By James Langton

(April 12 – 09:30 ET) – E-L Financial Corp. presents a rather bleak outlook for its business in the company’s 2000 annual report.

The firm says that its future prospects are in part a function of the continued profitability of its two insurance company subsidiaries, and partly a function of the successful management of its investment portfolios.

According to the company the future of its federally regulated subsidiaries will be afftected by the upcoming financial services reform legislation. As well, it notes that ongoing consolidation in the industry, resulting in increased price competition and lower investment yields.

Succeeding in this environment, E-L says, relies on the abilities of its subsidiaries “to effectively manage their operations, including the pricing and distribution of their products. Future success will also be a function of continued focus on cost-containment, service enhancement, investment management performance, appropriate pricing strategies and effective use of technology.”

Within its insurance subsidiaries, the company notes, “Underwriting results for the Canadian property and casualty industry are expected to continue to be depressed in 2001 as the industry’s profit drivers remain weak. High accident year loss ratios present the most significant challenge, flowing from prolonged chronic price competition.”

E-L says it is focusing on improving underwriting profitability by reducing the combined ratio significantly over the next three years. “Management’s focus in 2001, therefore, is: first, to maximize rate increases while retaining the business with the best rate adequacy and, second, to continue to be vigilant in managing operating expenses while implementing ease-of-doing-business initiatives to enhance broker support and increase efficiency.”

The company notes that there are finally signs that industry prices are rising, but it concedes that, “price recovery is likely to be gradual over the next several years, due to a strong industry balance sheet and competitors’ unwillingness to make drastic pricing corrections at the expense of market share.”

The firm also observes that the introduction of additional reserve and capital requirements for segregated fund guarantees has caused companies with “aggressive” guarantees to either retrench or raise fees. It says its traditional conservative stance on guarantees “has enhanced its competitive position and is expected to significantly improve its 2001 net sales”.

E-L notes that it “remains committed to the distribution of its products through qualified intermediaries who can provide the counsel consumers need to fulfil their financial goals,” and that it intends to “continually enhance the technology and service support that these advisors need to service their clients”.

On the firm’s board, it says that former prime minister John Turner and director William Harris, who have reached retirement age and will not be standing for re-election in 2001. On February 28, Douglas Hogeboom was elected to the board, He was appointed executive vice president of subsidiary Empire Life Insurance Co. and will assume its presidency on May 1.