Co-operators General Insurance Co. recorded a net loss for the first quarter as it struggled with turbulent financial markets and rising claims costs, the property and casualty insurer said Tuesday.

For the first quarter end March 31, the net loss was $6.4 million, or 38¢ a share. That compared with net income of $5.9 million, or 23¢ a share, for the same quarter in 2008.

“The impact of the downturn in the capital markets and increased claims costs contributed to the loss we experienced in the first quarter,” commented Kathy Bardswick, president and CEO of The Co-operators. “Despite a challenging environment, our fundamentals are solid, our capital position is strong, and we continue to make progress toward our strategic objectives.”

Gross written premium in the first quarter increased 5.8% to $466 million, compared to $440.4 million in the first quarter of 2008. Growth was achieved in all product lines with Western Canada leading the regional growth, making up $12.6 of the $25.6 million increase, the insurere says.

Gross written premium was up 9.5% in the Quebec region, reflecting the impact of strengthened broker relationships in the current year.

Net earned premium growth for the quarter was 1.7% above the previous year. Growth was predominately from Western Canada and Ontario regions, which was partially offset by declines seen in the Quebec region relating to fewer policies written in the prior two years resulting from the consolidation in the insurance brokerage industry, the company says.

First quarter net investment income from interest, dividends and real estate rose to $34.7 million in 2009, up from $34.5 million in 2008. Net investment gains of $6.2 million were achieved in the quarter, down from $17.3 million in the same period in 2008 where we had taken advantage of market opportunities that existed at the time.

During the quarter, Co-operators General recognized other than temporary impairments of $0.9 million related to a preferred share investment which was deemed to be other than temporarily impaired due to the continuing weakness of the U.S. financial sector. The insurer says the credit quality of its portfolio remains high with 96.6% of our bonds rated A or higher. Its equity portfolio is 82.8% weighted to Canadian stocks.

The combined ratio of claims and operating expenses for the quarter was 110.5%, compared to 109.2% for the first quarter of 2008. The first quarter loss ratio was down on auto, commercial and farm product lines. Home results were unfavourably impacted by replacement and clean up costs as well as major event losses relating to weather, Co-operators says.

The Quebec region experienced a 6 percentage point improvement in the loss ratio as milder weather conditions favourably impacted frequency and severity of claims.

Co-operators General’s capital position remains strong, the company says, as the Minimum Capital Test for Co-operators General Insurance Co. was 200% at March 31, 2009, well above the regulatory minimum requirement of 150%.

IE