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We provide a wide range of P&C insurance products throughout Canada in two broad lines of business: personal insurance and commercial insurance. Each line is further subdivided between auto and property, or in the case of commercial, property and liability lines of business.

The following charts illustrate our GWP mix on this basis for the fiscal year 2016 and 2015:

2016 GWP BY LINE OF BUSINESS

2016 GWP By Lines Of Business: Personal auto=44%, Personal property=19%, Commercial Auto=14%, Commercial property=23%

2015 GWP BY LINE OF BUSINESS

2015 GWP By Lines Of Business: Personal auto=43%, Personal property=19%, Commercial Auto=13%, Commercial property=25%

 

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2016 GWP BY REGION

2016 GWP By Region: Ontario=59%, BC=14%, Alberta & Prairies=13% Atlantic=7%, Quebec=6%, Other=1%

2015 GWP BY REGION

2015 GWP By Region: Ontario=57%, BC=15%, Alberta & Prairies=14% Atlantic=7%, Quebec=6%, Other=1%

 

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Our business mix remained relatively stable in 2016 with a slight shift from commercial property and liability to personal auto and commercial auto. In addition, there was a slight shift in the regional mix from British Columbia and the Alberta & Prairies regions to Ontario.

UNDERWRITING — PERSONAL LINES

Figure 6 presents selected results of operations of the personal lines of business for the year ended December 31.

2016 Personal Lines of Business Results
Figure 6
(in millions of dollars, except as otherwise noted) 2016 2015 $ Change % Change
Policies in force (thousands)
Auto 656.7 619.0 37.7 6.1%
Property 402.4 407.8 Loss: (5.4) Loss: (1.3%)
Total 1,059.1 1,026.8 32.3 3.1%
Gross written premiums
Auto 920.2 858.7 61.5 7.2%
Property 397.6 390.3 7.3 1.9%
Total 1,317.8 1,249.0 68.8 5.5%
Net earned premiums
Auto 876.7 820.3 56.4 6.9%
Property 367.9 357.7 10.2 2.9%
Total 1,244.6 1,178.0 66.6 5.7%
Underwriting (loss) income (undiscounted)1
Auto Loss: (34.3) 43.5 Loss: (77.8) Loss: (178.9%)
Property 4.6 43.0 Loss: (38.4) Loss: (89.3%)
Total Loss: (29.7) 86.5 Loss: (116.2) Loss: (134.3%)

1 The underwriting results in Figure 6 exclude certain operating expenses for the aforementioned investments in Sonnet.

 

PERSONAL AUTO
RATIOS

Personal Auto Ratios: Claims: 2016=77.2% 2015=68.4%, Expenses: 2016=26.7%, 2015=26.3%, Combined; 2016=103.9, 2015=94.7%

PERSONAL PROPERTY
RATIOS

Personal Property Ratios: Claims: 2016=62.8%, 2015=52.7%, Expenses:2016=36.0%, 2015=35.3%, Combined: 2016=98.8%, 2015=88.0%

TOTAL PERSONAL LINES
RATIOS

Total Personal Lines Ratios: Claims: 2016=73.0%, 2015=63.6%, Expenses: 2016=29.4%, 2015=29.1%, Combined: 2016=102.4%, 2015=92.7%

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Personal auto GWP grew in 2016, supported by increased auto policy volumes across most regions in Canada within our broker channel, and the launch of Sonnet. The personal auto combined ratio was impacted by an increase in claims severity and lower levels of favourable claims development, primarily due to deterioration in Alberta and British Columbia. In contrast, 2015 was positively impacted by the benefit from the one-time Ontario auto regulatory reforms enacted in that year, which reduced reserves for certain open claims. To address the challenges in personal auto, we are implementing a number of measures, including improvements in pricing, underwriting, and claims actions. We are also investing in the replacement of the personal lines policy administration system to support our broker distribution channel, which we expect will improve operating performance over the longer term, once implemented.

Personal property PIF decreased due to the cancellation of unprofitable business in British Columbia. These lower policy volumes were more than offset by increased average premiums and increased personal property policy volumes across most regions in Canada, resulting in overall GWP growth. The personal property combined ratio was significantly impacted by increased catastrophe losses, including the Fort McMurray wildfire. Catastrophe losses impacted the 2016 combined ratio by 12.3 percentage points, compared to 1.8 percentage points in 2015, which experienced relatively benign weather conditions. Despite these challenges, personal property produced an underwriting profit.

The personal lines of business results excluded certain expenses associated with the development and launch of Sonnet. Commencing in 2017, ongoing costs of Sonnet will be included in the line of business performance, resulting in increased operating expense ratios until Sonnet achieves the necessary scale. We are also investing in a new personal lines policy administration system, which will further increase the expense ratio during the build and roll-out phases. We expect this investment will yield significant efficiencies, including an improved rating structure, improved broker experience, speed to market with pricing changes, and provide a robust platform for acquisitions once fully implemented.

UNDERWRITING — COMMERCIAL LINES

Figure 7 presents selected results of operations of the commercial lines of business for the year ended December 31.

2016 Commercial Lines of Business
Figure 7
(in millions of dollars, except as otherwise noted) 2016 2015 $ Change % Change
Policies in force (thousands)
Auto 50.6 50.4 0.2 0.4%
Property and liability 118.9 124.0 Loss: (5.1) Loss: (4.1%)
Total 169.5 174.4 Loss: (4.9) Loss: (2.8%)
Gross written premiums
Auto 285.6 264.8 20.8 7.9%
Property and liability 480.7 494.6 Loss: (13.9) Loss: (2.8%)
Total 766.3 759.4 6.9 0.9%
Net earned premiums
Auto 266.6 258.3 8.3 3.2%
Property and liability 444.4 469.4 Loss: (25.0) Loss: (5.3%)
Total 711.0 727.7 Loss: (16.7) Loss: (2.3%)
Underwriting (loss) income (undiscounted)
Auto Loss: (4.6) 18.2 Loss: (22.8) Loss: (125.3%)
Property and liability (31.8) Loss: (16.7) Loss: (15.1) 90.4%
Total Loss: (36.4) 1.5 Loss: (37.9) Loss: (2,526.7%)

 

COMMERCIAL AUTO RATIOS
 

Commercial Auto Ratios: Claims: 2016=72.9%, 2015=64.2%, Expenses: 2016=28.8%, 2015=28.7%, Combined; 2016=101.7, 2015=92.9%

COMMERCIAL PROPERTY AND LIABILITY RATIOS

Commercial Property and Liability Ratios: Claims: 2016=68.0%, 2015=65.2%, Expenses: 2016=39.2%, 2015=38.4%, Combined: 2016=107.2%, 2015=103.6%

TOTAL COMMERCIAL LINES RATIOS

Total Commercial Lines Ratios: Claims: 2016=69.9%, 2015=64.9%, Expenses: 2016=35.2%, 2015=35.0%, Combined: 2016=105.1%, 2015=99.9%

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Commercial auto GWP increased compared to 2015 despite the impact of the overhaul of our commercial property and liability pricing strategy, which impacted certain associated commercial auto policy renewals. GWP grew at a significantly higher rate than PIF due to a shift from small commercial auto business to fleet business, which commands higher average premiums. The commercial auto combined ratio was impacted by higher claims severity and an increase in claims frequency, partially offset by lower large losses. In contrast, the prior year benefited from the one-time Ontario auto regulatory reforms enacted in 2015, resulting in increased levels of favourable claims development.

Commercial property and liability GWP decreased in 2016 due to the decline in PIF, driven by the overhaul of our pricing strategy designed to improve the profitability of this line of business. This was somewhat offset by higher average premiums resulting from our underwriting and pricing actions. The commercial property and liability combined ratio was impacted by increased catastrophe losses, including the Fort McMurray wildfire, which had an incremental impact of 2.9 percentage points, whereas 2015 experienced relatively benign weather conditions. This was somewhat offset by the beneficial impact of increased rate resulting from our underwriting and pricing actions.

Commercial property and liability performance has historically been challenged. In 2016, we continued to implement significant underwriting and pricing actions focused on bringing the commercial line of business back to profitability. Our objective is to provide competitive and sustainable pricing. We continue to focus on underwriting discipline, product enhancements, targeted rate increases, and the implementation of sophisticated pricing models to achieve rate adequacy in key lines of commercial business. While our underwriting and pricing actions have impacted our written premiums, we believe these initiatives will improve operating performance of the commercial lines of business going forward.