This past year has been a very busy and successful year for PEI Mutual. Throughout the year we implemented the changes that were outlined in last year’s Annual Report and in September we were faced with the devastation caused by Hurricane Juan. Even with Hurricane Juan we ended the year with very good financial results.

Growth
PEI Mutual continued to grow in 2003 with an increase in our written premiums of 13% ($1,236,000). Approximately 6% of this increase resulted from the addition of 1,000 new members to PEI Mutual, with 75% of these new members citing the reason for joining PEI Mutual as being referrals based on good service and the excellent reputation that PEI Mutual has.

Claims
Hurricane Juan claim payments have amounted to approximately $2,750,000 with $1,470,000 of this payout being recovered from our reinsurer. Our objective in the days following the hurricane was to respond to our policyholders as quickly as possible. We had approximately 750 insurable claims reported and to date have settled 75% of these claims.

The ongoing problem of oil spills continued in 2003 with an estimated $900,000 in claims resulting from accidental oil spills. The new oil installation guidelines which were announced last year are still being implemented. It is our hope that we will see the benefit of these changes by reducing oil spills in years to come.

Claims resulting from Hurricane Juan and oil spills accounted for 57% of all claims incurred in 2003.

Investments
In 2003 we realized a 9% return on our investments. The equity of PEI Mutual is invested in secure government bonds and blue chip common stock.

Staff and Agents
In January 2004, Wayne Newson retired after 23 years of service to PEI Mutual. Wayne was a Service Agent who serviced policyholders in Central Queens County. I congratulate Wayne on his retirement and thank him for the excellent service he has given our policyholders. I am pleased to advise that Sandra MacDonald from MacDonald Road in Crapaud was hired to replace Wayne.
I thank all our staff and service agents for their dedicated service to the policyholders of PEI Mutual.

Privacy Act
In January 2004, the new Federal Privacy Act was enacted. At PEI Mutual we voluntarily adopted a code of conduct in 1996 which dealt with many of the issues outlined in the new privacy act and standardized our method of obtaining and securing policyholder’s personal information. A brochure explaining the new act was recently mailed to all our policyholders.

Claims Free Discount
Last year we implemented a 5 year claims free discount of 10% and in the past year 3,030 policyholders qualified for this discount. We also have 3,656 policyholders on a 10 year claims free discount of 20% and 5,034 policyholders on a 15 year claims free discount of 25%. This gives us a total of 11,720 policyholders receiving a residential claims free discount which represents 51% of our total residential policyholders.

Oil Escapes
In 2003, $900,000 and in 2002, $950,000 was spent on claims involving oil spills. Oil spills damage our environment and ruin our property and it is in everyone’s best interest to improve their oil tank installation. By September 2006, all heating oil tank installations must be inspected and tagged under our provincial regulations. Starting in 2003 and going forward we have implemented a number of new guidelines and incentives that will encourage our policyholders to have their oil installation inspected and tagged sooner.

Mutual Rebate
I am pleased to advise that we will be giving a “Mutual Rebate” of 10% in 2004. One of the benefits of being a policyholder of PEI Mutual is that members participate in sharing our profits. In years when we have good financial results we pay a “Mutual Rebate”. This “Mutual Rebate” will be given as a discount at time of renewal.

Thank you for choosing PEI Mutual as your insurance provider. It is our goal to provide you with first rate service.

Terrence Shea,

General Manager