2015 Co-operators General Insurance Company ANNUAL REPORT mission vision values 2 Mission, Vision, Statement of Values and Co-operative Principles 4 Company Profile OUR MISSION The Co-operators: financial security for Canadians and their communities. 4 Corporate Governance/Annual Statement OUR VISION 5 Management’s Discussion & Analysis The Co-operators aspires to be valued by Canadians as... > a champion of their prosperity and peace of mind > a leader in the financial services industry, 34 Glossary of Terms distinct in its co-operative character, and > a catalyst for a sustainable society. 36 Responsibility for Financial Reporting 37 Independent Auditor’s Report STATEMENT OF VALUES At The Co-operators we... 38 Appointed Actuary’s Report > strive for the highest level of integrity > foster open and transparent communication > give life to co-operative principles and values 39 Consolidated Financial Statements > carefully temper our economic goals with consideration for the environment and the well-being of society at large 44 Notes to the Consolidated Financial Statements > anticipate and surpass client expectations through innovative solutions supported by mutually beneficial partnerships. 100 Corporate Directory CO-OPERATIVE PRINCIPLES 101 Board of Directors 1. Voluntary and open membership 2. Democratic member control 102 Member Organizations 3. Member economic participation 4. Autonomy and independence 5. Education, training and information 6. Co-operation among co-operatives 7. Concern for community About our cover By taking a sustainable approach to our business, we are better equipped to identify big-picture challenges and focus our efforts to make a substantive difference. contents 2 Mission, Vision, Statement of Values and Co-operative Principles 4 Company Profile OUR MISSION The Co-operators: financial security for Canadians and their communities. 4 Corporate Governance/Annual Statement OUR VISION 5 Management’s Discussion & Analysis The Co-operators aspires to be valued by Canadians as... > a champion of their prosperity and peace of mind > a leader in the financial services industry, 34 Glossary of Terms distinct in its co-operative character, and > a catalyst for a sustainable society. 36 Responsibility for Financial Reporting 37 Independent Auditor’s Report STATEMENT OF VALUES At The Co-operators we... 38 Appointed Actuary’s Report > strive for the highest level of integrity > foster open and transparent communication > give life to co-operative principles and values 39 Consolidated Financial Statements > carefully temper our economic goals with consideration for the environment and the well-being of society at large 44 Notes to the Consolidated Financial Statements > anticipate and surpass client expectations through innovative solutions supported by mutually beneficial partnerships. 100 Corporate Directory CO-OPERATIVE PRINCIPLES 101 Board of Directors 1. Voluntary and open membership 2. Democratic member control 102 Member Organizations 3. Member economic participation 4. Autonomy and independence 5. Education, training and information 6. Co-operation among co-operatives 7. Concern for community Co-operators General Insurance Company (CGIC) is a leading Canadian-owned multi-product COMPANY insurance and financial services organization with assets of $5.3 billion. PROFILE CGIC has 2,505 employees and is supported by a dedicated financial advisor network with 2,673 licensed insurance representatives throughout Canada. Under its primary line of business — Property and Casualty insurance — CGIC protects more than 734,000 homes, 1.1 million vehicles, 37,000 farms and 190,000 businesses. CORPORATE GOVERNANCE Co-operators General Insurance Company is part of The Co-operators group of companies. As such, we approach best practices and corporate governance in a similar manner. We disclose our corporate governance practices in significant detail in the Annual Information Form we file on SEDAR (www.sedar.com) at the end of March each year. Annual Statement This Annual Report constitutes the 37 The report of CGIC’s auditor Annual Statement of Co-operators General Insurance Company, which it is required to 38 The report of CGIC’s actuary deliver to its shareholders in accordance with s.334(1) of the Insurance Companies 39 CGIC’s consolidated financial statements Act (Canada). 44 (note 1) A list of CGIC’s subsidiaries The following list sets out the sections of this Annual Report which are delivered 44 (note 1) CGIC’s percentage of the voting rights for each of its subsidiaries to shareholders in accordance with s.334(1) of the Insurance Companies Act (Canada) 96 (note 26) The carrying amount of the shares of each of CGIC’s subsidiaries and the page numbers on which such sections are located within the Annual Report: 98 (note 29) A description of the role of CGIC’s auditor and actuary 100 The address of each of CGIC’s subsidiaries’ head office 4 Management’s Discussion & Analysis For the year ended December 31, 2015 February 17, 2016 This Management’s Discussion and Analysis (MD&A) comments on Co-operators General Insurance Company’s operations and financial condition for the year ended December 31, 2015. Unless otherwise stated or the context otherwise indicates, in this report, “Co-operators General”, “we”, “us” and “our” refers to the Consolidated Co-operators General Insurance Company including its wholly owned subsidiaries, The Sovereign General Insurance Company (Sovereign), COSECO Insurance Company (COSECO), L’Équitable, Compagnie d’assurances Générale (L’Equitable) and Co-operators Insurance Agencies Limited (CIAL). CGIC refers to the non-consolidated Co-operators General Insurance Company. The information in this discussion should be read in conjunction with our consolidated financial statements and notes. References to “Note” refer to the Notes to the consolidated financial statements. All amounts are expressed in Canadian dollars, unless otherwise specified, and are based on consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Additional information relating to Co-operators General, including our Annual Information Form, can be found on SEDAR at www.sedar.com. We use certain financial performance measures which do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. They should not be viewed as an alternative to measures of financial performance determined in accordance with IFRS. Such measures are defined in this document in the Key Financial Measures (Non-IFRS) section. The information in this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from these forward-looking statements as a result of various factors, including those discussed below or in our Annual Information Form. Please read the cautionary note which follows. CAUTION REGARDING FORWARD-LOOKING STATEMENTS This MD&A contains forward-looking statements and forward-looking information, including statements regarding the operations, objectives, strategies, financial situation and performance of Co-operators General. These statements, which appear in this MD&A (including the documents incorporated by reference herein), generally can be identified by the use of forward-looking words such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “plan”, “would”, “should”, “could”, “trend”, “predict”, “likely”, “potential” or “continue” or the negative thereof and similar variations. These statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in the forward-looking statements or information. In addition, this MD&A may contain forward-looking statements and information attributed to third party industry sources. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward- looking statements will not occur. Such forward-looking statements and information in this MD&A speak only as of the date of this MD&A. Forward-looking statements and information in this MD&A include, but are not limited to, statements with respect to: our growth expectations; the impact of changes in governmental regulation on our company; possible changes in our expense levels; changes in tax laws; and anticipated benefits of acquisitions and dispositions. With respect to forward-looking statements and information contained in this MD&A, we have made assumptions regarding, among other things: growth rates and inflation rates in the Canadian and global economies; the Canadian and U.S. housing markets; the Canadian and global capital markets; the strength of the Canadian dollar relative to the U.S. dollar; employment levels and consumer spending in the Canadian economy; and impacts of regulation and tax laws by the Canadian and provincial governments or their agencies. Some of the assumptions we have made are described in Outlook. Although we believe that the expectations reflected in the forward-looking statements and information are reasonable, there can be no assurance that such expectations will prove to be correct. We cannot guarantee future