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