Manager's Report 2015
PEI Mutual celebrated its 130th anniversary in 2015 with the opening of its new office building at 116 Walker Avenue, Summerside. On June 18, 2015, we closed the doors at 201 Water Street, Summerside and we reopened at our new location on Walker Avenue on June 23, 2015. We thank our General Contractor, Wellington Construction and the Architects, Engineers and Project Management team at Coles Associates for their diligent work on this project. The leadership of Roger Arsenault, Co-owner of Wellington Construction, and Robert Haggis, Architect from Coles Associates is greatly appreciated.
In 2015, we experienced excellent growth in business with an overall increase in our customer base. Our claim reports decreased in number but the average dollar value of claims increased significantly with "fire" and "water damage" being the most common cause. The following is a brief summary of our results for 2015:
- Good growth in premium and market share.
- Reduction in operating expense ratio.
- Reduction in reinsurance cost due to good claims experience with our reinsurer and increased liability retention.
- Average investment return.
- Significant claim payments.
- Net income after tax of $1,393,000.
Water damage claims resulting from broken water pipes and sewer backup have been an increased cause of loss over the past 10 years. Society is changing the way they construct and use their homes by:
- Constructing or renovating their dwellings to have an increased number and more elaborate washroom fixtures than in the past creating increased opportunity for water damage.
- Locating laundry facilities on the top floor of the dwelling rather than the basement, causing water damage throughout the complete dwelling when there is a problem with an appliance.
- Constructing elaborate living quarters in the basement with expensive furnishings and electronics. Water from burst water pipes will naturally gravitate to the basement and cause significant costly damage.
These lifestyle changes are increasing our claims cost, requiring increased premium charges. Effective January 2016, we have increased our rates for the optional sewer backup coverage. These new rates will be reflected in policy renewals for 2016.
Investment returns have decreased in 2015 compared to the past two years. The financial markets have been in turmoil for most of 2015, making it very difficult to realize a decent return on our investments. PEI Mutual's investment portfolio totals $51,000,000. These investments are managed by our Controller, Rudy Smith and myself. Fortunately, our investment policy limits the amount of risk that we can assume in purchasing investments and, as a result, our exposure was limited. Our return on investments realized for 2015 was 5.8% with a total investment income for the year of $3,000,000.
In the past few years, we have experienced increased inflationary rates for dwelling construction, requiring us to increase the value of homes on renewal. PEI Mutual subscribes to an industry standard home valuation estimator that provides us with the PEI inflation factors. It is apparent that the implementation of HST in PEI in 2013 has had an impact on the cost of construction.
Policyholders of PEI Mutual benefit by sharing in the Company profits through a "Mutual Rebate" which is given in years when the Company has good financial results. I am pleased to advise that our Board of Directors have approved a "Mutual Rebate" of approximately $2,300,000 (10%) in 2016. This year's "Mutual Rebate" will be given as a discount at time of renewal.
PEI Mutual is a 131 year old "Island" company that prides itself on providing "excellent" service to its valued policyholders. PEI Mutual is recognized as a "Top 101 Company in Atlantic Canada" as sponsored by Progress Magazine.
"Providing excellent service to our policyholders" is our key to success. I thank our team of dedicated staff, agents and directors for their hard work.
Thank you for choosing PEI Mutual as your insurance provider.
General Manager / CEO