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 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