Security and Service       Since 1908 REPORTS Board Management Auditor Actuary FINANCIALS Balance Sheet Operations Surplus Cash Flow Notes

1999 SASKATCHEWAN MUTUAL INSURANCE COMPANY ANNUAL REPORT CORPORATE MISSION Saskatchewan Mutual Insurance Company is dedicated to providing security for its policyholders and employees. Building on an historical foundation of integrity, commitment and superior service, SMI will successfully meet the challenges of the future through strategic planning and innovation. REPORT OF THE BOARD OF DIRECTORS The Board of Directors is pleased to present the 1999 Annual Report to the policyholders of Saskatchewan Mutual Insurance Company. 1999 was another very successful year for your company. Profit from underwriting operations and investment income resulted in net earnings of $1.3 million. Earned surplus increased 8% to $12.3 million at the end of 1999 and assets now total $31.5 million. We continue to experience steady, modest growth in revenue, with net written premiums increasing 6% in 1999. Our strong financial position has once again allowed us to lessen our dependence on reinsurance. As well, our Saskatchewan automobile business has shown very solid growth for three consecutive years. We carefully manage our growth in order to achieve a mix of business that will provide satisfactory and stable profits in the future. The loss ratio increased slightly in 1999, rising to 54% from 49% in 1998. Automobile, commercial property and personal property all continued to have excellent loss experience, while loss ratios for farm property generally increased from 1998 levels. Investment in technology resulted in higher general expenses for 1999. Acquisition and implementation of new information systems caused increased software, hardware and staffing costs. When the new systems become fully implemented and functional, we will be able to provide enhanced service to our policyholders and brokers, and our internal operations will be more streamlined and efficient. Additionally, we will have faster access to better policy and claims information for decision-making purposes. Investment income rose slightly in 1999 because of increased interest and dividend revenue. The Investment Committee of the Board has established and monitors a very prudent and conservative investment policy. Investments increased from $20.8 million at the end of 1998 to $22.9 million at the end of 1999. As always, our brokers have shown tremendous support for the company. SMI remains fully committed to the independent broker distribution system and will continue to be a "Full Partner" in the Broker Identity Program for 2000. The Board wishes to thank management and staff for their hard work and dedication. Development and implementation of the new information systems have required a great deal of extra time and effort from many of our employees and we especially express our sincerest appreciation to them. A.G. Ayers, F.C.A. Chairman R.W. Trost, C.A., HCIP President & C.E.O. Top of Page MANAGEMENT REPORT The financial statements are the responsibility of the management of SASKATCHEWAN MUTUAL INSURANCE COMPANY. They have been prepared in accordance with generally accepted accounting principles, using management's best estimates and judgments, where appropriate. Management is responsible for the reliability and integrity of the financial statements, the notes to the financial statements, and other financial information contained in this report. In the preparation of these statements, estimates are sometimes necessary because a precise determination of certain assets and liabilities is dependent on future events. Management believes such estimates have been based on careful judgments and have been properly reflected in the accompanying financial statements. Management is also responsible for maintaining a system of internal control designed to provide reasonable assurance that assets are safeguarded and that accounting systems provide timely, accurate and reliable financial information. The Board of Directors is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control. The Board is assisted in exercising its responsibilities through the Audit Committee of the Board, which is composed of four non-management directors. The Committee meets periodically with management and the auditors to satisfy itself that management's responsibilities are properly discharged, to review the financial statements and to recommend approval of the financial statements to the Board. R. W. Trost, C.A., HCIP President & C.E.O. S. L. Forbister, C.A. Secretary-Treasurer Top of Page AUDITORS' REPORT TO THE POLICYHOLDERS We have audited the balance sheet of Saskatchewan Mutual Insurance Company as at December 31, 1999 and the statements of operations, earned surplus 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, 1999 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles including the accounting requirements of the Superintendent of Financial Institutions Canada. Chartered Accountants Saskatoon, Saskatchewan February 18, 2000 APPOINTED ACTUARY'S REPORT TO THE POLICYHOLDERS I, Richard Gauthier, FCIA, of PricewaterhouseCoopers, have valued the policy liabilities of Saskatchewan Mutual Insurance Company in its balance sheet at December 31, 1999 and their change as reflected in its statement of operations for the year then ended in accordance with accepted actuarial practice, including the selection of appropriate assumptions and methods, except as described in the following paragraph. Under accepted actuarial practice, the valuation of policy liabilities reflects the time value of money. Pursuant to the authority granted by the Insurance Companies Act, the Superintendent of Financial Institutions Canada has directed that the valuation of some policy liabilities not reflect the time value of money. My valuation complies with that directive. In my opinion the valuation is appropriate, except as noted in the previous paragraph, and the financial statements fairly present its results. Richard Gauthier, FCIA, FCAS February 18, 2000 Top of Page || Financial Statements and Notes

Saskatchewan Mutual Insurance Company Email headoffice@saskmutual.com Copyright © 2000 disclaimer