by $4.1 million (2018 - $5.3 million) and decrease
net income by $3.0 million (2018 - $3.9 million). Larger rate and age changes would have a corresponding impact to net income.
Retirement benefit obligations
Measurement uncertainty exists in valuing the components of retirement benefit obligations. Each assumption is determined by
management, based on current market conditions and experiential information available at the time. Due to the long-term nature of the
plans, the calculation of benefit expenses and obligations depends on various assumptions such as discount rates, medical and dental
care cost trend rates, retirement age and mortality and termination rates. Actual experience that differs from the actuarial assumptions will
affect the amounts recorded for the accrued benefit obligation and benefit expense. Assumed medical and dental care cost trend rates
have a significant effect on the amount reported for the medical and dental benefit plans. A 1.0% increase in assumed medical and dental
benefit cost trend rates would increase the accrued benefit obligation for 2019 by $25.7 million (2018 - $21.9 million). A 1.0% decrease in
the discount rate would have the approximate effect of increasing the accrued benefit obligation for 2019 by $29.1 million (2018 - $24.0
million). Significant assumptions used in the calculation of employee future benefits are presented in Note 15 to the consolidated financial
statements.
Significant judgments
Impairment of investments
At a minimum, we review investments at the end of each quarter to identify and evaluate investments that show indication of possible
impairment. An investment is considered impaired if there is objective evidence of impairment. Objective evidence of impairment includes a
significant or prolonged decline in the fair value or net asset value below cost, or when a loss event that has a reliably estimable impact on
future cash flows of the financial instrument has occurred. Such impairments are recorded as a charge to earnings in the period that the
determination is made. The determination of what is significant or prolonged requires judgment. In making this judgment, we evaluate
factors including, but not limited to: a decline in current financial position, defaults on debt obligations, failure to meet debt covenants,
significant downgrades of credit status, and severity and/or duration of the decline in value. Previously impaired investments continue to be
reviewed quarterly.
36 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 37
Management’s Discussion & Analysis
ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with IFRS. CGIC and certain of its subsidiaries are insurance
companies and must also comply with the accounting and reporting requirements of regulators. The significant accounting policies used in
the preparation of the consolidated financial statements are described in Note 2 of the consolidated financial statements. The accounting
policies used are consistent with those applied in our audited consolidated financial statements for the year ended December 31, 2018
except for the adoption of IFRS 16 “Leases” adopted by Co-operators General effective January 1, 2019.
IFRS 16 "Leases" – IFRS 16 was issued in January 2016 to replace IAS 17 “Leases” and related interpretations by the International
Financial Reporting Interpretations Committee (IFRIC). The standard provides a single lessee accounting model, requiring lessees to
recognize right-of-use assets and related liabilities for all leases unless the lease term is 12 months or less, or the underlying asset has a
low value. The standard has been adopted by the Co-operators General on January 1, 2019. Co-operators General has elected to apply
IFRS 16 on its consolidated financial statements using the modified retrospective approach.
As of January 1, 2019, Co-operators General determined the impact to the consolidated balance sheet included an increase to assets and
liabilities of $35.8 million. In determining the lease liability on January 1, 2019, Co-operators General used the rate implicit in the lease if
known, otherwise it applied the incremental borrowing rate to the portfolio of leases. The weighted average discount rate as of January 1,
2019 was 2.82%. For a more detailed analysis on the impacts of IFRS 16 “Leases” please refer to Note 3 Adoption of new and amended
accounting standards in our consolidated financial statements.
There were no other new accounting standards which have a significant impact on our consolidated financial statements. For a complete
listing of new and amended accounting standards refer to Note 3 of our consolidated financial statements.
FUTURE ACCOUNTING CHANGES
The IASB has continued to issue a number of amendments and new accounting pronouncements that will be applicable to Co-operators
General. Included below are the details of select accounting standards issued but not yet applied. For a complete listing as well as their
estimated impacted, refer to Note 4 of our consolidated financial statements.
IFRS 7 "Financial Instruments: Disclosures"
In December 2011, IFRS 7 was amended to require additional financial instrument disclosures upon transition from IAS 39 to IFRS 9. The
amendments are effective upon adoption of IFRS 9, which is effective for annual periods beginning on or after January 1, 2018. However,
in September 2016, IFRS 4 was amended to provide an option of a temporary exemption from applying IFRS 9 for entities whose
predominant activity is issuing insurance contracts within the scope of IFRS 4. Therefore, qualifying entities will have the option to adopt
IFRS 9 upon the adoption of IFRS 17. Co-operators General qualifies for a temporary exemption; thus, IFRS 7 is effective for annual
periods beginning on or after January 1, 2022. We are currently evaluating the impact that this standard will have on our consolidated
financial statements.
IFRS 9 "Financial Instruments"
IFRS 9 was issued in July 2014 and is intended to replace IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 is a
three part standard aimed at reducing complexity in reporting financial instruments. The project has been divided into three phases: Phase
1 Classification and measurement, Phase 2 Impairment and Phase 3 Hedge accounting. Phase 1 was issued in November 2009 and
amended in October 2010. It requires financial assets to be recorded at amortized cost or fair value depending on the entity’s business
model for managing the assets and their associated cash flow characteristics. All financial assets are to be measured at fair value on the
balance sheet if they are not measured at amortized cost. At initial recognition, an entity may irrevocably designate a financial asset as
measured at (FVTPL) if doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise
from measuring assets or liabilities or recognizing the gains and losses on them on different bases. Phase 2 was completed in July 2014
and introduced a new expected loss impairment methodology that will result in more timely recognition of impairment losses. Phase 3 was
completed in November 2013. This phase replaces the rule-based hedge accounting requirements in IAS 39 to more closely align the
accounting with risk management activities.
The standard is effective for annual periods beginning on or after January 1, 2018. However, in September 2016, IFRS 4 was amended to
provide an option of a temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing insurance contracts
within the scope of IFRS 4. Therefore, qualifying entities will have the option to adopt IFRS 9 upon the adoption of IFRS 17. Co-operators
General qualifies for temporary exemption; thus, IFRS 9 is expected effective for annual periods beginning on or after January 1, 2022. We
are currently evaluating the impact that this standard will have on our consolidated financial statements.
IFRS 17 "Insurance Contracts"
IFRS 17 was issued in May 2017 and will replace IFRS 4 “Insurance Contracts”. The intent of the standard is to establish consistent
recognition, measurement, presentation and disclosure principles to provide relevant and comparable reporting of insurance contracts
across jurisdictions.
The standard requires entities to measure insurance contract liabilities as the risk-adjusted present value of the cash flows plus the
contractual service margin, which represents the unearned profit the entity will recognize as future service is provided. This is referred to
as the general model. Expedients are specified, provided the insurance contracts meet certain conditions. If, at initial recognition or
subsequently, the contractual service margin becomes negative, the contract is considered onerous and the excess is recognized
immediately in the consolidated statement of income (loss). The standard also includes significant changes to the presentation and
disclosure of insurance contracts within entities’ financial statements.
In December 2018, the IASB voted in favour of deferring the effective date of IFRS 17 from annual reporting periods beginning on or after
January 1, 2021 to January 1, 2022 (expected). The standard is to be applied retrospectively unless impracticable, in which case a
modified retrospective approach or fair value approach is to be used for transition. We are currently evaluating the impact that this
standard will have on our consolidated financial statements.
IFRS 3 "Business Combinations"
IFRS 3 was amended in October 2018 to revise the definition of a business and provide a simplified assessment of whether an acquired
set of activities and assets qualifies as a business. The amendment is effective for annual periods beginning on or after January 1, 2020.
We are currently evaluating the impact that this standard will have on our consolidated financial statements in the event of a business
acquisition.
IAS 1 “Presentation of Financial Statements and IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”
Amendments to IAS 1 "Presentation of Financial Statements" and IAS 8 "Accounting Policies, Changes in Accounting Estimates and
Errors" were issued in October 2018. The amendments are effective for annual periods beginning on or after January 1, 2020. The
amendments update the definition of 'material' and the meaning of 'primary users of general-purpose financial statements'. We are
currently evaluating the impact that these amendments will have on our consolidated financial statements.
Conceptual Framework of Reporting
In March 2018, the IASB revised its conceptual framework for financial reporting. The revised framework includes a new chapter on
measurement, guidance on reporting financial performance, improved definitions and guidance, and clarifications on important topics (e.g.,
the roles of stewardship, prudence, and measurement uncertainty in financial reporting). The IASB has also issued amendments that
update references to the framework in certain standards. The amendments are effective for annual periods beginning on or after January
1, 2020. We are currently evaluating the impact these amendments will have on our consolidated financial statements.
38 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 39
Management’s Discussion & Analysis
GLOSSARY OF TERMS
Certain terms used in this MD&A have the meanings set forth below that tend to be specific to the Canadian insurance industry or to
Co-operators General.
Advisor - an insurance advisor who sells insurance products exclusively for CGIC.
Assume - reinsurance term to describe an insurer taking on a risk, for a premium, from the primary insurer, to cover all or part of a risk
insured by the primary insurer who has then ceded the risk.
Broker - an intermediary who negotiates policies of insurance or reinsurance with insurers on behalf of the insured or reinsured, receiving
a commission from the insurer or the reinsurer for placement and other services rendered.
Catastrophe reinsurance - a form of insurance, which subject to specified limits, indemnifies the ceding company for the amount of loss
in excess of a specified retention amount with respect to an accumulation of losses resulting from a catastrophic event.
Cede - reinsurance term to describe a primary insurer purchasing insurance from a reinsurer who assumes the risk, to cover all or part of a
risk insured by the primary insurer.
OSFI - Office of the Superintendent of Financial Institutions (Canada), the government body responsible for the regulation and
supervision of financial institutions and private pension plans subject to federal oversight.
Property and casualty (P&C) insurance - all types of insurance excluding life insurance and governmental insurance. Also known as
general insurance.
Provision for adverse deviation (PFAD) - margins that are added to loss reserves to provide for adverse deviation from claims reserve
estimates; this includes provisions covering claims development variability and risks associated with interest rate and reinsurance
recoveries.
Unpaid claims and adjustment expenses - the amount provided as a liability to cover the estimated ultimate cost of settling claims,
including claims incurred but not reported arising out of events, which have occurred by the end of an accounting period, less amounts
paid with respect to those claims; also referred to as ‘provision for unpaid claims’ or ‘claims reserves.’
Reinstatement premium - the premium paid to restore the original reinsurance policy limit as a result of a reinsurance loss payment
under a catastrophe cover. Reinstatement premiums are reported as a reduction in net earned premium.
Reinsurer - an insurer who assumes all or part of a risk originally assumed by a primary insurer.
Claim - the amount owed by an insurer or reinsurer pursuant to a policy of insurance or reinsurance arising from the loss relating to an
insured event.
Retention - has two meanings: (1) in respect of reinsurance, the amount of risk not ceded to reinsurers; (2) in respect to policies in force,
the number of policyholders who renew for a subsequent term.
Claims development - a non-IFRS measure representing the change in reserve balance on unpaid claims through the process of
adjudication from the initial estimate to the ultimate amount paid.
Return on equity (ROE) - a non-IFRS measure representing net income as a percentage of average opening and closing shareholders’
equity excluding accumulated other comprehensive.
Claims experience - the realized claims loss record for a defined block of business.
Severity of claims - the average cost of each claim, based on the total claims cost and number of claims opened in a period.
Salvage and subrogation recoverable - Salvage recoverable is the estimated value of damaged property that may be retrieved,
reconditioned, and sold to reduce the amount of an insured loss. Subrogation recoverable is the estimate of the amount the insurer will
collect from a negligent third party or their insurer after assuming the insured’s legal right to collect damages.
Underwriting - the selection and assumption of risk for designated loss or damage arising from specified events by issuing a policy of
insurance in respect thereof.
Underwriting gain or loss - a non-IFRS measure calculating the profit or loss from the activity of taking on insurance risks, excluding
the impact of the MYA.
Claims incurred - the aggregate monetary amount of all claims paid during an accounting period adjusted by the change in the provision
for unpaid claims for that accounting period together with the related loss adjustment expenses, net of recoveries from reinsurers.
Combined ratio - a non-IFRS measure representing the percentage the claims and adjustment expenses plus the acquisition expenses
and the administrative expenses are to net earned premium.
Direct written premium (DWP) - a non-IFRS measure representing the total amount of premiums for new and renewal policies written
during a specified period.
Expense ratio - a non-IFRS measure representing the acquisition expenses plus administrative expenses to net earned premium,
expressed as a percentage.
Frequency of claims - the ratio of the number of claims files opened in a period to the total number of policies in force.
General insurance - all types of insurance excluding life insurance and governmental insurance. Also known as property and casualty
insurance.
Government automobile insurers - automobile insurers owned or controlled by the governments of the provinces of Quebec, Manitoba,
Saskatchewan and British Columbia.
Incurred but not reported (IBNR) - the estimate of claims incurred but not yet reported by policyholders.
Industry pools - consist of the “residual market” as well as mandatory risk-sharing pools (RSP) in Alberta, Ontario, Quebec, New
Brunswick and Nova Scotia. These pools, managed by the Facility Association (FA), except for the Quebec RSP, provide automobile
insurance to individuals who are otherwise unable to purchase such coverage from private insurers acting voluntarily. All insurance
companies share in the results of the pool according to their market share.
Liability insurance - insurance that serves to protect the insured from the financial consequences of damages claimed by third parties.
Line of business - the major product groupings offered to the public. Co-operators General’s major lines of business are: automobile,
home, commercial, and farm.
Loss ratio - a non-IFRS measure representing the percentage incurred losses plus loss-adjustment expenses are to net earned premium;
may be referred to as claims ratio.
Market yield adjustment (MYA) - a non-IFRS measure representing the impact of changes in the discount provision on claims liabilities,
the provision for adverse deviation (PFADs) and other discounting assumptions based on the change in the market-based yield of the
underlying assets.
Minimum Capital Test (MCT) - a non-IFRS measure representing the minimum and supervisory target capital standards established by
OSFI for property and casualty insurance companies.
Net earned premium (NEP) - the net written premium during the period, plus the unearned premiums reserve at the beginning of the
period, less the unearned premiums reserve at the end of the period, net of any reinsurance.
40 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
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RESPONSIBILITY FOR
FINANCIAL REPORTING
Management and the appointed actuary
Management is responsible for the preparation of the accompanying consolidated financial statements and the accuracy, integrity and
objectivity of the information they contain. These consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards and the requirements of Canadian insurance regulators. The financial information presented elsewhere in
the annual report is consistent with the consolidated financial statements. These consolidated financial statements, which necessarily
include some amounts that are based on management’s best estimates and the opinion of the appointed actuary, have been prepared
using careful judgment.
To assist management in the discharge of these responsibilities, Co-operators General Insurance Company and its wholly owned
subsidiaries, collectively known as “the Company”, maintain a system of internal controls designed to provide reasonable assurance that
assets are safeguarded; that only valid and authorized transactions are executed; and that accurate, timely and comprehensive financial
information is prepared. These controls are supported by policies and procedures and the careful selection and training of qualified staff.
Further, management has a process in place to evaluate disclosure controls and procedures and internal controls over financial reporting.
The appointed actuary is appointed by the Board of Directors pursuant to the Insurance Companies Act (Canada). Among the appointed
actuary’s responsibilities is the requirement to carry out an annual valuation of the Company’s insurance contracts in accordance with
accepted actuarial practice and regulatory requirements for the purpose of reporting to shareholders and the Office of the Superintendent
of Financial Institutions, Canada. Management is responsible for providing the appointed actuary the information necessary for completion
of the annual valuations. The appointed actuary’s report follows.
Audit Committee of the Board of Directors
The Audit Committee of the Board of Directors, consisting entirely of non-executive, independent directors, is responsible for reviewing the
accounting principles and practices employed by the Company and reviewing the Company’s annual consolidated financial statements
prior to their submission to the Board of Directors for final approval. The Audit Committee meets no less than quarterly with the internal and
external auditors, and management to review and discuss accounting, reporting and internal control matters. Both the internal and external
auditors have full and unrestricted access to the Audit Committee, with and without the presence of management. The Audit Committee is
responsible for recommending to the Board of Directors the appointment of the Company’s external auditors, the approval of their
remuneration and the terms of their engagement.
The consolidated financial statements have been examined independently by PricewaterhouseCoopers LLP, on behalf of the Company’s
shareholders. The Independent Auditor’s Report is presented below and outlines the scope of their examination and expresses their
opinion on the consolidated financial statements of the Company.
Independent auditor’s report
To the Shareholders of Co-operators General Insurance Company
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the financial position of Co-operators General Insurance Company and its subsidiaries (together,
the Company) as at December 31, 2019 and 2018, and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards (IFRS).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated balance sheets as at December 31, 2019 and 2018;
the consolidated statements of changes in shareholders’ equity for the years then ended;
the consolidated statements of income (loss) for the years then ended;
the consolidated statements of comprehensive income (loss) for the years then ended;
the consolidated statements of cash flows for the years then ended; and
the notes to the consolidated financial statements, which include a summary of significant
accounting policies.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit
of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical
responsibilities in accordance with these requirements.
(Signed)
(Signed)
Other information
Robert Wesseling
President and Chief Executive Officer
February 13, 2020
Karen Higgins
Executive Vice-President, Finance
and Chief Financial Officer
Management is responsible for the other information. The other information comprises the
Management’s Discussion and Analysis and the information, other than the consolidated financial
statements and our auditor’s report thereon, included in the annual report.
PricewaterhouseCoopers LLP
PwC Tower, 18 York Street, Suite 2600, Toronto, Ontario, Canada M5J 0B2
T: +1 416 863 1133, F: +1 416 365 8215
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
42 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 43
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with Canadian generally accepted auditing standards will always
detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions may cause the
Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Claire Cornwall.
(Signed) "PricewaterhouseCoopersLLP"
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
February 13, 2020
44 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 45
APPOINTED ACTUARY’S REPORT
To the Directors and Shareholders of Co-operators General Insurance Company:
I have valued the policy liabilities of Co-operators General Insurance Company for its consolidated balance sheet as at December 31, 2019
and their change in the consolidated statement of income (loss) for the year then ended in accordance with accepted actuarial practice in
Canada, including selection of appropriate assumptions and methods.
In my opinion, the amount of policy liabilities makes appropriate provision for all policy obligations and the financial statements fairly
present the results of the valuation.
(Signed)
Apundeep Lamba
Fellow, Canadian Institute of Actuaries
Guelph, Ontario
February 13, 2020
CONSOLIDATED
FINANCIAL STATEMENTS
CO-OPERATORS GENERAL INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
As at December 31
(in thousands of Canadian dollars)
Assets
Cash and cash equivalents
Invested assets including securities on loan (note 5)
Premiums due
Income taxes recoverable
Reinsurance ceded contracts (note 9)
Deferred acquisition expenses (note 10)
Deferred income taxes (note 11)
Intangible assets (note 12)
Right-of-use assets (note 13)
Other assets (note 14)
Liabilities
Accounts payable and accrued charges
Income taxes payable
Insurance contracts (note 8)
Retirement benefit obligations (note 16)
Deferred income taxes (note 11)
Lease liabilities (note 13)
Provisions and other liabilities (note 15)
Shareholders' equity
Share capital (note 17)
Contributed capital
Retained earnings
Accumulated other comprehensive income (note 20)
2019
$
2018
$
97,367
5,327,160
1,250,904
77
163,667
313,135
127,220
103,995
29,165
75,280
65,372
4,728,874
1,073,368
79,857
174,427
293,131
116,749
82,613
-
84,330
7,487,970
6,698,721
324,665
74,147
4,909,213
128,661
7,544
29,803
166,612
5,640,645
544,779
100,874
1,029,368
172,304
1,847,325
7,487,970
291,125
39
4,481,312
120,501
3,876
-
151,925
5,048,778
413,452
100,874
1,045,180
90,437
1,649,943
6,698,721
Contingencies, commitments and guarantees (note 28)
Approved by the Board of Directors:
(Signed)
John Harvie
Chairperson
(Signed)
Robert Wesseling
President and Chief Executive Officer
See accompanying notes to the consolidated financial statements.
46 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
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CO-OPERATORS GENERAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
CO-OPERATORS GENERAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
Years ended December 31
Years ended December 31
2019
(in thousands of Canadian dollars)
Balance, beginning of year
Net income
Other comprehensive income
Comprehensive income
Staff share loan plan
Preference shares issued
Preference shares redeemed
Common shares issued
Dividends declared (note 17)
Acquisition of subsidiary
from a related party (note 26)
Balance, end of year
Accumulated
other
Total
(in thousands of Canadian dollars except for earnings per share
and weighted average number of common shares)
Share
capital
$
Contributed
Retained
comprehensive
shareholders'
Income
capital
earnings
$
$
income
$
equity
$
Net earned premium (note 7, 8, 22)
Net investment income and gains (note 5)
90,437
1,649,943
Fees and other income
413,452
100,874
-
-
-
123
10,171
(8,969)
130,002
-
-
-
-
-
-
-
-
-
-
-
1,045,180
174,026
-
174,026
-
-
(1,499)
-
(58,339)
(130,000)
-
81,867
81,867
-
-
-
-
-
-
174,026
81,867
255,893
123
10,171
(10,468)
130,002
(58,339)
(130,000)
544,779
100,874
1,029,368
172,304
1,847,325
Accumulated
Expenses
Claims and benefits
Ceded claims and benefits (note 9)
Premium and other taxes
Commissions and advisor compensation
Ceded commission (note 9)
General expenses (note 23)
Income (loss) before income taxes
Income tax expense (recovery) (note 11)
Net income (loss)
2018
(in thousands of Canadian dollars)
Share
capital
$
Contributed
Retained
comprehensive
shareholders'
Weighted average number of common shares (note 18)
other
Total
Earnings (losses) per share (note 18)
capital
$
earnings
$
income
$
equity
$
Balance, beginning of year
227,840
10,132
1,169,323
123,733
1,531,028
Net loss
Other comprehensive loss
Comprehensive loss
Staff share loan plan
Preference shares issued
Preference shares redeemed
Common shares issued
Dividends declared (note 17)
Acquisition of subsidiary
from a related party (note 26)
Contribution of capital
Balance, end of year
-
-
-
(720)
9,990
(5,358)
181,700
-
-
-
413,452
-
-
-
-
-
-
-
-
(37,107)
-
(37,107)
-
-
(555)
-
(10,348)
-
(36,332)
(36,332)
-
-
-
-
-
(37,107)
(36,332)
(73,439)
(720)
9,990
(5,913)
181,700
(10,348)
(9,258)
100,000
100,874
(76,133)
-
1,045,180
3,036
-
90,437
(82,355)
100,000
1,649,943
2019
$
3,274,723
272,084
9,251
3,556,058
2,380,022
(106,183)
116,253
665,109
(108,952)
395,658
2018
$
2,886,877
66,679
8,458
2,962,014
2,191,331
(81,940)
99,825
576,368
(85,073)
331,040
3,341,907
3,031,551
214,151
40,125
174,026
6.40
25,560
(69,537)
(32,430)
(37,107)
(2.03)
23,359
See accompanying notes to the consolidated financial statements.
See accompanying notes to the consolidated financial statements.
48 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 49
CO-OPERATORS GENERAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CO-OPERATORS GENERAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31
(in thousands of Canadian dollars)
Net income (loss)
Other comprehensive income (loss)
Items that may be reclassified subsequently to the consolidated statement of income:
Net unrealized gains (losses) on available-for-sale financial assets
Net reclassification adjustment for (gains) losses included in net income (note 5)
Items that may be reclassified before income taxes
Income tax expense (recovery) relating to items that may be reclassified (note 11)
Items that will not be reclassified to the consolidated statement of income:
Remeasurement of the retirement benefit obligations (note 16)
Income tax expense (recovery) related to items that will not be reclassified (note 11)
Other comprehensive income (loss)
Comprehensive income (loss)
2019
$
174,026
203,476
(86,938)
116,538
32,348
84,190
(3,170)
(847)
(2,323)
81,867
255,893
2018
$
(37,107)
(66,604)
3,263
(63,341)
(18,677)
(44,664)
11,421
3,089
8,332
(36,332)
(73,439)
Years ended December 31
(in thousands of Canadian dollars)
Operating activities
Net income (loss)
Items not requiring the use of cash (note 24)
Changes in non-cash operating components (note 24)
Cash provided by operating activities
Investing activities
Purchases and advances of:
Invested assets
Property and equipment
Intangible assets
Acquisition of a subsidary from related party, net cash acquired (note 26)
Sales and redemptions of:
Invested assets
Property and equipment
Cash used in investing activities
Financing activities
Share capital - preference shares issued (note 17)
Share capital - preference shares redeemed (note 17)
Share capital - common shares issued (note 17)
Contribution of capital
Dividends paid (note 17)
Lease liabilities paid
Cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents, net of payments in transit
Cash and cash equivalents, net of payments in transit, beginning of year
Cash and cash equivalents, net of payments in transit, end of year
Cash
Cash equivalents
Net payments in transit, included in accounts payable and accrued charges
Cash and cash equivalents, net of payments in transit, end of year
Supplemental information (note 24)
2019
$
174,026
(66,528)
439,726
547,224
2018
$
(37,107)
86,268
172,820
221,981
(5,362,903)
(3,455,952)
(5,035)
(25,634)
-
4,959,271
2,156
(432,145)
10,171
(10,468)
-
-
(58,347)
(10,830)
(69,474)
45,605
8,644
54,249
77,447
19,920
(43,118)
54,249
(3,158)
(5,216)
(176,803)
3,115,688
1,578
(523,863)
9,990
(5,913)
181,700
100,000
(10,247)
-
275,530
(26,352)
34,996
8,644
21,411
43,961
(56,728)
8,644
See accompanying notes to the consolidated financial statements.
See accompanying notes to the consolidated financial statements.
50 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 51
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
1. Nature of operations
Unless noted or the context indicates otherwise, in these notes “Company” refers to the Consolidated Co-operators General Insurance
Company. CGIC refers to the Non-Consolidated Co-operators General Insurance Company.
The Company is comprised of CGIC and its wholly owned subsidiaries: The Sovereign General Insurance Company (Sovereign), COSECO
Insurance Company (COSECO), CUMIS General Insurance Company (CUMIS General), Co-operators Investment Limited Partnership
(CILP), Co-operators Strategic Growth Corporation (CSGC) and Co-operators Insurance Agencies Limited (CIAL). 100% of the voting rights
attached to all the outstanding voting shares or partnership interests of each of Sovereign, COSECO, CUMIS General, CILP, CSGC and
CIAL are held by CGIC. CGIC acquired CUMIS General on April 1, 2018; refer to note 26 for further details.
The registered office of the Company is 130 Macdonell Street, Guelph, Ontario. The Company is domiciled in Canada and is incorporated
under the Insurance Companies Act (Canada). These consolidated financial statements of the Company for the year ended December 31,
2019 were authorized for issue by the Board of Directors on February 13, 2020.
CGIC and certain of its subsidiaries are licensed to write insurance in all provinces and territories in Canada. With the exception of CUMIS
General, CGIC and certain of its subsidiaries are licensed to write all classes of insurance, other than life. CUMIS General is licensed to write
property and casualty as well as accident and sickness insurance. AZGA Service Canada Inc. (AZGA Canada), an associate of Co-operators
Life Insurance Company (CLIC), a company under common control, acts as Managing General Underwriter (MGU) with respect to the travel
insurance underwritten by CUMIS General. CGIC and certain of its subsidiaries are regulated by the federal Insurance Companies Act and
the various provincial insurance acts. The Company must comply with the accounting and reporting requirements of its regulator the Office of
the Superintendent of Financial Institutions, Canada (OSFI).
The Company’s common shares are 100% owned by Co-operators Financial Services Limited (CFSL), which in turn is owned 100% by The
Co-operators Group Limited (CGL). The Class E preference shares, Series C are traded on the Toronto Stock Exchange under the symbol
CCS.PR.C.
2. Summary of significant accounting policies
Basis of preparation and statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
References to IFRS are based on Canadian Generally Accepted Accounting Principles for publicly accountable enterprises as set out in Part
1 of the Chartered Professional Accountants of Canada (CPA) Handbook - Accounting. Part 1 of the CPA Handbook incorporates IFRS and
International Accounting Standards (IAS) as issued by the International Accounting Standards Board (IASB).
The consolidated balance sheet is presented on a non-classified basis. Assets expected to be realized and liabilities expected to be settled
within the Company’s normal operating cycle of one year are typically considered to be current. Certain balances are comprised of both
current and non-current amounts. The current and non-current portions of such balances are disclosed, where applicable, throughout the
notes to the consolidated financial statements.
Basis of measurement
These consolidated financial statements have been prepared under the historical cost convention excluding certain financial instruments and
insurance contract liabilities whose basis of measurement is disclosed in the following accounting policies.
Insurance contracts
Product classification
Insurance contracts are those contracts that transfer significant insurance risk at the inception of the contract. Insurance risk is transferred
when the Company agrees to compensate a policyholder if a specified uncertain future event, other than a change in a financial variable,
adversely affects the policyholder. Any contracts, including reinsurance contracts that do not meet the definition of an insurance contract under
IFRS are classified as investment contracts, or service contracts, as appropriate. Once a contract has been classified as an insurance contract,
it remains an insurance contract for the remainder of its lifetime until all rights and obligations are extinguished or expire. The Company does
not have investment contracts.
Revenue recognition
Premiums written for property and casualty insurance contracts are deferred as unearned premiums and recognized in the consolidated
statements of income (loss) over the terms of the underlying policies. Premiums written are gross of any premium taxes and commissions.
Fees and other income include commission revenue from the sale of insurance policies.
Insurance contract liabilities
Unearned premiums represent the portion of the premiums written relating to the period of insurance coverage subsequent to the consolidated
balance sheet date.
The provision for unpaid claims and adjustment expenses represents the estimated amount required to settle all reported and unreported
claims incurred to the end of the year. These estimates are determined using the best information available for claims settlement patterns,
inflation, expenses, changes in the legal and regulatory environment and other matters. The provision reflects the time value of money and is
discounted based on the projected market yield of the assets backing the claims liability.
Anticipated recoveries of amounts relating to reported and unreported claims for salvage and subrogation, net of any required provision for
impairment, are included as an allowance in the measurement of the claims provision. Estimation of the amount of these recoveries is based
on principles consistent with the Company’s method for establishing the related liability.
Differences between the estimated cost and subsequent settlement of claims are recognized in the consolidated statements of income (loss) in
the period in which they are settled or in which the provisions for claims outstanding are re-estimated.
In the normal course of claims adjudication, the Company settles certain obligations to claimants through the purchase of annuities from third
party life insurance companies under structured settlement arrangements (structured settlements). In accordance with OSFI Guideline D-5,
these contracts are categorized as either Type 1 or Type 2 based on the characteristics of the claim settlement. When the Company does not
retain a reversionary interest under the contractual arrangement to any current or future benefits of the annuity, and the Company has obtained
a legal release of the obligation from the claimant, it will be classified as a Type 1 structured settlement. For such contracts, any gain or loss
arising on the purchase of an annuity is recognized in the consolidated statements of income (loss) at the date of purchase and the related
claims liabilities are derecognized. All other structured settlements that do not meet these criteria are classified as Type 2, with the Company
recognizing the annuity contract in other investments within invested assets. A corresponding liability representing the outstanding obligation to
the claimant is recognized in insurance contracts.
The Company has established an experienced rated refund pool as part of its fidelity program. This program provides a mechanism for the
accumulation and redistribution of funds if favourable experience exists within the program over a period of years. Refunds are determined
based on the adequacy of the pool and the results of the fidelity operation.
Liability adequacy test
At each consolidated balance sheet date, an assessment is made of whether the insurance contract liabilities are adequate, using current
estimates of future cash flows. If that assessment shows that the carrying amount of the liabilities is insufficient in light of the estimated future
cash flows, the premium deficiency is recognized in the consolidated statements of income (loss). An additional liability is set-up if a reduction
in deferred acquisition expenses is insufficient.
52 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 53
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Premiums due
Presentation
Premiums due represent receivables that are recognized when owed pursuant to the terms of the related insurance contract. Premiums due
are measured on initial recognition at the fair value of the consideration receivable and are recorded on the consolidated balance sheets net of
any impairment losses. Premiums due are classified as loans and receivables.
Financial assets and liabilities are offset and the net amount reported in the consolidated balance sheets when there is a legally enforceable
right to offset the recognized amounts and there is the ability and intention to settle on a net basis, or to realize the asset and settle the liability
simultaneously.
Acquisition expenses
Recognition and measurement
Acquisition expenses are comprised of commissions and premium taxes, which relate directly to the acquisition of premiums. These expenses
are deferred and amortized over the terms of the related policies to the extent that they are considered to be recoverable from unearned
premiums, after considering the anticipated claims, expenses and investment income related to the unearned premiums. If a premium
deficiency arises, any deferred acquisition expenses would be written off first, then a liability would be recorded on the consolidated balance
sheets for any remainder.
Reinsurance
Premiums payable in respect of reinsurance ceded are recognized over the period in which the reinsurance contract is entered into and are
based on the underlying insurance contracts to which they relate. Ceded premiums are expensed in the consolidated statements of income
(loss) on a pro-rata basis over the term of the reinsurance contract.
Reinsurance ceded assets and liabilities are recognized and together reflect the net amount estimated to be recoverable under the Company’s
reinsurance contracts in respect of outstanding claims reported within insurance contracts. The amount recoverable is initially valued on the
same basis as the underlying insurance contract. The amount recoverable is reduced when events or conditions arise after the initial
recognition of the asset that provide objective evidence that the Company may not receive all amounts due under the contract.
Reinsurance commissions are recognized in the consolidated statements of income (loss) over the term of the reinsurance contract using
principles consistent with the Company’s method of recording acquisition expenses. The Company has in place certain reinsurance contracts in
which the commission has a floor and a ceiling based on the loss experience on the business ceded under the contract. Commissions are
estimated based on the experience of these contracts.
The Company also assumes reinsurance risk in the normal course of business. Premiums and claims on assumed reinsurance are recognized
as revenue or expenses in the same manner as they would be if the reinsurance contract was considered direct business. Liabilities arising
under these contracts are estimated in a manner consistent with the related insurance contract and are included as components of insurance
contracts.
Financial instrument contracts
Classification and designation
Financial assets are classified as fair value through profit or loss (FVTPL), available-for-sale (AFS), held-to-maturity (HTM), or loans and
receivables based on their characteristics and purpose of their acquisition. Certain financial assets may be designated as FVTPL at the
Company’s option. Financial liabilities are required to be classified as FVTPL or other financial liabilities.
The Company has classified its investment in stocks, bonds, pooled funds and derivatives as either AFS or FVTPL with the exception of private
debt bonds which are classified as HTM. Investments in limited partnerships are classified as AFS. Certain bonds backing unpaid claims and
adjustment expenses have been designated as FVTPL. Certain shares that contain embedded derivatives are designated as FVTPL. The fair
value option may be used when such a designation eliminates or significantly reduces an accounting mismatch caused by measuring assets
and liabilities on different bases or when instruments are measured and managed on a fair value basis in accordance with a documented risk
management strategy. If a contract contains embedded derivatives, the entire combined hybrid contract may be designated as FVTPL. The
Company’s FVTPL designations comply with these requirements.
Mortgages and other investments are classified as loans and receivables. Short-term investments, which include money market instruments
with a maturity of greater than three months from the date of acquisition, are classified as AFS and HTM. Currency derivatives and cash and
cash equivalents are classified as FVTPL. Accounts payable and accrued charges, as well as borrowings are classified as other financial
liabilities with interest expense, if any, recorded in general expenses.
Purchases and sales of invested assets classified as FVTPL, AFS, HTM or loans and receivables are recorded on a trade date basis, the date
on which the Company commits to purchase or sell the investment.
Financial assets are measured at fair value, with the exception of HTM assets and loans and receivables. Assets classified as HTM or loans
and receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less
provision for impairment losses, if any. Any premium or discount on the acquisition of bonds is included in the calculation of the effective
interest rate. Financial liabilities are measured at fair value when they are classified as FVTPL. Other financial liabilities are initially recognized
at fair value and subsequently measured at amortized cost using the effective interest method.
Changes in the fair value of FVTPL financial assets and financial liabilities are recognized in net income (loss) for the year, while changes in
the fair value of AFS financial assets are reported within other comprehensive income (loss) (OCI), until the related instrument is disposed of or
becomes impaired. Net foreign exchange gains and losses for FVTPL and monetary AFS financial instruments are recognized in net income
(loss), while net foreign exchange gains and losses for non-monetary financial instruments classified as AFS are recognized in OCI.
Accumulated other comprehensive income (AOCI) is included in the consolidated balance sheets as a separate component of shareholders’
equity (net of income taxes) and includes unrealized gains and losses on AFS financial assets. The cumulative gains or losses in the fair values
of investments previously recognized in AOCI are reclassified to net income (loss) when they are realized or impaired.
Financial assets are derecognized when the rights to receive cash flows from them have expired or when the Company has transferred
substantially all of the risks and rewards of ownership.
Fair value
Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants
at the measurement date. Fair value measurements for invested assets are categorized into levels within a fair value hierarchy based on the
nature of valuation inputs (Level 1, 2 or 3).
The fair value of other financial assets and financial liabilities is considered to be the carrying value when they are of short duration or when the
instrument’s interest rate approximates current observable market rates. Where other financial assets and financial liabilities are of longer
duration, fair value is determined using the discounted cash flow method using discount rates based on adjusted observable market rates.
Impairment of financial assets
The Company reviews its AFS investment portfolio on a quarterly basis, at a minimum, for any declines in fair value below cost, and recognizes
any losses in net income (loss) where there is objective evidence of impairment.
The Company assesses whether there is potential impairment of an AFS financial asset by assessing whether there is a significant or
prolonged decline in fair value below cost. For equity instruments, the Company considers a decline of 20% to be significant and a period of
twelve months to be prolonged. When assessing whether there is potential impairment of instruments other than equity instruments, factors
that are considered include, but are not limited to: a decline in current financial position; defaults on debt obligations; failure to meet debt
covenants; significant downgrades of credit status, and severity and/or duration of the decline in value. An impairment loss is recorded through
a reclassification adjustment to the consolidated statements of income (loss).
Impairments of AFS equity instruments cannot be reversed through the consolidated statements of income (loss) until the instrument is
disposed of. Impairments of AFS debt instruments are only reversed if, in a subsequent period, the fair value increases and the increase can
be objectively related to an event occurring after the impairment loss was recognized in the consolidated statements of income (loss).
54 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 55
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Financial assets include mortgages and other investments classified as loans and receivables that are also evaluated for impairment. These
financial assets are considered impaired when there is objective evidence of deterioration in credit quality that indicates the Company no longer
has reasonable assurance that the full amount of principal and interest will be collected. The Company then establishes specific provisions for
losses and balances are subsequently measured at their net realizable amount based on discounting the cash flows at the original effective
interest rate inherent in the loan or the fair value of the underlying security. If the Company determines that no objective evidence of impairment
exists for an individually assessed financial asset, whether significant or not, it collectively assesses the assets for impairment. Assets that are
individually assessed for impairment, and for which an impairment loss is or continues to be recognized, are not included in a collective
assessment of impairment. Changes in present value of estimated future cash flows of impaired loans are recognized in net investment income
and gains as a credit or charge to impairment losses.
Derivative financial instruments
Derivatives are classified as FVTPL and transactions are recorded on a trade date basis. There are no derivatives designated as a hedge for
accounting purposes. Derivatives are recognized at fair value in the consolidated balance sheets. The gains and losses arising from
remeasuring the derivatives at fair value are recognized in the consolidated statements of income (loss) in net investment income and gains.
Positive fair values are reported in invested assets as foreign currency forward contracts, and negative fair values are reported in provisions
and other liabilities.
Embedded derivatives
An embedded derivative is a component of a hybrid (combined) instrument that also includes a non-derivative host contract. Some of the cash
flows of the combined instrument vary in a way similar to a stand-alone derivative. An embedded derivative causes some or all of the cash
flows that otherwise would be required by the contract to be modified according to a specified financial variable. Derivatives embedded in other
financial instruments or contracts are separated from their host contracts and accounted for as derivatives when: (i) their economic
characteristics and risks are not closely related to those of the host contract; (ii) the terms of the embedded derivative are the same as those of
a free standing derivative; (iii) the combined instrument or contract is not measured at fair value with the changes in fair value being recognized
in net income (loss); and (iv) the fair value of the embedded derivative can be reliably measured on a separate basis. These embedded
derivatives are classified as FVTPL financial assets and liabilities with changes in fair value recognized in net income (loss) as a component of
net investment income and gains.
Investments under securities lending program
Securities lending transactions are entered into on a collateralized basis. The securities lent are not derecognized on the Company’s
consolidated balance sheets given that the risks and rewards of ownership are not transferred from the Company to the counterparties in the
course of such transactions. Securities received from counterparties as collateral are not recorded on the Company’s consolidated balance
sheets given that the risks and rewards of ownership are not transferred from the counterparties to the Company in the course of such
transactions.
Revenue and expense recognition
Included within net investment income and gains are dividend and interest income. Dividend income is recorded on the ex-dividend date and
interest income, which includes amortization of premiums or discounts, is recognized using the effective interest method. Realized gains and
losses on the sale of investments are computed using the average cost of investments, net of any impairment charges, and are recognized in
net investment income and gains on the date of sale.
Transaction costs for AFS financial assets and loans and receivables are recorded as part of the purchase cost of the asset. Transaction costs
for financial liabilities classified as other than FVTPL are included in the value of the instrument at issue. Transaction costs for FVTPL financial
instruments are expensed as incurred in the consolidated statements of income (loss).
Other significant accounting policies
Cash and cash equivalents
Cash and cash equivalents include short-term investments with a maturity of three months or less from the date of acquisition.
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Property and equipment
Computer equipment, furniture and equipment, and leasehold improvements are carried at cost less accumulated amortization and
accumulated impairment losses. Subsequent costs are included in the asset’s carrying value when it is probable that future economic benefits
associated with the item will flow to the Company and the cost of the item can be reliably measured. All repairs and maintenance costs are
charged to the consolidated statements of income (loss) during the year in which they occur.
Property and equipment balances are amortized on a straight-line basis over their estimated useful lives as follows:
Computer equipment
Furniture and equipment
Leasehold improvements
Term
3 years
10 years
Lesser of 5 years and terms of related lease
Leasehold projects in progress are carried at cost and amortization commences upon completion of the project.
Impairment reviews are performed when there are indicators that the carrying value of an asset may exceed its recoverable amount. The
recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Impairment losses are recognized in the
consolidated statements of income (loss) as an expense. In the event that the value of a previously impaired asset recovers, the previously
recognized impairment loss is recovered in the consolidated statements of income (loss) at that time.
Property and equipment are derecognized upon disposal or when no further future economic benefits are expected from its use or disposal.
Gains and losses on disposal are determined by comparing the proceeds with the net carrying value and are recorded in the consolidated
statements of income (loss). Fully depreciated property and equipment are retained in cost and accumulated amortization accounts until such
assets are removed from service.
Useful lives, amortization rates and residual values are reviewed annually and are taken into consideration when determining the depreciable
amounts of the property and equipment.
Leases
Effective January 1, 2019, the Company has adopted IFRS 16 in its consolidated financial statements. Below is a discussion of the current
accounting policy, and the accounting policy applicable before January 1, 2019. The impact of the changes and the Company’s elections on
transition are disclosed in note 3.
Policy applicable on and after January 1, 2019
At the inception of a contract, the Company determines whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To determine whether a
contract contains the right to control the use of an identified asset for a period of time, the Company determines whether it has the right to
obtain substantially all the economic benefits from the use of the identified asset and has the right to direct the use of the identified asset. An
identified asset is physically distinct and can be specified explicitly or implicitly.
The Company has elected not to separate lease components from non-lease components in a lease. This policy applies to contracts entered
into, or changed, on or after January 1, 2019.
At the commencement of a lease, the Company recognizes a right-of-use asset and a lease liability. The right-of-use asset is initially measured
at cost. Cost includes the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus
any initial direct costs incurred and an estimate of costs to dismantle or restore the underlying asset, less any lease incentives received.
The right-of-use asset is depreciated using the straight-line method from the commencement date to the end of the lease term. The lease term
includes the non-cancellable period of the lease including extension and termination options if the Company is reasonably certain to exercise
the option. The right-of-use asset is adjusted for certain remeasurements of the lease liability and impairment losses.
The lease liability is initially measured at the present value of the lease payments for the remainder of the lease term, discounted using the
interest rate implicit in the lease if known or, if that rate is not readily determinable, the Company’s incremental borrowing rate. Payments that
are variable in nature and do not represent in-substance fixed payments have been excluded from the lease payments and are included in the
consolidated statements of income (loss) under general expenses.
56 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 57
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension
option, or not to exercise a termination option. The lease term includes the non-cancellable period of the lease including extension and
termination options if the Company is reasonably certain to exercise the option.
The lease liability is amortized using the interest rate implicit in the lease if known, or if that rate is not readily determinable, the Company’s
incremental borrowing rate. It is remeasured when there is a change in the Company’s estimate of whether it will exercise an extension or
termination option. If the lease liability is remeasured, a corresponding adjustment is made to the right-of-use asset.
Policy applicable before January 1, 2019
Leases of property and equipment where the Company was not exposed to substantially all of the risks and rewards of ownership were
classified as operating leases. Incentives received from the lessor were deferred and amortized to the consolidated statements of income (loss)
on a straight-line basis over the term of the lease. Where substantially all of the risks and rewards had been transferred to the Company, the
lease was classified as a finance lease. In these cases, a liability and an asset were recognized based on the present value of the future
minimum lease payments and the balances were amortized over the lease term and useful life, respectively.
Business acquisitions and consolidation
The Company measures goodwill as the fair value of the consideration transferred, including the recognized amount of any non-controlling
interest in the acquiree, less the net recognized amount (generally fair value) of the identifiable assets acquired and liabilities assumed, all
measured as of the acquisition date. When the excess is negative, a bargain purchase gain is recognized immediately in net income (loss).
The Company elects, on a transaction-by-transaction basis, whether to measure non-controlling interest at its fair value, or at its proportionate
share of the recognized amount of the identifiable net assets, at the acquisition date. Transaction costs that the Company incurs in connection
with a business combination, other than those associated with the issue of debt or equity securities, are expensed as incurred.
IFRS 3 “Business Combinations” excludes from its scope the combination of entities or businesses under common control. Therefore, in
accordance with IAS 8 “Accounting policies, changes in accounting estimates and errors”, the Company has considered various other sources
of guidance and has elected to record the acquisition of businesses under common control using the pre-acquisition date book values for their
assets and liabilities and will not apply the measurement principles of IFRS 3; the difference between fair value and book value will be recorded
through equity. Consistent with IFRS 3, the results of the Company prior to the acquisition date will not be restated.
Subsidiaries
Subsidiaries are all entities over which CGIC has control. CGIC controls an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The
accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by CGIC.
Place of business
Ownership interest and
voting rights held by the
Company
The Sovereign General Insurance Company
COSECO Insurance Company
CUMIS General Insurance Company
Co-operators Investment Limited Partnership
Co-operators Insurance Agencies Limited
Co-operators Strategic Growth Corporation
Canada
Canada
Canada
Canada
Canada
Canada
100%
100%
100%
100%
100%
100%
Principal activities
Property & casualty insurance
Property & casualty insurance
Property & casualty insurance
Investment partnership
Licensed insurance agency
Licensed insurance agency
Investments in associates and joint ventures
Associates are those entities over which the Company has significant influence, but not control. Significant influence is considered to be held
where the Company has the power to participate in the financial and operating policy decisions of the investee but does not have control or
joint control over those policies. Significant influence is generally presumed to exist when the Company holds between 20 and 50 percent of
the voting power of another entity.
Joint ventures are joint arrangements where the parties have rights to the net assets of the arrangement. A joint arrangement is where two or
more parties have joint control. Joint control is the contractually agreed sharing of control, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.
Investments in associates and joint ventures are accounted for using the equity method (equity accounted investees) and are recognized
initially at cost. The Company’s investment includes goodwill identified on acquisition and is presented net of any accumulated impairment
losses. The consolidated financial statements include the Company’s share of the income, expenses and equity movements of equity
accounted investees, after adjustments to align the accounting policies with those of the Company, from the date that significant influence or
joint control commences until the date that significant influence or joint control ceases. When the Company’s share of losses exceeds its
interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the
recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the
investee.
Transactions eliminated on consolidation
Intra-company balances and transactions, and any unrealized income and expenses arising from intra-company transactions, are eliminated in
preparing the consolidated financial statements. Unrealized gains arising from transactions with equity accounted investees are eliminated
against the investment to the extent of the Company’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized
gains, unless the transaction provides evidence of impairment.
Intangible assets
Goodwill is not amortized but is evaluated for impairment annually or more frequently when an event or circumstance occurs that indicates
goodwill might be impaired. Testing for impairment is accomplished by determining if the carrying value of a cash-generating unit (CGU)
exceeds its recoverable amount at the assessment date. A CGU is the smallest identifiable group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or groups of assets. Each of those CGUs represents the Company’s investment by
legal entity. The assets constituting the CGU to which goodwill has been allocated are tested for impairment prior to testing the goodwill for
impairment. Any impairment loss on these assets is recognized in the consolidated statements of income (loss) prior to testing the CGU
containing goodwill for impairment.
If the carrying value of a CGU, including the allocated goodwill, exceeds its recoverable amount, the amount of the goodwill impairment is
measured as the excess of the carrying amount of the CGU over its recoverable amount. The recoverable amount is the higher of its fair value
less costs to sell or its value in use. Should the carrying value exceed the recoverable amount, an impairment loss is recognized in the
consolidated statements of income (loss) at that time. The estimate of recoverable amount required for the impairment test is sensitive to the
cash flow projections and the assumptions used in the valuation model. Previously recorded impairment losses for goodwill are not reversed in
future periods.
Finite life intangible assets are amortized on a straight-line basis over their estimated useful lives and are carried at cost less accumulated
amortization and impairment. Finite life intangible assets are tested for impairment when events or circumstances indicate that the carrying
value may not be recoverable. Indefinite life intangible assets are not amortized but are evaluated for impairment annually or more frequently
when an event or circumstance occurs that indicates impairment. An impairment loss is recognized as the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows, which are
CGUs.
For intangible assets excluding goodwill, an assessment is made at each balance sheet date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company makes an
estimate of the recoverable amount. A previous impairment loss is reversed only if there has been a change in the estimates used to determine
the asset’s or CGU’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset or
CGU is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net
of amortization, had no impairment loss been recognized for the asset or CGU in prior years.
The details of the Company’s accounting policy as it applies to each intangible asset group is as follows:
Goodwill
Licenses
Brand
Customer relationships
Software
Term
Indefinite life, not amortized
Indefinite life, not amortized
Indefinite life, not amortized
5 - 10 years
2 - 5 years
Software consists primarily of internally generated software development costs.
58 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 59
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Assets held for sale and discontinued operations
Foreign currency translation
Non-current assets and disposal groups are classified as assets held for sale when the Company expects the carrying amount to be recovered
through a sales transaction rather than through continuing use. This condition is satisfied when the asset or disposal group is available for
immediate sale in its present condition and the sale is highly probable. Non-current assets and disposal groups classified as held for sale are
measured at the lower of their previous carrying amounts, prior to being reclassified, and fair value less costs to sell. Liabilities directly
associated with the held for sale assets of a disposal group are presented separately from liabilities related to continuing operations.
A disposal group is classified as a discontinued operation if it meets the following conditions: (i) it is a component that can be distinguished
operationally and financially from the rest of the Company’s operations, and (ii) it represents either a separate major line of business or is part
of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations. Disposal groups classified as
discontinued operations are presented separately from the Company’s continuing operations in its consolidated statements of income (loss),
consolidated statements of comprehensive income (loss) and consolidated statements of cash flows.
Retirement benefit obligations
Retirement benefit obligations include pensions, medical and dental benefits and certain other benefits to qualifying individuals. The primary
pension plan is a defined contribution plan.
A defined contribution plan is a post-employment benefit plan under which an entity pays specified contributions into a separate entity and will
have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are
recognized as an employee benefit expense in general expenses in the consolidated statements of income (loss) in the periods during which
services are rendered by employees.
The other benefit plans are benefit obligations which are accounted for using the projected unit credit method. The expected costs of retirement
benefit obligations are expensed during the years that the employees render services and an accrued post-employment benefit obligation is
recognized. The obligation is determined by application of the terms of the plans together with relevant actuarial assumptions. There are no
employee contributions to the other-than-pension benefits plan. The plans are not funded. Net interest on the accrued benefit liability is
recognized in general expenses in the consolidated statements of income (loss).
The effects of remeasurement of retirement benefit obligations, including differences between the actual return on plan assets and the interest
income on plan assets, and actuarial gain and loss, are recognized permanently in OCI. Past service costs are recognized in the consolidated
statements of income (loss) at the earlier of when the amendment or curtailment occurs or when the Company recognizes related restructuring
or termination benefits, where applicable.
Borrowings
Functional and presentation currency
Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Canadian dollars,
which is CGIC’s functional and the Company’s presentation currency.
Transactions and balances
The Company translates all foreign currency monetary assets and liabilities into Canadian dollars at year-end foreign exchange rates. Revenue
and expenses are translated at the prevailing foreign exchange rate on the date of the transaction. Exchange gains and losses are recognized
in the consolidated statements of income (loss) with the exception of unrealized gains and losses associated with non-monetary financial
assets, such as equities classified as AFS, which are recorded in OCI.
Income taxes
The Company accounts for income taxes using the asset and liability method. Under this method, the provision for income taxes is calculated
based on income tax laws and rates enacted and substantively enacted as at the consolidated balance sheet date. The income tax provision is
comprised of current and deferred income taxes. Current income taxes are amounts expected to be payable or recoverable as a result of
current year operations. Deferred income tax assets and liabilities arise from temporary differences between the accounting and tax basis of
assets and liabilities. A deferred income tax asset is recognized to the extent that it is probable the benefit of losses and deductions will be
available to be carried forward to future years for income tax purposes. Current and deferred income taxes are recorded in the consolidated
statements of income (loss), except for those items that are associated with components of OCI. In those cases, the applicable tax is also
recorded in OCI.
Share capital
Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the issue of
equity instruments are shown in shareholders’ equity as a deduction from the proceeds, net of tax.
Use of estimates and judgments
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the consolidated balance sheet date and the reported
amounts of revenues and expenses during the year. The preparation of the consolidated financial statements also requires management to
exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in the notes for
the respective account balances.
Borrowings are initially recognized at fair value, net of any transaction costs incurred. Subsequently, borrowings are carried at amortized cost.
Debt issuance transaction costs are amortized over the term of the related debt using the effective interest method.
Significant estimates and assumptions include the following:
Provisions
Provisions are recognized when: (i) the Company has a present legal or constructive obligation as a result of past events, (ii) it is more likely
than not that an outflow of resources will be required to settle the obligation, (iii) and the amount can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the
passage of time is recognized as interest expense and classified as a general expense in the consolidated statements of income (loss).
Provision for advisor transition commissions
The Company’s advisors are eligible for a transition commission payout on a qualifying termination. The transition commission liability is based
on the number of years of service as an advisor and the advisor’s average trailing commission volume. Payments to terminated advisors are
funded in part from reduced commission payments which are made to advisors assuming the rights to the book of business during the first
three years of their agency relationship. The obligation to active advisors is determined by accruing for the benefits earned to date on a present
value basis assuming the cash flows associated with the earned benefits are paid out at the expected termination date.
Valuation of insurance contracts
The Company makes certain assumptions, which include discount rates and the future development of claims. Note 7(b) discloses the revised
estimate of prior year unpaid claims and adjustment expenses. The Company’s sensitivity of unpaid claims and after-tax net income to changes
in best estimate assumptions are disclosed in note 7(f).
Provision for advisor transition commissions
The provision for advisor transition commissions includes an obligation to active advisors determined by accruing for the benefits earned to
date. The Company makes certain assumptions in determining the present value of the cash flows associated with the earned benefits. Note
15 discloses the significant assumptions used to estimate the provision, which include discount rate and average termination age.
Valuation of other benefit plan obligation
The cost of the other benefit plan obligation is calculated by the Company’s independent actuaries using assumptions determined by
management. The actuarial valuation involves making assumptions about discount rates, future inflation, mortality rates, and health and dental
cost trends. If actuarial experience differs from the assumptions used, the expected obligation could increase or decrease in future years. Note
16 discloses the significant assumptions used to estimate the defined benefit obligation.
60 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 61
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Significant judgments include the following:
Annual Improvements 2015–2017 Cycle
Impairment of financial instruments
The Company assesses AFS financial instruments for objective evidence of impairment at each reporting date. Objective evidence of
impairment includes a significant or prolonged decline in the fair value or net asset value below cost or when a loss event that has a reliably
estimable impact on the future cash flows of the financial instrument has occurred. The determination of what is significant or prolonged
requires judgment. In making this judgment, we evaluate factors including, but not limited to: a decline in current financial position; defaults on
debt obligations; failure to meet debt covenants; significant downgrades of credit status, and severity and/or duration of the decline in value.
Annual Improvements 2015–2017 Cycle was issued in December 2017 by the IASB and included minor amendments to IFRS 3 "Business
Combinations", IFRS 11 "Joint Arrangements", IAS 12 "Income Taxes", and IAS 23 "Borrowing Costs". The annual improvements process is
used to make necessary but non-urgent changes to IFRS that are not included in other projects. The amendments issued are all effective for
annual periods beginning on or after January 1, 2019. The Company has determined there are no impacts of these amendments on its
consolidated financial statements.
3. Adoption of new and amended accounting standards
Effective January 1, 2019, the Company adopted the following new and amended accounting standards:
IFRS 16 "Leases"
IFRS 16 was issued in January 2016 to replace IAS 17 “Leases” and related interpretations by the International Financial Reporting
Interpretations Committee (IFRIC). The standard provides a single lessee accounting model, requiring lessees to recognize right-of-use assets
and related liabilities for all leases unless the lease term is 12 months or less, or the underlying asset has a low value.
The standard has been adopted by the Company on January 1, 2019. The Company has elected to apply IFRS 16 on its consolidated financial
statements using the modified retrospective approach. As a result, comparative information has not been restated and continues to be reported
under IAS 17.
As of January 1, 2019, the Company determined the impact to the consolidated balance sheet included an increase to assets and liabilities of
$35,764.
The Company used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases
under IAS 17:
•
Elected to grandfather the assessment of which transactions are leases. The Company did not reassess whether a contract is, or
contains, a lease at the date of initial application, but rather applied IFRS 16 to contracts that were previously identified as leases
under IAS 17;
Applied a single discount rate to a portfolio of leases with similar characteristics;
•
• Relied on its assessment of the whether leases were onerous immediately before the date of initial application in accordance with
IAS 37, as an alternative to performing an impairment review;
Excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application; and
•
• Used hindsight in its determination of the right-to-use asset and lease liability in determining if the lease term of the contract contains
an option to extend or terminate the lease.
4. Accounting standards issued but not yet applied
IFRS 7 "Financial Instruments: Disclosures"
In December 2011, IFRS 7 was amended to require additional financial instrument disclosures upon transition from IAS 39 to IFRS 9. The
amendments are effective upon adoption of IFRS 9, which is effective for annual periods beginning on or after January 1, 2018. However, in
September 2016, IFRS 4 was amended to provide an option of a temporary exemption from applying IFRS 9 for entities whose predominant
activity is issuing insurance contracts within the scope of IFRS 4. Therefore, qualifying entities will have the option to adopt IFRS 9 upon the
adoption of IFRS 17. The Company qualifies for a temporary exemption; thus, IFRS 7 is effective for annual periods beginning on or after
January 1, 2022 (expected). The Company is currently evaluating the impact that this standard will have on its consolidated financial
statements.
IFRS 9 "Financial Instruments"
IFRS 9 was issued in July 2014 and is intended to replace IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 is a three
part standard aimed at reducing complexity in reporting financial instruments. The project has been divided into three phases: Phase 1
Classification and measurement, Phase 2 Impairment and Phase 3 Hedge accounting. Phase 1 was issued in November 2009 and amended in
October 2010. It requires financial assets to be recorded at amortized cost or fair value depending on the entity’s business model for managing
the assets and their associated cash flow characteristics. All financial assets are to be measured at fair value on the balance sheet if they are
not measured at amortized cost. At initial recognition, an entity may irrevocably designate a financial asset as measured at (FVTPL) if doing so
eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities
or recognizing the gains and losses on them on different bases. Phase 2 was completed in July 2014 and introduced a new expected loss
impairment methodology that will result in more timely recognition of impairment losses. Phase 3 was completed in November 2013. This
phase replaces the rule-based hedge accounting requirements in IAS 39 to more closely align the accounting with risk management activities.
The standard is effective for annual periods beginning on or after January 1, 2018. However, in September 2016, IFRS 4 was amended to
provide an option of a temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing insurance contracts within
the scope of IFRS 4. Therefore, qualifying entities will have the option to adopt IFRS 9 upon the adoption of IFRS 17. The Company qualifies
for temporary exemption; thus, IFRS 9 is expected effective for annual periods beginning on or after January 1, 2022 (expected). The Company
is currently evaluating the impact that this standard will have on its consolidated financial statements.
In determining the lease liability on January 1, 2019, the Company used the rate implicit in the lease if known, otherwise it applied the
incremental borrowing rate to the portfolio of leases. The weighted average discount rate as of January 1, 2019 was 2.82%.
IFRS 17 "Insurance Contracts"
The additional disclosures related to the right-of-use assets and lease liabilities can be found in note 13.
IFRIC 23 "Uncertainty of Income Tax Treatment"
IFRIC 23 was issued in June 2017 and is intended to clarify the accounting for uncertainties in income taxes. The interpretation addresses the
determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income
tax treatments under IAS 12. It specifically considers whether tax treatments should be considered collectively; assumptions for taxation
authorities' examinations; the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and the
effect of changes in facts and circumstances. The Company has determined there are no impacts of these amendments on its consolidated
financial statements.
IAS 19 "Employee Benefits"
IAS 19 was amended in February 2018 and clarifies that if a plan amendment, curtailment or settlement occurs, it will be mandatory that the
current service cost and the net interest for the period after the remeasurement be determined using the assumptions used in the
remeasurement. The amendments also clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the
asset ceiling. The Company has determined there are no impacts of these amendments on its consolidated financial statements.
IFRS 17 was issued in May 2017 and will replace IFRS 4 “Insurance Contracts”. The intent of the standard is to establish consistent
recognition, measurement, presentation and disclosure principles to provide relevant and comparable reporting of insurance contracts across
jurisdictions.
The standard requires entities to measure insurance contract liabilities as the risk-adjusted present value of the cash flows plus the contractual
service margin, which represents the unearned profit the entity will recognize as future service is provided. This is referred to as the general
model. Expedients are specified, provided the insurance contracts meet certain conditions. If, at initial recognition or subsequently, the
contractual service margin becomes negative, the contract is considered onerous and the excess is recognized immediately in the consolidated
statements of income (loss). The standard also includes significant changes to the presentation and disclosure of insurance contracts within
entities’ financial statements.
In December 2018, the IASB voted in favour of deferring the effective date of IFRS 17 from annual reporting periods beginning on or after
January 1, 2021 to January 1, 2022 (expected). The standard is to be applied retrospectively unless impracticable, in which case a modified
retrospective approach or fair value approach is to be used for transition. The Company is currently evaluating the impact that this standard will
have on its consolidated financial statements.
62 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 63
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
IFRS 3 "Business Combinations"
5. Invested assets and net investment income and gains (losses)
IFRS 3 was amended in October 2018 to revise the definition of a business and provide a simplified assessment of whether an acquired set of
activities and assets qualifies as a business. The amendment is effective for annual periods beginning on or after January 1, 2020. The
Company is currently evaluating the impact that this standard will have on its consolidated financial statements in the event of a business
acquisition.
a) Invested assets
IAS 1 "Presentation of Financial Statements" and IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors"
December 31, 2019
Fair value
Amortized cost
Carrying value
Classified
Designated
Loans and
AFS
$
FVTPL
$
FVTPL
$
receivables
$
Other
$
Total
$
Amendments to IAS 1 "Presentation of Financial Statements" and IAS 8 "Accounting Policies, Changes in Accounting Estimates and Errors"
were issued in October 2018. The amendments are effective for annual periods beginning on or after January 1, 2020. The amendments
update the definition of 'material' and the meaning of 'primary users of general purpose financial statements'. The Company is currently
evaluating the impact that these amendments will have on its consolidated financial statements.
Conceptual Framework for Financial Reporting
In March 2018, the IASB revised its conceptual framework for financial reporting. The revised framework includes a new chapter on
measurement, guidance on reporting financial performance, improved definitions and guidance, and clarifications on important topics (e.g., the
roles of stewardship, prudence, and measurement uncertainty in financial reporting). The IASB has also issued amendments that update
references to the framework in certain standards. The amendments are effective for annual periods beginning on or after January 1, 2020. The
Company is currently evaluating the impact these amendments will have on its consolidated financial statements.
Bonds
Federal
Provincial
Municipal
Corporate
Asset-backed securities
Stocks
Canadian common
Canadian preferred
U.S. equities
Short-term investments
Limited partnerships
Pooled funds
Foreign currency forward contracts
Mortgages
Other investments
Investment income due and accrued
840,643
1,045,533
10,489
814,994
73,011
2,784,670
744,208
-
184,964
929,172
75,944
188,358
195,510
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,882
-
-
-
38,085
36,386
-
57,205
9,053
140,729
-
430,025
-
430,025
-
-
-
-
-
-
-
Total invested assets
4,173,654
4,882
570,754
-
-
-
-
-
-
-
-
-
-
-
-
-
-
521,887
9,867
30,894
562,648
-
-
-
348
-
348
-
-
-
-
14,874
-
-
-
-
-
-
878,728
1,081,919
10,489
872,547
82,064
2,925,747
744,208
430,025
184,964
1,359,197
90,818
188,358
195,510
4,882
521,887
9,867
30,894
15,222
5,327,160
64 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 65
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Fair value
Classified
FVTPL
$
AFS
$
Amortized cost
Carrying value
Designated
FVTPL
$
Loans and
receivables
$
Other
$
Total
$
about the information that would be used by market participants in pricing assets or liabilities. To verify pricing, the Company assesses the
reasonability of the fair values by comparing to industry accepted valuation models, to movements in credit spreads and to recent transaction
prices for similar assets where available. Mortgages are measured at amortized cost and their fair value, valuation technique and inputs are
disclosed under note 5(e).
December 31, 2018
Bonds
Federal
Provincial
Municipal
Corporate
Asset-backed securities
Stocks
Canadian common
Canadian preferred
U.S. equities
Foreign equities
Short-term investments
Limited partnerships
Pooled funds
Foreign currency forward contracts
Mortgages
Other investments
Investment income due and accrued
799,140
854,380
30,116
812,132
73,432
2,569,200
567,307
-
155,929
3,912
727,148
89,274
137,433
179,484
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,683
-
-
-
40,182
35,438
-
49,761
8,976
134,357
-
395,598
-
-
395,598
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
443,059
13,990
27,040
484,089
-
-
-
430
-
430
-
-
-
-
-
10,178
-
-
-
-
-
-
839,322
889,818
30,116
862,323
82,408
2,703,987
567,307
395,598
155,929
3,912
1,122,746
99,452
137,433
179,484
1,683
443,059
13,990
27,040
10,608
4,728,874
Total invested assets
3,702,539
1,683
529,955
At December 31, 2019, the fair value of the securities on loan included in invested assets above consists of $75,726 (2018 - $54,967) in stocks
and $715,678 (2018 - $395,210) in bonds.
b) Investments - measured at fair value
The Company is responsible for determining the fair value of its investment portfolio by utilizing market-driven measurements obtained from
active markets where available, by considering other observable and unobservable inputs and by employing valuation techniques that make
use of current market data. Assets and liabilities recorded at fair value in the consolidated balance sheets are measured and classified in a
hierarchy consisting of three levels for disclosure purposes. The three levels are based on the significance and reliability of the inputs to the
respective valuation techniques. The input levels are defined as follows:
Level 1 - Quoted prices
Represents unadjusted quoted prices for identical instruments exchanged in active markets. The fair value is determined based on quoted
prices in active markets obtained from external pricing sources.
Level 2 - Significant other observable inputs
Includes directly or indirectly observable inputs other than quoted prices for identical instruments exchanged in active markets. These inputs
include quoted prices for similar instruments exchanged in active markets; quoted prices for identical or similar instruments exchanged in
inactive markets; inputs other than quoted prices that are observable for the instruments, such as interest rates and yield curves, volatilities,
prepayment spreads, credit risks and default rates where available; and inputs that are derived principally from or corroborated by observable
market data by correlation or other means. Consistent with market participants, the Company determines the fair values of foreign exchange
forward contracts by using a discounted cash flow valuation technique using observable market data.
Level 3 - Significant unobservable inputs
Includes inputs that are not based on observable market data. Management is required to use its own assumptions regarding unobservable
inputs as there is little, if any, market activity in these assets or liabilities or related observable inputs that can be corroborated at the
measurement date. Unobservable inputs require significant management judgment or estimation to make certain projections and assumptions
The following summarizes how fair values were determined for recurring measurements:
December 31, 2019
AFS
Bonds
Stocks
Short-term investments
Limited partnerships
Pooled funds
FVTPL
Bonds
Stocks
Foreign currency forward contracts
Total invested assets at fair value
FVTPL
Foreign currency forward contracts (note 15)
Total financial liabilities at fair value
December 31, 2018
AFS
Bonds
Stocks
Short-term investments
Limited partnerships
Pooled funds
FVTPL
Bonds
Stocks
Foreign currency forward contracts
Total invested assets at fair value
FVTPL
Foreign currency forward contracts (note 15)
Total financial liabilities at fair value
Level 1 -
Level 2 -
Level 3 -
Significant
Significant
other observable
unobservable
Total
Quoted prices
$
-
927,292
-
-
-
inputs
$
2,784,670
-
75,944
-
195,510
inputs
fair value
$
-
-
-
188,358
-
$
2,784,670
927,292
75,944
188,358
195,510
927,292
3,056,124
188,358
4,171,774
-
430,025
-
430,025
1,357,317
-
-
Level 1 -
Quoted prices
$
-
725,268
-
-
-
140,729
-
4,882
145,611
-
-
-
-
140,729
430,025
4,882
575,636
3,201,735
188,358
4,747,410
71
71
-
-
71
71
Level 2 -
Significant
Level 3 -
Significant
other observable
unobservable
inputs
$
2,569,200
-
89,274
-
179,484
inputs
$
-
-
-
137,433
-
Total
fair value
$
2,569,200
725,268
89,274
137,433
179,484
725,268
2,837,958
137,433
3,700,659
-
395,598
-
395,598
1,120,866
-
-
134,357
-
1,683
136,040
2,973,998
10,790
10,790
-
-
-
-
134,357
395,598
1,683
531,638
137,433
4,232,297
-
-
10,790
10,790
66 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 67
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Excluded from these totals are AFS investments of $1,880 (2018 - $1,880) in shares of other co-operative entities which are carried at cost as
they do not have quoted market prices in active markets and their fair value cannot be measured reliably.
The investments measured at fair value and classified as Level 3 are limited partnerships, which represent units of third-party managed private
equity funds (Funds). The fair values of limited partnership investments are based on the net asset value (NAV) from each of the individual
Funds most recent quarterly or annual financial statements. Limited partnership NAV’s are derived by valuation techniques employed by each
Funds management using unobservable inputs. The Company assesses the NAV disclosed in each Funds most recent financial statement
using independent analytical procedures to ensure the amount is a reasonable representation of fair value. The Company does not assess the
sensitivity of the fair value of limited partnerships because the inputs used by each fund manager to determine the NAV are unobservable and
not readily available.
The following table is a reconciliation of the Level 3 fair value measurements.
2019
Balance, beginning of year
Purchases
Sales and redemptions
Losses
Unrealized included in OCI
Balance, end of year
2018
Balance, beginning of year
Purchases
Sales and redemptions
Acquisition of subsidiary from related party
Gains
Unrealized included in OCI
Balance, end of year
Limited
partnerships
$
137,433
68,969
(11,835)
(6,209)
188,358
Limited
partnerships
$
93,800
28,165
(1,376)
5,469
11,375
137,433
No investments were transferred between levels during the year (2018 - $nil).
c) Net investment income and gains
December 31, 2019
Interest income
Dividend income
Other investment income
Investment expense
Net investment income
Net realized gains (losses)
Net foreign exchange gains (losses)
Change in fair value (note 24)
Impairment losses (note 24)
Net investment gains
Net investment income and gains
AFS
$
73,047
56,328
-
(4,728)
124,647
87,318
3,566
-
(3,946)
86,938
211,585
Classified
Designated
Loans and
FVTPL
FVTPL
receivables
$
-
-
-
-
-
-
10,446
-
-
10,446
10,446
$
4,338
21,871
-
(977)
25,232
(1,109)
(40)
5,823
-
4,674
29,906
$
18,110
-
-
(1,112)
16,998
387
-
-
-
387
17,385
Other
$
2,444
-
318
-
Total
$
97,939
78,199
318
(6,817)
2,762
169,639
-
-
-
-
-
2,762
86,596
13,972
5,823
(3,946)
102,445
272,084
December 31, 2018
Interest income
Dividend income
Other investment income
Investment expense
Net investment income
Net realized gains
Net foreign exchange gains (losses)
Change in fair value (note 24)
Impairment losses (note 24)
Net investment gains (losses)
Net investment income and gains
(losses)
d) Maturity profile of invested assets
December 31, 2019
Bonds
Stocks
Short-term investments
Limited partnerships
Pooled funds
Foreign currency forward contracts
Mortgages
Other investments
Investment income due and accrued
December 31, 2018
Bonds
Stocks
Short-term investments
Limited partnerships
Pooled funds
Foreign currency forward contracts
Mortgages
Other investments
Investment income due and accrued
AFS
$
65,487
30,611
-
(4,468)
91,630
10,401
6,634
-
(20,298)
(3,263)
Classified
Designated
Loans and
FVTPL
FVTPL
receivables
$
-
-
-
-
-
-
(15,505)
-
-
$
3,534
20,472
-
(924)
23,082
647
(140)
(46,321)
-
$
16,221
-
-
(1,009)
15,212
272
-
-
-
(15,505)
(45,814)
272
Other
$
843
-
222
-
Total
$
86,085
51,083
222
(6,401)
1,065
130,989
-
-
-
-
-
11,320
(9,011)
(46,321)
(20,298)
(64,310)
88,367
(15,505)
(22,732)
15,484
1,065
66,679
< 1
Year
$
1 - 3
Years
$
4 - 5
Years
$
6 - 9
Years
$
> 10
Years
$
104,164
894,710
1,003,897
530,816
392,160
-
90,818
-
-
4,882
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
119,189
241,353
122,818
35,590
-
30,894
-
-
-
-
-
-
-
-
-
-
-
2,937
9,765
-
No fixed
$
-
Total
$
2,925,747
1,359,197
1,359,197
-
188,358
195,510
-
-
102
-
90,818
188,358
195,510
4,882
521,887
9,867
30,894
349,947
1,136,063
1,126,715
566,406
404,862
1,743,167
5,327,160
7%
21%
21%
11%
8%
32%
100%
< 1
Year
$
1 - 3
Years
$
4 - 5
Years
$
6 - 9
Years
$
> 10
Years
$
49,821
834,414
708,719
875,087
235,946
-
99,452
-
-
1,683
83,974
-
27,040
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
252,341
89,467
12,928
-
-
-
-
-
-
-
-
-
-
-
4,349
9,765
-
No fixed
$
-
Total
$
2,703,987
1,122,746
1,122,746
-
137,433
179,484
-
-
4,225
-
99,452
137,433
179,484
1,683
443,059
13,990
27,040
261,970
1,086,755
798,186
888,015
250,060
1,443,888
4,728,874
6%
23%
17%
19%
5%
30%
100%
68 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 69
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
e) Mortgage diversification
Creditor concentration
Insured residential
Uninsured residential
Commercial
Geographic concentration
Atlantic
Quebec
Ontario
West
Fair Value
December 31,
December 31,
2019
$
8,445
132,734
380,708
521,887
2018
$
15,528
81,475
346,056
443,059
December 31,
December 31,
2019
$
38,987
69,221
198,298
215,381
521,887
2018
$
45,116
38,845
157,376
201,722
443,059
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
The Company’s interests in unconsolidated structured entities at end of the year are as follows:
December 31, 2019
Asset-backed securities
Pooled funds
Limited partnerships
December 31, 2018
Asset-backed securities
Pooled funds
Limited partnerships
Asset-backed securities
Carrying value
Maximum exposure
to loss
$
82,064
195,510
188,358
$
82,064
195,510
188,358
Carrying value
Maximum exposure
to loss
$
82,408
179,484
137,433
$
82,407
179,484
137,433
Investment in third-party asset-backed securities consists of mortgage-backed securities, auto loan receivables and credit card receivables.
Financing and support is limited to the investment made.
526,119
447,699
Pooled funds
Mortgages measured at fair value, for disclosure purposes only, are classified as Level 3. The fair value of the mortgages has been calculated
by discounting the expected cash flows of each instrument. The discount rate is determined using the Government of Canada benchmark bond
yield for instruments of similar maturity, adjusted for specific credit risk. In determining the adjustment for credit risk, Addenda Capital Inc.
(Addenda), a company under common control and responsible for managing the Company’s investment portfolio, considers market conditions,
the value of the properties that the mortgage is secured by and other indicators of creditworthiness.
Investments in pooled funds consist of units invested in underlying fixed income and equity securities managed by Addenda and other third-
party managers. The pooled funds are perpetual private trusts created under trust agreements. Pooled funds provide investors with access to
the underlying portfolio with the objective of reducing volatility risk through balanced portfolios and achieving increased yields. Financing and
support is only provided to the pooled funds through the purchase of units and therefore, the Company’s maximum exposure in the pooled
funds is limited to the total fair value of its investments in these funds.
f) Unconsolidated structured entities
Limited partnerships
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the
entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual
arrangements. A structured entity often has some or all of the following features or attributes: (a) restricted activities, (b) a narrow and well-
defined objective, such as to provide investment opportunities for investors by passing on risks and rewards associated with the assets of the
structured entity to investors, (c) insufficient equity to permit the structured entity to finance its activities without subordinated financial support
and (d) financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks
(tranches).
The Company has interests in various structured entities included in invested assets on the consolidated balance sheets. These entities include
asset-backed investment vehicles, pooled funds and limited partnerships. The Company does not consolidate these structured entities as the
Company does not hold significant ownership or does not control the entity that manages these structured entities.
The Company owns units of the Funds with a mandate to generate capital appreciation and yield through investments in infrastructure assets.
Limited partnership investments are structured to give the third-party sponsor the exclusive right to manage and control the Funds. These
limited partnerships are financed by the capital commitments and contributions of the limited partners of the Funds. The Company’s maximum
exposure to loss is limited to the total capital contributed to these Funds by the Company. The Company has committed to providing future
capital contributions which are disclosed in note 28.
g) Other investments
Structured settlement annuities
Loan receivable
Fair Value
h) Temporary deferral of IFRS 9
December 31,
December 31,
2019
$
9,676
191
9,867
2018
$
9,765
4,225
13,990
9,867
13,990
The Company has temporarily deferred the adoption of IFRS 9. The Company qualified for temporary deferral from IFRS 9 based on the
following reasons: (1) the Company has not previously applied any version of IFRS 9, and (2) the Company's activities were predominantly
connected with insurance as at December 31, 2015, and there have been no significant changes in its activities since that date. The conclusion
that the Company's activities were predominantly connected with insurance was made on the basis that the carrying value of the Company's
liabilities arising from insurance contracts, within the scope of IFRS 4, comprised of more than 90 percent of the Company's total liabilities.
70 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 71
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
In accordance with the requirements of the temporary deferral, the Company has disclosed the following information to allow for comparability
with entities that have adopted IFRS 9.
6. Financial risk management
Solely payments of principal and interest
The below table categorizes the Company's financial assets between two groups: a) financial assets with contractual terms that give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (SPPI) and b) all other
financial assets.
December 31, 2019
SPPI
Other
December 31, 2018
SPPI
Other
Change in fair
value during the
year
$
285,131
312,747
Change in fair
value during the
year
$
460,883
(29,074)
Fair Value
$
3,386,394
1,944,998
Fair Value
$
3,101,263
1,632,251
Credit risk exposure related to financial assets categorized as SPPI
The below table describes the credit risk exposure and credit risk concentrations for financial assets categorized as SPPI.
December 31, 2019
AAA
AA
A
BBB
Below BBB
Not rated
December 31, 2018
AAA
AA
A
BBB
Below BBB
Not rated
Fair value
Carrying value
$
$
1,126,872
1,126,872
886,490
886,953
397,015
68,728
20,336
885,876
883,729
396,750
68,599
20,336
3,386,394
3,382,162
Fair value
Carrying value
$
$
1,139,519
1,139,518
690,781
812,700
364,800
73,986
19,477
690,039
809,585
363,977
74,027
19,477
3,101,263
3,096,623
The Company has established risk management policies and practices covering key aspects of the operations. The Board of Directors
approves these policies and management is responsible for ensuring the policies are properly maintained and implemented. The Board of
Directors receives confirmation that the risks are being appropriately managed through regular reporting, as well as annual compliance
reporting and by reviews conducted by the Company’s internal audit department.
Credit risk
Credit risk refers to the risk of financial loss from the failure of a debtor/counterparty to meet its payment obligations to the Company. Credit risk
is increased when there is a concentration of investments made in similar industry sectors, in the same geographical area or within a single
entity. The Company’s investment policy puts limits on the bond portfolio including portfolio composition limits, issuer type limits, bond quality
limits, single issuer limits, corporate sector limits and general guidelines for geographic exposure. The Company monitors all positions within
these concentration limits.
The Company limits its investment concentration in any one corporate investee or control group to 5% of total assets and a maximum of 20% of
the bond portfolio can be invested in bonds rated below A. At December 31, 2019, the largest corporate credit exposure was 1.5% of invested
assets (2018 - 1.4%) or 4.3% of total equity (2018 - 4.0%), and the bond portfolio includes 86.2% (2018 – 86.4%) of bonds rated A or better.
The Company’s mortgage portfolio represents 9.8% (2018 - 9.4%) of invested assets carrying value. The Company has a comprehensive
mortgage policy which includes, among other factors, single loan limits, diversification by type of property limits, and geographic diversification
limits. Each mortgage is secured by real estate and related contracts. The largest single mortgage balance was $12,313 (2018 - $10,840). All
commercial mortgages greater than $2,000 are risk rated on an annual basis.
Concentrations of credit risk for insurance contracts can arise from reinsurance ceded contracts as insurance ceded does not relieve the
ceding company of its primary obligation to the policyholder. The Company has established a Reinsurance and Insurance Counterparty
Standards Committee that evaluates the financial condition of its reinsurers to minimize its exposure to significant loss from any one reinsurer’s
insolvencies. Reinsurers are typically required to have a minimum financial strength rating of A- at the inception of the treaty; rating agencies
used are A.M. Best and Standard & Poor’s. Concentration guidelines are also in place to establish the maximum amount of business that can
be placed with a single reinsurer. There were no material defaults on transactions with reinsurers during the year. Based on management’s
review of creditworthiness of its reinsurers, no allowance, other than as required by actuarial standards, is included in the consolidated financial
statements.
Another potential source of credit risk for insurance contracts is premiums due from policyholders. The Company’s credit exposure to any one
individual policyholder is not material. The Company’s policies, however, are distributed by advisors, program managers, or brokers who
manage cash collection.
The table below provides information regarding the overall credit risk of the Company by classifying assets according to the credit ratings of the
counterparties. AAA is the highest possible rating, and those assets that fall outside the range of AAA to BBB are classified as speculative
grade.
Bonds, short-term investments and selected cash equivalent amounts are based on external ratings provided by Dominion Bond Rating
Services, Standard & Poor’s and Moody’s Investors Services.
Reinsurance ceded contracts and other receivables are classified based on financial strength ratings provided by A.M. Best and Standard &
Poor’s. Mortgages are classified using Addenda’s internal rating system which monitors the credit related exposures. Addenda considers
experience, judgment and other qualitative and quantitative factors in assigning an internal credit rating.
72 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 73
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
-
-
December 31, 2019
Cash and cash equivalents
Bonds
Short-term investments
Limited partnerships
Pooled funds
Foreign currency forward contracts
Mortgages and other investments
Investment income due and accrued
AAA
$
19,921
AA
$
-
A
$
-
Below
BBB
BBB
Not rated
$
-
$
-
1,088,152
911,856
522,959
297,440
84,656
85,858
4,960
-
-
-
-
-
-
-
4,882
8,445
-
-
-
-
-
-
-
-
-
-
-
-
-
382,351
137,370
3,486
Total
$
97,367
2,925,747
90,818
188,358
195,510
4,882
531,754
30,894
163,667
The Company participates in a securities lending program managed by a federally regulated financial institution whereby the Company lends
securities it owns to other financial institutions to allow them to meet delivery commitments. The Company receives securities of superior credit
quality and value as collateral for securities loaned. Securities with a fair value of $849,524 (2018 - $478,993) were received as collateral. The
collateral received has not been recorded in the Company’s consolidated balance sheet.
The Company is the assigned beneficiary of collateral consisting of cash, trust accounts and letters of credit totaling $112,652 as at December
31, 2019 (2018 - $119,319) as security from unlicensed reinsurers. This collateral is held in support of policy liabilities of $74,309 as at
December 31, 2019, (2018 - $92,205) and could be used should these reinsurers be unable to meet their obligations. The cash portion of the
collateral $15,171 (2018 - $26,233) has been recorded in the Company’s consolidated balance sheet.
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market
risk is comprised of three types of risks: equity risk, currency risk and interest rate risk.
$
77,446
20,684
-
188,358
195,510
-
102
30,894
4,839
Reinsurance ceded contracts
4,977
97,265
56,856
Premiums due
Other receivables
-
-
-
-
-
6,585
-
(269)
-
2,874
-
-
-
-
1,250,904
1,250,904
40,782
50,241
a) Equity risk
1,198,908
1,027,408
968,751
437,415
88,142
1,809,519
5,530,142
Equity risk arises whenever financial results are adversely affected by changes in the capital markets.
December 31, 2018
Cash and cash equivalents
Bonds
Short-term investments
Limited partnerships
Pooled funds
Foreign currency forward contracts
Mortgages and other investments
Investment income due and accrued
AAA
$
43,962
AA
$
-
A
$
-
Below
BBB
BBB
Not rated
$
-
$
-
1,089,225
712,920
533,774
281,077
67,084
99,452
-
-
-
-
-
-
-
-
1,683
15,528
-
-
-
-
-
-
-
-
-
-
-
-
-
304,860
125,494
6,943
$
21,410
19,907
-
137,433
179,484
-
4,224
27,040
7,588
Total
$
65,372
2,703,987
99,452
137,433
179,484
1,683
457,049
27,040
174,427
1,073,368
1,073,368
46,404
54,160
1,232,926
826,030
915,355
408,259
74,027
1,516,858
4,973,455
Reinsurance ceded contracts
287
95,899
71,227
Premiums due
Other receivables
-
-
-
-
-
5,494
-
(574)
-
2,262
-
-
-
-
An investment policy is in place and its application is monitored by the Board of Directors on a quarterly basis. Diversification techniques are
employed to minimize risk. Policies limit investments in any entity or group of related entities to a maximum of 5% of the Company’s assets.
The Company’s stock portfolio is benchmarked to the indices noted in the table below. A 10% movement in the indices, with all other variables
held constant, would have the following estimated effect on the fair values and OCI before taxes of the Company’s stock holdings.
Stock Portfolio
Canadian common
U.S. equities
Foreign equities
b) Currency risk
Benchmark
S&P/TSX Composite Index
S&P 500 Index (CDN $)
MSCI EAFE Index (CDN $)
December 31, 2019
AFS
$
December 31, 2018
AFS
$
69,716
18,773
-
54,076
15,885
372
Currency risk is the risk that the value of the foreign denominated financial instruments that is not offset by corresponding liabilities will fluctuate
as a result of changes in foreign exchange rates.
Management has interpolated short-term investments ratings as follows: AAA = R-1 (high); AA = R-1 (middle); A = R-1 (low); BBB = R-2 (high,
middle, low); below BBB = R-3 (high, middle, low).
The total amounts outlined in the tables above represent the Company’s maximum credit exposure based on a worst case scenario, except for
structured settlements, and do not take into account any collateral held or other credit enhancements attached to the assets.
The majority of the Company’s currency risk is related to its investment holdings. Policies limit investments in foreign denominated securities to
a maximum value of 15% of invested assets. A 10% change in the value of the foreign currency would be offset in net income (loss) by a
change in the fair value of foreign currency forward contract hedges of $20,147 (2018 - $11,975). A 10% change in the value of the foreign
currency would affect the fair value of investments by $37,332 (2018 - $33,133). For AFS foreign denominated investments, a 10% change in
the value of the foreign currency would result in an increase or decrease in OCI of $27,253 (2018 - $24,187).
During the year, the Company changed the presentation of fixed income pooled funds held and currently discloses these investments with a
credit risk of “not rated”. This change provides more relevant information about the nature of the pooled funds. In 2018, investments in fixed
income pooled funds of $58,353 were presented with a credit risk of “A” and other pooled funds of $121,131 were presented with a credit risk
of “not rated”.
The Company mitigates a portion of currency risk by buying or selling foreign exchange forward contracts. Foreign exchange forward contracts
are commitments to buy or sell foreign currencies for delivery at a specified date in the future at a fixed rate. Foreign exchange forward
contracts are transacted in over-the-counter markets. Foreign exchange forward contracts with positive fair values are included in invested
assets (note 5) and those with negative fair values are included in provisions and other liabilities (note 15).
In the normal course of claims adjudication, the Company settles certain obligations to claimants through the purchase of annuities from third
party life insurance companies under structured settlement arrangements. The Company guarantees the life insurers’ obligations under these
annuities, which are $794,804 as at December 31, 2019 (2018 - $740,051), based on the net present value of the projected future cash flow of
these guarantees. $9,676 (2018 - $9,765) of the total value is classified as Type 2 structured settlements and recorded in other investments
within invested assets. This business is placed with several licensed Canadian companies. The net risk to the Company is the credit risk
related to the life insurance companies from which the annuities are purchased from. To manage this risk, the Company enters structured
settlements with life insurance companies with a credit rating of A or higher. No defaults occurred in 2019 and 2018 and the Company
considers the possibility of default to be remote. Credit risk is further reduced to the extent of coverage provided by Assuris, the life insurance
compensation insurance plan that funds most policy liabilities of an insolvent Canadian life insurer.
The counterparty risk of default for these derivative financial instruments is limited to their positive replacement cost, which is substantially
lower than their notional amount. The replacement cost of over-the-counter derivative financial instruments is an estimate and is determined
using valuation models that incorporate prevailing foreign exchange rates and prices on underlying instruments with similar maturities and
characteristics. The replacement cost reflects the estimated amount that the Company would receive, or might have to pay, to terminate the
contracts as at December 31, 2019. The Company would receive $4,811 to terminate the contracts as at December 31, 2019 (2018 - pay
$9,107). The maturity date for the Company’s contracts range from January 23 to April 30, 2020. The notional amounts of the foreign currency
forward contracts total $252,625 (2018 - $215,564). The counterparties are federally regulated financial institutions.
OSFI requires disclosure of the replacement cost, credit equivalent amount and the risk-weighted equivalent for each type of derivative
instrument. The credit equivalent amount is the replacement cost of an instrument plus an additional amount representing potential future credit
74 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 75
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
exposure, as defined by OSFI. The risk-weighted equivalent is determined by applying a risk-weighted factor to the credit equivalent amount
based on OSFI guidelines.
The credit equivalent amount and risk-weighted equivalent by type of derivative instrument is as follows:
Foreign currency forward contracts
December 31, 2019
December 31, 2018
Credit Equivalent
Risk-weighted
Credit Equivalent
Risk-weighted
Amount
Equivalent
Amount
Equivalent
$
4,931
$
24
$
1,700
$
8
Exposure to currency fluctuations on insurance contract liabilities is not considered to be material.
c) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest
rates. The Company is significantly exposed to changes in interest rates. Movements in short-term and long-term interest rates, including
changes in credit spreads, cause changes in the realized and unrealized gains and losses.
To manage this risk, historical data and current information that profiles the ultimate claims settlement pattern by class of insurance, is used as
a basis to develop a Board-approved and monitored investment policy and strategy. The policy and strategy is based upon prudence,
regulatory guidelines and claims settlement patterns by product line. The policy provides conservative investment limits which balance the
Company’s long-term focus with market opportunities as they arise. This is achieved by investing in a diversified mix of securities and by
shifting between asset classes as trends in capital markets develop.
Interest rate risk also causes income volatility as a result of the discounting of the unpaid claims and adjustment expenses on the projected
portfolio yield of the assets backing the claims liabilities. Changes in the value of the unpaid claims and adjustment expenses resulting from
fluctuations in interest rates flow through claims and adjustment expenses in the consolidated statements of income (loss). The corresponding
change in asset values will either flow through the consolidated statements of income (loss) or through OCI based on the designation of assets
held to settle future claims obligations. If the assets backing the liabilities are classified as AFS, the gains and losses due to interest rate
fluctuations flow through OCI. If the assets backing the liabilities are designated under the fair value option as FVTPL, the gains and losses due
to interest rate fluctuations flow through the consolidated statements of income (loss).
To mitigate the impact of interest rate risk, the Company utilizes an asset liability management (ALM) strategy. A portion of the assets backing
the Company’s unpaid claims and adjustment expense liabilities are designated as FVTPL under the fair value option with the objective of
offsetting a targeted proportion of the financial impact of interest rate changes and avoiding an accounting mismatch between the impact of
interest rate changes on assets and liabilities in the consolidated statements of income (loss).
A 1% movement in the interest rate, with all other variables held constant, would have the following estimated effect on the fair values, and net
income (loss) or OCI before taxes, of the Company’s holdings:
Bonds
Canadian preferred stocks
Pooled funds
Liquidity risk
December 31, 2019
December 31, 2018
AFS
$
131,949
-
17,682
FVTPL
$
7,097
16,882
-
AFS
$
120,906
-
14,588
FVTPL
$
6,336
16,037
-
Liquidity risk refers to the ability of the Company to access sufficient funds to meet financial obligations as they fall due. The Company’s
obligations arise as a result of claims, contractual commitments, or other outflows. The Company has no material commitments for capital
expenditures and there is normally no need for such expenditures in the normal course of business.
Claims, contractual commitments and other outflows payments are funded by current revenue cash flow which normally exceeds cash
requirements. At December 31, 2019 the Company had $97,367 (2018 - $65,372) of cash and cash equivalents, and $90,818 (2018 - $99,452)
of short-term investments. In addition, the Company had a combination of lines of credit and a liquid investment portfolio. Together, the bond
portion of the portfolio, which consists primarily of Canadian fixed-income securities issued or guaranteed by governments and investment
grade corporate bonds, and publicly traded Canadian and U.S. equities had a December 31, 2019 fair value of $4,177,724 (2018 -
$3,733,950).
Along with internally generated funds, the Company has credit facilities of $19,000 (2018 - $19,000) that provide it with additional financial
flexibility to fulfill cash requirements on an ongoing basis. The Company had utilized $nil (2018 - $nil) as at the balance sheet date.
The Company’s estimated maturities of its financial liabilities, insurance contracts and other commitments are shown in the following table on
an undiscounted basis. Financial liabilities and contractual commitments are presented based on their estimated contractual maturities.
Insurance contacts and provisions and other liabilities are presented based on expectations of the timing of future cash flows and/or the
duration of the contract.
Contractual commitments are not reported on the consolidated balance sheet.
December 31, 2019
Accounts payable and accrued charges
Income taxes payable
Insurance contracts
Provisions and other liabilities
Provision for advisor transition commissions
Advisor transition commission payable
Other provisions
Foreign currency forward contracts
Other liabilities
Contractual commitments
Mortgage funding
December 31, 2018
Accounts payable and accrued charges
Income taxes payable
Insurance contracts
Provisions and other liabilities
Provision for advisor transition commissions
Advisor transition commission payable
Other provisions
Foreign currency forward contracts
Other liabilities
Contractual commitments
Operating lease commitments
Mortgage funding
< 1
Year
$
324,665
74,147
1 - 3
Years
4 - 5
Years
6 - 9
Years
> 10
Years
$
-
-
$
-
-
$
-
-
$
-
-
Total
$
324,665
74,147
2,970,593
980,413
488,732
278,105
56,333
4,774,176
45,737
9,537
8,267
71
1,619
42,440
8,214
500
-
822
12,833
24,255
40,816
166,081
-
-
-
160
-
-
-
-
-
-
-
-
17,751
8,767
71
2,601
3,434,636
1,032,389
501,725
302,360
97,149
5,368,259
8,631
6,674
61
-
-
15,366
< 1
Year
$
291,125
39
1 - 3
Years
$
-
-
4 - 5
Years
$
-
-
6 - 9
Years
$
-
-
> 10
Years
$
-
-
Total
$
291,125
39
2,736,785
904,407
445,872
239,306
50,993
4,377,363
33,140
8,421
4,955
10,790
1,406
36,914
8,890
500
-
945
15,095
22,401
43,754
151,304
-
-
-
394
-
-
-
-
-
-
-
-
17,311
5,455
10,790
2,745
3,086,661
951,656
461,361
261,707
94,747
4,856,132
12,014
2,155
14,169
18,579
2,171
20,750
8,680
-
8,680
1,513
-
1,513
-
-
-
40,786
4,326
45,112
The mortgage funding commitments have interest rates ranging from 3.54% to 6.45% (2018 – 4.00% to 6.70%).
76 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 77
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
7. Insurance risk management
a) Nature of risks arising from insurance contracts
the portfolio market yield of assets supporting the claims liabilities as well as considerations for the timing of the relative cash flows of the
assets and liabilities. This rate could fluctuate significantly based on changes in interest rates and credit spreads. The interest rates used to
discount the claims liabilities for each of the operating companies are as follows:
There is uncertainty whether an insured event occurs and to what degree for each policy. By the very nature of an insurance contract, the risk
is random and therefore unpredictable. Insurance companies accept the transfer of uncertainty from policyholders and seek to add value
through the aggregation and management of insurance risk. The Company is at risk for losses in the event that incomplete or incorrect
assumptions or information are used when pricing, issuing or reserving for insurance products.
CGIC, Sovereign, COSECO
CUMIS General
2019
2.49%
2.33%
2018
2.84%
2.79%
The principal risk to the Company under its insurance contracts is that the actual claims and benefit payments arising may exceed the carrying
amount of the insurance liabilities because the frequency and/or severity of the actual claims were greater than expected.
Being a property and casualty insurer, catastrophes could have a significant effect on the Company’s operating results and financial condition.
Catastrophic loss risk is the exposure to loss resulting from multiple claims arising out of a single catastrophic event. Potential events include
perils such as earthquake, tornado, wind, hail, flood or fire.
Underwriting risk, claims risk and product design and pricing risk are also important to the proper management of insurance risk. Underwriting
risk is the exposure to financial loss resulting from the selection and approval of risks to be insured or the inappropriate application of
underwriting rules to risks being insured. Claims risk is the exposure to financial loss resulting from a change in the frequency and/or severity of
claims; inadequate claim adjudication; or inappropriate claim settlement. Product design and pricing risk is the exposure to financial loss from
transacting insurance business where costs and liabilities experienced in respect of a product line exceed the expectation in pricing it. Policies,
processes and other internal controls have been established to manage these risks to within tolerable levels.
In managing certain insurance risks, reinsurance is employed by the Company; however, the Company is still exposed to reinsurance risk.
Reinsurance risk is the risk of financial loss due to inadequacies in reinsurance coverage or the default of a reinsurer. If a reinsurer fails to pay
a claim for any reason, the Company remains liable for the payment to the policyholder.
Other external factors play a role in the Company’s management of insurance risk. Property and casualty insurers are subject to significant
regulation by governments. As in any regulated industry, it is possible that future regulatory changes or developments may prevent the
Company from raising rates or taking other actions to enhance operating results. As well, future regulatory changes, novel or unexpected
judicial interpretations or political developments could impact the ultimate amount of claims that must be paid out. Macroeconomic risks such
as fluctuations in the long-term portfolio yields used in the valuation of the Company’s insurance contracts or changes in the Company’s
forecasts of expected inflation levels are also important considerations in developing the estimated liability.
The discounted unpaid claims and adjustment expenses incorporates assumptions concerning future investment income, projected cash flows,
and appropriate provisions for adverse deviations (PFADs). As the estimates for unpaid claims are subject to measurement uncertainty and the
variability could be material in the near term, the Company includes PFADs in its assumptions for claims development, reinsurance recoveries
and future investment income. The incorporation of PFADs is in accordance with accepted actuarial practice in order to ensure that the
actuarial liabilities are adequate to pay future benefits. The selected PFADs are within the ranges recommended by the Canadian Institute of
Actuaries (CIA).
The following table represents the discounted development of the claims net of reinsurance.
Accident year
2010
$
2011
$
2012
$
2013
$
2014
$
2015
$
2016
$
2017
$
2018
$
2019
$
Total
$
Estimate of ultimate claims costs:1
At end of
accident year
1,438,417
1,451,371
1,369,236
1,595,650
1,584,753
1,637,924
1,757,030
1,882,990
2,181,340
2,251,704
One year later
1,281,611
1,382,851
1,345,293
1,562,625
1,541,947
1,588,473
1,749,824
1,897,698
2,153,872
Two years later
1,257,183
1,338,812
1,306,988
1,525,744
1,510,417
1,567,564
1,782,620
1,878,246
Three years later
1,238,647
1,325,881
1,282,392
1,516,796
1,496,184
1,572,105
1,770,003
Four years later
1,218,537
1,303,524
1,269,019
1,497,580
1,491,529
1,558,292
Five years later
1,218,888
1,308,161
1,268,875
1,514,138
1,495,807
Six years later
1,204,957
1,294,171
1,255,413
1,494,589
Seven years later
1,196,048
1,289,072
1,251,151
Eight years later
1,195,147
1,288,264
Nine years later
Current year estimate
of cumulative claims
Cumulative payments
to date
1,192,446
1,192,446
1,288,264
1,251,151
1,494,589
1,495,807
1,558,292
1,770,003
1,878,246
2,153,872
2,251,704
16,334,374
(1,179,404)
(1,262,678)
(1,219,681)
(1,435,308)
(1,386,700)
(1,398,439)
(1,530,477)
(1,523,557)
(1,615,290)
(1,235,418)
(13,786,952)
b) Sources of uncertainty and processes used to determine assumptions for insurance contracts
Provision recognized
13,042
25,586
31,470
59,281
109,107
159,853
239,526
354,689
538,582
1,016,286
2,547,422
The Company establishes an unpaid claims and adjustment expense provision to cover claims incurred but not settled at the end of the
reporting period. The unpaid claims provision contains both individual claims estimates and an incurred but not reported (IBNR) provision.
Individual claims estimates are set by internal claims adjusters on a case-by-case basis. These specialists apply their knowledge and expertise,
after taking available information regarding the circumstances of the claim into account, to set individual case reserve estimates. The Company
has documented policy and procedures by which case reserve estimates are set. The claims reserving strategy and monitoring of their
application and effectiveness falls under the accountability of the Company’s National Claims department except for travel insurance, which is
completed by the MGU’s actuarial department. Additional monitoring is provided over the travel insurance through a quarterly meeting of the
Canada Statutory Reserve Committee, which includes members of the Company and the MGU. The claims reserves are reviewed by the
committee, and the Company’s actuarial department subsequently performs a quarterly peer review.
The IBNR is a provision intended to cover future development on both reported claims and claims that have occurred but have yet to be
reported. Uncertainty exists on reported claims in that all information may not be available at the valuation date. Claims that have occurred may
not be reported to the Company immediately; therefore, estimates are made as to their value, an amount which may take years to finally
determine.
The total unpaid claims and adjustment expense provision is an estimate that is determined using a range of accepted actuarial claims
projection techniques, such as the Chain Ladder and Bornhuetter-Ferguson methods. These techniques use the Company’s historical claims
development patterns to predict future claims development. In situations where there has been a significant change in the environment or
underlying risks, the historical data is adjusted to account for expected differences.
The initial actuarial estimate of unpaid claims and adjustment expenses is an undiscounted amount. This estimate is then discounted to
recognize the time value of money. The discount rate applied to measure the value of unpaid claims and adjustment expenses is based upon
Provision with respect to 2009 and prior accident years
Effect of discounting
Net unpaid claims and adjustment expenses
158,662
133,308
2,839,392
1 The 2018 estimate of net unpaid claims and adjustment expenses have been adjusted to incorporate the ultimate claims costs from the 2018 acquisition of a subsidiary from
a related party which was previously disclosed on a separate line.
c) Changes in assumptions used in measuring insurance contracts
Assumptions used to develop this estimate are selected by class of business and geographic location. Consideration is given to the
characteristics of the risks, historical trends, amount of data available on individual claims, inflation and any other pertinent factors. Some
assumptions require a significant amount of judgment such as the expected impacts of future judicial decisions and government legislation. The
diversity of these considerations result in it not being practicable to identify and quantify all individual assumptions that are more likely than
others to have a significant impact on the measurement of the Company’s insurance contracts. There were no new assumptions identified in
the year or the preceding year as having a potential or identifiable material impact on the overall claims estimate.
d) Objectives, policies and processes for managing risks arising from insurance contracts
The Company’s underwriting objective is to develop business within the Company’s target market on a prudent and diversified basis and to
achieve profitable underwriting results.
The Company uses comprehensive underwriting manuals which detail the practices and procedures used in the determination of the insurance
risk for each item to be insured and the decision of whether or not to insure the item. The Company underwrites automobile business after
annual reviews of the client’s driving record and claims experience. The Company underwrites property lines based on physical condition,
property replacement values, claims experience, geography and other relevant factors. All employees in the underwriting area are trained and
78 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 79
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
their work is subject to underwriting reviews by the Company. Advisors and brokers are compensated, in part, based on the profitability of their
portfolio.
f) Sensitivity analysis
In setting the provision for unpaid claims and adjustment expenses required to cover the estimated liability for claims, the Company’s practice
is to maintain an adequate margin to ensure future years’ earnings are not negatively affected by prior years’ claims development and other
variable factors such as inflation. The Company, in accordance with OSFI requirements, seeks a full peer review every three years
accompanied by an annual methodology and assumption review in the intervening years.
The Company’s pricing policies take into account numerous factors including claims frequency and severity trends, product line expense rates,
special risk factors, the capital required to support the product line and the investment income earned on that capital. The Company’s pricing
process is designed to ensure an appropriate return on equity while also providing long-term rate stability. These factors are reviewed annually
and adjusted periodically to ensure they reflect the current environment.
The Company monitors its compliance with all relevant regulations and actively participates in discussions with regulators, governments and
industry groups to ensure that it is well-informed of contemplated changes and that its concerns are understood. In its strategic planning
process, the Company considers the implications of potential changes to its regulatory and political environment and adjusts its plans if
necessary.
e) Objectives, policies and processes for managing insurance risk through reinsurance
The Company’s strategy is to retain underwriting risk where it is financially prudent. The Company reviews its insurance requirements annually
to assess the level of reinsurance coverage required. Reinsurance is purchased to limit the Company’s exposure to a particular risk, category
of risk or geographic risk area. To manage reinsurance counterparty risk, the Company assesses and monitors the financial strength of its
reinsurers on a regular basis.
The Company writes business that is broadly diversified in terms of the lines of business and geographic location. There is no guarantee that a
catastrophe will not result in claims against the Company in excess of its maximum reinsurance coverage; however, based on the Company’s
catastrophic loss models, protection is in excess of regulatory guidelines and at a level that management considers prudent.
The Company follows the policy of underwriting and reinsuring contracts of insurance which limits the liability of the Company to a maximum
amount on any one loss. In addition, the Company has obtained reinsurance which limits the Company’s liability in the event of a series of
claims arising out of a single occurrence, with the exception of travel insurance which is described in further detail below.
The Company’s net retentions are as follows:
Individual loss
Property
General liability
Automobile
Fidelity and Director's liability
Catastrophe
Maximum limit
Company retention
2019
$
7,500
5,000
5,000
3,000
2018
$
7,500
5,000
5,000
3,000
1,400,000
70,000
1,300,000
70,000
For certain special classes of business or types of risk, the retention for single risk events may be lower through specific treaties or the use of
facultative reinsurance. The maximum limit for catastrophe reinsurance is applied to all property and casualty insurance operations ultimately
owned by CGL. After application of the catastrophe program, the Company’s retention is $70,000 (2018 - $70,000) in incurred claims.
CUMIS General’s accident and sickness travel insurance, underwritten by the MGU is fully ceded; 45% to CLIC and 55% to an external
reinsurer. In addition, 55% of the property travel insurance is ceded to an external reinsurer; the Company’s maximum exposure per person is
$56 (2018 - $56). Catastrophe reinsurance is purchased for $1,800 (2018 - $,1800) of protection with a retention of $450 (2018 - $450).
The underwriting impact of the Company’s use of reinsurance programs on the year’s results is described in note 9.
The Company has exposures to risks in each class of business that may develop and that could have a material impact on the Company’s
financial position. The correlation of assumptions has a significant effect in determining the ultimate claims liability and movements in
assumption are non-linear; also, it is not possible to quantify the sensitivity of certain key assumptions such as future legislative changes.
To ensure that the Company has sufficient capital to withstand a variety of significant and plausible adverse event scenarios, the Company
performs Dynamic Capital Adequacy Testing (DCAT) on the capital adequacy of the Company. DCAT is performed annually, as required by the
CIA, and is prepared by the appointed actuary. The adverse event scenarios are reviewed annually to ensure that the appropriate risks are
included in the DCAT process. Plausible adverse event scenarios used in the most recent DCAT process included consideration of claims
frequency and severity risk, inflation risk, premium risk, reinsurance risk and investment risk. The exposure of the peril of earthquake with
default of reinsurers was also applied in a stress test analysis, as outlined in note 7(g). The most recent results indicated that the Company’s
future financial and capital positions are satisfactory under the assumptions applied.
The Company's estimated sensitivity of insurance contract unpaid claims and after-tax net income to changes in best estimate assumptions in
the insurance contract is as follows:
Assumption
Discount rate
Discount rate
Net loss ratio
Misestimate
Insurance contract -
claims
After-tax net
income impact
December 31,
2019
$
December 31,
2018
$
December 31,
2019
$
December 31,
2018
$
(57,058)
60,124
227,502
28,394
(50,738)
53,408
211,629
26,136
41,652
(43,891)
(166,076)
(20,728)
37,039
(38,988)
(154,489)
(19,079)
Sensitivity
+100 bps
-100 bps
+10%
1% deficiency
The impacts related to the discount rate sensitivities are approximately linear within this range.
g) Concentrations of insurance risk
The Company has catastrophe exposures arising from the property and automobile comprehensive policies it writes across the country.
Exposures to concentrations of insurance risk subject to catastrophe losses are evaluated, and the Company has adopted a reinsurance
strategy to reduce such exposures to an acceptable level.
A particular focus is the exposure to the peril of earthquake in British Columbia, Quebec, and Eastern Ontario. The Company utilizes industry-
accepted earthquake modeling techniques to understand its exposures and applies this information to establish the catastrophe coverage
outlined in note 7(e). In addition to earthquake, other catastrophe perils such as hail and windstorm are also modeled, and reinsurance is
purchased based on the peril that generates the largest loss. As the catastrophe reinsurance purchased is not peril specific, the Company is
thereby provided with a high level of protection for catastrophic loss from other perils. The stress tests completed on the Company’s capital are
based on 1 in 500 year events; this exceeds the regulatory requirements established by OSFI.
The Company’s net earned premium split by line of business and geographic area is as follows:
Auto
Home
Farm
Commercial
Travel and other
2019
$
2018
$
1,603,822
1,388,566
902,713
143,384
551,374
73,430
811,157
130,458
490,433
66,263
Net earned premium (note 8, 22)
3,274,723
2,886,877
80 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 81
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
c) Profile of net unpaid claims and adjustment expenses
Auto
Home
Farm
Commercial
Travel and other
Discounted provision
December 31, 2019
Gross
Ceded
$
$
Net
$
December 31, 2018
Gross
Ceded
$
$
1,893,830
279,255
56,196
685,525
73,917
10,084
22,854
898
65,328
50,167
1,883,746
1,721,122
256,401
55,298
620,197
23,750
294,578
58,214
619,294
77,812
11,311
34,274
2,160
56,494
53,145
Net
$
1,709,811
260,304
56,054
562,800
24,667
2,988,723
149,331
2,839,392
2,771,020
157,384
2,613,636
d) Reconciliation of net unpaid claims and adjustment expenses
2019
Gross
Ceded
$
$
Net
$
2018
Gross
Ceded
$
$
Net
$
Balance, beginning of year
Less: effect of discounting at prior year-end
2,771,020
103,949
157,384
2,613,636
662
103,287
2,475,952
105,568
135,236
2,340,716
334
105,234
Undiscounted unpaid claims and
adjustment expenses at prior year-end
Paid on prior years
Change in estimate on prior years
Incurred on current year
Paid on current year
2,667,071
156,722
2,510,349
2,370,384
134,902
2,235,482
(869,116)
(28,721)
(55,271)
(22,015)
(813,845)
(6,706)
(781,047)
(78,897)
(47,607)
(28,161)
(733,440)
(50,736)
2,378,834
127,130
2,251,704
2,279,319
110,345
2,168,974
(1,294,382)
(58,964)
(1,235,418)
(1,278,142)
(71,299)
(1,206,843)
Acquisition of a subsidiary from related party
-
-
-
155,454
58,542
96,912
Undiscounted unpaid claims and
adjustment expenses at current year-end
Effect of discounting
Balance, end of year
Current
Non-current
Balance, end of year
2,853,686
135,037
2,988,723
1,142,648
1,846,075
2,988,723
147,602
2,706,084
1,729
133,308
149,331
2,839,392
98,397
50,934
149,331
1,044,251
1,795,141
2,839,392
2,667,071
103,949
2,771,020
1,103,290
1,667,730
2,771,020
156,722
2,510,349
662
103,287
157,384
2,613,636
110,936
46,448
157,384
992,354
1,621,282
2,613,636
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
West
Ontario
Quebec
Atlantic
Net earned premium (note 8, 22)
h) Financial risks in insurance contracts
Information about credit risk, liquidity risk and market risk for insurance contracts is disclosed in note 6.
8. Insurance contracts
Insurance contracts are comprised of the following balances:
Undiscounted unpaid claims and adjustment expenses
Effect of time value of money
PFADs
Effect of discounting
Discounted unpaid claims and adjustment expenses
Unearned premiums
Experience rated refund pool
a) Profile of unearned premiums
2019
$
1,155,743
1,648,926
161,421
308,633
3,274,723
2018
$
1,050,026
1,426,448
128,372
282,031
2,886,877
December 31,
December 31,
2019
$
2,853,686
(141,929)
276,966
135,037
2,988,723
1,909,860
10,630
4,909,213
2018
$
2,667,071
(145,666)
249,615
103,949
2,771,020
1,697,482
12,810
4,481,312
Auto
Home
Farm
Commercial
Travel and other
December 31, 2019
Gross
Ceded
$
865,419
527,513
79,018
367,381
70,529
1,909,860
$
296
106
99
14,387
38,374
53,262
December 31, 2018
Net
$
865,123
527,407
78,919
352,994
32,155
Gross
$
753,198
472,390
73,150
311,088
87,656
1,856,598
1,697,482
Ceded
$
211
91
103
8,625
61,092
70,122
Net
$
752,987
472,299
73,047
302,463
26,564
1,627,360
Ceded unearned premiums are included in reinsurance ceded contracts on the balance sheet (note 9).
b) Reconciliation of unearned premiums
Balance, beginning of year
Written premium
Less: earned premium
Acquisition of a subsidiary from
related party
2019
Gross
Ceded
$
$
Net
$
2018
Gross
Ceded
$
$
Net
$
1,697,482
3,780,168
3,567,790
70,122
276,207
293,067
1,627,360
3,503,961
3,274,723
1,399,757
3,315,810
3,126,601
6,475
253,159
239,724
1,393,282
3,062,651
2,886,877
-
-
-
108,516
50,212
58,304
Balance, end of year
1,909,860
53,262
1,856,598
1,697,482
70,122
1,627,360
82 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 83
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
9. Reinsurance programs
10. Deferred acquisition expenses
a) Underwriting impact of reinsurance contracts
Details of deferred acquisition expenses are as noted below:
December 31,
December 31,
2019
$
276,207
293,067
106,183
108,952
77,932
2018
$
253,159
239,724
81,940
85,073
72,711
Balance, beginning of year
Acquisition expenses deferred
Amortization expense
Acquistion of a subsidiary from related party
Balance, end of year
11. Income taxes
December 31,
December 31,
a) Reconciliation to statutory income tax rate
2019
$
293,131
695,357
(675,353)
-
313,135
2018
$
224,504
625,957
(596,420)
39,090
293,131
Ceded
Written premium (note 22)
Earned premium
Claims and benefits
Commission
Cost of reinsurance ceded program
Assumed
Written premium (note 22)
Earned premium
Claims and benefits
Commission
Underwriting gain from assumed reinsurance
b) Reinsurance ceded contracts
2019
$
27,778
25,169
14,378
10,351
440
2018
$
19,946
19,549
9,632
7,158
2,759
The amounts presented under reinsurance ceded contracts in the consolidated balance sheet represent the Company’s net
contractual rights under reinsurance contracts and consist of the following:
Reinsurance ceded assets
Reinsurers' share of unearned premiums (note 8)
Reinsurers' share of unpaid claims & adjustment expenses (note 8)
Reinsurer receivables
Reinsurance ceded liabilities
Unearned reinsurance commissions
Payable to reinsurers
Unlicensed reinsurer deposits
Reinsurance ceded contracts
Current
Non-current
December 31,
December 31,
2019
$
53,262
149,331
8,586
211,179
25,968
6,373
15,171
47,512
163,667
117,890
45,777
163,667
2018
$
70,122
157,384
15,495
243,001
37,165
5,176
26,233
68,574
174,427
135,700
38,727
174,427
In the consolidated statements of income (loss), income tax expense reflects an effective tax rate which differs from the statutory tax rate for
the following reasons:
Income (loss) before income taxes
Income tax at statutory rates
Effects of :
Non-taxable investment income
Non-deductible expenses
Change in income tax rates
Difference in effective tax rate of subsidiaries
Adjustment to tax expense in respect of prior years
Other
Income tax expense (recovery)
2019
$
214,151
57,821
(18,789)
722
(143)
(11)
(101)
626
40,125
%
27.0
(8.8)
0.3
(0.1)
-
-
0.3
18.7
b) Income taxes included in the consolidated statements of income (loss)
Current tax expense (recovery)
Current period
Change in tax rates
Adjustment for prior periods
Deferred tax recovery
Origination and reversal of temporary differences
Change in tax rates
Adjustment for prior periods
Income tax expense (recovery)
2018
$
(69,537)
(18,775)
(14,476)
585
(13)
2
(49)
296
(32,430)
2019
$
46,855
(208)
3,158
49,805
(6,486)
65
(3,259)
(9,680)
40,125
%
27.0
20.8
(0.8)
-
-
0.1
(0.4)
46.7
2018
$
(21,407)
(45)
(151)
(21,603)
(10,961)
32
102
(10,827)
(32,430)
84 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 85
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
c) Income taxes included in OCI
The net movement of the deferred income taxes is as follows:
Current income tax expense (recovery)
Deferred income tax expense (recovery)
Total income tax expense (recovery) included in OCI
Items that may be reclassified subsequently to the consolidated statements of income (loss):
Net unrealized gains (losses) on available-for-sale financial assets
Net reclassification adjustment for (gains) losses included in income
Total items that may be reclassified subsequently to the consolidated statements of income (loss)
Items that will not be reclassified subsequently to the consolidated statements of income (loss):
Remeasurement of the retirement benefit obligations
Total income tax expense (recovery) included in OCI
d) Components of deferred income taxes
December 31, 2019
Bonds and mortgages
Stocks
Intangible assets
Property and equipment
Right-of-use assets
Insurance contracts
Retirement benefit obligations
Lease liabilities
Provisions and other liabilities
Loss carry-forwards and credits
December 31, 2018
Bonds and mortgages
Stocks
Intangible assets
Property and equipment
Insurance contracts
Retirement benefit obligations
Provisions and other liabilities
Loss carry-forwards and credits
Assets
$
436
(2,987)
657
183
(7,269)
43,359
34,764
7,441
43,700
6,936
127,220
Assets
$
763
(3,639)
383
101
40,717
32,583
38,026
7,815
2019
$
33,034
(1,533)
31,501
2019
$
55,611
(23,263)
32,348
(847)
31,501
Liabilities
$
-
-
(7,612)
(10)
-
-
-
-
-
78
(7,544)
Liabilities
$
-
-
(3,968)
4
-
-
-
88
2018
$
(20,303)
4,715
(15,588)
2018
$
(19,701)
1,024
(18,677)
3,089
(15,588)
Net
$
436
(2,987)
(6,955)
173
(7,269)
43,359
34,764
7,441
43,700
7,014
119,676
Net
$
763
(3,639)
(3,585)
105
40,717
32,583
38,026
7,903
Balance, beginning of year
Income statement recovery (note 24)
Other comprehensive income recovery (expense)
Acquisition of a subsidiary from related party (note 26)
Other items
Balance, end of year
e) Loss carry-forwards
2019
$
112,873
9,680
1,533
-
(4,410)
119,676
2018
$
101,935
10,827
(4,715)
4,961
(135)
112,873
The Company has non-capital loss carry-forwards of $26,006 (2018 - $28,843) of which deferred income taxes of $7,014 (2018 - $7,799) has been
recognized. The non-capital loss carry-forwards expire as follows:
2036
2037
2038
2039
12. Intangible assets
$
175
359
344
25,128
Cost
January 1, 2018
Additions
Acquisition of a subsidiary from a related party
December 31, 2018
Additions
December 31, 2019
Accumulated amortization
January 1, 2018
Amortization (note 24)
Acquisition of a subsidiary from a related party
December 31, 2018
Amortization (note 24)
December 31, 2019
Net carrying value
December 31, 2018
December 31, 2019
Goodwill
Licenses
Brand
relationships
Software
development
Total
Customer
Software
under
$
$
1,076
-
5,730
6,806
-
6,806
53,750
1,250
-
55,000
-
55,000
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
800
800
-
800
-
-
-
-
-
-
$
$
$
$
26,394
177
5,700
32,271
18,165
50,436
8,180
3,251
4,702
16,133
4,070
18,395
361
-
18,756
-
18,756
18,127
188
-
18,315
182
20,203
18,497
-
3,428
-
3,428
7,469
10,897
-
-
-
-
-
-
99,615
5,216
12,230
117,061
25,634
142,695
26,307
3,439
4,702
34,448
4,252
38,700
6,806
6,806
55,000
55,000
800
800
16,138
30,233
441
259
3,428
10,897
82,613
103,995
116,749
(3,876)
112,873
86 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 87
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
The carrying amount of goodwill that was allocated to CGUs as at December 31, 2019 is as follows:
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Expenses included in the consolidated statements of income (loss)
Cash-generating unit
CUMIS General
CGIC
Total
$
5,730
1,076
6,806
13. Right-of-use assets and lease liabilities
Effective January 1, 2019, the company has applied IFRS 16 to the consolidated financial statements.
The Company leases real estate, which is primarily comprised of leases for advisor and service offices across the country. Lease terms range
from less than three years to nine years.
Right-of-use assets
Balance at January 1, 2019
Additions
Depreciation
Balance at December 31, 2019
Lease liabilities
Off-balance sheet lease obligation, December 31, 2018
Leases transferred to a related party
Operating lease obligation, before effect of discounting, January 1, 2019
Base Rent
Reasonably certain extension options
Effect from discounting, January 1, 2019
Operating lease obligations, January 1, 2019
Undiscounted cash flows
Less than one year
One to three years
Four to five years
Six to nine years
Undiscounted balance at December 31, 2019
Effect from discounting
Lease liabilities at December 31, 2019
Current
Non-Current
Lease liabilities at December 31, 2019
Buildings
$
35,764
4,869
(11,468)
29,165
Building
$
40,786
(2,839)
37,947
33,318
4,629
(2,183)
35,764
$
10,992
14,097
6,081
580
31,750
(1,947)
29,803
10,992
18,811
29,803
Potential future undiscounted cash outflows of $64,027 have not been included in the lease liability as it is not reasonably certain that the
leases will be extended. The lease liability also does not include future undiscounted cash flows of $580 for leases the Company is committed
to but has not yet commenced.
Interest on lease liabilities
Variable lease payments not included lease liabilities
Lease expenses included in the consolidated statements of income (loss)
14. Other assets
Due from related parties (note 25)
Loans to related parties (note 25)
Reinsurance assumed receivables
Property and equipment
Due from risk sharing pools
Investments in associates and joint ventures
Prepaid expenses
Other
Details of property and equipment are as noted below:
Furniture
Computer
and
Leasehold
Projects in
equipment
equipment
improvements
progress
$
$
$
$
Cost
January 1, 2018
Additions
Disposals
Transfers
December 31, 2018
Additions
Disposals
Transfers
December 31, 2019
Accumulated amortization
January 1, 2018
Amortization
Disposals
December 31, 2018
Amortization
December 31, 2019
Net carrying value
December 31, 2018
December 31, 2019
44,017
11
(1,578)
-
42,450
24
-
-
42,474
40,526
2,259
(1,290)
41,495
905
42,400
955
74
36,666
368
-
-
37,034
2,813
-
(1,142)
38,705
29,554
1,556
-
31,110
1,379
32,489
5,924
6,216
59,704
2,484
-
1,079
63,267
1,206
(1,014)
1,004
64,463
48,174
4,455
-
52,629
4,275
56,904
10,638
7,559
1,385
295
-
(1,079)
601
992
-
(1,004)
589
-
-
-
-
-
-
601
589
18,118
14,438
2019
$
861
5,725
6,586
December 31,
December 31,
2019
$
35,714
300
3,040
14,438
3,879
7,061
3,540
7,308
75,280
2018
$
42,535
300
1,435
18,118
4,192
7,925
4,126
5,699
84,330
Total
$
141,772
3,158
(1,578)
-
143,352
5,035
(1,014)
(1,142)
146,231
118,254
8,270
(1,290)
125,234
6,559
131,793
88 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 89
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
15. Provisions and other liabilities
Information regarding the plan’s costs, liabilities and actuarial assumptions is as follows:
Provision for advisor transition commissions
Advisor transition commission payable
Other provisions
Foreign currency forward contracts (note 5)
Other liabilities
December 31,
December 31,
2019
$
137,873
17,300
8,767
71
2,601
166,612
2018
$
116,161
16,774
5,455
10,790
2,745
151,925
The provision for advisor transition commissions is an obligation to active advisors determined by accruing for the benefits earned to date on a
present value basis assuming the cash flows associated with the earned benefits are paid out at the expected termination date. The provision
is discounted at a rate of 2.80% (2018 - 3.67%) and assumes an average termination age of 56 (2018 - 57). A reconciliation of the provision for
advisor transition commissions is provided below.
Balance, beginning of year
Additional provision charged to income
Earning of advisor benefits
Interest expense
Settlements for advisor terminations
Change in assumptions
Balance, end of year
2019
$
2018
$
116,161
109,610
16,590
4,662
(9,616)
10,076
137,873
13,795
3,917
(7,910)
(3,251)
116,161
Accrued benefit obligation
Balance, beginning of year
Current service cost
Interest on accrued benefits
Benefits paid
Remeasurement (gain) loss
Actuarial gains and losses arising from changes in financial assumptions
Actuarial losses arising from changes in demographic assumptions
Balance, end of year
Elements of defined benefit cost recognized in the year
Current service cost
Interest on accrued benefits
Components of defined benefit costs recorded in net income (loss)
Remeasurements on the net defined benefit liability:
Actuarial gains and losses arising from changes in financial assumptions
Actuarial losses arising from changes in demographic assumptions
Components of defined benefit costs recorded in OCI
Total components of defined benefit costs
2019
$
120,501
4,302
4,738
(4,050)
16,745
(13,575)
128,661
4,302
4,738
9,040
16,745
(13,575)
3,170
12,210
2018
$
126,686
4,749
4,366
(3,879)
(11,421)
-
120,501
4,749
4,366
9,115
(11,421)
-
(11,421)
(2,306)
Measurement uncertainty exists in valuing the components of retirement benefit obligations. Each assumption is determined by management
based on current market conditions and experiential information available at the time; however, the long-term nature of the exposure and future
fluctuations in the actual results makes the valuation uncertain.
A 1% decrease in the discount rate would increase the provision for advisor transition commissions $8,957 (2018 - $8,100) and decrease net
income by $6,539 (2018 - $5,913). A 2 year decrease in the average termination age would increase the provision for advisor transition
commissions $4,146 (2018 - $5,275) and decrease net income by $3,026 (2018 - $3,851). Larger rate and age changes would have a
corresponding impact to net income.
16. Retirement benefit obligations
The Company offers a defined contribution and medical, dental and life insurance plans for qualifying individuals. The primary pension plan is a
defined contribution plan, which has no legal or constructive obligation to pay further amounts.
a) Medical, dental and life insurance benefits
The Company offers medical, dental and life insurance benefits for qualifying retirees and certain other individuals. The accrued benefit
obligation has been determined as at December 31, 2019, based on updated actuarial assumptions from the valuation completed as at
January 1, 2019. The plan is unfunded and the Company meets its obligation as it falls due. The next triennial valuation is due to be completed
as at January 1, 2022.
The significant actuarial assumptions were as follows:
Significant assumptions
Discount rate
Assumed medical care cost trend rates as at December 31
Medical care cost trend rate
Cost trend rate declines to
Year that the rate reaches the rate it is assumed to remain at
Mortality
Retiring at the end of the reporting period:
Average life expectancy for male retiring at age 65
Average life expectancy for female retiring at age 65
Retiring 20 years after the end of the reporting period:
Average life expectancy for male retiring at age 65
Average life expectancy for female retiring at age 65
2019
3.25%
5.25%
4.50%
2022
22.0
24.3
23.1
25.3
2018
4.00%
5.50%
4.50%
2022
21.8
24.2
22.9
25.1
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics.
90 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 91
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
The sensitivity of the other benefit plan obligation to changes in the weighted principal assumptions is:
17. Share capital
Impact on other benefit plan obligation
The number of shares and the amounts per share are not in thousands.
Significant assumptions
Discount rate
Medical and dental cost trend rates
Life expectancy
Change in
assumption
Increase in
assumption
Decrease in
assumption
1.00%
Decrease by $21,703
Increase by $29,195
1.00%
Increase by $25,702
Decrease by $20,775
1 year
Increase by $7,402
Decrease by $7,233
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is
unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the obligation to significant
actuarial assumptions, the same projected unit credit method has been applied as when calculating the retirement benefit obligation recognized
within the balance sheet.
The weighted average duration of the accrued benefit liability is 21.7 years.
Through its medical, dental and life insurance benefit plan, the Company is exposed to standard risks including changes in bond yields and life
expectancy. The discount rate is derived from corporate bond yields and a decrease in the bond yields will increase the accrued benefit
obligation. The medical and dental benefits are provided for the life of the member, so increases in life expectancy will increase the accrued
benefit obligation. The ultimate cost of the plans will depend upon actual future events rather than the assumptions made.
b) Defined contribution pension plan
The Company has a defined contribution pension plan for all of its employees. The total cost recognized for the Company’s defined contribution
plans is $16,846 (2018 - $15,447), which is recognized in general expenses in the consolidated statements of income (loss).
Authorized senior preference shares
Class A preference shares, Class B preference shares and Class E preference shares rank equally, and in priority to all other classes of
preference and common shares.
1,440,000 Class A preference shares, series A, non-cumulative dividend to be determined semi-annually by the Board of Directors
subject to a minimum rate of 5% of the redemption value if declared, redeemable at the redemption value of $37.50 per share,
with a stated value of $25 per share. Convertible to Class F preference shares, series A. The Company may redeem or
purchase at any time, at its option, all or part of the shares for the redemption value in accordance with the terms and
conditions set out in the Company’s By-law No. 2.
Unlimited Class A preference shares, series B, non-cumulative dividend to be determined semi-annually by the Board of Directors
subject to a minimum rate of 5% of the redemption value if declared, redeemable at the redemption value of $100 per share,
with a stated value of $100 per share. The Company may redeem or purchase at any time, at its option, all or part of the
shares for the redemption value in accordance with the terms and conditions set out in the Company’s By-law No. 2.
Unlimited Class B preference shares, non-cumulative dividend to be determined semi-annually by the Board of Directors subject to a
minimum rate of 5% of the redemption value if declared, redeemable at the redemption value of $50 per share, with a stated
value of $25 per share. Convertible to Class G preference shares, series A. The Company may redeem or purchase at any
time, at its option, all or part of the shares for the redemption value in accordance with the terms and conditions set out in
the Company’s By-law No. 2.
Unlimited Class E preference shares, series A, non-cumulative dividend, if declared, payable quarterly, the rate being 5.75% per annum
until June 30, 2002. After June 30, 2002, dividends are the greater of 90% of the prime rate or 5.50%. On June 30, 2002 and
thereafter on every fifth anniversary, the holder has the right to convert the Class E preference shares, series A preference
shares into non-cumulative redeemable Class E preference shares, series B on a share for share basis. On June 30, 2002
and thereafter on every fifth anniversary, the Company may redeem the whole issue at $25 per share. After June 30, 2002 at
any date other than the anniversary dates, the Company may redeem the shares in whole or part for $25.50 per share. On
June 30, 2007 the Company redeemed all of the Class E preference shares, series A at a cash redemption price per share of
$25.00.
Unlimited Class E preference shares, series B, issued June 30, 2002 and every fifth year thereafter, only on conversion of Class E
preference shares, series A. Non-cumulative dividend, if declared, payable quarterly. On the twenty-first day prior to June 30,
2002 and every fifth anniversary thereafter, the dividend rate will be set at a minimum of 95% of the Government of Canada
yield. On June 30, 2007 and every fifth anniversary, the Company may redeem the whole issue at $25 per share.
Unlimited Class E preference shares, series C, non-cumulative dividend, if declared, payable quarterly, the rate being $0.3125 per
share, to yield 5.00% per annum. The initial dividend was declared and paid on September 30, 2007 and amounted to
$0.3767 per share. On June 30, 2012 and thereafter, the Company may redeem at any time all or from time to time any part
of the outstanding Class E preference shares, series C at the Company’s option, by payment of an amount in cash for each
Class E preference shares, series C of $26.00 if redeemed during the 12 months commencing June 30, 2012, $25.75 if
redeemed during the 12 months commencing June 20, 2013, $25.50 per share if redeemed during the 12 months
commencing June 30, 2014, $25.25 per share if redeemed during the 12 months commencing June 30, 2015, and $25.00 per
share if redeemed on or after June 30, 2016, together in each case with an amount equal to all declared and unpaid
preferential dividends up to but excluding the date fixed for redemption.
Unlimited Class E preference shares, series D, non-cumulative dividend, if declared, payable quarterly, the rate being $1.8125 per
share, to yield 7.25% per annum. The initial dividend was declared and paid on September 30, 2009 for $0.6505 per share.
On June 30, 2014 and on June 30 every five year thereafter, the dividend rate will reset to be equal to the then current five-
year Government of Canada bond yield plus 5.21%. The Class E preference shares, series D were not redeemable prior to
June 30, 2014. On June 30, 2014 the Company redeemed all of the Class E preference shares, series D at a cash
redemption price per share of $25.00.
Unlimited Class E preference shares, series E, issued June 30, 2014 and on every fifth year thereafter, only on the conversion of Class
E preference shares, series D. Non-cumulative quarterly floating rate dividend, as and when declared, equal to the then
current three-month Government of Canada Treasury Bill yield plus 5.21%. The Company may redeem all or part of the
outstanding Class E preference shares, series E at its option without the consent of the holder, by the payment of an
amount in cash for each Class E preference shares, series E so redeemed of (i) $25.00 per share together with an amount
equal to the sum of all declared and unpaid dividends up to, but excluding, the date fixed for redemption in the case of
redemptions on June 30, 2019 and on June 30 every fifth year after such date, or (ii) $25.50 per share together with an
amount equal to the sum of all declared and unpaid dividends up to, but excluding, the date fixed for redemption in the case
of redemptions on any other date after June 30, 2014 that is not a Class E preference shares, series E conversion date.
92 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 93
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Authorized junior preference shares
Unlimited Class C, preference shares issuable in series
100,000 Class C preference shares, series A, non-cumulative 6% dividend and a participating dividend up to 5%, each to be
determined annually by the Board of Directors with a stated value of $100
Unlimited Class D preference shares, series A, non-cumulative dividend to be determined annually by the Board of Directors,
redeemable at $100 per share, with a stated value of $100 per share
Unlimited Class D preference shares, series B, non-cumulative dividend to be determined annually by the Board of Directors,
redeemable at $100 per share, with a stated value of $100 per share
Unlimited Class D preference shares, series C, non-cumulative dividend to be determined annually by the Board of Directors,
redeemable at $100 per share, with a stated value of $100 per share
Unlimited Class F preference shares, series A, non-cumulative dividend subject to a minimum rate of 5% if declared to be determined
annually by the Board of Directors, redeemable at $37.50 per share, with a stated value of $25 per share
Unlimited Class G preference shares, series A, non-cumulative dividend subject to a minimum rate of 5% if declared to be determined
annually by the Board of Directors, redeemable at $50 per share, with a stated value of $25 per share
Unlimited Class H, Class I and Class J preference shares, these have been authorized but have been given no attributes and have not
yet been issued. The Board of Directors has the right to define the attributes and issue as required
Authorized common shares
Unlimited Common Shares
The redemption of any share must be approved in advance by OSFI.
The changes and the number of shares issued and outstanding are as follows:
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Beginning of year
Issued during the year
the year
End of year
Number of
Amount
Number of
Amount
Number of
Amount
Number of
Amount
Redeemed during
2018
Shares
$
Shares
164,287
4,107
-
$
-
Shares
$
Shares
$
44,469
1,109
119,818
2,998
Class A preference shares,
series A
Class A preference shares,
series B
690,759
69,075
99,896
9,990
42,487
4,249
748,168
74,816
Class B preference shares
426
11
Class D preference shares,
series A
Class D preference shares,
series B
Class D preference shares,
series C
Class E preference shares,
series C
Class F preference shares,
series A
Class G preference shares,
series A
13,803
1,380
42,535
4,254
43,184
4,318
4,000,000
100,000
488,624
12,216
14,984
375
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Common shares
21,503,693
48,076
2,996,232
181,700
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
422
11
13,803
1,380
42,535
4,254
43,184
4,318
4,000,000
100,000
488,624
12,216
14,984
375
24,499,925
229,776
Less staff share loan plan
243,812
15,972
227,840
191,690
5,358
430,144
16,692
413,452
The staff share loan plan consists of loans to employees of the Company’s ultimate parent and its subsidiaries for the purchase of the
Company’s Class A, Series B preference shares. Loans are offered on an interest free basis to all employees at pre-determined intervals and
are repaid through payroll withholdings and dividend payments. Loans are generally settled within ten years and are secured by the preference
shares. The carrying value of the preferred shares closely approximates the fair value of the staff share loan plan.
Beginning of year
Issued during the year
the year
End of year
Number of
Amount
Number of
Amount
Number of
Amount
Number of
Amount
Dividends are as follows:
Redeemed during
During 2019, the Company issued 2,120,470 (2018 – 2,996,232) common shares with a value of $130,002 (2018 - $181,700) to its parent as a
result of the acquisition of a business from a related party (note 26).
Class A preference shares,
series A
Class A preference shares,
series B
Class B preference shares
Class D preference shares,
series A
Class D preference shares,
series B
Class D preference shares,
series C
Class E preference shares,
series C
Class F preference shares,
series A
Class G preference shares,
series A
2019
Shares
$
Shares
119,818
2,998
-
$
-
Shares
$
Shares
119,818
2,998
-
$
-
748,168
74,816
101,705
10,171
59,696
5,970
790,177
79,017
422
11
13,803
1,380
42,535
4,254
43,184
4,318
4,000,000
100,000
488,624
12,216
14,984
375
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
412
10
13,803
1,380
42,535
4,254
43,184
4,318
4,000,000
100,000
488,624
12,216
14,984
375
26,620,395
359,778
Dividends
Class A, series A
Class A, series B
Class B
Class D, series A
Class D, series B
Class D, series C
Class E, series C
Class F, series A
Class G, series A
Common shares
2019
2018
Declared per
Paid per
Declared per
Declared
Share
Paid
share
Declared
Share
$
-
3,887
1
69
213
216
5,000
916
37
48,000
58,339
$
-
5.00
2.50
5.00
5.00
5.00
1.25
1.88
2.50
1.81
$
113
3,782
1
69
213
216
5,000
916
37
48,000
58,347
$
0.94
5.00
2.50
5.00
5.00
5.00
1.25
1.88
2.50
1.81
$
232
3,664
1
69
213
216
5,000
916
37
-
10,348
$
1.88
5.00
2.50
5.00
5.00
5.00
1.25
1.88
2.50
-
Paid per
share
$
1.88
5.00
2.50
5.00
5.00
5.00
1.25
1.88
2.50
-
Paid
$
274
3,521
1
69
213
216
5,000
916
37
-
10,247
Common shares
24,499,925
229,776
2,120,470
130,002
Less staff share loan plan
430,144
16,692
413,452
140,173
8,969
561,348
16,569
544,779
94 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 95
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
18. Earnings per share
Earnings per share is calculated by dividing net income, after deducting total preferred share dividends, by the weighted average number of
fully paid common shares outstanding throughout the year.
Net income (loss)
Less dividends on preference shares declared
Net income (loss) available to common shareholders
Weighted average number of outstanding common shares
Earnings (losses) per share
19. Retained earnings
2019
$
174,026
10,339
163,687
25,560
6.40
2018
$
(37,107)
10,348
(47,455)
23,359
(2.03)
The Company has charged $6,493 (2018 - $7,992) to retained earnings for the difference between the carrying value and the redemption
amount of preferred shares.
Class A preference shares, series A
Class B preference shares
Class F preference shares, series A
Class G preference shares, series A
20. Accumulated other comprehensive income
Unrealized gains on available-for-sale financial assets
Cumulative remeasurement of the retirement benefit obligations
Acquisition of a subsidiary from related party
21. Capital management
2019
$
-
10
6,108
375
6,493
2018
$
1,498
11
6,108
375
7,992
December 31,
December 31,
2019
$
210,575
(38,271)
-
172,304
2018
$
123,349
(35,948)
3,036
90,437
The Company views capital as a scarce and strategic resource. This resource protects the financial well-being of the organization, and is also
critical in enabling the Company to pursue strategic business opportunities. Adequate capital also acts as a safeguard against possible
unexpected losses, and as a basis for confidence in the Company by shareholders, policyholders, creditors and others.
For the purpose of capital management, the Company has defined capital as shareholders’ equity excluding AOCI. The Company has a Capital
Management Policy that is approved by the Board of Directors. The purpose of this policy is to protect and evaluate the allocation of capital as
a scarce and strategic resource, maximize the return on invested capital, and to plan ahead for future capital needs. Capital is monitored by the
Management Capital Committee at the Company’s ultimate parent level.
Reinsurance is utilized to protect the Company’s capital from catastrophic loss arising from perils such as earthquake, tornado, wind, hail, flood
or fire. The incidence and severity of catastrophic losses are inherently unpredictable. To limit the Company’s potential impact, it purchases
reinsurance which will reimburse the Company for claims. Details of the Company’s reinsurance program are disclosed in note 7(e). The
Company’s retention on any single event is $70,000 (2018 - $70,000), which represents approximately 4.2% (2018 - 4.5%) of the Company’s
capital.
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
On an annual basis, the appointed actuary prepares the DCAT analysis which projects and analyzes trends of capital adequacy under a variety
of plausible adverse scenarios. Also on an annual basis, the Company performs stress testing in accordance with OSFI Guideline E-18. This
testing evaluates the potential effects on the Company’s financial condition of a set of specified changes in risk factors, corresponding to
exceptional but plausible adverse events. At least annually, the Company performs an Own Risk and Solvency Assessment (ORSA) to
determine the minimum amount of capital the Company can hold and still be within its risk appetite (ORSA Capital). The results of this
assessment are provided to the Board of Directors.
CGIC and some of its subsidiaries are subject to regulatory capital requirements defined by OSFI and the Insurance Companies Act (Canada).
OSFI measures the financial strength of property and casualty insurers using the Minimum Capital Test (MCT). The MCT compares a
company’s capital, including AOCI, against the risk profile of the organization. The risk-based capital adequacy framework assesses the risk of
assets, insurance contracts, structured settlements, letters of credit, derivatives, unlicensed reinsurance and other exposures, by applying
varying factors.
The Company’s internal target or Minimum Internal MCT is determined through the ORSA Capital, while giving consideration to DCAT, internal
stress testing results and OSFI’s supervisory target MCT. OFSI’s supervisory target is 150%. The Company’s Minimum Internal MCT,
established by the Board of Directors is 180%. As at December 31, 2019, the Company and its subsidiaries held capital in excess of both
OSFI’s target ratio and internal minimums.
22. Net earned premium
Direct written premium
Assumed written premium (note 9)
Gross written premium
Ceded written premium (note 9)
Net written premium
Change in gross unearned premium
Change in ceded unearned premium
Net earned premium (note 7, 8)
23. Supplemental expense information
Compensation costs
Retirement benefit obligations
Amortization expense
Interest expense
Other
2019
$
3,752,390
27,778
3,780,168
(276,207)
3,503,961
(212,378)
(16,860)
3,274,723
2019
$
356,441
9,040
10,811
49
19,317
395,658
2018
$
3,295,864
19,946
3,315,810
(253,159)
3,062,651
(189,209)
13,435
2,886,877
2018
$
310,693
9,115
10,220
2
1,010
331,040
96 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 97
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
24. Consolidated statements of cash flows
25. Related party transactions
a) Other non-cash items
The following transactions were carried out with related parties:
i) Items not requiring the use of cash
Investing activities gains
Impairment losses (note 5)
Amortization and depreciation of:
Bond premium/discount
Mortgage accretion
Intangible assets (note 12)
Property and equipment
Right-of-use assets (note 13)
Change in fair value of FVTPL invested assets (note 5)
Deferred income taxes (note 11)
Retirement benefit obligations
Loss from investments in joint ventures
ii) Changes in non-cash operating components
Insurance contracts
Reinsurance ceded contracts
Premiums due
Deferred acquisition expenses
Staff share loan plan
Accounts receivable and other assets
Accounts payable and accrued charges
Income taxes payable/recoverable
Deferred income taxes (note 11)
Provisions and other liabilities
b) Supplemental information
Interest and dividends received
Interest paid
Income taxes paid (net of recoveries)
2019
$
(100,568)
3,946
17,140
324
4,252
6,559
11,468
(5,823)
(9,680)
4,990
864
(66,528)
427,901
10,760
(177,536)
(20,004)
123
652
47,160
120,854
4,410
25,406
439,726
2019
$
201,379
908
(50,290)
2018
$
(2,309)
20,298
16,377
273
3,439
6,980
-
46,321
(10,827)
5,236
480
86,268
318,329
20,463
(104,302)
(29,402)
(720)
(13,161)
28,114
(54,991)
-
8,491
172,821
2018
$
160,798
-
33,382
Associates of
Associates and
companies under
Companies under
joint ventures
common control
common control
Parents
2019
Income
Reinsurance premium
Other investment income
Income from associates and joint ventures
Investment counselling services
Expenses
Reinsurance
Corporate services
Agency force support
Employee benefit insurance
Product distribution and underwriting services
Dividends declared
Balances outstanding at year-end
Reinsurance assets
Reinsurance liabilities
Premiums due
Due from related parties (note 14)
Loans to related parties (note 14)
Due to related parties
$
-
-
(864)
-
(864)
-
-
-
-
-
-
-
-
-
-
2,568
300
-
$
-
-
-
-
-
-
-
-
-
94,935
94,935
-
-
-
-
-
-
3,626
$
(71,933)
-
-
(5,100)
(77,033)
(74,900)
84
21
9,078
44,686
$
-
318
-
-
318
-
151,638
-
-
-
(21,031)
151,638
Total
$
(71,933)
318
(864)
(5,100)
(77,579)
(74,900)
151,722
21
9,078
139,621
225,542
-
49,451
49,451
30,411
3,580
17,202
13,390
-
9,292
-
-
-
19,756
-
12,993
30,411
3,580
17,202
35,714
300
25,911
98 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 99
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
Associates of
Associates and
companies under
Companies under
joint ventures
common control
common control
Parents
2018
Income
Reinsurance premium
Other investment income
Net realized gains
Income from associates and joint ventures
Investment counselling services
Expenses
Reinsurance
Corporate services
Employee benefit insurance
Product distribution and underwriting services
Dividends declared
Balances outstanding at year-end
Reinsurance assets
Reinsurance liabilities
Premiums due
Due from related parties (note 14)
Loans to related parties (note 14)
Due to related parties
$
-
-
-
(829)
-
(829)
-
-
-
-
-
-
-
-
-
7,811
300
-
$
-
-
-
-
-
-
-
-
-
126,050
126,050
-
-
-
-
-
-
17
$
(54,446)
-
-
-
(5,123)
(59,569)
(56,306)
107
7,088
38,457
$
-
222
6,303
-
-
-
126,594
-
-
(56,306)
126,701
7,088
164,507
241,990
(10,654)
126,594
-
1,451
1,451
49,174
15,671
15,110
9,639
-
1,069
-
-
-
25,085
-
14,725
49,174
15,671
15,110
42,535
300
15,811
In the table above, the use of the term ‘Parents’ includes all related party transactions with the immediate and ultimate parent companies, as
defined in note 1. Included in ‘Companies under common control’ are all related party transactions between companies that are controlled by
the same ultimate parent company. Included in ‘Associates and joint ventures’ are all related party transactions where the Company has
significant influence or joint control. All transactions between CGIC and its subsidiaries have been eliminated on consolidation and are not
disclosed in this note, except for those transactions with CUMIS General occurring before the acquisition date of April 1, 2018; refer to note 26
for further detail.
During the year, the Company changed the presentation of “Corporate services” (previously named ‘Management services’) received by the
Parents. Corporate services currently includes all significant shared services received, including shared information technology and workplace
services costs. This change provides more relevant information about the nature of the corporate services received. In 2018, corporate
services were presented as management services and excluded shared information technology and workplace services costs of $81,764.
With the exception of the management services, which are based on an internal contract, all other services are in the normal course of
business and are established at agreed upon terms and conditions.
During the year, the Company recognized the benefit of $6,785 (2018 - $4,872) in its income tax expense relating to income tax losses of a
related party which the Company purchased from CFSL by issuing 105,559 common shares (2018 – 87,341) for a nominal value (2018 -
nominal value).
The amounts due to/from related parties represent current accounts with related parties and are generally settled within 30 days.
Key management personnel of the Company includes all directors and executive and senior management. The summary of compensation to
key management personnel for the year is as follows:
Total
$
(54,446)
222
6,303
(829)
(5,123)
Salaries and other short-term benefits
Post-employment benefits
Other long-term benefits
Total compensation of key management personnel
2019
$
17,534
2,282
2,098
21,914
2018
$
14,474
1,928
2,211
18,613
6,525
(53,873)
26. Business combinations under common control
Acquisition of business from H.B Group Insurance Management Ltd. (HB)
On May 27, 2019, CGIC entered into an agreement with a company under common control, HB, to acquire a line of business that provides
brokerage services for group home and auto insurance across Canada. Both parties to the agreement are owned 100% by CFSL. The
Company has applied the predecessor accounting method and recorded the acquisition at the carrying values of the net assets. The difference
between the carrying value and the consideration exchanged was recorded through shareholders’ equity in the Company’s consolidated
financial statements.
The fair value of the consideration exchanged of $130,002 was funded by CGIC through the issuance of common shares to its parent, CFSL.
The carrying value of net assets acquired was $nil. The acquisition provides CGIC with direct access to HB’s customer base.
Acquisition of CUMIS General
On April 1, 2018, CGIC entered into an agreement with a company under common control, CUMIS Services Incorporated, to acquire 100% of
the common shares of CUMIS General, a property and casualty insurance company. Both parties to the agreement are owned 100% by CFSL.
The Company has applied the predecessor accounting method and recorded the acquisition at the carrying value of CUMIS General. As of the
date of the acquisition, the results of the operations of CUMIS General are included in these consolidated financial statements. The difference
between the carrying value and the consideration exchanged was recorded through shareholders’ equity in the Company’s consolidated
financial statements.
The fair value of consideration exchanged of $179,160 was paid in cash. CGIC funded this transaction through the issuance of common shares
to its parent, CFSL. The internal reorganization simplifies the overall structure of CGL by aligning the property and casualty operations under a
common legal entity.
100 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 101
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
The table below summarizes the consideration paid for CUMIS General and the amounts recognized for the assets acquired, liabilities
assumed, and through equity as at the acquisition date.
27. Segmented information
Carrying value of assets acquired
Cash and cash equivalents
Invested assets including securities on loan
Premiums due
Reinsurance ceded contracts
Deferred acquisition expenses
Deferred income taxes
Income taxes recoverable
Intangible assets
Other assets
Carrying value of liabilities acquired
Accounts payable and accrued charges
Insurance contracts
Provisions and other liabilities
Net assets acquired
Fair value of consideration exchanged
Difference allocated through equity
Allocated to:
Contributed capital
Retained earnings
Accumulated other comprehensive income
Difference allocated through equity
As at
April 1, 2018
$
2,357
219,741
30,938
82,713
39,225
4,961
481
7,528
2,985
390,929
6,748
287,274
102
294,124
96,805
179,160
(82,355)
(9,258)
(76,133)
3,036
(82,355)
For the year ended December 31, 2018, CUMIS General contributed net earned premium of $109,672 and income before taxes of $2,648 to
the Company’s consolidated statements of income (loss). Had CUMIS General been acquired on January 1, 2018, it would have contributed
net earned premium of $145,045 and income before taxes of $5,085 to the Company’s consolidated statements of income (loss).
The Company’s results of operations are reviewed by senior management and the Board of Directors based on one operating and reporting
segment, property and casualty operations.
Regulatory information
The carrying amount of the Company’s subsidiaries’ aggregate share capital are as follows:
December 31,
December 31,
2019
$
45,953
105,507
109,672
67,801
14,959
343,892
2018
$
45,953
105,507
109,672
63,301
11,373
335,806
Sovereign
COSECO
CUMIS General
CIAL
CSGC
Total carrying amount of subsidiaries' share capital
Related party revenue
Less than 1% (2018 - 1%) of revenue is generated from related parties.
Geographic information
The Company operates exclusively in Canada, writing business in all provinces and territories.
Major customers
The Company derives its source of revenue from many policyholders, none of which generate more than 10% of the revenue total.
28. Contingencies, commitments and guarantees
The Company is subject to litigation arising in the normal course of conducting its insurance business. The Company is of the opinion that this
litigation will not have a significant effect on the financial position, results of operations or cash flows of the Company. In addition, the Company
is from time to time subject to litigation other than the litigation relating to claims under its policies. Legal proceedings are often subject to
numerous uncertainties and it is not possible to predict the outcome of individual cases. In management’s opinion, the Company has made
adequate provision for, or has adequate insurance to cover all claims and legal proceedings. Consequently, any settlements reached should
not have a material adverse effect on the consolidated financial position of the Company.
The Company provides indemnification agreements for directors and certain officers acting as directors on behalf of the Company, to the extent
permitted by law, against certain claims made against them as a result of their services to the Company. The Company purchases directors
and officers insurance to mitigate the potential financial impact associated with these commitments. The limits of insurance purchased are
compared to Canadian benchmarks obtained from the financial institutions practice of the Company’s broker and other industry sources. They
are consistent with limits purchased by organizations of similar size and are in amounts management believes to be adequate and reasonable.
The Company has entered into commitments with private equity funds to invest $71,701 (2018 - $51,676) as well as US$177,500 (2018 -
US$115,000) of capital contributions into limited partnership structures. Capital contributions may be called upon by the General Partner in
such amounts and at such times as the General Partner shall deem appropriate. At December 31, 2019, the Company has provided capital
contributions of $162,548 (2018 - $121,460) to finance these limited partnership investments, which are included in note 5.
102 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 103
Notes to the Consolidated Financial Statements
(Amounts in thousands of Canadian dollars, except for per share amounts and where otherwise noted)
29. Rate regulated entities
Automobile insurance is regulated as to the nature and extent of benefits in all provinces. Additionally, the establishment and management of
rating structures and algorithms, as well as underwriting rules, are regulated in the provinces of Alberta, Ontario, New Brunswick, Nova Scotia,
Prince Edward Island and Newfoundland and Labrador where private insurance systems exist. The Company’s access to write automobile
insurance is limited and regulated in those provinces with publicly-run automobile insurance programs.
The Company’s claims costs are influenced by governments to the extent they pass legislation or regulations that change the nature and extent
of benefits and other requirements that impact claims costs and the settlement process.
The Company is subject to three types of regulatory processes, known as rate filings, to modify their rating structures and algorithms.
Depending on the content and/or impact of the filing, one process is prescribed in the regulation as follows:
Category
File and use
File and approve
Description
Insurers file their rates with the regulatory authority and wait a specific amount of time before implementing them
Insurers file their rates with the regulatory authority and wait for approval before implementing them
Use and file
Insurers file their rates with the regulatory authority within a specified period after they are implemented
The following table lists the provincial authorities which regulate automobile insurance rates. For the year ended December 31, 2019,
automobile direct written premium in these provinces comprised 45.4% (2018 - 44.8%) of the Company’s total direct written premiums during
the year.
Jurisdiction
Alberta
Regulatory authority
Alberta Automobile Insurance Rate Board
Newfoundland and Labrador
Public Utilities Board
Regulatory process
File and approve
File and use or file and approve
New Brunswick
Nova Scotia
Ontario
Prince Edward Island
Quebec
New Brunswick Insurance Board
File and approve
Nova Scotia Utility and Review Board
File and use or file and approve
Financial Services Regulatory Authority
Island Regulatory and Appeals Commission
Authorite des Marches Financiers
File and use
File and use
Use and file
Corporate directory
REGION VICE-PRESIDENTS
Patrick Décarie
Atlantic/Quebec Region
3080 le Carrefour Blvd., Suite 700
Laval, QC H7T 2R5
Phone: (514) 703-0983
Fax: (418) 877-6592
Mark Feeney
Central Ontario Region
1720 Bishop Street N
Cambridge, ON N1T 1T2
Phone: (519) 618-1216
Fax: (519) 623-9943
Chris Ross
Western Region
5550 1 Street SW
Calgary, AB T2H 0C8
Phone: (403) 221-7137
Fax: (403) 221-7106
Don Viau
North East and West Ontario Region
1547 Merivale Road, Suite 400
Nepean, ON K2G 4V3
Phone: (613) 683-1327
Fax: (613) 727-2607
CUMIS GENERAL
INSURANCE COMPANY
151 North Service Road
Burlington, ON L7R 4C2
Phone: (800) 263-9121
cumis.com
Lisa Guglietti
Executive Vice-President and Chief
Operating Officer, P&C Manufacturing
Bob Hague
Executive Vice-President,
President Credit Union Distribution
COSECO INSURANCE COMPANY
5600 Cancross Court
Mississauga, ON L5R 3E9
Phone: (800) 387-1963
cooperatorsgroupinsurance.ca
Lisa Guglietti
Executive Vice-President and Chief
Operating Officer, P&C Manufacturing
THE SOVEREIGN GENERAL
INSURANCE COMPANY
Sovereign Centre
140, 6700 MacLeod Trail SE
Calgary, AB T2H 0L3
Phone: (403) 298-4200
sovereigngeneral.ca
Steve Phillips
Executive Vice-President
and Chief Operating Officer
CO-OPERATORS GENERAL
INSURANCE COMPANY
130 Macdonell Street
Guelph, ON N1H 6P8
Phone: (519) 824-4400
service@cooperators.ca
cooperators.ca
Robert Wesseling
President and Chief Executive Officer
Kevin Daniel
Executive Vice-President and
Chief Client Officer
Emmie Fukuchi
Executive Vice-President and
Chief Digital & Marketing Officer
Lisa Guglietti
Executive Vice-President and Chief
Operating Officer, P&C Manufacturing
Paul Hanna
Executive Vice-President,
Member Relations, Governance and
Corporate Services
Karen Higgins
Executive Vice-President and
Chief Financial Officer
Carol Poulsen
Executive Vice-President and
Chief Information Officer
INVESTOR RELATIONS
Lesley Christodoulou
Vice-President, Corporate Finance Services
130 Macdonell Street
Guelph, ON N1H 6P8
Phone: (519) 767-3909
Fax: (519) 763-5152
lesley_christodoulou@cooperators.ca
104 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 105
SHARE LISTINGS
The Toronto Stock Exchange Symbol
“CCS.PR.C”
Board of
Directors
John Harvie
Chairperson
Atlantic
Denis Laverdière
Vice-Chairperson
Atlantic
Robert Wesseling
President and Chief Executive Officer
ALBERTA
Hazel Corcoran
Jim Laverick
Bob Petryk
ATLANTIC
Michael Mac Isaac
BRITISH COLUMBIA
Phil Baudin
Bill Kiss
Marilyn Loewen Mauritz
MANITOBA
Jocelyn VanKoughnet
ONTARIO
Denis Bourdeau
Chris Johnson
Rick Hoevenaars
Geri Kamenz
Robert Paterson
Reba Plummer
Jack Wilkinson
Alexandra Wilson
QUEBEC
Louis-H. Campagna
Jessica Provencher
SASKATCHEWAN
Gilles Colbert
Collette Robertson
Member organizations
The membership of The Co-operators Group Limited consists primarily of co-operative organizations,
credit union centrals and representative farm organizations.
Ontario
> Caisse Populaire Alliance Limitée
> Co-operative Housing Federation of Canada†
> Gay Lea Foods Co-operative Limited
> GROWMARK, Inc.
> Ontario Federation of Agriculture
> Ontario Organic Farmers Co-operative Inc.
> St-Albert Cheese Co-operative Inc.
> United Steelworkers ‒ District 6†
Quebec
> Fédération des coopératives d’alimentation du Québec
> Fédération des coopératives funéraires du Québec
> Fédération québécoise des coopératives en
milieu scolaire/COOPSCO
> La Coop fédérée
> La Fédération des coopératives du Nouveau-Québec
> william.coop
Saskatchewan
> Access Communications Co-operative Limited
> Agricultural Producers Association of Saskatchewan
> Credit Union Central of Saskatchewan
> Federated Co-operatives Limited†
> Regina Community Clinic
† Multi-region member
Alberta
> Alberta Federation of Agriculture
> Alberta Federation of Rural
Electrification Associations
> Credit Union Central Alberta Limited
> Federation of Alberta Gas Co-ops Ltd.
> UFA Co-operative Limited
Atlantic
> Amalgamated Dairies Limited
> Atlantic Central
> Atlantic Retail Co-operatives Federation
> Canadian Worker Co-operative Federation†
> Newfoundland-Labrador Federation
of Co-operatives
> Northumberland Cooperative Limited
> Scotian Gold Cooperative Limited
> UNI Coopération Financière
British Columbia
> Agrifoods International Cooperative Limited†
> BC Agriculture Council
> BC Tree Fruits Cooperative
> Central 1 Credit Union†
> Modo Co-operative
> Mountain Equipment Co-op†
> PBC Health Benefits Society
> Realize Strategies Co-op
Manitoba
> Arctic Co-operatives Limited
> Caisse Populaire Groupe Financier Ltée
> Credit Union Central of Manitoba Limited
> Granny’s Poultry Cooperative (Manitoba) Ltd.
> Keystone Agricultural Producers
106 CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT
CO-OPERATORS GENERAL INSURANCE COMPANY | 2019 ANNUAL REPORT 107
The Co-operators, 130 Macdonell Street, Guelph, ON N1H 6P8
Phone: (519) 824-4400 | cooperators.ca | service@cooperators.ca
Available in French ~ Disponible en français
Released March 10, 2020 | COM368 (03/20)
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