SEVENTY-SIX YEARS.

Auckland Star, Volume LXVI, Issue 186, 8 August 1935, Page 4

SEVENTY-SIX YEARS.

NEW ZEALAND INSURANCE SOUND AND PROGRESSIVE. RESULTS IN , PAST DECADE. The latest accounts of the New Zealand Insurance Company indicate a maintenance of the strong financial position which has been manifested throughout the whole of the past decade, and, indeed, for the greater part of the 76 years it has been in existence. Profits are not on the same scale as they were before the slump set up new standards in our economic structure, but they are. nevertheless, satisfactory and enable a reasonable return to be made to shareholders without in any degree impairing the provision for fully protecting policy holders by the maintenance of adequate reserves. Past Years Compared. The following table given the result of yearly operations during the past decade: — Earnings. Dividends. Reserves. £ P.c. £ £ 1920 .. 107.3ns 11.9 12.-i.OOO 1,189,207 l!»-'7 .. 1>15.511 12J 131,250 1,252,18!) I!>2S .. 210,704 11J 137,500 1.1!)1.225 920 .. 214,287 11J 137,500 1.285,814 3030 .. 231,499 12 143,750 1,401,55! 1931 .. 216,869 10 150,000 1,150,943 1032 .. 204,261 10 150,000 1,130 950 1933 .. 194,048 10 150,000 1,101,932 Vβ- •■ 22S '- >!)5 *!-5 '187,500 1,320,311 103j .. 197,225 10 150,000 1,393,119 ♦Includes bonus. Sources of Income. The following table, giving the respective proportions of the profit shown by tne underwriting and investment sections, is oi interest in this connection: Underwriting Investment profits. earnings. J O2 " 80,158 U7 £ 240 ™il 00, I.™ 125 358 JSP* 80.521 130,271 - fson 80,210 134.077 Jg|O 91,880 140 114 R%}, 70,573 140,296 HE 77.806 126 453 J2f3 ■■••• 74,004 120.044 U?,t 110,593 117,702 lfW 80,070 117,148 Total earnings include the surplus obtained from the underwriting of insurance risks and the interest earned from investments. In both classes conditions have undergone vital changes since the post war slump. Values of insurable property have fallen tremendously. bcarcely any asset that has an insurable m , ° ~ s been immune in this respect, lake the case of a house insured in ]£r'O for £1000, and considered a good risk. 10-day the insurable value of a similar iroperty .might be £600. As rates have not been raised—they have, as a fact, been lowered—it is apparent that the annual premium from such a property is little more than half the amount obtained in the "good old days." To a greater or less extent this change in conditions has been operative throughout the whole field of insurance. Under the necessity of maintaining a large portion of their funds in a liquid state leading insurance coin panics have relied to a considerable extent upon the income obtained from investments. In former times they could depend upon earning close to 5 per cent interest on the millions set aside for the protection of policy holders; to-day the rate is closer to Vh per cent. Thus although the reserve funds invested have not decreased—on the contrary they have increased -the revenue from this source has dropped by £23 000 sinco 1931. Over the latest term underwriting profits have shown a substantial decline as compared with the results of the previous year. On that occasion, however, an exceptional reduction in sustained losses was chiefly responsible for the more favourable showing of the net returns. Expenses and Losses. Further interesting details of the business are shown in the following table: — Kx. Ex- Tx>sfi pense Premiums. Losses, penscs. rate. rate. £ £ £ n.c. ]>.c. 1926 . 1,00<i,012 633,973 355 380 50 48 . - :.",3' i 1027 . 1,121,425 Wi4.654 :::!8,.".5R 50 02 ,'!IU!I 1028 . 1,150,232 694,344 301,:!07 00.30 .".I 41 1921) . 1,183,974 724,190 302,573 01.17 3O 02 1930 . 1,199,382 737.710 302,277 01.51 30 21 1031 . 1,145,257 740.245 353.439 04I!. , ! .",0 80 1932 .1,050,351 670,714 349,331 03.80 :«.26 1933 . 1,008,530 0J2.039 333,387 01.68 33 07 1934 . 1.001,328 553,880 330,848 55.32 :!304 1035 . 1,050,702 590,778 345,03S 50.70 33.20 Figures in the column giving returns of premiums collected may be specially emphasised. They arc equivalent, to gross turnover in an ordinary trading business and their maintenance in recent years, despite lowered levels of insurable goods and services, is a tine tribute to the skill of the management and the zeal of the staff. Premiums, it is true, can be inflated if doubtful business is accepted, but the management of the New Zealand Insurance is not likely to relax its habitual conservatism, knowing that any I lapse in this direction must sooner or later be reflected in swollen loss returns. For the latest period losses arc nearly £43,000 more than they were a year ago, but are still considerably lower than the average over the last decade. Expenses are higher and seem to indicate bigger efforts to secure business. Balance-sheet Items. Following are balance-sheet items over the past three years:— LIApiLITIES. 1933. 1934. 1935. £ £ £ Capital 1,500,000 1,500,000 1,500,000 Reserve fund 400,000 500,000 500,000 Reserve for unex pi re d risks 506,000 506,000 531,000 Conting. res. — 145,991) 153.55T Invest. fluctuation and con. a/c. . 151,079 52,663 56,690 Taxation provision 20,000 30,000 40,000 Approp. for unascertained losses ... 205,431 150,953 138,308 Sundry creditors . 110,770 90,336 87,632 ASSETS. 1933. ■ 1934. 1935. £ £ f Mortgages .. 52,000 52,250 46,250 Shares .... 180,589 174,441 239,800 Properties .. 418,749 417,550 440,703 Bonds and debentures . 1,973,893 2,104,593 2,035,631 Fixed dep'sts 158,152 154,002 147,127 Accrued interest and rents 38,534 38,283 30,010 Branch bal'cs. 133,294 150,968 171,916 Cash 117,922 123,004 107,443 Total assets 3,073,133 3,224,101 3,234,060 The most notable' change is the substantial addition of £25,000 to the reserve for unexpired risks, bringing the total to £531,000, beiug 50.53 per cent of premiums accepted. At the annual meeting on Tuesday the chairman of directors, Mr. Oliver Nicholson, said in this connection: "Many companies rely upon a 40 per cent appropriation, but we prefer to work upon undeniably safe margins." Contingency reserve, an item introduced for the first time last year, and started off with ■ the handsome credit of £145,999, has been increased by a further allocation of £7500, and the investment fluctuation fund has gained by £3000. The items mentioned all indicate a deliberate intention to further strengthen the general financial position. "Taxation provision" and "appropriation for unascertained losses" are items that the management can gauge with reasonable accuracy, and the movements shown probably represent actual variations in the business. On the assets side a notable feature is an increase in the item shares, and a 1 corresponding reduction in bonds and debentures. The chairman declined to given in open meeting details of these i shares. However, he did vouchsafe the information that they were not shares of companies in a similar line of business, adding that they had been bought with sound judgment, and had proved a profit-

able investment. Fixed deposits are lower, while "propertiee" have increased nearly .£30,000. Branch balancee and cash in band arc closely associated, and an increase 111 the former is practically counter balanced by a decrease in the latter. Total assets reached new record figures at £3,234,060. The following additional particulars maybe noted: — Bonds and Debentures. (Government and Municipal Securities ) 3!>:i3. l!) 34. lO.Vi. £ £ <£ U.K.. N.Z. & , Ana 3,503.005 1,704,501 1.C44 500 UnjonofS.A. 57.G01 57,601 57 008 U.S.-A 104,183 190.29.3 1110,411 S. America . 86,550 8(i,1(i4 79.85(5 rwP"' %*i- • "• VM 41 '' 1U 37,9(52 Other debentures 19.752 23.533 25,1915 Totals ... 1,078,883 2,104,593 2,035,631 The total amount invested in bonds and debentures is less, and may indicate that the management has decided that some •portion of its funds may give better returns if invested in some other form. It is worthy of note tl.at the auditors in their report explicitly state that "the aggregate market value of the securities as at May 31 is in excess of the amount appearing in the balance-sheet." The Investment Aspect. The following table shows the market values of the shares at this period in recent years: — , . Palil to £ s (1 1024 12 o l io o 1023 12 O 1 13 O l!>-<> 14 0 2 O G 1027 14 0 1 10 C 1028 16 0 2 2 0 1!>-'!) l<s O 2 8 O 1830 16 O 2 5 O 1031 20 O 2 1 3 1032 20 0 2 0 6 1033 20 0 2 12 <i 1934 L'f> o :; 2 (i li>3o 20 0 3 7 3 Based on latest valuations and dividends, the present purchaser receives under 3 per cpnt per annum on his outlay. For many years it was a policy with the company 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 nakiug 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 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 ehareholdere. The Trust Branch. 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 contribution to the profit and loss account. The following table shows the amounts held in trust in the years named:— £ f 1025 ... 3,988.614 1031 ... 5,07(5,370 102(5 ... 4,538.170 1032 ... 5,800,161 1027 ... 4,041,510 1033 ... 0,157,848 1028 ... 5,371,257 1034 ... 5,555,107 102!) ... 5.5:;:!.740 1!)35 ... 5,821,380 1030 .. . j,757,223