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Economical Insurance is committed to a long and profitable future with a focus on the customer

Over the past 146 years Economical has grown to become one of Canada’s largest property and casualty insurers. We’re developing a strategy for success that includes investing in game-changing digital solutions, staying on top of market trends, and meeting the needs of our business partners and customers.

A proudly Canadian company headquartered in Waterloo, Ontario, our multi-channel distribution allows us to focus on the customer to deliver a trustworthy experience from our policy coverage to our claims service.

Get ready for the future, with us.

Our vision

To be one of Canada’s top property and casualty insurers, recognized for our business innovation and how well we take care of our customers.

Our mission

To be the insurance partner Canadians choose to protect what they value most.

Our values

We focus on customers first.

We bring our best.

We’re stronger together.

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At the end of 2017, the independent rating agency A.M. Best reaffirmed the financial strength of Economical with an A- (Excellent) rating for the fifth consecutive year. This recognition provides additional confidence for our valued broker partners and customers as we drive our strategy forward. 

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Percentage based on 104,770 Economical claimant survey responses measuring customer satisfaction with claims services from January 2007 to December 2017.

2017 Performance at a glance

Gross Written Premiums (GWP)

Combined Ratio (COR)

Net Income (Loss)

Expense Ratio

Total Equity

Minimum Capital Test (MCT)

Message from John Bowey,
chairman of the board

John Bowey

"[Our] successes demonstrate how we are making strides towards our future goals, shifting into gear with the execution of our innovative strategies while staying focused on improving the operational effectiveness of our core business."

For Economical, 2017 was a year to focus on the initiatives that will secure our future success.  This included continuing to strengthen our core business while we advance our innovative strategies to take care of our customers and build competitive advantage in an industry undergoing unprecedented change. That focus, combined with significant progress along the path to becoming a public company, gives Economical a solid foundation from which to achieve our goal to be one of Canada’s top P&C insurers.

Despite our progress, our financial performance has been disappointing. We are not discouraged. We know our corrective actions will take time to improve our core business performance, and for the benefits of our major strategic investments to impact our results. In each case, we believe our actions and investments are the right ones, and that they will position us for success. We are committed to securing those improved results quickly and prudently.

In this report, I will share my thoughts on why I believe 2017 has been successful overall and has moved us well along the path to securing Economical’s bright future and the achievement of its goal to be a leader in our industry in Canada.

Setting the foundation for future success

Despite a year that brought many challenges for us and for the Canadian P&C industry, we delivered important accomplishments that are worthy of celebration. These successes demonstrate how we are making strides towards our future goals, shifting into gear with the execution of our innovative strategies while staying focused on improving the operational effectiveness of our core business. 

  • Rowan Saunders completed his first year as Economical’s CEO. His early performance has only increased our confidence that selecting him to lead our company was the right decision. His experience and insights have been invaluable in helping us assess our position and make the additional changes needed to improve our performance and our execution as we prepare for public company status.
  • We’ve strengthened our executive team across key areas of the business with the appointment of Fabian Richenberger, Executive Vice-President, Commercial Insurance, Paul MacDonald, Executive Vice-President, Personal Insurance, along with Kelley Irwin, Senior Vice-President and Chief Information Officer, and Roger Dunbar, Senior Vice-President, Sonnet Insurance. 
  • Our strategic investments are building new capabilities. During the year, we fully integrated Petline into our business and we also celebrated the first anniversary of Sonnet, our unique and industry leading digital-direct brand.  This year, we will launch Vyne, our new broker offering in personal lines and individually rated commercial auto. Vyne will dramatically enhance the way we work with our broker partners to improve our customers’ experience.
  • Last but not least, we have achieved important milestones in our journey to demutualizing and becoming a public company.

Across the financial services industry in Canada, and within insurance in particular, 2017 was a challenging year. The industry is in a period of great change, as consumer expectations continue to evolve, technological innovations create new opportunities, and industry consolidation changes our competitive landscape.

At Economical, we are focused on improving the core of our business in order to build the right capabilities to optimize our bold business strategy, create alignment and accountability, drive profitable growth, and build a high-performance culture.

Continuing the path to becoming a public company

In February 2017, the Ontario Superior Court of Justice appointed policyholder committee members to represent the two groups of eligible policyholders as required by our demutualization regulations. Throughout the year, these committees negotiated the allocation of financial benefits that will result from the planned demutualization of Economical. This transformation from a mutual to a public company is an essential part of our future. It will provide us access to the capital we need to make further investments in innovation and to grow through acquisitions in a frequently consolidating market.

In February 2018, the policyholder committees reached an agreement in principle on benefit allocation. Once the committees finalize the details of their agreement, which they continue to work on, the next step is for Economical to submit a formal conversion proposal to the Office of the Superintendent of Financial Institutions. The conversion proposal will detail how Economical will convert from its current mutual form to a public company with share capital. If the required authorizations are obtained, the next steps include two policyholder votes and seeking government approval, all leading to a proposed initial public offering when the conditions are right.

On its own that progress is significant, given that the demutualization process we are required to work with is complex and a successful P&C demutualization will be the first of its kind in Canada. But it is only the tip of the iceberg when viewed in the context of everything else that needs to be in place for us to mount a successful initial public offering and thrive as a public company.  The work to build public company-level governance and controls is ongoing, while at the same time we are transforming our core business to compete with the leaders in our industry and generate the kind of performance that public markets will expect of us. Taken together, these opportunities require us to bring our best on multiple fronts across our business, and I’m very proud of what we have achieved so far.

A strengthened leadership team

As I have described, an important part of our commitment to laying a foundation for the future was to bolster our executive team. The Board is very confident that Economical’s executive team is now as talented as any in our industry, and they will deliver the results for our future success.

In addition to our new executives, we have also added talent to our Board to ensure we have a solid team in place to oversee the major, Canadian, publicly traded financial institution we will become.

  • In August 2017, Jay Forbes joined our Board, with extensive leadership experience across private and public companies. His insight is expected to help Economical achieve profitable growth and operational effectiveness.
  • And, effective January 2018, Susan Monteith joined our Board after a 30-year career as a trusted advisor in capital markets. As we continue our journey to demutualization, Susan’s strengths in strategic growth initiatives and her capital markets experience will support our preparations for a successful initial public offering.

Unfortunately, we are also losing two very talented directors.

  • After five years of dedicated service, David Wilson retired from our Board in 2017, having consistently provided valuable counsel and acting as a highly capable chair of the special committee, and we’d like to take this opportunity to publicly thank him for his contributions.
  • And, Gerry Hooper is retiring from the Board, where he’s served for 18 years, including 11 years as our Board Chair. His current term expires at the close of this year’s Annual Meeting, and comes after he helped achieve pivotal milestones in the demutualization process for Economical. Thanks to Mr. Hooper’s committed leadership, Economical is in a strong position to achieve our vision to be one of Canada’s top P&C insurers.

Focus on the future

Looking ahead to 2018 and beyond, Economical will be focused on executing the strategy that’s now in place. We have a solid plan to achieve the milestones ahead and have a clear focus on delivery. Although 2017 posed challenges for us, our continued investments and operational changes are expected to deliver the wins we need to achieve future success. The Board is confident that Economical has the right leadership team in place to achieve what we have set out to do. We also have a committed team of talented employees who have the confidence of the Board and our appreciation for their continued hard work.

And of course, our broker partners will continue to be an important key to our future. We thank them for their continued support, loyalty, and trust as we continue our journey to make Economical one of Canada’s leading P&C insurers.

John Bowey - signature
John Bowey
Board Chair

Message from Rowan Saunders,
President and CEO

Rowan Saunders

"Across Economical, I see our values come to life every day through our employees, both at work and in the community — we focus on customers first, we bring our best, and we’re stronger together. Those values are what makes Economical a truly great place to work."

In a year with great change and unique challenges, I am proud to see how Economical’s leaders, employees, and partners have worked together to pursue our goal of becoming a leading P&C insurer in Canada. Economical has disrupted the industry, using technology, innovation, and a focus on the customer to drive our vision. The foundation and future success of our strategic execution would not be possible without the counsel and support of our Board, the commitment of our broker partners, or the dedication of our teams bringing their best every day.

2017 was a challenging year financially for Economical, but also an impressive year given the progress we made in building new capabilities. We continue to pursue strategic initiatives to improve operational efficiency and return to profitable growth, with significant transformation across our business. In 2017, we developed and implemented strategies that we expect will fix the core of our business, and we will continue to pursue those in 2018 while maintaining our focus on strategic initiatives and investments that will lay the foundation for being a public company with a profitable and long future.

Our financial performance in 2017

We ended 2017 with disappointing results as the deteriorating trends that emerged in late 2016 continued, resulting in a combined ratio of 113.7% and a net loss of $92.7 million. We have been working intensely to correct these results and succeed through a smart, disciplined approach with a view to the long-term to ensure sustainable profitable growth.

The profitability challenge related primarily to our personal auto and commercial fleet business, consistent with trends we’ve seen in the industry generally. The heavy weighting of our portfolio to regulated auto meant we were disproportionately impacted by adverse industry trends and exposure to challenge in the auto business cycle. In response, we have implemented a number of corrective pricing actions, enhanced our underwriting capabilities, and instigated broker management actions that will intensify during 2018 but will take time to earn through our results. Some of these actions include our updated commercial strategy and new broker offering Vyne, which will be instrumental in shaping our future profitable portfolio.

We continue to see growth in gross written premiums, which increased by 9.7% compared to the prior year, driven by new business growth in our digital-direct brand, Sonnet, the acquisition of Petline, and personal lines growth within our broker channel. These were partially offset by an intended decline in gross written premiums in our commercial lines, as a result of targeted underwriting actions in this line of business.

Our capital position remains well in excess of both minimum internal capital targets and external regulatory requirements, with total equity of approximately $1.7 billion and a Minimum Capital Test ratio of 242.1%, as of the end of 2017.

At the end of 2017, the independent rating agency A.M. Best reaffirmed Economical’s financial strength rating of A- (Excellent) for the fifth consecutive year. A.M. Best acknowledged Economical’s strong risk-adjusted capitalization, favourable underwriting leverage and liquidity, historically positive operating performance, diversified product offerings, operational improvement initiatives, and established market presence across Canada. This recognition provides additional confidence as we drive our strategy forward.

Foundation for the future

As I mentioned in last year’s annual report letter, our focus over the next few years will be on improving our operational performance and effectively executing on our strategic initiatives. After a thorough review of our value drivers, we implemented a robust profit improvement plan to accelerate profitability focused on underwriting excellence, operational effectiveness and targeted growth.

We have bold actions well underway: re-pricing all product lines, reconstructing our commercial insurance portfolio, tighter underwriting standards, enhanced productivity and proactively managing external provider costs. These activities are transforming our company into an agile, innovative, and competitive industry leader, all directly in support of our vision to be one of Canada’s leading P&C insurers.

As we continue to execute on our strategic initiatives, we have implemented a new management organization structure to provide greater clarity, alignment and accountability.

  • In April 2017, Fabian Richenberger joined Economical as Executive Vice-President of Commercial Insurance. Previously President at Northbridge Insurance, Fabian has been leading the execution of Economical’s new commercial lines strategy and structure to strengthen the broker experience, improve profitability, capture more market share in small business, and expand our capabilities in middle market and specialty lines.
  • Also in April 2017, Kelley Irwin joined Economical as Senior Vice-President and Chief Information Officer. Most recently CIO of Corporate Technology at TD Bank Group, Kelley has been driving improvement through optimization of our technical solutions as the leader of IT strategy and operations, while Economical continues to transform its business platforms.
  • In August 2017, Economical welcomed Roger Dunbar as Senior Vice-President of Sonnet Insurance. Previously at Trader Corporation, Roger is in place to build on the strong foundation of our digital-direct brand’s first year of operation.
  • In January 2018, Paul MacDonald joined Economical as Executive Vice-President of Personal Insurance. As the previous Chief Claims Officer for RSA Canada and with deep personal lines executive experience, Paul is committed to deepening our capabilities to deliver the most relevant products and experiences to our customers and brokers.

We materially bolstered our management bench strength, both at the executive level and at the operational and regional levels. It’s encouraging to see the high-quality talent Economical is able to attract and retain to provide the right leadership for the business challenges we face and to execute our ambitious strategy in the years ahead.

Advancing our strategy for success

Significant progress was achieved on our strategic initiatives in 2017, including refinement of our multi-channel strategy through the successful launch of Sonnet, building the foundation for our new broker offering, and supporting the newly acquired Petline.

Our digital-direct brand Sonnet celebrated its first anniversary in 2017, closing out the year with more than 50,000 customers. Sonnet was also recognized for its technological innovation, winning the Insurance Canada Technology Award and Insurance Canada People’s Choice Award, and recognized for its commitment to the customer, winning international Stevie Awards for Customer Service.

Over the last year, the Economical team has been working to evolve our broker-facing policy administration system to simplify workflows, streamline administration and billing, and provide our valued broker partners more options, efficiencies, and control. In early 2018, we were able to share the work being done by introducing Vyne, which is expected to increase speed and efficiency, reduce manual intervention, enable future innovation, and allow us to build scale. Our approach is driven by broker feedback and our platform is built for serving consumers who value the advice and support of a broker when determining their insurance needs.

Our acquisition of Petline has been successfully integrated by all measures and has built experience for future acquisitions. The brand contributed to the growth in our premiums for personal lines in 2017 and continues to experience a strong combined ratio. Our broker partners are now able to integrate Petline products into their coverage offerings, and we continue to see strong opportunities for growth in this market in years to come.

stronger together

I am pleased to share that this is the third year Economical has been named one of the Waterloo Area’s Top Employers. Over the course of 2017, in response to employee feedback, we improved our community giving program to feature corporate matching of employee donations and opportunities for employees to nominate and vote for deserving local charities to receive donations. We also unveiled a new employment brand that reflects the fun, ambitious, and rewarding work experience at Economical.

Our employees continue to bring their best as we evolve along our journey to becoming a public company. Across Economical, I see our values come to life every day through our employees, both at work and in the community — we focus on customers first, we bring our best, and we’re stronger together. Those values are what makes Economical a truly great place to work.

Executing for success

In 2017 we truly shifted our strategy into high gear. We continue to look for opportunities to maximize our operational efficiency and build capabilities for the future. We have the right strategy and the right leadership to drive exceptional execution. There have been, and will continue to be, difficult decisions to make that are necessary to position Economical for a successful initial public offering and establish ourselves as a leader in the industry.

We have laid the foundation for our future, which we will continue to build on to make Economical a strong, independent Canadian insurance leader.

Rowan Saunders - signature
Rowan Saunders
President and Chief Executive Officer