Tradition Mutual Insurance Company
2007 Annual Report
Tradition Mutual Insurance Company
NOTICE OF THE 5TH ANNUAL MEETING The 5th Annual Meeting of the policyholders of Tradition Mutual Insurance Company will be held at the St. Pauls Community Centre in St. Pauls, Ontario on Tuesday, March 18, 2008 at 1:00 pm. The meeting is called to; receive and dispose of the annual report for the year ending December 31, 2007, the auditors report, to appoint auditors and authorize the directors to set the auditors’ remuneration, to set the remuneration of the directors, and to transact any other business that may properly come before the meeting. Retiring directors are Larry Barker, Jim McCutcheon & Don Brubacher. Larry Barker and Jim McCutcheon are both eligible for re-election to the board. A new director must be elected to fill Don Brubacher's position. Be advised that any eligible policyholder, wishing to run for director, must state his/her intentions in writing to the Corporate Secretary at least five (5) days prior to the annual meeting. Election forms are available at the office during regular business hours. President Joan Schmidt
Corporate Secretary Irene Van De Walle
Tradition Mutual Insurance Company
AUDITORS’ REPORT To the Policyholders of Tradition Mutual Insurance Company Sebringville, Ontario We have audited the balance sheet of Tradition Mutual Insurance Company as at December 31, 2007 and the statements of income, comprehensive income, members’ surplus, accumulated other comprehensive income and cash flows for the year then ended. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the company as at December 31, 2007 and the results of its operations and cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. Stratford, Ontario January 26, 2008
Famme & Co. LLP Chartered Accountants
President’s Message I believe it’s very much in order for me to thank Don It has been not only a Brubacher, director of Tradition Mutual for 16 years. privilege, but an honour Don will be retiring at the March 2008 annual to have served this past meeting. He has been instrumental in many year as Chair of the important decisions over the years, such as the Tradition Mutual amalgamation in 2003 to create Tradition Mutual. Insurance Board... also His expertise as a Director is complemented by his the first female in this ability in adjusting claims for our policyholders. We role. I’m hoping I have served Tradition, and it’s wish Don and his wife, Marie, all policyholders, proud. It’s a very the best in their future endeavors. rewarding experience and a great opportunity to learn more, both Whenever there is a change, there our main objective is to professionally and personally. is an opportunity. If you feel you serve our policyholder have the qualities to be a director But of course with responsibility comes challenges, and we have on the Tradition board, I urge you to contact the office or any of the had a few this busy year at the directors of the company to find out what it entails. Tradition office. With some large liability and automobile claims, our overall claim expense is not We have again supported community events and very good, but our main objective is to serve our projects this year, which shows our commitment to policyholders, and I know we have done just that. our friends and neighbours, many of whom are also policyholders, the true owners of Tradition Mutual A big thanks to our Manager, Alec Harmer, and our Insurance Company. great staff, agents & brokers, who have all worked extra hard to make all aspects of the business run Our mission is: smoothly. I too, want to thank my fellow directors “We will put our policyholders first by providing for all their help and direction to work as a “team” insurance with integrity and prompt service at a for the betterment of Tradition, and in turn you, our reasonable cost while ensuring the viability of the policyholders. company for future generations.” Hope to see you at our annual meeting.
Joan Schmidt President
We want to hear from you Tradition Mutual is a small local insurance company, operating for over 100 years in the Perth area. We insure more than six thousand people, families and businesses in this area. Operating on a not-for-profit philosophy, our main concern has always been to provide the community with excellent insurance and financial products at the most reasonable price possible.
Wrap that up with people who work to provide you with personal and professional service and advice. That’s us. But we want to hear from you. If you have an idea for a new product or service, a story regarding something we’ve done well or not so well, we want to hear it. Contact us by phone, letter or e-mail.
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Tradition Mutual Insurance Company
BALANCE SHEET Assets Cash Investments - (Note 1, 2 and 4) Accrued interest receivable Mortgage receivable, 6%, $983 monthly, including principal and interest, due April 30, 2008 Outstanding premiums receivable Due from reinsurer - ceded claims - other Other receivables Income taxes receivable Deferred policy acquisition expenses Capital assets - net of amortization Investment in subsidiary - (Note 5) Future income taxes
as at December 31, 2007
2007
2006
$ 1,955,866 18,015,566 54,283
$ 1,908,800 16,509,864 52,628
90,935 2,785,696 17,568,772 223,912 403,161 48,998 535,018 961,111 130,943 212,622
97,141 2,691,491 13,708,969 10,257 377,897 183,391 444,498 919,555 133,980 167,186
$42,986,884
$37,205,657
25,252,201 4,708,375 592,092
20,604,210 4,673,398 609,393
$30,552,668
$25,887,001
12,330,079
11,318,656
104,137
0
$42,986,884
$37,205,657
Liabilities Provision for unpaid claims Unearned premiums Accounts payable and accrued liabilities
Members’ Surplus Accumulated Other Comprehensive Income
Tradition Mutual Insurance Company
STATEMENT OF MEMBERS’ SURPLUS Members’ Surplus
for the year ended December 31, 2007
2007
2006
Balance – beginning of year Net income (loss) for the year per statement of income
$11,318,656
$11,448,833
1,011,423
(130,177)
Balance – end of year
$12,330,079
$11,318,656
2007
2006
Accumulated Other Comprehensive Income Balance – beginning of year Adjustment on implementation on financial instruments standards - (Note 2) Unrealized gains and losses on available for sale financial assets per statement of comprehensive income
$
Balance – end of year
$
---
$
---
$
---
583,475
(479,338)
2
104,137
---
Message from the Manager I normally discuss events My year as chair has taken me away from the office a that occurred during the lot during 2007. Thanks to everyone, especially my prior year and then management team of Kim, Irene & Tracy for keeping recognize the staff and the office running so well. Of course no one keeps agents. This time, I want better track of me than Donna! The board was very to start right off with the supportive of my position and hosted OMIA on recognition of the staff several events, such as the OMIA golf tournament. and agents. In early 2007, we started a process of It was held at the Mitchell Golf & Country Club and switching to a new computer system and in although it’s a fun get-together for the mutuals, we September a process of “running parallel” was started. also managed to raise $1,500 which was donated to This process entails entering information on both the the Salvation Army in St. Marys at Christmas time. old system and on the new system. More than twice On the financial front, Tradition continues to the work as they have to fix up the policy or claim on struggle with large claims and although the bottom the new system before they renew the policy or make line looks good, it is due in large a change. This has caused our part to recoveries from our policy issuance to slow down reinsurer, FMRP. You pay us Thanks to all the staff and considerably. This means a lot of [Tradition] premium and in turn explaining to do to you, our agents. Your efforts will we pay you for your claims. policyholders, when you are not bring long term FMRP does the same for us. We getting your insurance policies in improvements to our pay them a portion of the our “normal” timely fashion. The company for the benefit of premiums and in turn, when we agents and staff have worked our policyholders. have large claims, they pay us. together to make the best of a The more claims we have though, difficult time and we continue to the higher the rates we have to ask for your patience and pay and this leaves us with less money in future understanding over the coming months until years to pay our claims and expenses. For those of everything is 100% on the new system. you who look at all our financial reports, you will Thanks to all the staff and agents. Your efforts will see some changes this year in our statement. Come bring long term improvements to our company for out to our annual meeting where we will review all the benefit of our policyholders. of the changes. At the same time all of this has been going on, I had the honour of being Chair of the Ontario Mutual Insurance Association (OMIA). OMIA provides mutual companies with many services, including education, benefits and business planning on a collective basis.
I hope you spend a few minutes to review the entire annual report. The whole purpose of this report is so you can be up-to-date with the company you own... Tradition Mutual.
Alec Harmer, CIP Manager
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Tradition Mutual Insurance Company
STATEMENT OF INCOME Income
for the year ended December 31, 2007
2007
2006
Gross Premiums Written Less: Increase (decrease) in reserve for unearned premiums Reinsurance premiums Reinsurance assumed
$10,043,991
$10,075,277
35,717 1,709,278 (45,919)
(304,522) 1,595,332 (47,974)
1,699,076
1,242,836
Net premium income
$ 8,344,915
$ 8,832,441
10,478,434 5,060,247
18,579,028 11,539,727
5,418,187 1,200,753 564,111 310,180 17,521 90,201 21,963 46,326 45,647 30,690 34,973 31,554 88,764 125,612 264,142 9,622 84,671 53,467
7,039,301 1,517,302 498,660 273,814 13,054 77,056 22,273 43,444 22,591 20,849 31,958 28,733 96,049 124,669 172,030 8,993 75,966 86,357
8,438,384
10,153,099
(93,469)
(1,320,658)
35,268
---
Claims and Expenses Gross claims incurred Reinsurance plan recoveries Net claims incurred Commissions Salaries and directors’ fees Benefits and education Audit and legal fees Travel, convention and meetings Corporation premium tax Printing supplies Office and general MVA’s and claim reports Telephone and mailing Insurance Association fees Office premises Data processing Bank charges Advertising and promotion Loss prevention
Premium deficiency Underwriting gain (loss)
(128,737)
(1,320,658)
1,081,410 16,351
1,081,108 7,947
1,097,761
1,089,055
969,024
(231,603)
Other Revenue Investment income Other income
Equity in Net Income (loss) of Subsidiary Income (loss) before income taxes Provision for income taxes (recoverable)
- current - future
(3,037)
(38,475)
965,987 --(45,436)
(270,078) (89,401) (50,500)
(45,436) Net income (loss) for the year
$ 1,011,423
4
(139,901) $
(130,177)
Serving the Policyholders Well Don Brubacher will be Don was recognized by OMIA with the first “Scott retiring from the Robinson” award, which is given to a director who company effective the participates in and promotes education in the March annual meeting. mutual system. He started with the On a personal note, Don and his wife, Marie moved company, at the time to Perth County in 1967. Both of them drove a Downie Mutual, in 1992. school bus, which Marie managed to do for twenty In the fall of that year, Downie Mutual wrote its first eight years! Don was active in the community by auto policy and ended the year with a total of fifteen being on the Ellice Township Council for thirteen thousand dollars in automobile premium. The entire years and spending the last three company’s premium volume was as Reeve. Don was also actively approximately one million, six farming. First, he operated a hundred thousand dollars. The Don was instrumental farrow to finish hog operation, company had a manager, two full in the start up of and then changed to a cash crop time and one part-time staff, six operation. He also owned and Tradition Financial agents and six directors. operated a country elevator until Don was instrumental in the start the fall of 2003. up of Tradition Financial in 1997 Don and Marie have three children, Lynn, Lori & and in the amalgamation of Blanshard Mutual and Randy and a foster child, Bill. They are also very proud Downie Mutual in 2003. Today, Don leaves a grandparents of Kelly, Kim, Krista, Katie, Maggie, company with a premium volume of ten million and Nichole, Mathew, Sydney, Dylan, Eric & Brooklyn. twenty-eight staff and agents. Don’s business knowledge, insurance education and Don has adjusted claims for the company since his start training, and pride in community have made him a and has always promoted education for the directors of valuable director of Tradition Mutual. the company, especially if they did adjust claims.
Chartered Insurance Professional Designation During 2007, Tracy Lamont, Claims Supervisor and Steven Riehl, Exclusive Agent received their Chartered Insurance Professional designation. An educated staff is important to Tradition but it takes a lot of dedication from the staff to acquire their CIP designation. These ten college level courses are taken on an employee's personal time and each one requires hours of study to complete the three hour exam required to pass the course. Congratulations Steve & Tracy!
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Tradition Mutual Insurance Company
STATEMENT OF COMPREHENSIVE INCOME
for the year ended December 31, 2007
2007 Net income for the year (per statement of income)
$ 1,011,423
2006 $
(130,177)
$
(130,177)
Other Comprehensive Income Unrealized gains (losses) on available for sale financial assets
(479,338)
Comprehensive income for the year
$
532,085
---
Tradition Mutual Insurance Company
STATEMENT OF CASH FLOWS Cash Provided By (Used In):
for the year ended December 31, 2007
2007
Operating Activities Net income for the year per statement of comprehensive income Adjustments to convert income to cash basis: Increase (decrease) in unearned premiums Increase (decrease) in unpaid claims and adjustment expense Increase (decrease) in payables Increase (decrease) in income tax payable Amortization of capital assets Amortization of discounts on bonds and debentures (Gain) loss on sale of investments Decrease (increase) in receivables Decrease (increase) in deferred policy acquisition expenses Decrease (increase) in investment income due and accrued Decrease (increase) in income tax receivable Decrease (increase) in future income taxes
$ 1,011,423
Investing Activities Proceeds from sale of investments Purchase of investments (Increase) decrease in investment in subsidiary Purchase of capital assets Repayment of mortgage receivable
Excess of cash provided over cash applied (cash applied over cash provided) Cash — beginning of year Cash — end of year
$
(130,177)
34,977
(305,903)
4,647,991 (17,301) --85,800
12,766,486 (63,259) (87,643) 69,370
422 (95,341) (4,192,927)
4,858 (61,068) (10,224,369)
(90,520)
213,059
(1,655) 134,393 (45,436)
(4,216) (183,391) (50,500)
$ 1,471,826
$ 1,943,247
1,659,318 (2,965,964) 3,037 (127,356) 6,206
2,146,862 (3,956,063) 38,475 (34,068) 5,850
(1,424,759)
(1,798,944)
47,067 1,908,800
144,303 1,764,497
$ 1,955,867
$ 1,908,800
Interest paid during the year amounted to $8,855 (2006 - $8,993). Income taxes paid (recovered) during the year amounted to $112,179 (2006 - $169,623).
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2006
Pyramid Recreation Centre Tradition Mutual Insurance has been a strong supporter of various community events and activities both financially and through employee volunteerism.
physical activity to occur and we want to support our community in this endeavour which will enable more people, both young and old, to incorporate physical activity into their daily lives. We hope the people in our community will experience the benefits of regular activity including better sleep, fun, good times with friends, healthy body weight, healthy heart and lungs, less stress, optimal learning This year, Tradition Mutual Insurance was pleased to ability, positive feelings about self, and strong make a corporate sponsorship to the Pyramid muscles and bones. It’s just our Recreation Centre project in the way of demonstrating our Town of St. Marys. As a local commitment to our community insurance company, operating in and the people who live in it!� Tradition felt it was St. Marys and area, we at Tradition felt it was important to give back to the community where we work and live.
important to give back to the community where we work and live
Tradition Mutual was happy to sponsor the first of our planned events at the new Rec Centre. The free skate on December 31st, 2007 brought out a large crowd to enjoy the new ice pad and we look forward to hosting more events in the near future.
Agent Jim Stacey sums it up by saying “At Tradition Mutual, we recognize the importance of physical activity to healthy bodies and healthy minds. The new Pyramid facility will provide an important place for
Appraisals Sometimes our policyholders have items of a unique and/or valuable nature. To insure these items properly we may request an appraisal. An appraisal is simply a valuation by a third party with expertise regarding the items to be appraised, such as jewellery. Jewellery is the most common item that we get appraisals on. Many times, jewellery purchases include an appraisal. Most of the time, these are not true appraisals. They are one page, with a couple of descriptive lines written on them along with a value, usually in excess of the price
you paid. A proper appraisal is several pages long, very descriptive and details the qualifications and methodologies used by the appraiser in determining the value. Insurance is just one reason to have an appraisal done. They are useful for other reasons such as; trust and estate settlements, partnerships, marketing and sales tool, and charitable contributions. So if you own something out of the ordinary or have been handed down an item from a relative, maybe you should have it appraised. You may be pleasantly surprised.
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Tradition Mutual Insurance Company
NOTES TO THE FINANCIAL STATEMENTS
for the year ended December 31, 2007
1. Accounting Policies The accounting policies of the company conform with those generally accepted in Canada and comply with the requirements for filing with the Financial Services Commission of Ontario. a)
Investments The company classifies its investments as available for sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and reevaluates this designation at each reporting date. Available for dale financial assets, comprising principally of marketable equity securities, are investments that are quoted in an active market but are not actively being traded. All mutual funds and Farm Mutual Pooled funds are classified as available for sale because Management does not intend to trade these investments for short-term profit making. Any increase or decrease in the market value is shown in the current year on the Statement of Comprehensive Income as Unrealized gains (losses) on available for sale financial assets. The quoted market price was used to determine the fair value of these investments. Certain of these investments are not publicly traded in an active market and as a result, are shown at cost.
b)
Investment in Subsidiary The investment in the wholly owned subsidiary is accounted for on the equity basis. The company includes in income the earnings and losses of the subsidiary.
c)
Premiums Earned and Deferred Policy Acquisition Expense Insurance premiums are included in income on a daily prorata basis over the life of the policies. Acquisition expenses related to unearned premiums, which expenses comprise commissions and premium taxes, are deferred and amortized to income over the periods in which the premiums are earned. The method followed in determining the deferred acquisition expenses limits the amount of the deferral to its realizable value by giving consideration to claims and expenses expected to be incurred as the premiums are earned.
d)
Capital Assets Capital assets are shown at acquisition cost net of accumulated amortization to date as provided for using the declining balance method of amortization at the following rates: Buildings 5% Furniture and office equipment 10% Parade cart 30% Amortization of computer equipment is calculated using the straight-line method at an annual rate of 33.33% Normal maintenance and repair expenditures are expensed as incurred.
e)
Provision for Unpaid Claims The provision for unpaid claims represents an estimate for the full amount of all costs and the projected final settlements of claims incurred prior to the balance sheet date. These estimates of future loss activity are necessarily subject to uncertainty. These provisions are adjusted up or down as additional information affecting the estimated amounts become known during the course of claims settlement. All changes in estimates are recorded as incurred claims in the current period. The company is a mutual insurance corporation and a member of the Fire Mutuals Guarantee Fund. Therefore, under provisions of the Ontario Insurance Act, it is exempt from the requirement to use actuarial reports.
f)
Income Taxes The company uses the liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Future income tax assets and liabilities are recognized for temporary differences between the tax and accounting bases of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes that are likely to be realized.
g)
Revenue Recognition Revenue is recognized when the requirements for the sale of the goods or services are met and ultimate collection is reasonably assured.
h)
Use of Estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that could affect amounts reported as assets, liabilities, revenues and expenses. Due to measurement uncertainty, results could differ from those estimates.
i)
Financial Instruments Financial instruments are items which are cash, rights to receive cash or obligations to pay cash at a future date. Unless otherwise noted, it is management’s opinion that the company is not exposed to significant interest, currency, or credit risks arising from financial instruments. The fair value of these instruments approximated their carrying value.
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A Dedicated Employee Donna Kipfer is retiring at the end of March, after thirty-eight years of service to the company.
the company. At that time, she worked in every area; accounting, administration, underwriting and claims. As Edward was looking to retire, Murray Matthison was hired as Secretary-Treasurer in 1987 until l992. Alec Harmer was hired as Secretary Manager in 1992. Alec and the board recognized Donna’s administrative abilities and knowledge of every aspect of the company and in 1994, appointed her, Corporate Secretary.
Donna’s career with Tradition started in the summer of 1970, when she was approached by Foster Henderson, who was the current Secretary-Treasurer of Downie Mutual, to see if she would type policies on an old manual typewriter for him on a trial basis. She was paid $1.00 per policy for this duty. Her help was needed because in 1969, Franklin Buuck became an agent for Downie and brought a sizeable increase of business to the Company. The Downie office at that time was in Foster’s basement, in Sebringville.
In her years with the company, Donna has performed property and commercial underwriting, accounts receivable and payable, administration, assignment of claims, reception, and the list could go on. Donna continued on her role as Corporate Secretary of Tradition Mutual when Downie amalgamated with Blanshard Mutual in 2003.
On a personal note, Donna and During 1974, Foster needed more Burnell live just North of assistance and asked Donna to Donna’s career with Stratford on a dairy farm. They work in his office a few afternoons Tradition started in the will be celebrating their forty-fifth a week. In the fall of 1976, the first wedding anniversary in October summer of 1970 office building for Downie was and have always lived at the same built in Sebringville, right next to residence. They have four the school. As Foster was retiring, daughters, Susan, Leanne, Paula and Gwen. They are Edward Doerr, who was a former Director, was hired as very proud grand-parents of Rachael, Hannah, Chloe, the new Secretary Treasurer (Agent) of Downie in 1977. Emmet, Sofia, Mitchell, Richie and Aidan. Donna continued to work for Edward a few Although Donna has a lot of insurance abilities, our afternoons at first, but gradually it became three or business is about people, and she has an almost four days per week, covering for him when he was fascinating knowledge of people in this community. out writing insurance and on holidays. Her personality on the phone or front counter is In 1987, a new, larger office building was built at our always warm and friendly. present location and Donna was now full time with Our best wishes from everyone at Tradition to Donna and Burnell on a well earned retirement.
Irene Van De Walle Irene Van De Walle has been working for Tradition Mutual for over fifteen years. She originally worked for Blanshard Mutual, handling farm and commercial underwriting and accounting, all on a part-time basis. She left Blanshard Mutual for a short period to focus on family and the family farm, but was asked to come back to help out in accounting.
She was performing this function when the amalgamation occurred in 2003 and we were fortunate she agreed to stay on. Irene has been handling the ever increasing complexity of accounting for Tradition Mutual since then. In December of 2007, due to the impending retirement of Donna Kipfer, who was the company’s Corporate Secretary since 1994, Irene was given the title of Secretary-Treasurer of the company. Congratulations Irene! 9
2. Change in Accounting Policy The company adopted the provisions of CICA Sections 3855, Financial Instruments - Recognition and Measurement and 1530, Comprehensive Income, on January 1, 2007 which address the classification, recognition and measurement of financial instruments in the financial statements and the inclusion of other comprehensive income. As a result of adopting these new standards, the Company recorded a non-cash pre-tax charge of $583,475 for the change in accounting for financial assets classified as available for sale and measured at fair value instead of cost. These changes are reported as a one-time cumulative effect of a change in accounting policy in accumulated other comprehensive income on January 1, 2007.
3. Capital Assets
As at December 31, 2007
Capital assets are stated at cost and consist of the following:
Land Buildings Furniture and fixtures Computer equipment Parade cart
Cost $ 89,390 1,083,247 325,992 194,055 12,469
Accumulated Amortization $ -426,353 200,699 114,863 2,127
2007 Net Book Value $ 89,390 656,894 125,293 79,192 10,342
2006 Net Book Value $ 89,390 672,212 120,806 37,147 ---
$ 1,705,153
$
$
$
744,042
961,111
919,555
4. Investments The company has reported its investments as described in Note 1 for 2007 and at cost for 2006.
2007 Available for sale, shown at fair value
2006 $18,015,566
$16,509,864
The company carries investments as summarized below:
Term Deposits Bonds and Debentures Provincial Municipal Corporate
$
Cost 679,367
$
Cost 530,000
Market Value $ 530,000
1,970,475 294,739 2,367,380
1,979,165 304,651 2,354,354
1,633,914 396,169 2,376,484
1,649,170 413,798 $ 2,454,084
$ 4,632,594
$ 4,638,170
$ 4,406,567
$ 4,517,052
2,543,500 1,500,047 8,515,295 29,620
2,679,654 1,454,588 8,534,199 29,268
2,271,887 1,198,915 8,073,977 28,518
2,615,680 1,297,422 8,104,667 28,274
$17,900,423
$18,015,214
$16,509,864
$17,093,095
1 to 3 Years 230,000
3 to 5 Years 180,000
Common Shares Mutual Funds Farm Mutual Pooled Funds Fire Mutuals Guarantee Fund
These investments mature over the following time periods: Within 1 Year Term Deposits $ 269,367 Bonds and Debentures Provincial 450,847 Municipal 99,998 Corporate --$ Percent of Total
Market Value $ 679,335
820,212 15%
$
$
$
148,744 --270,151
150,000 49,975 938,743
1,220,884 144,766 1,158,486
648,895
$ 1,318,718
$ 2,524,136
15%
14%
56%
Common shares, mutual funds, pooled funds and the Fire Mutuals Guarantee Fund have no specific maturities.
10
$
Over 5 Years ---
Should You Take Collision Coverage Off of Your Vehicle? This is a question that is commonly asked. There are some things that you may want to consider before making the decision to delete this coverage.
You may be required to purchase collision coverage for your rental vehicle when you are not at fault for an accident. If you are involved in an accident which is not your fault and we are able to confirm the required facts to cover the claim under the Direct Compensation Property Damage section of your policy; you may be entitled to a rental vehicle as part of your claim. If you do not carry collision coverage on the vehicle involved in the accident, the rental company will require that you purchase collision coverage on their vehicle to protect them from any loss while you are driving the vehicle.
Is your vehicle financed? If you have financed or leased your vehicle you may be required to carry specified coverage on that vehicle. The financing company may require that you carry collision coverage with a specific minimum deductible to protect their interests in the vehicle.
What are the cost savings? If you are thinking of deleting this coverage from your vehicle, ask your agent or broker how much you will save. The cost of Collision coverage is not always the most expensive coverage on your auto policy.
Are you considering all costs that you may incur in a collision? Many people understand that removing collision insurance from a vehicle is removing coverage for an accident where they are considered at fault. Without this coverage on the policy, you may also be responsible for additional costs such as towing and storage if your vehicle is towed from the accident scene.
Liability Limits
Is the other vehicle unidentified? If your accident involves an unidentified vehicle such as a hit and run; there is no coverage for this accident unless you carry collision coverage on your vehicle even if you are not at fault.
Over the years, one question pops up on a regular basis. Is one million dollar liability limits enough? My usual response was to say that we have hardly ever seen a million dollar claim made. Now, within the last few years, my mind has changed and the million dollar mark no longer looks like an un-reachable limit.
The claims process may be delayed for accidents where you are not considered at fault. If you are involved in an accident where you are not at fault you may be covered for your loss under the Direct Compensation Property Damage section of your policy. In order to proceed under this section of the policy, we have to contact the other person’s insurance company to confirm facts of the loss. We also have to confirm that the other driver has valid liability insurance on their policy. Sometimes this process can take some time. If you carry collision coverage the claims process can start under the collision coverage. If you do not carry collision coverage, we may have to wait to start the claims process until all information is known and confirmed.
Like anything, liability awards have an element of inflation to them. If you have injured someone and those injuries will interfere with their future income, that income, in today’s dollars, is more then it was ten years ago. If that person spent time in a hospital, had to see a specialist or have tests like CT scans, etc., those costs become part of the liability claim against you. Medical expenses can be very substantial. Many times, it’s the higher limit that protects you from having to hire your own lawyer should a lawsuit be made against you in excess of one million. Today, when lawsuits come in on relatively minor claims close to the million mark, it stands to reason that more serious ones are going to start over the million dollar level. Even though your lawyer will just monitor the claim to protect your interests over your policy limit, this could add up to thousands of dollars.
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5. Investment in Subsidiary Tradition Mutual Insurance Company owns 100 common shares of Tradition Financial Services Ltd., a wholly owned subsidiary. The income earned (loss incurred) by Tradition Financial Services Ltd. is reflected on the financial statements of Tradition Mutual Insurance Company as an increase (decrease) in income on the Statement of Income and an increase (decrease) in the investment in subsidiary on the balance sheet.
2007 Investments in subsidiary consists of: 100 common shares Advance to subsidiary Cumulative income earned (loss incurred) by the subsidiary
$
2006
100 599,900
$
(469,057) $
100 599,900 (466,020)
130,943
$
133,980
6. Provision for Unpaid Claims The provision for unpaid claims and amounts recoverable from the company’s reinsurer are categorized as follows:
2007 Type of Unpaid Claims Property Liability Automobile Greenhouse Facility Association and risk sharing pool
$
Gross 755,400 5,489,297 18,630,812 4,988 371,704
$25,252,201
2006 Ceded 563,413 2,941,441 14,058,930 4,988 ---
Gross $ 1,481,011 1,830,025 16,954,092 3,656 335,426
$17,568,772
$20,604,210
$
$
Ceded 603,603 885,535 12,216,175 3,656 ---
$13,708,969
7. Income Taxes Under subsections 149(1)(t) and 149(4.2) of the Canadian Income Tax Act, the company is exempt from income taxes if it received at least 90% of its gross premium income in respect of insurance of farm property or the residences of farmers. If more than 20% of its gross premium income is from non-farm sources, then the non-farm percentage of the company’s net income is subject to income tax. If less than 20% of its gross premium income is from farm sources, then all of its net income is subject to income tax.
8. Related Party Transaction During the year, the company entered into transactions with related parties as follows: The company has advanced an interest-free loan to Tradition Financial Services Ltd. (a wholly owned subsidiary) with no specific terms of repayment. At December 31, 2007 the balance of this loan was $599,900 (2006 - $599,900).
9. Reinsurance Ceded The company follows the policy of underwriting and reinsuring contracts of insurance which, in the main, limit the liability of the company to a maximum amount of one claim of $230,000 (2006 - $225,000) in the event of a property claim, $175,000 (2006 $150,000) in the event of a liability claim, $200,000 (2006 - $200,000) in the event of an automobile claim and $20,000 (2006 $20,000) in the event of a farmer’s accident claim. In addition, the company has obtained reinsurance regarding stop loss coverage.
10. Income Taxes For income tax purposes, the company has losses carried forward from prior years which can be used to reduce future years’ taxable income. These losses expire as follows: 2009 359,624 2014 64,879 2026 158,503 2027 127,342 $
710,348
The potential benefits relating to the available losses have been recorded on the balance sheet as part of future income taxes of $212,622 (2006 - $167,186).
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Tradition Financial Update Change is a constant thing in life.
At the end of the day, the only time high prices are great is if you are selling assets – not when you want to buy.
Global growth, while slowing, is still robust because The stock market developing countries, accounting for 30 percent of volatility we've seen world gross domestic product, are expanding at a lately is the sort of thing rapid and sustainable rate and are continuing to fuel that makes investors nervous as they became demand for commodities from resource rich aware of the steep decline in stock prices. History countries such as Canada. Central banks around the shows that this correction is not world have injected large even close to the worst on record, amounts of money to address the but more importantly it shows credit situation that the United it is best to invest on a that we’ve experienced corrections States has created. Lower interest regular basis, utilizing a of 10 percent or more, 13 times rates encourage both the diversified portfolio in the last 29 years. individual and the manufacturing industries. It is expected that For those who are waiting on the there will be some continued sidelines for signs of recovery or stability, remember short term market volatility as the correction works that the markets will not sound a bell when the itself out. worst is behind us. In times like this, it is best to invest on a regular basis, utilizing a diversified We would like to encourage you to meet with your portfolio, as volatile markets such as these provide advisor to review your portfolio. A financial advisor can help you understand the market and make good buying opportunities and allow you to take prudent investment decisions. advantage of the power of dollar cost averaging.
2007 Tradition Mutual Scholarship Awards
Parade Cart We like to participate in community events and we needed something easy to drive and maintain. So look out for us driving this souped-up golf cart in you next community parade.
And the award goes to‌ Coalby Ashkanase St. Michael Catholic Secondary School Jillian Pyper St. Michael Catholic Secondary School Jerrika Schneider Mitchell District High School Nicole Staffen St. Marys District Collegiate & Vocational Institute Justin Innes Stratford Central Secondary School Melissa Bondy Stratford Northwestern Secondary School Congratulations!
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Directors Joan Schmidt . . . . . . . . . . . . . . . . . . . . . . . .519-625-8168 Glenn Coulthard . . . . . . . . . . . . . . . . . . . .519-393-6653 Donald Brubacher . . . . . . . . . . . . . . . . . . .519-393-6606 Larry Barker . . . . . . . . . . . . . . . . . . . . . . . . .519-348-0084 Douglas Ahrens . . . . . . . . . . . . . . . . . . . . .519-393-6813 John Hudson . . . . . . . . . . . . . . . . . . . . . . . .519-461-1668 Robert Kittmer . . . . . . . . . . . . . . . . . . . . . .519-349-2416 Jim Watt . . . . . . . . . . . . . . . . . . . . . . . . . . .519-284-0066 Jim McCutcheon . . . . . . . . . . . . . . . . . . . . .519-461-0497
Brokers F.A. Campbell & Son Ins. Brokers Ltd. – Mitchell . . . . . . . . . . . . . . . . . . . . . . . . .519-348-8425 Stonetown Insurance Brokers Ltd. – St. Marys . . . . . . . . . . . . . . . . . . . . . . . .519-284-3321
Agents Chris Dietz . . . . . . . . . . . . . . . . . . . . . . . . .519-656-2585 Bruce Hanly . . . . . . . . . . . . . . . . . . . . . . . . .519-229-6560 Kathryn Mallon . . . . . . . . . . . . . . . . . . . . . .519-271-9018 Ian Morrison . . . . . . . . . . . . . . . . . . . . . . . .519-349-2592 Keith Patterson . . . . . . . . . . . . . . . . . . . . . .519-348-8391 Laurel Poirier . . . . . . . . . . . . . . . . . . . . . . .519-348-0482 Robert Ready . . . . . . . . . . . . . . . . . . . . . . . .519-393-6965 Steve Riehl Sr. . . . . . . . . . . . . . . . . . . . . . . .519-393-6708 Steve Riehl Jr. . . . . . . . . . . . . . . . . . . . . . . .519-393-5990 Jim Stacey . . . . . . . . . . . . . . . . . . . . . . . . . .519-284-3326 Lloyd Walkom . . . . . . . . . . . . . . . . . . . . . . .519-348-8050 Lynda Vincent . . . . . . . . . . . . . . . . . . . . . . .519-527-2204 or 1-888-269-0377
Officers Alec Harmer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Manager Irene Van De Walle . . . . . . . . . . . . . . .Secretary-Treasurer
Head Office
Service Office
264 Huron Road, P.O. Box 10 293 Queen Street West Sebringville, Ontario N0K 1X0 St. Marys, Ontario Tel: 519-393-6402 Tel: 519-284-3084 Toll Free: 1-800-263-1961 Fax: 519-393-5185
www.TraditionMutual.com