Message from the President

On behalf of your Board of Directors, it is my pleasure to present the 2007 Annual Report for McKillop Mutual Insurance Company.

This past year your company was able to achieve a substantial underwriting profit of $1,383,320 due largely to a lower than normal loss ratio of 46.54%.Although our return on Investments was not quite as favourable as last year due to the less than stellar performance of the markets , we were still able to add $609,407 which represents approximately 5% return on investment. This gives the company a net income before income tax and return of premium of $2,018,383.

Your board is very happy with these numbers and believe these results were at least partially attained due to the initiatives taken in the area of loss prevention, sound underwriting practices, insuring all properties to value as well as careful administration of all costs. However we also realize that a certain amount of luck was involved and luck may not always be on our side. Therefore after careful consideration it was decided to add approx. $1,000,000 to reserves resulting in a ratio of 1.25 : 1 surplus to written premium. This will leave your company in a relatively strong position to face whatever the future offers.

The Mutual Insurance system is based on "Insurance at Cost". We at McKillop Mutual believe strongly in this concept and strive to return as much of the profit as possible back to our owners (policyholders) . Therefore your board is very pleased to declare a return of premium of 20% on property and liability business to eligible policyholders. In accordance with company bylaws you must be a policyholder for 3 years to be eligible. This is the largest return of premium in recent memory and represents approximately $690,000. This is our way to say "Thank-You for the great year", and should serve to substantially lower your insurance costs.

In March 2007 we welcomed a new member to our board. Barry Mills was elected to serve a three year term, replacing Steve Kennedy who retired due to other commitments. Barry along with his wife Nancy & their family live in Exeter. Barry has proven to be a very effective addition to the board bringing forth lots of ideas and insight.

Your "Board of Directors" must remain accountable to all policyholders. Therefore, if anyone has questions, concerns, comments, criticism or even compliments I urge you to contact any director. A full list of directors is published in the Annual Report. Please remember we are here to serve on your behalf. If there is a problem" Tell us", if not "Tell others".

The Annual Meeting will be held Wednesday March 5, 2008 at 1:30 pm at the McKillop Mutual office in Seaforth. I encourage all policyholders to attend and discuss the affairs of your company. Remember, you own it.

This past year has been very rewarding for me, I would like to thank my fellow board members for giving me the opportunity to act as your president this past year, I am still learning on a daily basis. Thanks also go to our manager Ken Jones and all his staff for making my job as president very easy.

Brad Carnochan, President

Message from the General Manager

When McKillop Mutual deals with a policyholder, it deals with one of its owners. Established in 1876 McKillop Mutual Insurance Company is 100% Canadian and owned by its policyholders. We operate on a not for profit basis, unlike stock companies that have to provide shareholders with dividends from profits. Our roots are in rural Ontario.
As a member of the company, eligible policyholders may vote on the affairs of the company and become a director. Eligible policyholders also share in the profits of the company. Over the past three years we have returned $1,217,764 to eligible policyholders and are very pleased to offer another refund for the year 2007.

An insurance company has two sources of income – premiums earned and investment income. It also has two basic expense categories – operating expenses and policyholder claims.

What is an underwriting profit?

An insurance company achieves an underwriting profit when the premium it earns exceeds the cost of its operating expenses and policyholder claims. An underwriting profit means that the company made money on its insurance business.

An insurance company can still earn a profit even if it loses money on its insurance operations. This happens when the investment income from the company’s varied investments is enough to offset the insurance loss. When this situation occurs, it means the company had to rely on its past financial successes to make money in the current year. It is important not to rely on the past to realize future financial success. While an overall profit is a good thing, the goal of many insurance companies is to break even on their insurance operations, so as not to rely on the investment profit.

Profit allows the company to remain strong, minimizes the need for future premium increases and allows the company to grow in size.

Thank you for making 2007 another successful year.

Ken Jones, Secretary/Manager

Farmers’ Accident/ Labour Replacement

Coverage is available for Accidental Death & Dismemberment and Replacement Labour Expenses. The plan is primarily designed for farm operations that rely on the principle owners, their immediate families or key farm labourers to perform critical and/or time sensitive functions for the farm operation. Contact your agent or broker to learn more about this valuable coverage.

Loss Prevention

McKillop Mutual Insurance Company has implemented a routine inspection program and it is the company’s goal to have all properties inspected. The purpose of this program is to help make the homes and premises of our policyholders safe by identifying and correcting any concerns before loss or damage occurs. This is a valuable service offered usually at no cost to policyholders.

Loss prevention works, and we hope you will welcome loss prevention officers into your homes and onto your premises. If you have been chosen for an inspection, the loss prevention officer that will complete the inspection will contact you in advance to arrange a time that is convenient for you both. You will be notified of any concerns the loss prevention officer has, and we will let you know if there are any recommendations to improve the safety of your property.

Fighting Ice Dams

Ice damming on the lower edge of a roof is caused by the heat from the attic melting the bottom layer of snow on the roof. Over time water can back up under the shingles into the roof space and eventually into the living area. Thick ice will form on the roof and it can be very difficult to remove without causing shingle damage. On a sloped roof you goal is to make drainage paths through ice on the lower edge where most ice dam and water backup problems occur. The best defence against ice dams is to reduce the attic temperature with proper insulation and ventilation. If this is not possible, using de-icing cables is the easiest way to prevent ice damming by providing drainage paths. Chemical de-icers may be used to create drainage paths however they may cause discolouring of shingles. Water leaks inside the house are troublesome and costly to fix but don’t necessarily signal a structure problem requiring total clearing of the roof. Opening drainage paths may stop or minimize the leaks and avoid the expense and danger of clearing the roof.

Candle With Care

Left unattended or put in the wrong place candles can become a potentially dangerous hazard. Make sure you enjoy them with safety in mind

• Never leave burning candles unattended and extinguish before going to sleep or leaving the room.
• Do not allow children to keep or use candles or incense in their rooms.
• Keep candles at least one metre away from anything that can burn, including curtains.
• Always use stable, nonflammable candle holders.
• If you have children in your home, store candles, matches and lighters out of reach.

Identity Theft

Identity fraud is on the increase in Canada and if you have become a victim you should follow these procedures:

1. Promptly notify your bank and credit card companies.
2. Report your suspicions to the police and the RCMP “phonebuster unit”: 1-888-495-8501
3. Advise your passport office.
4. Cancel all bank or credit cards.
5. Notify Canada Post if you feel your monthly bills are being monitored.
6. Obtain a new OHIP, SIN and drivers license.
7. Notify the Privacy Commissioner at:
   www.privcom.gc.ca  or contact www.safecanada.ca  for more information.

Damage to Non-Owned Automobiles

This coverage is available for vehicles that you may rent or lease under endorsement OCPF #27. This endorsement provides for loss or damage to a non-owned automobile including its equipment resulting from the care, custody or control of that non-owned automobile by an insured person. In order for the coverage to be effective the lease agreement must be in the name of the named insured. Please contact your agent/broker for further information.

Vehicle Identification Numbers (VINS)

These numbers are the fingerprints of your vehicle. These are the series of 17 letters and numbers that are accepted as the world wide standard for identifying vehicles. The VIN provides key information about the manufacturer, model, model year, make, equipment and class of a vehicle. It uniquely identifies a specific vehicle to the insurance industry, law enforcement, government, consumers and concerned stakeholders. If the VIN on the vehicle ownership does not match the VIN plate on the dashboard, then contact the motor vehicle licencing office right away. If the VIN on the pink liability slip does not match the VIN plate on the dashboard, then contact your insurance agent/broker or your insurance company. Also, as an anti fraud initiative we have been collecting copies of ownerships in order to record the Registered Insurance Number (RIN) which is a number specific to the registered owner of the vehicle.

Fire Extinguishers and Smoke Detectors

It is law in Ontario that a smoke detector is required on each level of residential buildings. Fire Extinguishers and Smoke Detectors are available at the office for sale to our policyholders at or below cost.

Fire Extinguishers may also be returned  to the office by our policyholders for refill at no cost.

Farm & Town Financial Services

Due to recent restructuring, our financial services company in Exeter has closed. Your account will continue to be serviced by your representative who will be contacting you.