Hard markets return for Canadian P&C insurers – IBC

Toronto, November 23, 2001 – Third quarter results for Canada’s property and
casualty insurance industry have been released and the figures are a strong indication of what is commonly
referred to by insurers as a “hard market.”

In its quarterly analysis of the financial performance of the P&C insurance industry,
the Insurance Bureau of Canada says written premiums have increased by 11% this year with much larger increases
recorded in the United States and elsewhere.

“Although revenues are rising, the cost of claims is increasing at a quicker pace
– up 12 per cent this year, ” says Paul Kovacs, chief economist for the Insurance Bureau of Canada.

“Terrible underwriting results in combination with eroding investment returns have
driven insurance earnings lower. After-tax industry ROE has fallen to less than 2 per cent this year –
the lowest level ever recorded.”

Looking at regional statistics, the insurance industry is experiencing very large losses in
Atlantic Canada. In Ontario, premiums haven’t kept up with alarming and persistent cost increases, particularly
for auto insurance. The healthiest insurance market in the country is Quebec.

Adding to the industry’s challenges are the terrorist attacks of September 11 in New York and
Washington and weaknesses in the economy. “Interest rates have fallen, equity markets initially lost ground,
and now, reinsurance costs are soaring,” Kovacs says.

This year’s third quarter results show net profits for the P&C insurance industry dropped
by 46.7% to $165 million compared to the same period in 2000. This deterioration shows that the industry has
suffered a double blow by a 46.3% decline in recognized gains, and an 11.6% hike in underwriting losses.

Direct written premiums improved considerably, with a year-over-year increase of 12.4% in
third quarter 2001 from the same period last year. At the same time, the industry loss ratio worsened to 77%
from 76.6% in 2000, as the 7.4% growth of earned premiums lagged behind the 8% claims growth.

During the first nine months of the year, dramatic deterioration in stock market values
contributed to a 62.2% reduction in realized investment gains while lower interest rates produced a 1.4% drop
in investment income.

The Insurance Bureau of Canada is the national trade association of the private property and
casualty insurance industry. It represents about 200 companies that provide more than 90 per cent of the
non-government home, car and business insurance in Canada. Visit the media section of the bureau’s Web site at
www.ibc.ca for more news releases and information.

For more information contact:
Mary Devorski – 416-362-2031 ext. 351

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