What an exciting year for PEI Mutual. Together, under-writing profit and investment income produced approximately $2.39 million net income for the year, thus giving the Company the opportunity to provide a 10% Mutual rebate to the policyholders effective May 1, 2006.

PEI Mutual continues to work on monitoring two of our largest risks - oil escapes and wood burning losses. Oil claim losses decreased approximately $650,000 from 2004 and wood burning losses decreased approximately $450,000 during the same period.

On behalf of your Board of Directors, I wish to thank the PEI Mutual team members for their excellent work and dedication. They've performed well once again looking after policyholder's needs both at head office and on the road across the Island from tip to tip. Our great Company is here to work with families in their homes, with their businesses, and with their community centers & churches. We take pride in helping our insured families and communities with their unfortunate losses.

We were pleased to hire two new agents this year - Paul Power and Darren Baglole. Our team of twelve agents plus our in-office agent continue to work on our Company's growth adding more policyholders each year. This growth, together with good underwriting skills, continue to add greatly to the Company's success. Gross written premiums were up 9.1 % for the year.

Thank you to the Board of Directors for giving me the opportunity to serve as President of such a great Company. Management, agents, adjusters, our safety surveyor, office staff, and directors work together as a strong team. We take pride in working with our 20,000 (+) policyholders.

Brian MacKinley,

President