Speech by Mr. Jude Martineau, President and Chief Operating Officer of Desjardins General Insurance Group, on the occasion of the 2008 Desjardins Group Annual General Meeting

Centre des congrès de Québec, March 29, 2008
(Actual speech may differ from this text)

Thank you Mr. D'Amours,
Ms. Leroux,
Ms. St-Pierre Babin,
Gentlemen,
Distinguished guests and officers,

Good afternoon,

I'm very pleased and proud to be here this afternoon to present the 2007 annual review of your property and casualty insurer. It was a very good year, in terms of both achievements and results. Your insurer achieved outstanding financial results and can therefore offer one of its highest contributions ever to Desjardins Group's overall results.

Before describing our main achievements, I'd like to mention a project that we've been thinking about for some time, and that is particularly important to me. It's based on the core values of our cooperative Group: mutual assistance and solidarity. I'm referring to the Desjardins Aid Fund, which you heard about this morning in the social responsibility video.

In September, your property and casualty insurance subsidiary received the approval of Desjardins Group to create this aid fund. The fund will provide financial compensation to Desjardins members who meet the eligibility criteria and who find themselves in a precarious situation following a loss that is not covered by their insurance policy. With a budget of $1 million in 2008 allocated from your subsidiary's income, this fund is officially being launched during these Annual General Meetings. It's our way of helping members in need and going beyond our normal protection and prevention activities.

A management committee made up of three members of councils of representatives, Michelle Giasson, Pierre Levasseur and Paulo Pépin, one caisse General Manager, Lise Gagné, and one DGIG senior manager, Pierre Rousseau, will assess aid requests submitted by the caisses or by DGIG employees.

I'll now present a summary of our achievements in 2007, beginning with four major strategic projects that are being conducted simultaneously to boost our competitive advantages. These multi-year projects are related to our 2006-2008 Strategic Plan. They require major investments and will provide us with the tools to face the challenges ahead.

The four strategic projects are e-business, profitability and loss ratio, IT infrastructure migration and individual market growth outside Québec.

On the screen, you'll see some achievements and initiatives related to these projects.

We're very proud to have succeeded in staying on budget and schedule in 2007 for these major projects, which have already begun to bear fruit.

I'll go into more detail about our Ontario growth project under the Desjardins brand in a few minutes, when we look at 2008 and our ongoing projects.

DGIG's strategic projects, business development and growth led to the need for additional office space. In November, we inaugurated a new building in Lévis, within walking distance of our head office. DGIG rents office space in this building, which has the capacity for some 460 employees.

Desjardins General Insurance Group is very proud of its achievements in 2007. We were thrilled to be ranked 12^th in the 2007 list of the Best Employers in Canada and 1st among Québec employers. But beyond our ranking, this is a commitment to excellence because we can use the opinions of employees to identify improvement initiatives and develop an action plan. In 2007, we focused on three areas: career opportunities, non-monetary recognition and social responsibility.

Let's now look at business development in Québec and the other Canadian provinces.

First of all, it goes without saying that our main concern remains the client. We continually strive to improve our service offer and listen to customers' needs. DGIG also signed a partnership agreement with Chubb for the teleprevention program, an added-value property insurance product.

Our products and services are highly accessible thanks to various distribution networks, including our presence in the Desjardins caisse network, and competent staff. Our efforts are rewarded with results that speak for themselves: 95% of customers renewed their policies with one of our subsidiaries and 93% are satisfied with our claims process.

In the individual market in Québec, the growth of DGIG and particularly its subsidiary Desjardins General Insurance (DGI) is in large part due to a dynamic business partnership with the Desjardins caisse network. The referral program continues to be a major success for both DGIG and the caisses.

In a stagnant and highly competitive market, DGI must increase its efforts to stand out from the competition. Therefore, DGI is initiating its own campaigns and contests using the Desjardins platforms and is also participating in several promotions in partnership with Desjardins Group.

In the Canadian group insurance market, we've achieved impressive results under The Personal brand. I'd like to highlight the renewal of our agreement with the Regroupement des ingénieurs du Québec, a sizeable group that has been with The Personal since 1987. The organization representing Ontario engineers also renewed its agreement with The Personal. In addition, we renewed some thirty other partnerships during the year and welcomed around twenty new employee groups.

We also completed a strategic thinking exercise dealing exclusively with growth. This exercise allowed us to identify the best approach for growth and helped us develop orientations, growth avenues and a market approach based on integrated customer offer management. The conclusions of this exercise are already influencing our operations and will lead to a review of our marketing practices across Canada.

I'll now present an overview of our financial results in 2007, which was an exceptionally profitable year.

For a fourth consecutive year, net income at DGIG broke the $100 million mark, and return on equity exceeded 20%. Your subsidiary generated a 26.7% return on equity, which is up from 25.2% in 2006. This performance ranks us among the leaders in the top quartile of the industry. Consolidated net income totalled $140 million in 2007, for an increase of 17.6% over 2006. The portion of this net income attributable to Desjardins Group was $126 million, compared to $107 million in 2006.

These excellent results are a considerable achievement considering the fact that operating expenses were increased by massive investment in projects vital to DGIG's future. We achieved these financial results by focusing more than ever on our partnership with the Desjardins caisse network and on operational efficiency. We also benefited from excellent weather conditions across Canada.

Automobile insurance rate reductions in recent years have curbed growth in sales and caused the market to stagnate. Despite this, premium income was up 1.2% over 2006, to $1 billion 429 million.

Volume in the individual market totalled $723 million, and in the group market, gross premiums written were $650 million. In the commercial market, gross premiums written stood at $56 million, generating favourable results.

In addition to good weather, a revision of underwriting and claims policies improved our property insurance loss ratio, allowing us to reach an excellent overall ratio. Even though automobile rate reductions and major investments in the development of your subsidiary exerted pressure on operating expenses, which reached 23.2%, DGIG's ratio compared favourably to the industry average, which was over 30%.

Investment income amounted to $104 million in 2007, for a major increase of $26 million over 2006. High stock market returns, advantageous exchange contracts and a new asset allocation strategy were key to these results.

Moreover, we were able to pay substantial dividends of $109 million to Desjardins Group in 2007. The combined dividends paid in 2006 and 2007 reached more than a quarter of a billion dollars.

I'll now present our outlook for 2008 and our projects underway. First of all, I'd like to go back to our growth project in the Ontario individual market. Our strategic thinking exercise on growth confirmed our decisions with regard to this project. This is a major development opportunity for DGIG. In fact, it's the main growth avenue outside Québec, and this major project will account for a large part of our business development.

Why? Because we're already number 1 in Québec in a mature market. Because we're number 2 in Canada in group insurance, where the potential for growth is interesting but limited. And, finally, because Ontario is Canada's largest insurance market.

We've developed a 5-year plan for growth. Our Board of Directors participated in the risk assessment process, and decided that our ability to succeed outweighs the risks involved.

Therefore, for the first time, we're using a widespread media campaign to promote our home and auto insurance under the Desjardins brand in Canada's largest insurance market. On March 17, we launched a huge advertising campaign in Ontario featuring the Desjardins name. This is the beginning of a long-term commitment to make our mark in Ontario.

The goal of this comprehensive campaign is to introduce our company to consumers, to set us apart from the competition, and to be considered and eventually chosen by consumers. This major campaign requires an investment of $10 million, which will certainly benefit Desjardins Group as a whole.

The creative concept of this campaign is based on improvement. Just because something has already been invented, it doesn't mean it can't be improved. Everything can change, evolve and improve. This is the basis of the "insurance improved" concept, which means that we didn't invent auto insurance, but that we certainly helped evolve and improve it with our direct distribution model with no intermediaries, our great prices, our online services, and our outstanding customer service, including 24/7 access to a claims team.

I'd now like to show you the two TV ads that are currently running on the main English-language channels in Ontario. These ads ask viewers to imagine life if certain things hadn't improved or evolved. Here they are.

Television spots, Ontario advertising campaign, Desjardins brand (1 min.)

We think this campaign is fresh and that the concept is interesting, different and allows us to present our own unique offer. We also think it will have a positive impact in a market where almost nobody has heard of us. We don't think anything similar has been seen in the Ontario market.

For this campaign under the Desjardins General Insurance brand, we're relying mainly on television and radio to quickly gain widespread visibility in the market. This campaign is also being used in French-language newspapers in Ontario under the Desjardins Assurances générales brand.

We can build on the "insurance improved" concept with different variations and keep the campaign evolving for at least a couple of years. Its main strength is its simplicity.

Our employees are very enthusiastic about this campaign and also aware of its significant commercial potential. They'll have front-row seats for the launch of Desjardins General Insurance in Ontario, and they're ready to serve customers.

With this campaign, we're participating in building awareness of the Desjardins brand outside Québec. Our growth project will certainly be an important lever for the brand in Ontario, thus benefiting all Desjardins Group components. Here's to its success!

In 2008, we'll continue to pursue strategic projects underway to give our organization the best possible development tools. We intend to maintain our profitable growth strategy, taking into account the insurance cycle and the company's strategic orientations. Finally, the conclusions of the strategic thinking exercise on growth, which was completed in 2007, will be important factors in developing our 2009-2011 Strategic Plan.

In closing, I'd like to express my thanks to the President of Desjardins Group, Alban D'Amours, for his support in 2007 and wish him a happy retirement. I'd also like to take this opportunity to welcome our new President, Monique Leroux.

In addition, I'd like to highlight the contribution of the members of our Board of Directors for their support. In particular, I'd like to thank Raymond Gagné, whose Board chairmanship ended in 2007 after seven years of loyal service. His guidance and support were invaluable to achieving our goals. I'd also like to welcome his successor, Clément Samson.

Our thanks as well to the caisse network and the other Desjardins Group components for their support throughout the year.

In addition, I'd like to offer my sincerest thanks to all our employees and managers for their efforts during the year, which contributed to the organization's excellent results. I'd also like to pay tribute to my senior management colleagues, who assist me day in and day out in performing my duties.

In closing, we're building the DGIG of tomorrow. Each and every one of you will contribute, directly or indirectly, to this process. I'm convinced that the steps being taken will ensure a promising future for your property and casualty insurance subsidiary and for Desjardins Group as a whole.

Thank you for your attention!