President's Report 2012

PEI Mutual has experienced a profitable year for 2012 and in spite of stagnant investment opportunities, has been able to meet and exceed regulatory requirements with regard to financial stability.

I am pleased to report that our oil related loss experience is improving and that the environmental and financial impact of oil spills is being addressed. I would like to thank our policyholders for their cooperation in replacing high risk outdoor oil tanks. Since 2011, our Company has offered more than $150,000 in direct payment incentives towards outdoor oil tank replacements.

Looking to the future, safety and security of persons and property loss due to fire of an electrical origin is being monitored. Policyholders are advised to make sure their electrical systems are adequate, especially when considering major changes or additions such as heating systems.

Over the last twenty-five years PEI Mutual has enjoyed a steady annual increase in policyholders, which has resulted in an increased number of service employees and a decline in available office space within our cherished older building. To this end, the Board of Directors has approved preliminary plans to eventually construct a new building to address this situation and provide for future growth opportunities.

Long-term employees and Board members of the Company have seen many changes and have been willing to embrace them with enthusiasm. Along the way there has always been the loyal policyholder base, of whom the roots of many date back several generations. Both of these groups will be a very important part of the future. Let the journey continue!

Percy Affleck,