FACTS FOR INVESTORS.

Auckland Star, Volume LXIV, Issue 190, 14 August 1933, Page 4

FACTS FOR INVESTORS.

N.Z. INSURANCE CO. ;. WEATHERS FINANCIAL STORM. 3i ■ SOUXD, WEALTHY, PROSPEROUS. 3 After three years of the worst economic slump known in the memory of most people the £1 shares of the Xew Zealand 3 Insurance Company...are worth to-day £2 | 12/0. In fact investors arc literally tumbling over themselves in the rush to 1 become part proprietors in this sound and j well-managed institution. The reason is not far to i?cck. The tragic events o? the past few years have taken heavy toll of 3 most industrial undertakings. Many have' > been shaken to their foundations by the i economic cyclone. Scores have either reJ duced or ceased the payment of dividends, while mortgages are completely out of favour for reasons that are too obvious to need recapitulation. 1 Looking around the investor, discovers j that in all the range of securities —not ex--1 eluding Government stocks—insurance scrip is the only class that id still paying j the same rate of dividend as was ruling •> before the slump. This is not to say L that the difficulties of the past three ) years have not left their impression upon ' the operations of insurance companies. 3 They have, and that all too plainly, but conservative management over a long . period of years had placed them in a posi- '. tion where they were well equipped to 1 deal with all vicissitudes. Past Years Compared. 5 Reverting to the N.Z. Insurance Co. in particular consideration of the results over * a period of years gives the following interesting comparisons: —

In comparing the position of reserves in various years, it should be noted that in in 1925 £150,000 Was capitalised, iu 1927 £150,000, and in 1930 £300,000. It "will be seen that earnings over the latest period are the lowest for ten years. This is readily understood, for there have been many factors which operated relentlessly against successful trading. In the first place new business is necessarily harder to procure in times of depression. Moreover, the need of extra precautions against accepting doubtful risks is a feature that must not be overlooked. Expenses, too, are swollen by excessive Government taxation. It is a necessity that the company shall hold a substantial portion of its assets in Government securities, and here its earning power has been seriously curtailed by the action of Parliament in lowering the interest rates payable on Government bonds. When all these matters are focussed for consideration it will be recognised that'those responsible for the conduct of insurance business must have a worrying time in their endeavours to maintain operations on a profitable basis. The -wide spread of the company's activities, which is a source of strength under normal conditions, must, in these days, add materially to the anxieties of the board and management. Business is carried '■ out in all New Zealand and Australian, centres, in the United Kingdom, . India, South Africa, America, Egypt and the. Fa'- East. Not one of these countrlr? has escaped the world-wide depression; business is difficult ih*'all of them, and every security must be zealously guarded. Sources of Income. The following table, giving the respective, proportions of the profit shown by the underwriting and investment sections, is of interest in this connection: — *.- '•. Underwriting Investment profits. earnings. £ £

It has been a policy with the company for many -years to limit its yearly distribution to shareholders to approximately the amount obtained as interest from investments, leaving underwriting surplus for the year to swell the reserves until these reached a level justifying the board in making a bonus . distribution. This policy has not been strictly adhered to in the last three years, but, considering all the facts, few will challenge the wisdom of the temporary change. Times have been exceptional, and 'with reserves already high enough to satisfy the most conservative it would have been regrettable to have lowered the rate of_ dividend at a time when the, distribution was doubly welcome to shareholders. Expenses and Losses. Further interesting details of the business are shown in the following table: — Ex-

Premiums are the lowest for a decade, but losses, fortunately, have decreased by over £48,000, and the loss rate, though still high, is better than it was a year ago. Expenses, too, have been radically curtailed, with a consequent improvement in the ratio. Balance-sheet Items. Following are balance-sheet items over the past three years:— LIABILITIES. 1031. 1032. 1033. £ £ £ Capital 1,500,000 1,500,000 1,500,000 Iteserve fund 350,000 350,000 400,000 [teserve for unexpir e d risks 575,000 527,500 50G.000 Invest, fluctuation & cont. a/c. . 120,000 149,251 151,070 Taxation provision .. . 20,000 20,000 20,000 ipprop. for i una seer- i t a i n e tl , ,_„ losses 209,740 190,241 200,431 Sundry creditors . 170,226 111,477 110,770 ,

rotal assets 3,125,915 3,033,050 3,073,133

These figures show that the reserve for I unexpired risks has been lowered by ' £70,000 since 1931, and in the same period j general reserves and investment fluctua- , tion accounts have increased over £80,000. < On the assets side the item bonds and debentures again command most attention, comprising practically two-thirds of the total assets. The following additional particulars of j this item may he noted:— .

Bonds and Debentures. 1 (Government and Municipal Securities.) 1931. 1932. 1933. £ £ £ U.K. N.Z. & Aus. . I,CGI,SOS 1,591,490 1,593,005 Union of S.A. .. . 07,001 57,001 57,001 Dominion nf Can 17,404 — —■ U.S.A. .. 193.140 192,724 194,183 S. Am'lca M).57(i M 0.570 5>0,559 I Japan . . 22,794 22,794 22,794 | Debentures (not Govt, or : in u 11 i- ; cipal) . 19.052 19.052 19,752 1 Totals . £2,051,071 £1,964,237 £1,073,50S ' Since the 1932 balancing there has been a definite appreciation in gilt-edged, 1 securities in Great Britain, Newf Zealand ; and Australia, and as a consequence the . aggregate item at £1,973.8)3 is probably again worth its face value. Under the 1 ' circumstances the . establishment of an j investment fluctuation and contingency , account —now standing in credit at over ] £150,000 —though a wise precaution, may prove to have been unnecessary. The Trustee Branch. i; In 1914. the company inaugurated a '; trustee branch, which, in its early stages,, '. was a charge on general profits. It has, however, made steady progress, and by now doubtless makes a satisfactory con- | \ tributiou to the'profit and loss account. The following table shows the amounts ■ held in trust in the years named: — £ £ 1925 .. 3.958.014 1930 .. 5.757.223 1020 .. 4,555,170 1031 .. 5,97(1,370 1927 .. 4.941.519 1032 .. 5,800,101 1928 .. 5,371,257 1033 .. 0,157,8-18 1029 . . 0,533,740 The Investment Aspect. The following table shows the market value of the shares at this period, in

Based on latest valuations and dividends, the present purchaser receives just over 3% per cent per annum on his outlay.

( ; Profits. Dividends. Reserves. ) £ p-c. £ £ 1024 .. 187,850 12} 112,500 1,081,070 1923 .. 214,87.1 13.2 118,750 1,205,05(1 1926 .. 197,898 11.9 125,000 1,139,207 1927 .'. 215,511 12i 131,250 1,252,189 ) 1928 ..210,794 11* 137,500 1,191,225 > 1929 214,287 11J 137,500 1,285,814 ) 1930 . . 231,499 12 143,750 '1,401,551 1931 .. 210,809 10 150,000 1,150,943 1932 .. 204,201 10 150,000 1,130,930 > 1933 .. 194,048 10 130,000 1,101,932

1025 103.277 111,507 3020 80,158 317,240' 1027 00,153 125,33S 102S S0.521 . 130,271 1020 *0,210 134,077 1030 01,380 140,111 1031 7i;,r>73 110,290 1032 77,806 126,455 1033 74,004 120,011

Ex- Loss pensc Premiums. Losses, penscs. Rate. Kate. £ £ £ p.c. p.c. 1924 1,026,045 008,214 348,973 59.2 34.0 3 92.j 1,072.761 603,650 342,334 50.2 31.9 1920 1,080,012 033,973 355.380 59.48 33.33 1927 1,121,425 004,084 338,588 59.02 30.10 1928 1,150.232 094,344 301,307 00.30 31.41 1929 1,183.974 724,190 302,573 01.17 30.02 1930 1,199,382 737,719 302,277 01.51 30.21 1931 1,145,257 740.245 353,439 64.03 30.80 1932 1,050.351 670,714 349,331 63.80 33.20 1933 1,OOS,530 022,039 333.3S7 Cl.GS 33.07

ASSETS. 1931. 1032. 1933. £ £ , £ Mortgages .. 62,000 52,000 52,000 Shares 158,658 152,943 180,589 Properties . 417*148 417,680 418,740 Bonds and debentures 2,055.971 1,904,237 1,973,893 rixed dep'sts 77,215 116,458 158,152 iccrued interest and rents 45,719 38,710 38,534 3ranch bal'cs 190,359 175,054 133,294 Dash 122,844 115,988 117,922

recent years:— Paid to s. (1. £ s. d. 19124 12 U 1 10 0 1025 12 0 1 15 0 10a(J 14 0 2 0 6 1027 14 (I 11!) 0 11)28 10 O 2 2 9 1!J20 10 0 2 8 0 1080 lii 0 2 5 0 1081 20 0 2 1 3 103a 20 0 2 0 0 1083 20 0 2 12 U