2018 Integrated Annual Report

Robert Wesseling
Our world increasingly needs purpose-built organizations that hold the sustainability and resiliency of our communities as top priorities.” Robert Wesseling
President and Chief Executive Officer,
The Co-operators Group Limited
Read Robert’s Letter
John Harvie
Our members provide an array of community-based perspectives that help shape our products, services and solutions.” John Harvie
Chairperson, Board of Directors,
The Co-operators Group Limited
Read John’s Letter
Value Creation

Value Creation at a Glance

Everything from the financial capital we hold to the people we employ allows us to insure, protect and provide financial prosperity for our stakeholders, who sustain our organization over the long term.

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Inputs Inputs

Inputs from our stakeholders enable us to provide protection, prosperity and peace of mind for our clients and members.

Outputs Outputs

Outputs are the direct result of our activities and the products, services and solutions that we offer.

Outcomes and Impacts Outcomes and Impacts

These result from our outputs and reflect the social, environmental, intellectual and financial value created for clients, members, communities and our organization.

Clients
$3.89b Total operating revenue
$4.25b Direct written premium
$3.68b Individual and Group Assets under management
$2.12b Claims and benefits paid
We insure 875,000 homes
1.4m vehicles
230,000 employees through Group Benefits plans
J.D. Power Customer Satisfaction Awards Home Ranked highest in Western region Auto Ranked highest in Alberta and Atlantic regions 38 Credit Union Net Promoter score
Members and co-ops
113,413 households in the Member Benefits Program
$1.03b in co-operative business
45 member organizations
126 delegates from
7 regions across Canada provide insights and expertise, and are essential to the democratic governance of our organization
$12.0m Member Loyalty Program payment
$1.6m distributed to support co-operatives
93% Member Relationship Index
90% Member Engagement Score
81% of employees understand the importance of co-operative business relationships to our ongoing success
Communities
5,350 employees
2,753 licensed insurance representatives, including:
496 exclusive Financial Advisors
636 retail outlets across Canada
81% carbon emissions reduction since 2010
4.3% of pre-tax profit donated
13.1% total impact investments (percentage of invested assets)
1.94m Canadians reached by our World is Changing resiliency video campaign, raising awareness of extreme weather and climate change impacts
Impact investments contributed to projects and initiatives that generated 229.0m MWh* of renewable energy

* Impacts are the result of the entire investment entity, not solely from The Co-operators investment.

Our organization
$11.5m net loss after tax attributable to members
78% aggregated Employee Engagement Score
94% employee retention rate
73% Financial Advisor Satisfaction Index
Inputs Inputs

Inputs from our stakeholders enable us to provide protection, prosperity and peace of mind for our clients and members.

Clients
$3.89b Total operating revenue
$4.25b Direct written premium
$3.68b Individual and Group Assets under management
Members and co-ops
113,413 households in the Member Benefits Program
$1.03b in co-operative business
45 member organizations
126 delegates from
7 regions across Canada provide insights and expertise, and are essential to the democratic governance of our organization
Communities
5,350 employees
2,753 licensed insurance representatives, including:
496 exclusive Financial Advisors
636 retail outlets across Canada
Outputs Outputs

Outputs are the direct result of our activities and the products, services and solutions that we offer.

Clients
$2.12b Claims and benefits paid
We insure 875,000 homes
1.4m vehicles
230,000 employees through Group Benefits plans
Members and co-ops
$12.0m Member Loyalty Program payment
$1.6m distributed to support co-operatives
Communities
81% carbon emissions reduction since 2010
4.3% of pre-tax profit donated
13.1% total impact investments (percentage of invested assets)
Our organization
$11.5m net loss after tax attributable to members
Outcomes and Impacts Outcomes and Impacts

These result from our outputs and reflect the social, environmental, intellectual and financial value created for clients, members, communities and our organization.

Clients
J.D. Power Customer Satisfaction Awards Home Ranked highest in Western region Auto Ranked highest in Alberta and Atlantic regions 38 Credit Union Net Promoter score
Members and co-ops
93% Member Relationship Index
90% Member Engagement Score
81% of employees understand the importance of co-operative business relationships to our ongoing success
Communities
1.94m Canadians reached by our World is Changing resiliency video campaign, raising awareness of extreme weather and climate change impacts
Impact investments contributed to projects and initiatives that generated 229.0m MWh* of renewable energy

* Impacts are the result of the entire investment entity, not solely from The Co-operators investment.

Our organization
78% aggregated Employee Engagement Score
94% employee retention rate
73% Financial Advisor Satisfaction Index

Governance highlights

Member Engagement Score

What it is and why it matters
90%*
2015: 91%
2013: 88%
Target: 85%
Status: Above target
* 2017 results. Our Member Engagement Score is recorded biennially.

Representation of women on the Board of Directors

What it is and why it matters
27%
2017: 23%
2016: 23%
Target: 30% by the end of 2020; 50% by the end of 2025
Status: In progress

Member Loyalty Program payment

What it is and why it matters
$12.0m
2017: $14.8m
2016: $14.7m

Governance

Distinct in our co-operative character

We focus on the pursuit of profit for people. Our members, the ways we engage and support them, and how we are governed are integral parts of who we are.

Member Organization Profile

La Fédération des coopératives du Nouveau-Québec (FCNQ)

La Fédération des coopératives du Nouveau-Québec (FCNQ) exists to support and meet the needs of co-ops in the Inuit communities of Nunavik. Each co-op is managed exclusively by Inuit and Cree staff, ensuring the knowledge and experience gained from operating their collective enterprises remain an asset of the community.

Download the report to read the full story

A relationship of trust has made The Co-operators an invaluable partner for the development of FCNQ. As members, we can better promote the co-operative movement in Nunavik and collaborate with other members to build social and economic strength.”

François Day
General Manager, FCNQ

Clients

A champion of client prosperity and peace of mind

We provide insurance, risk management and wealth solutions for clients with different needs, preferences and risk exposures. Our clients include credit unions, farms, small businesses, investment firms, non-profits, individual Canadians, and more.

Client highlights

Claims and benefits paid to clients

What it is and why it matters
$2.12b
2017: $1.97b
2016: $1.86b

Total client households

What it is and why it matters
2018: 1,074,809
2017: 1,032,621
2016: 990,743
2014 baseline: 919,766
Target: Add more than 100,000 client households by the end of 2018 from the start of 2015
Status: Above target

J.D. Power Customer Satisfaction Awards

What it is and why it matters
Home Ranked highest in Western region Auto Ranked highest in Alberta and Atlantic regions
Target: Achieve a ranking of third-highest or above in every region where eligible and win at least two awards
Status: In progress

Individual and Group assets under management (Wealth Management – Life Operations)

What it is and why it matters
$3.68b
2017: $3.69b
2016: $3.81b
Target: $4.07b by the end of 2018
Status: Below target

Total co-operative
business volume

What it is and why it matters
$1.03b
2017: $890.5m
2016: $728.3m
Target: $950m by the end of 2018
Status: Above target

Number of Comprehensive Water policy endorsements

What it is and why it matters
2018: 295,733
2017: 250,297
2016: 144,821
Target: 300,000 by the end of 2019
Status: In progress

Making good on claims in times of need

When Bill and Gisele Hunt of Windsor, Ontario, experienced their first flood, they described it as life-changing. The devastation was extensive, as their basement took on five to six inches of water. Co-operators claims representative Tracey Stein assured him she would send an approved, out-of-town contractor to their home within the day who would complete the work to their standards.

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I’ve dealt with my share of insurance companies, but I have never been treated better, or with more empathy and respect than I was by Tracey. Once we decided to have a contractor replace the basement, Tracey issued us a cheque in their name for the prescribed amount with instructions to only pay when I was satisfied. Today, my basement is the jewel of the house!”

Bill Hunt
Retired Police Officer and client, Windsor, ON

Innovating our claims response

The changing nature of risk requires a transformation in how we respond to events when they occur. We are employing several technological and process-driven advancements, in order to effectively and efficiently respond to clients in times of need.

$2.12b Total amount paid in claims and benefits to clients in 2018

Claims/benefits paid by type

  • Property damage (42%)
  • Collision repairs (24%)
  • Injuries (15%)
  • Death and disability (9%)
  • Other (6%)
  • Medical and dental (4%)

What causes property damage?

  • Fire (37%)
  • Water (27%)
  • Wind/hail/ice (21%)
  • Theft/vandalism (9%)
  • Other (6%)

Community highlights

Percentage of pre-tax profit contributed

What it is and why it matters
4.3%*
2017: 4.8%
2016: 4.1%
Target: Exceed Imagine Canada’s benchmark of 1% each year
Status: Target achieved
* Decreased from previous year due to change in Imagine calculation process.

Total amount distributed to support co-operatives

What it is and why it matters
$1.6m
2017: $1.4m
2016: $1.6m

Total impact investments**

What it is and why it matters
13.1%
2017: 7.7%
2016: 6.5%
Target: 6–10% by the end of 2018
Status: Above target
**Includes impact investments made with intent since the launch of our strategy and those that pre-date the strategy.

Carbon emission reductions

What it is and why it matters
81%
2017: 81%
2016: 72%

Target: 75% by the end of 2018, and 100% by the end of 2020
Status: Above 2018 target; in progress towards 2020 target

Community

Value for communities

Building safer, more sustainable and resilient communities resonates with our core purpose as a co-operative. Working towards long-term environmental, social and financial sustainability isn’t only the right thing to do — it’s also good business.

Improving the mental health of young Canadian leaders

We partnered with Enactus Canada to support the mental health resiliency of Canadian university and college students. The Co-operators Youth Mental Health Project Accelerator is designed to empower Enactus participants with the resources needed to identify, create and deliver projects that bring mental health solutions to their communities, reduce the number of youth with mental health concerns and improve their resiliency.

Download the report to read the full story

We’re grateful for the focus on mental health that The Co-operators has brought to our program. These student-led projects demonstrate a multi-faceted approach and will leverage the expertise of local organizations.”

Nicole Almond
President, Enactus Canada

Impact investing

By 2018, we had invested $1.2b in impact investments

An example of our impact investments from 2018

Toronto Green Bond

  • Theme: Climate Change
  • Focus area: Clean Transportation
  • Investment: Toronto Green Bond
  • Amount invested: $10.5m

City of Toronto green debentures are used to finance capital investments in sustainable development across the city in order to mitigate and adapt to the effects of climate change and reduce greenhouse gas emissions. The proceeds from Toronto’s inaugural green bond will be used exclusively to finance capital projects for sustainable clean public transit infrastructure.

Building community resilience to climate risk

We launched The World is Changing media campaign to inform and prepare Canadians for the changing nature of climate-related risks.

Competitiveness

A competitive, co-operative financial services organization

Significant challenges coalesced in 2018 to impact financial performance across the group of companies. These pain points pervaded the industry, but we’re confident in our capital position and our co-operative, innovative mindset.

Competitiveness highlights

Total operating revenue

What it is and why it matters
$3.89b
2017: $3.60b
2016: $3.41b
Target: $4.0b by the end of 2018
Status: Below target

Net income (loss) after tax attributable to members

What it is and why it matters
($11.5m)
2017: $162.8m
2016: $162.5m

Total equity of participating policyholders and members

What it is and why it matters
$3.13b
2017: $3.25b
2016: $3.05b
Target: $3.2b by the end of 2018
Status: Below target

Aggregated employee engagement score

What it is and why it matters
78%
2017: 80%
2016: 81%

Target: Maintain 80% or better each year
Status: Below target

Financial Advisor Satisfaction Index

What it is and why it matters
73%*
2016: 72%
*2017 result.

Roadmap for climate-related financial disclosures

We developed a three-year road map to integrate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) by the end of 2020. We’ve taken steps to embed climate risk into our governance, strategy, risk management, metrics and targets and continue to convene and advocate for widespread, consistent adoption of TCFD recommendations in Canada and internationally.

Download the report to read the full story

The risks and challenges of climate change are continuing to increase. Today, we see the impact on our clients and communities. We see the impact in our financial results. By adopting these recommendations, we can create greater transparency and meaningfully address what we know are real and significant risks.”

Karen Higgins
Chief Financial Officer
The Co-operators Group Limited

The next four years:
Preview of dynamic, integrated strategy

As we face the future, we are working to identify new opportunities to lead, anticipate greater challenges in our midst, and develop a new, innovative corporate strategy that will carry us forward.

Client Engagement
We will be the leader in client engagement within the financial services industry.
Co-operative Identity
Being a co-operative is core to our identity and our business. We will continue to be invaluable to the co-operative system.
Competitiveness
We will relentlessly pursue operational excellence, which will allow us to grow profitably and capture market share.
Create the Future
The business landscape is changing, and we need to be ready. We will explore and invest in far-reaching new business models and capabilities to secure future success.
Workforce Capability
Our people are the core source of our competitive advantage in a rapidly changing environment.

The Future

On the Horizon

Being efficient and nimble, while continuing to embrace and feed our co-operative roots will differentiate us in a world of rapid change. The future needs co-operation to sustain a resilient and prosperous society.

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Aligning our strategy to the United Nations 2030 Sustainable Development Goals (SDGs)

Globally, challenges like climate change, social inequality, financial insecurity, and more are putting the well-being of communities at risk. In an interconnected world, we can’t solve these problems alone — we need all hands on deck. We’re linking our long-term strategic priorities with a collective global effort to protect the environmental, social and financial well-being of current and future generations.

Our nine priority SDGs

While we endorse all 17 SDGs, we will focus our resources on the following nine SDGs for which we have the greatest expertise and can make the most meaningful impact:

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  • 3.  Good health and well-being
  • 5.  Gender equality
  • 7.  Affordable and clean energy
  • 8.  Decent work and economic growth
  • 9.  Industry, innovation and infrastructure
  • 11. Sustainable cities and communities
  • 12. Responsible consumption and production
  • 13. Climate action
  • 17. Partnerships for the goals