Executive interview

Co-operative strength in challenging financial times

In 2023, inflation, rising interest rates, the risk of recession and economic uncertainty alongside the economic impacts of catastrophic climate change have put increasing financial pressure on our members, clients and our communities. In addition, they have brought greater volatility to financial markets in Canada and internationally. Our long-term stability and focus on sustainability will be key to navigating financial uncertainty, and through our own financial strength, we can support our members, clients and communities through challenging times.

Photo of Karen Higgins

Karen Higgins
Executive Vice President, Finance and Chief Financial Officer,The Co‑operators Group Limited

What issues and trends are top of mind as we consider our financial performance?

Karen Higgins: After decades of a low inflationary environment, we and the industry are grappling with high inflation. This impacts our claims costs along with other operating expenses which, in turn, puts pressure on our rates, negatively impacting Canadians who are more price sensitive. In addition, 2023 was the fourth-most expensive year for catastrophic claims in the P&C industry, due overwhelmingly to extreme weather events. There’s no denying climate change and its impact on society. While major event claims were down slightly from 2022, we still expect this issue to persist well into the future.


Overall how did we perform financially in 2023?

KH: Our financial performance was challenged in 2023. We significantly missed our overall profitability target, mainly driven by aspects of our underwriting results. And while we were not as impacted by catastrophes in 2023 as the rest of the industry, we were not immune to inflation impacts, a sharp rise in auto theft, and a return to pre-pandemic claims frequency in auto line of business. On a positive note, our life insurance operations out-performed in their core insurance operations and the overall economic environment was favourable against our expectations.

It's also important to note that as we established our 2023 to 2026 strategic plan, we knew there would be significant expenditures early in the plan period, with delayed financial benefits. We have had to balance prioritization of goals, resources and spending, while investing for the future and advancing our underlying business. As always, we maintain our long-term focus to ensure a strong, stable capital position that will enable us to achieve our purpose for generations to come.


What were the areas of strength in our financial performance?

KH: There were two areas to highlight as positives: profitable growth and the economy. Our top line growth exceeded our expectations in 2023. It out-paced our target for the consolidated company, and more importantly, exceeded targets in all areas of strategic importance. While the economy remains volatile, the overall impact to our bottom line was positive, with equity markets performing well, so we were able to take advantage of high yields through shifts in our asset mix.


How does our co-operative identity shape our approach to financial strength and stability?

KH: Our purpose comes first. As a co-operative, we balance profitability with the short-term and long-term needs of our members, clients and communities. To meet those needs, we need to ensure our capital is sufficient and sustainable to combat high inflationary times, periods of economic volatility and the ever-increasing claims impact of climate change. Our comprehensive, strategic financial planning and execution oversight processes along with thoughtful decision-making ensure this balance is achieved.