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Section 1 — Corporate Overview

About Economical

Economical is one of Canada’s leading property and casualty (“P&C”) insurers. Headquartered in Waterloo, Ontario, we are an insurance company that provides a wide range of personal and commercial insurance products to customers across Canada. We partner with independent insurance brokers who work with customers to assess their insurance needs. We also offer personal auto and personal property insurance through our digital direct business, Sonnet, and through our group and affinity business, Economical Select, and pet insurance through our Petline business. We are committed to providing our broker partners and customers with the products and services that today’s market demands.

Our financial stability is demonstrated by assets over $5.6 billion and total equity over $1.7 billion as at December 31, 2017, reflecting the combined strength of our member companies.

Corporate Strategy

Our strategy strives to achieve our vision — to be one of Canada’s top P&C insurers, recognized for our business innovation and how well we take care of our customers. It builds on our 146-year heritage, and is powered by two imperatives: growing our business profitability and operating effectively. Across Economical, we are focused on four core strategic thrusts which serve those imperatives:

Combining sound fundamentals and exceptional experiences to exceed customer and broker expectations

We are building on strong relationships with our broker partners by equipping them with customer-centric products and pricing, faster servicing, and a streamlined workflow for personal lines business to enhance their competitiveness in a changing marketplace and expand our market share in the broker distribution channel. To drive growth in profitable commercial segments, we are focusing on developing speed and simplicity to service small commercial business, deepening our underwriting expertise for mid-market business, and expanding our capabilities for large accounts and specialty lines. In our direct channel, we continue to offer customers industry-leading self-service capabilities, while positioning ourselves for growth through customer targeting, acquisition, and conversion optimization. Both channels are supported by ongoing investments in new technologies and advanced analytics aimed at leveraging sophisticated insights in marketing, product design, and business mix optimization. We continue to focus on offering diversified products, enhancing our pricing sophistication, and building strong underwriting expertise to build competitive advantage in the market and deliver predictable returns.

Creating industry-leading speed and agility through productivity and efficiency

Efficient and flexible processes and systems are essential to respond to rapidly changing industry conditions and are key to effectively managing our expenses. We are in the process of replacing our legacy personal lines policy administration and billing systems with Guidewire, which will increase speed to deliver our products to market and allow us to more efficiently service our customers. In addition, we have a number of other technology modernization initiatives underway which will provide a more scalable platform to integrate future acquisitions. With ongoing pressure on profitability, we are working to address controllable costs through improvements to claims recovery and procurement, and optimizing our suite of business-supporting technology applications.

Empowering a culture that delivers on our brand

Culture is a key ingredient to operating as a high-performance organization. Building an engaging values-based culture where customer focus, operational excellence, innovation, and collaboration are championed by all, will lead us forward in delivering on the essence of our brand — inspiring customer and shareholder confidence. We know there is a strong relationship between a highly engaged workforce and company performance; engaged employees produce superior quality, deliver better financial results, create better customer experiences, and drive continuous improvement and innovation. We are focused on inspiring an engaging environment that enables our people to maximize their individual and collective contribution to long-term value creation.

Growing and diversifying inorganically

We are currently pursuing demutualization under a framework established by the federal government in 2015. The culmination of that process is a planned initial public offering (“IPO”), which would open access to capital markets, significantly enhance our ability to acquire other companies, and allow us to make the investments needed to realize our vision. We continue to prepare to operate as a public company through enhancement of capital modeling, investment management, risk management, reporting and disclosure practices, and development of new compensation programs. We recently completed the acquisition and integration of Petline Insurance into Economical’s operations, building organizational capabilities required to be ready for future large-scale acquisitions.