Reports

General Manager's Report 2019

It is our vision to make PEI Mutual the insurer of choice on PEI. Our people strive to achieve this through the products and personal service that we offer to our Members.

Hard Market and Mutuality

The insurance industry has and continues to experience a ?hard market? where property owners may have a difficult time finding affordable insurance. PEI Mutual was formed in 1885 because of these same conditions where Island farmers experienced difficulty arranging insurance for their property. The original Members of the Company joined together to insure one another mutually. Today we continue to accept many new members that share in our values of mutual protection and shared loss prevention.

2019 Financial Results

Financially PEI Mutual experienced a very good year illustrating responsible financial management and stewardship by the Board of Directors.

Gross Written Premiums increased by $2.2 Million dollars in 2019. This increase can be attributed to new Members purchasing policies, existing Members purchasing additional coverages and rising costs of construction.

2019 was our largest claims year ever with over $21.5 million in incurred losses. On September 7th and 8th Hurricane Dorian alone added just over $8 million dollars to our claim payments. Fortunately we receive excellent support from our reinsurer, Farm Mutual Re based in Cambridge Ontario. Under our catastrophe reinsurance treaty our hurricane losses were reduced by more than $6.7 million dollars.

Although operating expenses increased they were slightly lower relative to premiums written. This resulted in PEI Mutual realizing an underwriting profit of $1.1 million.

Investment Income followed the markets with 2019 seeing very positive results.

We saw continued downward pressure on fixed income yields and are continuing to maximize returns in a low interest rate environment. We continue to invest 79% of our assets in secure high quality fixed income products.

Common stock reporting is again affected by accounting standard IFRS 9 which requires that all gains or losses are booked on December 31st. During 2019 North American stock markets rebounded and made further gains following their decline toward the end of 2018. Investment income from stocks includes Dividend Income along with realized and unrealized gains. We continue to invest 21% of our assets in high quality North American companies that have very good longer term outlooks and favorable commitments to shareholders.

Our net income after tax was very positive at just under $4.2 million.

Mutual Rebate

Following our 2019 year end the Board of Directors declared a Mutual Rebate of 10% that will be applied to policy renewal premiums effective May 1, 2020 through to April 30, 2021.

Member Service

Hurricane Dorian caused an extremely busy year in claims activity. Our Members suffered damage across the Island. We have an excellent team that responded to our Members when they needed us most. PEI Mutual staff worked many weekends and evenings to handle the additional workload. A big thanks goes out to all who pitched in.

Member Service has been a major focus for our agents and support staff over the 2019 year. Our 16 field agents have been busy contacting and meeting with Members to update policies ensuring that they are current. If you would like to arrange a visit with one of our agents please contact our office.

I would like to close by thanking our entire staff for their dedication and continued commitment to excellence in Member Service.

Finally I will say thank you to you, our loyal Members, who choose PEI Mutual as their insurer.

Sincerely,

Blair Campbell,
CEO / General Manager

President's Report 2018

2018 was a very busy year for PEI Mutual. We paid out $2.41 million in special mutual rebate cheques to our policyholders. Premiums increased by $1.8 million or 7.5% over last year. Total policies in force at December 31, 2018 were 36,066, which included 874 new policies added during the year. PEI Mutual now has property insured on PEI in the amount of $11.9 billion. The Company is very financially secure and has a policyholder security fund greater than the minimum requirements of the PEI Insurance Act.

Net claims increased by $3.27 million over last year, with $15.8 million in covered claims paid out to policyholders during the year. The total number of claims incurred this year was 1,463 up 48% from the 986 claims incurred in 2017. Fire losses continue to be the Company’s loss leader with 101 losses incurred in 2018, totaling $5.9 million. Other loss leaders were: water, rupture and freezing; windstorm and hail; and sewer back up.

Although we had a significant rise in claims due to very adverse weather conditions, PEI Mutual still had a very successful year. Our staff and management team are cutting our operating expenses with their hard work and dedication to detail. Due to the large increase in claims, we experienced an underwriting loss of $722,000 for the year. Investment income was also down this year, mainly due to the adoption of a new accounting standard (IFRS 9). This new standard required the Company to recognize its unrealized gains/losses on stock in its investment income starting this year. The impact of this new standard was magnified as the stock markets were near their 52 week low at December 31, 2018. Total comprehensive income for the year was still $1.0 million, and this has been added to our Member’s Surplus, which now stands at $53.3 million. As a result of our financial success, PEI Mutual will be able to provide a 10% Mutual Rebate to our policyholders to be deducted off premiums when policies are renewed in 2019.

During the past year, PEI Mutual directors, management, agents and staff participated in a very successful Strategic Planning process, which resulted in the following positive outcomes: a new Vision Statement, a new Mission Statement, a new Core Values Statement and over 60 new action items, all of which will guide the Company strategically and cohesively over the next three to five years.

It has been a rewarding year to serve as President of PEI Mutual and I would like to thank the directors, management, agents and staff for making PEI Mutual the best insurance company on PEI.

Claude Dorgan,
President

President's Report 2017

Once again, PEI Mutual had a successful year in underwriting and investments. We have a great team of agents, staff, management, and directors. Terry Shea and Blair Campbell shared this year as CEO’s, with Terry retiring the end of May 2017, and being succeeded by Blair.

We value our Island Company in giving back and continuing to support Island organizations and events.

PEI Mutual had excellent year end results, and your Board of Directors are pleased to issue a special Mutual rebate cheque of 10% of your 2017 premium PLUS giving you another 10% off your 2018 premium at renewal time, for a total of $4.8 million being returned to policyholders.

Thank you to everyone at PEI Mutual for my opportunity to serve as President for the past year.

Brian MacKinley,
President

Manager's Report 2016

In 2016, we experienced excellent growth in business with an overall increase in our customer base. Our claim reports decreased both in number and severity. This decrease in claim payments is attributed to improved weather conditions and fewer winter storms during the 2016 winter season. The following is a brief summary of our results for 2016:

• Good growth in premium and market share.
• Reduction in operating expense ratio. Over the past number of years we have placed significant emphasis on reducing our operating expenses.
• Reduction in reinsurance cost due to improved claims experience with our reinsurer and an increase in liability reinsurance retention.
• Profit from insurance business of $3,356,000.
• Good return on investments yielding investment income of $3,244,000.
• Net income after tax of $5,175,000.
• Return on equity of 11%.

On May 31, 2017, I will be retiring from PEI Mutual after more than 32 years in a managerial capacity; first 16 years as Accountant/Controller and the last 16 years as Manager/CEO. Throughout this time I was fortunate to have worked with a dedicated team of staff, agents and directors. Together, we saw the company grow from:

• A premium base of $3,200,000 in 1984 to $22,800,000 in 2016.
• A surplus of $4,600,000 to $48,100,000.
• A staff compliment of 9 individuals to 25 individuals.
• A service agent base of 9 individuals to 15 individuals.

I have enjoyed my many years of working in a leadership capacity for this great Island Company and I want to take this opportunity to thank the staff, agents and directors for their hard work. I also want to thank our policyholders for their commitment to dealing with an "Island Owned and Operated" insurance company. It gets more difficult every year to compete in an international market and I am pleased that we are able grow our business annually on a profitable basis. Our main objective is to provide protection to our policyholders with excellent customer service at a competitive price and modern insurance product. We are local and your money does stay on PEI. If you have a question you can contact us via e-mail, telephone or by visit to our new office building in Summerside, PEI. Our telephones are answered in person and you do not have to deal with voice mail and be left wondering when your call will be returned. We strive to provide our customers personal service in an efficient manner.

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 $2,700,000 (10%) in 2017. This year's "Mutual Rebate" will be given as a discount at time of renewal.

PEI Mutual is a 132 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.

Terry Shea,
General Manager / CEO

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.

Terry Shea,
General Manager / CEO

Manager's Report 2014

PEI Mutual is on the edge of an exciting and historical event with the construction of our new office building at 116 Walker Avenue in Summerside. Our historical documents indicate that the head office of our company has been at its present location since the company first opened its doors 130 years ago. It will be sad to leave our current location but exciting to move and start a new chapter in the PEI Mutual history. Our new building is a modern, environmentally friendly building that will accommodate PEI Mutual operations for many years to come.

In 2014 we experienced a year of increased claims that can be attributed to bad weather events throughout the year. The following is a brief summary of our results for 2014:

• Good growth in premium and market share.
• Reduction in reinsurance cost due to good claims experience with our reinsurer and increased liability retention.
• Reduction in operating expense ratio.
• Good investment return.
• Significant increase in claims reported resulting in increased claim payments.
• Net income after tax of $1,495,000.

The poor claims experience in 2014 resulted from weather related claims as follows:

• Sewer backup claims totaling $2,980,000 which was 23% of total claims for 2014. On average for the last 10 years, sewer backup represented 7% of total claims. Sewer backup claims have been increasing in number in the past five years. In July 2014, we increased the rates for sewer backup and made underwriting requirements more stringent.
• Windstorm claims totaling $1,473,000 which was 11% of total claims for 2014. On average for the last 10 years, windstorm represented 7% of total claims.

In 2014, we had two long standing agents retire from our company. Peter Johnston from Kinlock provided 38 years of service and David MacAdam from Morell provide 30 years of service. I express my gratitude to both Peter and David for their dedication to the company. In November 2014, we hired John Flood, Jill Abbott and Jeff Trainor to look after the insurance needs of the PEI Mutual policyholders in the areas that were serviced by Peter and David. Everyone at PEI Mutual wishes Peter and David a wonderful retirement and is pleased to welcome John, Jill and Jeff to the PEI Mutual team.

The PEI Mutual staff, agents and directors were pleased to receive two awards in 2014:

• In October 2014, we were awarded the Summerside Chamber of Commerce Business Excellence Award.
• Also, in October 2014, PEI Mutual was recognized as recipient of the prestigious award "A Top 101 Company in Atlantic Canada" as sponsored by Progress Corp. PEI Mutual has received this award for each of the past 17 years.

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 $2,200,000 (10%) in 2015. This year's "Mutual Rebate" will be given as a discount at time of renewal.

PEI Mutual is a 130 year old Island company with its Head Office located in Summerside, PEI. Decisions are made promptly on PEI. We are in the business of providing service to our policyholders and it's our goal to give excellent service in an efficient manner. I thank our agents and staff for their hard work in achieving this goal.

Thank you for choosing PEI Mutual as your insurance provider.

Terry Shea,
General Manager / CEO

Manager's Report 2013

2013 has been a year of increased claims both in number and size. We ended the year with a net income after taxes of $1,131,361 which is made up of a loss from insurance business of $2,039,000; income from investments of $3,430,000; and an income tax deduction of $260,000. Fire and water damage were the two main causes of increased claims.

Water and sewer backup claims have been increasing consistently over the past ten years. We feel this increase is attributable to the manner in which new homes are designed and used. Laundry facilities are now being placed on the upstairs level of the home resulting in significant damage to the dwelling when a water pipe bursts. Basements that were once left unfinished are now finished and furnished with very expensive materials and furnishings that are damaged when water migrates to the basement. In 2013, we paid $2.33 million for 307 water escape claims. In 2012, we paid $1.14 million for 162 water escape claims. A thorough review of our claims experience has revealed that our premium charged is insufficient to cover our claims. A rate increase for sewer backup coverage will be implemented in 2014.

PEI Mutual has an investment portfolio totaling $53.3 million. These investments are managed by our controller, Rudy Smith and myself. Our investment policy limits the amount of risk that we can assume in purchasing investments and, as a result, our exposure to the overall investment market fluctuations is limited. Our return on investments realized for 2013 was 6.4% which is a significant improvement over the past six years.

Operating a local Island owned company in a global market where change is constant is a continuous challenge. Our employees take great pride in working for PEI Mutual and have significant interest in the success of the company. Over the past number of years, we have worked hard to reduce the expense ratio of the company and I am pleased to advise that it is now the lowest it has been in the past 30 years of record.

It is our goal to have our policyholders adequately insured. When a claim occurs, we want you looked after. Our 14 agents throughout PEI have been finding it more difficult to make contact with policyholders and to have policyholders take the time to sit down and review their coverage. Please call Head Office to arrange a visit from your agent. It is in your best interest to have proper insurance coverage, as it is too late after a claim to determine that your protection is not as good as it could have been.

Providing excellent service to our policyholders is our first and foremost goal. From our receptionist to our agents and claims adjusters, we strive to provide high quality, efficient service. When you contact PEI Mutual, you will be greeted by one of our highly trained, professional, friendly staff located at Head Office in Summerside. Please call 1-800-565-5441 to speak to an agent or to report a claim.

PEI Mutual is a 129 year old Island company with its Head Office located in Summerside, PEI. Decisions are made promptly on PEI. We are in the business of providing service to our policyholders and it's our goal to give excellent service in an efficient manner. I thank our agents and staff for their hard work in achieving this goal.

Thank you for choosing PEI Mutual as your insurance provider.

Terry Shea,
General Manager

Manager's Report 2012

I am very pleased to advise that PEI Mutual experienced a good year financially and that we will provide our policyholders with a 10% Mutual Rebate of approximately $2,100,000 in 2013. This year's Mutual Rebate will be given as a discount at time of renewal.

PEI Mutual continues to grow on an annual basis. In 2012, the gross premium revenue of the company has grown by almost 7%. Each of our lines of insurance (farm, fishing, residential and commercial) has been profitable and our investment return was very good.

In the past 10 - 15 years, we have experienced growth in claims resulting from oil spills. In 2012, this trend has reversed and there has been a reduction in oil spill claims. Our statistics indicate that 80% of past oil spill claims resulted from outdoor single wall steel installations and that these tanks are failing between 6-10 years of age. In 2011, we implemented new requirements to have some of these tanks replaced earlier than the current tagged expiry date. Policyholders affected would have received information on this in the mail. In order to assist with the financial burden on our policyholders, we offered a $100 incentive to have outdoor steel oil installations converted to a non-corrosive oil tank or a non-petroleum based heat source. To date, over 1,500 policyholders have benefited from this incentive. I thank our policyholders for working with us to improve their oil installations. The $100 oil incentive program has been extended until December 31, 2013. Please visit our web site at www.peimutual.com or contact Head Office to obtain information on this program.

We have experienced an increase in claim occurrences caused by electrical wiring and water damage. We feel both these causes are indicative of changes in the way families operate their homes. The increased use of electricity to heat homes and the use of new home appliances have increased the demand on the electrical service. In 2012, we paid $1.1 million and in 2011 we paid $1.3 million on claims deemed to have been electrical in nature. The increase in water damage claims is attributable to the manner in which new homes are designed and used. Laundry facilities are now being placed on the upstairs level of the home resulting in significant damage to the dwelling when a water pipe bursts. Basements that were once left unfinished are now finished and furnished with very expensive materials and furnishings that are damaged when water migrates to the basement. In 2012, we paid claims of $1.14 million for 162 water escape claims.

It is our goal to have our policyholders adequately insured. When a claim occurs, we want our policyholders looked after. Our 14 agents throughout PEI have been finding it more difficult to make contact with policyholders and to have policyholders take the time to sit down and review their coverage. Please call Head Office to arrange a visit from your agent. It is in your best interest to have proper insurance coverage; as it is too late after a claim to determine that your protection is not as good as it could have been.

We are dedicated to providing excellent service to our policyholders who have experienced damages resulting from an insured loss. From our receptionist to our claim's manager, we strive to provide high quality, efficient service. When you phone PEI Mutual, you will be greeted by our highly trained, professional, friendly staff who are located at Head Office in Summerside. Please call 1-800-565-5441 to report a claim.

PEI Mutual is an Island company owned by its policyholders with its Head Office located in Summerside, PEI. Decisions are made promptly on PEI. We are in the business of providing service to our policyholders and it's our goal to give excellent service in an efficient manner. We are a 128 year old Island company owned and operated by islanders with decisions made locally. I thank our agents and staff for their hard work in achieving this goal.

Thank you for choosing PEI Mutual as your insurance provider.

Terry Shea,
General Manager

Manager's Report 2011

When weather is harsh, we tend to have increased claims. This was the situation in 2011 with an increase in fire, water and oil spill claims. The increased claims costs were positively impacted by a reduction in our operating expenses and a reasonably good return on our investment portfolio giving us a net income after tax of $1,525,214.

Since 2001, we have paid almost $1,000,000 annually to clean up oil spills. This represents 14% of our total claim payout for all claims in the past 10 years. Outdoor oil installations represent only 34% of PEI Mutual's total insured oil installations, but are the cause of 80% of our oil losses. Our experience has been that outdoor oil steel installations will not last until their present tagged expiry date. Existing single wall steel tanks appear to be failing between 6-10 years of age.

In 2011, we implemented more stringent requirements for outdoor steel oil tanks. Policyholders affected would have received information on this in the mail. We realize this puts a financial burden on our policyholders, but our past claims experience is not sustainable. In order to alleviate some of the financial burden, we have offered a $100 financial incentive to policyholders who change their outdoor steel tank to either a non-corrosive oil tank or convert to a non-petroleum based heat source. Information on this incentive can be obtained by visiting our web site at www.peimutual.com or by contacting Head Office. To date, 629 policyholders have benefited from this incentive.

PEI Mutual has an investment portfolio totaling $49,000,000. These investments are managed by our controller, Rudy Smith and myself. Since 2008, the investment markets have been volatile making it very difficult to earn a decent return on our portfolio. Our return on investments realized for 2011 was 5.32%.

Policyholders of PEI Mutual benefit by sharing in the Company's profits through a "Mutual Rebate" which is given in years when the Company has good financial results. I am pleased to advise that we will be giving a "Mutual Rebate" of approximately $1,900,000 (10%) in 2012. A "Mutual Rebate" has been paid to our policyholders for 22 of the past 28 years. The total amount refunded to the policyholders in those 22 years was $27,800,000. This year's "Mutual Rebate" will be given as a discount at time of renewal.

PEI Mutual Education Trust is pleased to continue providing scholarships to Grade 12 graduating students across PEI. In 2011, we awarded 20 scholarships of $750 each. I congratulate all the 2011 recipients. Our Education Trust was a centennial project in 1985 and, since inception, we have awarded 532 scholarships totaling $284,000.

It is our goal to have our policyholders adequately insured. When a claim occurs, we want our policyholders looked after. Our 14 agents throughout PEI have been finding it more difficult to make contact with policyholders and to have policyholders take the time to sit down and review their coverage. Please call Head Office to arrange a visit from your agent. It is in your best interest to have proper insurance coverage, as it is too late after a claim to determine that your protection is not as good as it could have been.

PEI Mutual is an Island company owned by its policyholders with its Head Office located in Summerside, PEI. Decisions are made promptly on PEI. We are in the business of providing service to our policyholders and it's our goal to give excellent service in an efficient manner. We are a 127 year old Island company owned and operated by Islanders with decisions made locally. I thank our agents and staff for their hard work in achieving this goal.

Thank you for choosing PEI Mutual as your insurance provider.

Terry Shea,
General Manager

Manager's Report 2010

PEI Mutual has just completed 125 years of business on PEI. This past year was an exciting time for the employees of PEI Mutual. Throughout the year, we spearheaded a number projects to celebrate our history. A TV commercial was produced on PEI which featured PEI Mutual employees and their families as actors. We also advertised in local papers and built a parade float which was entered in most of the PEI parades throughout the summer. Mutual rebate cheques representing 10% of policyholders' premium were mailed to all our policyholders in March, 2010 totaling $1,473,000. Overall, it was a busy fun-filled year for our employees and I thank them for their leadership and participation in our festivities.

Weather incidents and oil spills resulted in a large increase in claim activity for 2010. The number of losses increased by 43% over 2009 representing an increase of $1,500,000 in claim payouts.

Claims resulting from wind damage represented 16% of our total claim payout and 40% of our number of claims in 2010. This is more than double our average in the past 10 years.

Since 2001, we have paid almost one million dollars annually to clean up oil spills. Oil spills represent 14% of our total claim payout for all claims in the past 10 years. Outdoor oil installations appear to be failing faster that expected. A few facts about our experience:

• Provincial regulations require that all oil tank installations be tagged. Outdoor steel installations appear to be deteriorating and leaking prior to their present expiry date on the provincial tag. Our experience is that the single wall steel tanks, that are tagged for 15 years, appear to be failing between 6-10 years.
• Outdoor oil installations represent 34% of PEI Mutual's total oil installations on our books but are the cause of 80% of our oil losses.

Some recommendations on oil installations:

• An oil furnace and tank should be professionally inspected and serviced yearly, with a filter change and removal of sludge and water from the bottom of the tank.
• It is recommended that oil tanks be installed in the basement of a home when conditions permit. This protects the tanks from our harsh weather elements and will result in a quicker response to an oil leak because the homeowners will notice the leak prior to any significant loss of oil. Oil spills from outside oil tanks are not usually detected until all the oil has leaked and the tank is empty.

Over the past 15 years water damage claims have increased in both number and dollars. We attribute this to an increase in people finishing their basements with higher quality products.

I am pleased to welcome Kendall Docherty as a new service agent. He lives in Hazelbrook with his wife Denise and young family. Kendall is well known throughout PEI for his musical talents. He makes an excellent addition to the PEI Mutual team.

I am pleased to advise that PEI Mutual was once again recognized in 2010 by Progress Corp as a "Top 101 Company in Atlantic Canada". PEI Mutual has received this award for each of the past thirteen years. In 2010, there were three other companies in PEI that received this award.

PEI Mutual is an Island Company which contributes greatly to our Island economy through contributions to local charities and organizations and through the employment of 35 full time permanent staff who contribute to and volunteer in their home community.

"Providing excellent service to our policyholders" is our key to success. I thank our team of dedicated employees and directors for their hard work.

Thank you for choosing PEI Mutual as your insurance provider.

Terry Shea,
General Manager

Manager's Report 2009

Rebate Cheque Enclosed!
PEI Mutual Celebrating 125th Anniversary
Rebates to policyholders total $3,100,000

PEI Mutual is celebrating 125 years of business. Our policyholders benefit from our financial success by sharing in the Company's profits through "Mutual Rebates" which are given in years when the Company has good financial results. I am pleased to advise that policyholders will receive a total of $3,100,000 in mutual rebates:

• A "Mutual Rebate" of $1,600,000 (10% of 2010 premium) will be deducted from our policyholder's invoice in 2010, and
• A "Special Mutual Rebate" of $1,500,000 (10% of 2009 premium) is being paid out to our policyholders - your cheque is enclosed!
  Mutual rebates have been paid to our policyholders for 21 of the past 27 years. The total amount refunded to our policyholders in these 21 years is approximately $25,500,000.

125 years old……….. a brief history of this great Company.

In the 1880's Prince Edward Island experienced difficult times resulting in many maritimers leaving their homes, bound for New England. The farmers stayed behind. They had a difficult time purchasing insurance from companies outside PEI. At the Farmers Convention in 1885, a group of farmers decided to petition the Provincial Legislature for the Incorporation of PEI's first Mutual Insurance Company. This company would be owned by its members and each member would promise to help pay the losses of others in the group. This company would be called the Prince Edward Island Agricultural Mutual Fire Insurance Company and would allow farmers to insure farm property at much reduced costs on what they called a "Mutual Plan". On April 10, 1885, final assent of the bill to incorporate the company was passed in the legislature and PEI Mutual was born. This company could only insure farm property and was quite successful. Other property owners wanted to insure with the "Mutual Plan" which resulted in the formation of another company in 1899, the Prince Edward Island Mutual Fire Insurance. This company would insure "other than farm" properties. In 1941 the two companies amalgamated to our present day company.

Today, 125 years later, PEI Mutual has 25,000 members and is a financially sound company writing 28% of the PEI property and casualty insurance market. A testament of recent growth and financial success of the Company …. our revenues are 4 times what they were 20 years ago and our equity or accumulated surplus is 5.5 times what it was 20 years ago.

Our head office is located in Summerside and it is the only company of its type on PEI. We are truly an Island company, owned and operated by Islanders with decisions made locally.

The success that PEI Mutual has experienced in the past 125 years is a testament to the diligent work of our employees and the leadership of our Board of Directors. I thank the Staff, Agents and Directors for their dedication to the success of PEI Mutual.

Thank you for choosing PEI Mutual as your insurance provider.

Terry Shea,
General Manager

Manager's Report 2008

PEI Mutual is an Island Company, owned and operated by Islanders. In 2010 we will be celebrating our 125th anniversary. The success that PEI Mutual has experienced is a testament to the diligent work of our employees and the leadership of our Board of Directors. A large number of our employees have been with the Company for over 20 years. Our agents, Peter Johnston and Bruce Simpson; and office staff, Vicky Waite, Thelma Cote and Rose Kelly have been with the Company for approximately 30 years. In the past 30 years, our premiums have grown from $2 million to $14 million and our surplus has grown from $2 million to $32 million. Today, PEI Mutual is a financially sound, Island owned company contributing significantly to our Island economy. I thank the staff, agents and directors for their dedication to the success of PEI Mutual.

Our financial results for 2008 gave us a net income after tax of $804,000. Our experience has deteriorated in 2008 compared to our results for the past five years. Gross claims were up 19% over 2007 with an increase in the number of claims reported by 26%. Damages resulting from water, freezing and sewer backup amounted to $1,621,000, 18% of our total claim payments in 2008. Ten years ago, water, freezing and sewer backup claims represented 3% of total claim payments. There has been a gradual increase in these types of claims over the past years. Oil escape claims continue to be a major cause of loss with claim payments of over $1 million in 2008. We have spent over $1 million in each of the past three years as a result of oil escapes. Ten years ago, claims resulting from oil escape were almost non existent. Over the past seven years, our agents have been working with policyholders to have oil installations improved.

PEI Mutual has an investment portfolio totaling $41,000,000. These investments are managed by our controller, Rudy Smith and myself. Investment markets have plummeted in 2008 and PEI Mutual's investment portfolio was negatively affected. 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 2008 was 5.66%

Three of our employees have volunteered their time to benefit associations connected to PEI Mutual. Blair Campbell, our Corporate Secretary, has accepted an invitation to be a member of the Board of Directors of the Canadian Association of Mutual Insurance Companies, a trade association of property and casualty insurance companies formed as mutuals. Rudy Smith, our Controller, is the President of the Greater Summerside Chamber of Commerce. Stan Gallant, our Systems Analyst, has accepted a position on the Statistics Committee for the Ontario Mutual Insurance Association. The knowledge gained by Blair, Rudy and Stan from their involvement in these organizations will benefit PEI Mutual greatly.

One of the benefits of being a policyholder of PEI Mutual is that policyholders share in its financial success. Although 2008 was not a banner year, our Board of Directors felt the financial position of PEI Mutual warranted a Mutual Rebate to our policyholders. I am pleased to advise that a 10% Mutual Rebate has been approved by our Board of Directors for 2008. This rebate will be deducted off your premium due in 2009. Mutual Rebates have been given to policyholders in 20 of the past 26 years with a total payout of approximately $22,600,000.

Thank you for choosing PEI Mutual as your insurance provider.

Terry Shea,
General Manager

Manager's Report 2007

Our 2007 financial year was average when compared to our past 10 years. 2006 was our best year in 25 years. Based on our success in 2006, the Board of Directors declared a Special Mutual Rebate of $1,240,000 to be paid in 2007. This rebate was paid in April, 2007 and deducted from our earnings for 2007, reducing our 2007 income by $1,240,000.

We experienced an increase in large losses in 2007 having 33 losses reported that were greater that $50,000. Claims relating to wood heat practices were significantly higher in 2007 representing 12% of our total payout for all claims.

PEI Mutual has an investment portfolio totaling $39,000,000. These investments are managed by our controller, Rudy Smith and myself. Our investment policy limits the amount of risk that we can assume in purchasing investments. Our return on investments realized for 2007 was 7.5%, a total of $2,800,000.

In 2007, Cam Trail, our service agent for West Prince County, retired after 27 years of service to PEI Mutual. Over these years, PEI Mutual experienced significant growth and Cam was instrumental in contributing to this growth. On behalf of everyone at PEI Mutual, I thank Cam for his hard work and long term service to our Company and wish him much happiness in his retirement years.

Randy Wedge from Palmer Road and Eddie Trail from Cascumpec were hired in 2007 as service agents for West Prince County. Randy is a graduate of Concordia University and has been employed in the sales and service industries for the past 10 years. Eddie is a graduate of The University of New Brunswick and has been employed in sales and service for the past 20 years. I welcome both Randy and Eddie to our team.

PEI Mutual is an Island company owned by its policyholders with its Head Office located on PEI. Decisions are made promptly on PEI. In profitable years, we give Dividends or Mutual Rebates back to our policyholders either in the form of a cheque or as a reduction from premiums due in the following year. I am pleased to advise that a 10% Mutual Rebate has been approved by our Board of Directors for 2007. This rebate will be deducted off your premium due in 2008. Mutual Rebates have been given to policyholders in 19 of the past 25 years with a total payout of approximately $21,000,000.

PEI Mutual is an Island company which contributes greatly to our Island economy through contributions to local charities and organizations and through the employment of 33 full time permanent staff. PEI Mutual is 123 years old.

Providing excellent service to our policyholders is our key to success. I thank our team of dedicated employees and directors for their hard work.

Thank you for choosing PEI Mutual as your insurance provider.

Terry Shea,
General Manager

Manager's Report 2006

Your rebate cheque is enclosed.
Most successful year in past 25 years.
Rebates to policyholders total $2,700,000

PEI Mutual has just completed its best year financially for the past 25 years. Our policyholders will benefit from our success by sharing in the Company’s profits through “Mutual Rebates” which are given in years when the Company has good financial results. I am pleased to advise that policyholders will receive a total of $2,700,000 in mutual rebates:

• A “Mutual Rebate” of $1,400,000 (10% of 2007 premium) will be deducted from our policyholders’ invoice in 2007, and
• A “Special Mutual Rebate” of $1,300,000 (10% of 2006 premium) is being paid out to our policyholders – your cheque is enclosed.
  Mutual rebates have been paid to our policyholders for 18 of the past 24 years. The total amount refunded to our policyholders in these 18 years is approximately $20,000,000.

In 2006, we continued our struggle to reduce the occurrence and cost of oil escape claims. Unfortunately, they continue to occur and the clean up costs are significant. There were 20 new oil escape claims reported in 2006 at an estimated total cost of $1.5 million dollars. On a positive note, in 2006 we did have some success in recovering some of our costs from installers and manufacturers who were deemed to be at fault.

In 2006, Philip MacDonald, our service agent for Summerside and area, retired after 27 years of service to the Company. Philip experienced many changes over these years and was a significant contributor to the Company’s success. On behalf of everyone at PEI Mutual, I thank Philip for his long term service with the Company.

Mark MacDonald from Cornwall , was hired in 2006 as our service agent for part of central Queens County . Mark is a graduate of Nova Scotia Agricultural College and has been employed in the agriculture industry for the past 18 years. I welcome Mark to our team.

I am pleased to advise that PEI Mutual was once again recognized in 2006 by Progress Corp as a “Top 101 Company in Atlantic Canada”. PEI Mutual has received this award for each of the past nine years. In 2006, there were seven other companies in PEI that received this award.

PEI Mutual is an Island company owned by its policyholders with its head office located on PEI . Decisions are made promptly on PEI . We are in the business of providing service to our policyholders and it’s our goal to give excellent service in an efficient manner. I thank our agents and staff for their hard work in achieving this goal.

Thank you for choosing PEI Mutual as your insurance provider.

Terry Shea,
General Manager

Manager's Report 2005

Oil spills were the story of the year for 2004. We had 24 claims reported costing PEI Mutual approximately $1,700,000. Over the past five years, we had 121 oil spill claims reported at a cost of $4,500,000. Approximately 73% of these oil spills were from oil tanks located outside a building.

In 2003, we started an oil tank contest to promote policyholders having their oil tank installation brought up to provincial standards. To date, we have awarded seven prizes of $1,000 each, and plans are to continue with four more $1,000 draws in 2005. Information on this contest is on the last page of the Annual Report.

We thank our policyholders who have updated their oil installation to provincial standards and urge all our policyholders to do so as soon as possible. Provincial regulations require that all oil installations meet provincial standards by September 2006.

There has been a great deal of media attention given to insurance company profits for 2004. The insurance industry in Canada has realized a 20% return on equity. Much of this return was realized on the automobile line of business and PEI Mutual does not sell automobile insurance. PEI Mutual’s return on equity for 2004 was 5% which is a bit lower than where it should be. PEI Mutual is owned by its policyholders and does not have the shareholders that the other insurance companies have, who expect a return on their investment (dividend). PEI Mutual must earn a profit which is sufficient to support premium growth. This profit is added to our equity and is held to keep our company strong for future generations of policyholders.

Our rate increases in the past number of years have been minimal and there are no planned rate increases in 2005. Our income in past years has been sufficient to grow our surplus and keep the company in the excellent financial standing it enjoys today.

Our goal at PEI Mutual is to provide excellent service. Our agents are busy servicing the needs of customers throughout PEI. Our head office staff process the work of our agents, service policyholders on the phone and process insurance claim payments to policyholders. We settle claims as quickly as possible and it is not uncommon to have a claim cheque in the mail the day after the claim is reported. I thank all our staff and service agents for their dedicated service to our policyholders.

Computer technology is an ever growing facet in all businesses and PEI Mutual is no exception. Technology allows for efficiency and we aim to be efficient. We keep abreast of change and our systems are to modern standards. At present we have 35% of our policyholders paying their insurance premium electronically on-line. We are pleased to have such a large percentage of our policyholders using this service.

PEI Mutual was honored to receive the Community Enhancement Award at the Greater Summerside Chamber of Commerce Business Awards Banquet in 2004. This award was given in recognition of both the company and employee contributions to community. We are proud of PEI Mutual’s annual contributions to hospitals, exhibitions, Special Olympics and many more Island organizations. Since its centennial year in 1985, PEI Mutual has awarded 400 scholarships to high school graduates totaling $200,000. PEI Mutual displays its community spirit by sponsoring programs such as Community Showcase on Eastlink TV and the Eric MacEwen Show on CFCY. PEI Mutual has been the title sponsor of the PEI Mutual Provincial Summer and Winter Games for the past eight years.

Management & staff show commitment to the community through contributions to charities such as the United Way and by volunteering as members of the Board of Directors on organizations such as the Chamber of Commerce, Summerside Regional Development Corporation, Slemon Park Corporation and the Insurance Institute of PEI.

PEI Mutual has been a “Top 101 Company in Atlantic Canada “ for the past 7 years, as awarded by Progress Corp. Policyholders of PEI Mutual benefit by sharing in the company’s profits through a “Mutual Rebate” which is given in years when the company has good financial results. A “Mutual Rebate” has been paid to the policyholders for 14 of the last 20 years. The total amount refunded to the policyholders in those 14 years was $11,950,000. I am pleased to advise that we will be giving a “Mutual Rebate” of 5% in 2005. This “Mutual Rebate” will be given as a discount at time of renewal.

PEI Mutual is an Island company owned by its policyholders with its head office on PEI. Decisions are made promptly on PEI. Thank you for choosing PEI Mutual as your insurance provider.

Terrence Shea,
General Manager

Manager's Report 2004

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

Manager's Report 2003

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