Geulph, Ont.-based Co-operators General Insurance Co. reported a consolidated net loss of $18.3 million for the fourth quarter ended Dec. 31, 2008 and net income of $62.1 million for the year as a whole.

In Q4 2007, net income was $60.8 million, while net income for 2007 as a whole was $148.2 million. Earnings per common share for Q4 amounted to -$1.06 compared with $2.88 for the same period last year whereas earnings per common share for 2008 totalled $2.68 compared with $6.95 in 2007.

“In the midst of unprecedented market volatility, our conservative investment strategy has served us well. Our capital position remains strong, as the company’s minimum capital test is 204%, well above the regulatory minimum of 150%,” said Kathy Bardswick, president and CEO of Co-operators. “Our strong position allows the company to continue with strategic investments in staff and infrastructure that support our strategy of broadening product relationships with our clients and keep us moving toward our long-term growth goals.”

Gross written premium in Q4 increased 3.1% to $539.1 million, compared with $523.1 in Q4 2007, primarily due to growth in auto policy counts and premium increases on home and farm.

Net earned premium growth for the quarter was 3.3% above the previous year due to growth in all lines of business, but primarily driven from auto and home results.

Net investment income, which is comprised of interest, dividends and rent less investment expenses, was down $1.7 million vs the prior year, despite investment in higher yielding mortgages. Net realized investment gains were down $32.6 million from 2007. Negatively impacting net realized investment gains in the quarter was a writedown of $14.2 million relating to a collateralized debt obligation deemed to be other-than-temporarily impaired due to the weakening of underlying collateral.

Co-operates adheres to a conservative investment policy and strategy that is based upon prudence and regulatory guidelines and, in a broad sense, on claims settlement patterns by product line. The firm focuses on maximizing long-term returns while taking advantage of current market opportunities. This is achieved by investing in a diversified mix of securities and by shifting between asset classes as trends in the market evolve.

The company’s portfolio composition is conservative and the assets are high quality and well diversified. The credit quality of its bond portfolio remains high, with 96.4% rated “A” or higher. Our equity portfolio is 82.0% weighted to Canadian stocks, with a further weighting to large financial institutions. The firm has no mortgages in arrears.

The combined ratio for the quarter was 109.4%, up from 93.6% during the comparable period last year due to an increase in current accident year claims, an increase in property losses due to storm activity, a decrease in the interest rate used to discount claims liabilities, a significant facility association loss as well as the Alberta and Nova Scotia legislation challenges relating to the cap on minor bodily injury claims.

For the year, gross written premiums increased 3.2% to $2.2 billion, compared with $2.1 billion in 2007. Growth was experienced across all lines of business and across all regions with the most significant dollar increases coming from the Western Canada and Ontario regions. Western Canada growth is from all product lines, while Ontario growth mainly relates to auto.

Net earned premium growth was 3.8% above the previous year and was largely attributable to the automobile and home lines of business, predominately in Western Canada and Ontario.

Net investment income from interest, dividends and real estate increased to $145.5 million from $142.3 million in 2007 mainly related to investment in higher-yielding mortgages and corporate bonds. Net realized investment gains of $58 million were ahead of the 2007 level of $39.2 million. Much of the increase in gains relates to the disposal of our real estate portfolio that occurred during 2008, partially offset by Q4 other than temporary impairment writedown of $14.2 million.

The year-to-date combined ratio increased to 106.2% from 98.3% in 2007. Claims were impacted unfavourably by an increase in current accident year claims, a decrease in the interest rate used to discount claims liabilities, facility association results as well as the Alberta and Nova Scotia legislation challenges relating to the cap on minor bodily injury claims. In addition, we continued to experience severe weather related losses in our habitational portfolio.