A.M.P. SOCIETY.

Auckland Star, Volume XXXVIII, Issue 153, 28 June 1907, Page 3

A.M.P. SOCIETY.

ANNUAL MEETING OF POLICYHOLDERS. A YEAR'S RECORD BUSINESS. GENERAL PROSPERITY OF THE COMMONWEALTH. Tie fifty-eighth, annual meeting of the policy holders of the Australian Mutual Provident Society was held at Sydney on the 17th inst., Mr. A. W. Meeks, LUC, presiding. The annual report, which has already been published in detail and which has been circulated among policy-holders, was taken as read. The Chairman, in moving the adoption of the report, said that the new business of the past year, amounting to £4,555,436, was the largest in the history of the society, and reflected in a marked manner the general state of prosperity which had prevailed throughout the Commonwealth and New Zealand during the year, and the continued confidence reposed in the society. A remarkable fact in connection with this new business was that about 20 per cent of the policies issued were on the lives of those who were already members of the society. A life office, however, would obtain small advantage from a large acquisition of new business which entailed a heavy outlay, unless it were able to retain that business on its books.

I " The value of new business to a society is to be determined by its tenacity, and not its magnitude," said Mr. Meeks. '"'You -will see that after all allowance has been made for claims, lapses, and surrenders, there has been a net addition to the assurances of no less than £2,340,193 —a figure which has been exceeded only twice in the society's history —viz., in 1885 and ISB6, when the office was twenty years' younger, and the claims and maturities had not commenced to accrue in large numbers. This feature of the tenacity of the business is one which is characteristic of the society, and which marks it out conspicuously in comparison with all other Australian and most British offices." - - -- THE INDUSTRIAL BUSINESS. The industrial department, the chairman explained, was making all the pro gress anticipated. For .an industrial office to have established a condition of equilibrium between, incoiie and outgo in so short a time was a very unusual occurrence. The department continued to be a valuable ally of the ordinary business, though the credit for it was not shown in the accounts. Notwithstanding the large increase in the new business, and the increased age of the lives assured, the claims were absolutely smaller in amount than for the year 1905. Nevertheless, for claims and matured endowments the society paid out during the year a sum of £1,203.321. FINANCIAL POSITIONAn amount of £990,747 had been added to the accumulated funds, which at the end of the year reached a. total of £ 22,413.527. The society would now be adding from a million upwards a year to its funds, so that the power for good was being largely increased. The directors were fully conscious of the grave responsibility with which they were entrusted in the control of these enormous interests, " and," the chairman added, " it is largely owing to a full sense of this responsibility that they annually present to you the accounts of the society with a candour and completeness not, 1 believe, imitated by any other life office in the ■world. They do this in order that they may invite the fullest criticism of their methods, as they are always ready to consider any questions which an enlightened public opinion may suggest fr consideration, and which may enable them to still further adapt the practice of the society to the advancing needs of the community." After making provision for various contingencies, fully set out in the revenue account, there was a surplus of assets over liabilities of £765,341. and, by setting aside £664,693 for distribution, it was possible to allot a cash bonus equal all round to that of last year. The proposed extension to Great Britain being temporarily hung up, owing to the appeal of Mr Campbell to the Privy Council, the chairman refrained from any criticism.

"The revenue account and balancesheet," he said "set out in the usual exhaustive manner., the monetary operations of the society, during the year, and I do not feel justified in trying your patience by any criticism of the details. You can deduce from them the facts stated on page 14 of the actuary's report, that the rate of interest on the mean funds of the year has been £4 9/7,rfand that is 2d per cent less than in 1905, but in excess of the rate of any other year since 1900; also that the rate of expense has been 13.86 per cent of the premium receipts (excluding of course consideration for annuities). This is a trifling increase on the rate of last year, fully accounted for by the large increase of new business. In fact, dur rate of expenditure may be said to have become crystallised, inasmuch as it has been between 13 and 14 per ceat for 20 years." THE "EXPENSE EATE." I should just like here to say a few words on this question of the expense rate, for the reason that there is no life assurance subject on which opinion is so confused. This confusion does not arise from any want of intelligence on the part of the public, but is due to efforts of some expensively managed life offices to conceal their extravagances by promulgating various nebulous theories regarding the incidence of expense. The -worst of these theories is that eQ iw.9 ai them *gtge« Qng grit*.

affirms that a certain rate, such as "5 or 100 per cent of the new premiums, should be assumed to be the measure of expense of the new business, and that economy of management should be determined by the ratio which the balance _of expenses bear to the renewal premiums. Another holds that the expense of conducting the renewal business should be assumed to be 5 or 7i per cent of the renewal premiums, and that the ratio of the balance of expenses to the new premiums should determine ti* question of economy. It will at once be obvious that where so wide a margin both of method and detail; is permitted no accurate comparison can possibly be made/ since each company will select the mthbd' which favours itself. There would be no room for assumption in the method if offices followed our example, and clearly set out in their revenue accounts what are the respective expenses of new and renewal business. A glance at our revenue account for last year will show that the new business expenses for commission and medical fees absorbed about 52 per cent of the new premiums; if to this were added th'e share of cost of advertising, printing, and administration, which cannot accurately determined, the new business would bo found to cost about 60 per cent of the first year's premiums, and this rate has! been constant with us for many year?. This would bring out the cost'of conducting the renewal business and investing the funds at a little over 9 per cent of the renewal premiums. If we adopted the principle of some critics and assumed the cost of our new business to be the whole of our new premiums, our renewal business would be managed for about 5i per cent of the renewal premiums. But all these theories are mere subterfuges to conceal extravagance in management. Every life office- provides a specific fund from which to defray the expenses of management. This is the loading on the net premiums, and, when the expenses exceed this loading, the office is not living within its means. Now, if you look at the valuation schedule on pages 10 and 11, you will see that at 31st December last we "had an annual provision of £385,018 from which to defray expenses of management, while from the revenue account you will see that the actual expenses of last year were £259.768, so that we have an unappropriated balance of £125,250 per aanurn to go towards providing bonuses for the policy-holders. Any person, then. who wishes to ascertain whether an office is economically or extravagantly managed has only to compare the annual expenses with the annual loading, and he will have an answer at hand. An office whose expenses exceed the loading or annual provision for that purpose is, as I have said, living beyond its mea"B. POLICY LIABILITIES. The question of the valuation of the policy liabilities is one which I sholl not discuss, inasmuch as it is of a purely technical nature, but the methods employed are fully described in the actuary's report. The central feature, however, which everyone of ordinary intelligence can grasp, is that the stringency of the valuation is being periodically increased by a gradual reduction in the rate of interest employed. This reduction, from 3J to 3 per cent, in the valuation rate for all policies issued since Ist January, 1903, represents, I am informed, an increase of liability of about £55,000, which,"under the method previously in use, would be now added to the surplus. Notwithstanding this'and ari increase of £17.000 in the reserve for contingencies (which is quite apart from the reserve for securities shown in the balance-sheet), i we are able to allot a bonus equal to that of the previous year. The history of the past year is strikingly expressed in the following paragraph of the actuary's report:—

The salient features of this report are that a largely increased new business has been obtained without any practical increase in the expense rate: the reserves for the policy liabilities have been further strengthened; an addition of £17.000 has been made to the reserve for contingencies, and the rate of bonus has been maintained at the old level. Briefly, then, our position at the end of the year was: — 1. That wo had in force 206,994 policies, assuring, with bonus additions in force and to be declared, £70.727.430. 2. Thnt our total income was £2,923,678. 3. That our total accumulated fund were £22,413.527.

"MUTUAL" V. '•PROPRIETAEY" OFFICES. During the past year there has been some discussion through the Press and otherwise regarding the relative merits of mutual and proprietary offices. The history of life assurance, especially during the past year, has shown that abuses can exist in the management of mutual as well as in that of proprietary offices, though it must be admitted that there is less probability of it in a mutual than in a proprietary office. In a proprietary office the first care of the management is to provide dividends for the shareholders, and shareholders are not given to asking embarrassing questions, as long as they are receiving good dividends; the policy-holders, of course, have no voice in the management, have no right to ask any questions, except on matters relating to their own particular policies. In a mutual office, on the contrary, the power of determining the methods of the society rests primarily in the hands of the members who elect the directors. It is, perhaps, true that the general body of poljcy : holders does not very much concern itself with details of management, as long as the office prospers, but this body knows that it has the power—and has occasionally exercised it —of stepping in and breaking up the directorate, when the management diJ not appear to be in harmony with the ideas of policy-holders. There is one broad fact which stands out clearly and unmistakably, and that is that in every English-speaking country the most successful and prosperous offices are conducted on the mutual principle; the relation may not be one of cause and effect, but the fact remains, and it may not be out of place to add that the A.M.P. Society is the most successful and prosperous office, mutual or proprietary, or any country." (Cheers.) '

NEW ZEALAND BRANCH.

A RECORD YEAR'S BUSINESS. In the absence of a delegate for the New Zealand Local Board at the Annual meeting, the following memorandum from the local board re the society's position in that colony was read to the meeting by Mr F. E. Whitcombe, one of the head office directors, who recently visited New Zealand with Mr Teece, general manager of the society. •■'The"local board for New Zealand regrets that an untoward combination of circumstances has made it inconvenient for a member to attend the annual meeting this jear* sad v t}us regret,)

is felt the more keenly in that the annual report now under consideration presents more than ordinary features of interest. It is now an ordinary case in the history- of the society" for the directors to announce that there has been an increase in new business and a net gain in business in force, but when they are ible to announce that the increase in /lew business for the year now closed is a record, for the society, it is a matter for special emphasis, for it is not only a tribute to the energy and self sacrifice of the society's indoor and outdoor staff, but it is an assurance to members that the institution is undoubtedly regarded by the people at large as absolutely sound and trustworthy, and one than which there is no better in which to place the annual sum set aside by the careful man to, make provision on bis death for those dependent upon him during his life.

"The New Zealand Board is pleaded that the colony, which- is in its charge, can claim some share of the praise due to the remarkable statement of affairs now laid before members, for the business in New Zealand also shows its records. The new business amounted to £859,417, being £237,503 in excess of the previous year, and £ 140,917 in excess of the previous record year (1S88).

"The amount completed is equal to nearly £1 per head of the whole of the white population of the colony. The net gain, after deducting all void business, including transfers outwards or inwards, was 1084 policies assuring £525,220. The annual income of the branch from all sources was almost £500,000, and the total funds on the branch books amount to £4,141,077.

"The total policies existing on the branch books are 54,694 assuring £9,----427.999.

"The continued stability of the -world's markets for the products of the colony and the adoption of less wasteful methods of management in farm businesses of all kinds has increased the profit earning power of the better classes of land, and capital values have correspondingly advanced, but the local board endeavours to exercise a careful discrimination in the selection of the securities offered for advances, and has no hesitation in informing members that they need have no fear in relation to the society's investments in New Zealand.

""The local board regrets that on this occasion it is compelled to vary a statement hitherto made with such regularity as to make it become almost monotonous. It has to confess that on the 31st December last some interest was in arrear, namely £13 3/2 (since paid), as against £194,611 10/S collected. The total amount invested in loans on mortgage is £2,618,217.

"The industrial Department,' which was inaugurated in the beginning of lOOj, continues to progress in a very satisfactory manner, and at the close of the year thei-e were in existence 2528 policies producing an annual income of £4596. This is considerably more than double what it was at the close of the previous year.

The individual members of the local board, as members of the A.M.P., sincerely congratulate the principal board and the chief officers of the society on the excellent results of their careful and judicious management."

Mr Whiteombe, continuing, said, "I would like also to say that I very recently visited New Zealand in company ■with the general manager, and we inspected the whole of the district offices and a number of the securities held by the society in that colony. I am therefore in a position to- personally confirm the assurances of the local board as to the position of the society and its investments in New Zealand. With regard to the amount of new business transacted there by the society there was one fact which had not been mentioned, but which should be pointed out, and that is that the volume of the new business done by the society in New Zealand was larger than that written by the New Zealand Government Insurance Department for the year 1906. It is most unusual for this state of affairs to exist, and it must be borne in mind that the Government Department has the advantage that all members of the civil service are compelled to insure in that department, consequently it will be seen that the balance of choice on the part of the public was overwhelmingly in favour of the A-MP. Society."