OPERATOR: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the ING Canada fourth quarter 2008 earnings conference call. (Operator Instructions). I would like to remind everyone that this conference call is being recorded, and will turn the conference over to Michelle Dodokin, VP Investor Relations.
MICHELLE DODOKIN, VP IR, ING CANADA: (spoken in French). Thank you and good morning everyone. A link to our live webcast and background information for the call is posted on our website at www.INGCanada.com under the Investor Relations tab.
As a reminder, the slide presentation contains a disclaimer on forward-looking statements, which also applies to the discussion on this conference call.
Here with me today are Charles Brindamour, Chief Executive Officer; Mark Tullis, our Chief Financial Officer; Martin Beaulieu, Senior Vice President of Personal Lines; and Byron Hindle, Senior Vice President of Commercial Lines.
We will start with formal remarks from Charles and Mark, followed by a Q&A session. Martin and Byron will be available to answer your questions during the Q&A period. With that, I will ask Charles to begin his formal remarks.
CHARLES BRINDAMOUR, PRESIDENT, CEO, ING CANADA: Thank you, and good morning everyone. In light of the announcements made by ING Groep this morning, we felt it was important to inform our shareholders about ING Canada's performance, and as such, decided to release our fourth quarter earnings ahead of schedule.
We finished the year in a very solid capital position, with excess capital of CAD427 million and no debt. This reflects our strong capital position going into the fourth quarter and some strategic changes in our portfolio mix, which further strengthen our balance sheet as capital markets continued to deteriorate.
Our MCT ratio at year-end was 205%, a 5 point improvement from the third quarter. With our strong capital base we are well-positioned in the current environment, both financially and strategically.
In the fourth quarter we had a net loss of CAD64 million, reflecting CAD186 million in common share impairments caused by the continued decline of the Canadian Stock Market, which dropped 23% in the fourth quarter and 35% overall in 2008.
The impairments reflect the extraordinary nature of equity market conditions and the uncertainty over when the market will recover. To be clear, the size of the impairment does not reflect upon the overall quality of our common share portfolio. We invest in large dividend-paying Canadian companies that, like so many others, have been adversely impacted by the overall market deterioration.
However, we felt that it would be prudent to recognize these losses, because it was not clear to us when the market value of these securities would recover. Mark Tullis will provide more information on our investment portfolio in his comments.
In the fourth quarter our net operating income was CAD75 million or CAD0.63 per share, or CAD0.93 per share in the same quarter last year.
The decrease in operating income was mainly driven by severe storms that impacted property results through most of '08. Despite the weather, our underwriting business remained healthy, with a combined ratio of 98.9% in the fourth quarter.
Storms across Canada in late December impacted personal property, resulting in a combined ratio of 114% in that segment. Underwriting performance in personal auto was driven by a decrease in favorable prior year claims development and higher severity, ending with a combined ratio of 102.9% for the quarter.
Though personal auto severity picked up in the fourth quarter, severity for the year only increased by low single digits, and frequency was down. Fluctuations in the level of favorable prior-year development are normal from quarter to quarter.
Commercial lines results were strong once again, with combined ratios of 91.6% in commercial auto and 73.2% in commercial non-auto. The 37% increase in underwriting income points to stable current year results and more favorable prior year development.
We built a very high-quality portfolio of commercial risks through effective underwriting and pricing discipline, and this is demonstrated through the consistency of our results.
For the year our operating businesses performed well, with underwriting income of CAD117 million and a combined ratio of 97.1%, despite a substantial jump in weather-related claims.
Catastrophe claims alone increased CAD74 million in 2008 due to damages caused by snow, rain, hail and wind, entirely making up the decrease in underwriting income for the year.
Notwithstanding weather challenges in 2008, our largest …