Navigating the P&C Market Cycle for Long-Term Profitability: Insights from a Canadian Perspective

Market & Cycle How Long Can We Stay Profitable?A Canadian Perspective Presented by: Kevin A. Lee FCAS, FCIA Executive Vice-President IAO Actuarial Consulting Services Inc.

Table of Contents • P&C Industry ROE • Market Composition • Regional / Line of Business Results • Auto Some More • What is to Blame for the Cycle? • Can the Cycle be avoided? • What to Expect

P&C Industry - ROE

ROE Comments • Cycle is evident • Most recent is very short and severe – trough to peak in 3 years • 9/11 what was the impact? • Most drastic in history? • Insurers better than reinsurers in latest peak • Small had less extremes then largest • Raises interesting questions – more later

Market Composition Insurers (2007)

Market Composition Top 5 Insurers (2007)

Market Composition Large Insurers (2007)

Market Composition Medium Insurers (2007)

Market Composition Small Insurers (2007)

Market Composition Auto by Region (2007) Source: IICC

Market Composition Comments • Huge auto share • As auto goes, so goes the industry • More rate regulation in auto makes cycle more severe – a dam that bursts • Large companies have larger share of auto – helps explain some of the earlier ROE slides

Automobile

Automobile Loss Ratio

Automobile ROE

Automobile Trends Province 2007 Overall Loss Loss Ratio Trend • Newfoundland 63% 6.0% • Nova Scotia 51% -0.5% • New Brunswick 51% -2.8% • Prince Edward Island 53% -0.9% • Quebec 61% 5.4% • Alberta 63% 8.6% • Ontario 78% 9.0%

Personal Property

Personal Property Loss Ratio

Personal Property ROE

Commercial Property

Commercial Property Loss Ratio

Commercial Property ROE

Commercial Liability

Commercial Liability Loss Ratio

Commercial Liability ROE

Regional / Line of Business Comments • Wild ride in Atlantic Canada – always ignored • Prepare for one in Alberta – auto minor injury regulation • Property relatively stable • Auto is the culprit

Auto Some More • Joe Average hates auto insurance • Auto insurance in Canada is highly politicized • Rate regulators put constant downward pressure on rates • Companies eventually respond • Public outcry • Changes to the auto product • If changes are initially successful, calm ensues, • But . . . the cycle eventually repeats

What is to Blame? • Yes, yes . . . Economic cycles, catastrophic events, etc. • But … • The product itself • Human nature in general • Company management • actuaries

Can Anything Be Done? • Yes, but we will always have a cycle • Do your rate indications – where are they? • Do your rate indications – do them more often • Stop being so passive – leadership is needed • Better communication

What to Expect • The cycle will repeat • Relative rate adequacy has slipped especially Ontario Auto • Industry ROE results are still okay • Market likely to remain soft until industry ROE results deteriorate. • Eventually markets will harden

END OF PRESENTATION

Navigating the P&C Market Cycle for Long-Term Profitability: Insights from a Canadian Perspective

Navigating the P&C Market Cycle for Long-Term Profitability: Insights from a Canadian Perspective

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State of Connecticut Vendor Self-Serve Accounts Payable Division Table of Contents

Prince George Royals Defensive Playbook Table of Contents

Oasys PRIMER 9.3 October 2008

Table of contents

Standard Right of Way Plan Format

Periodic Table

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Elements and Their Properties

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