INFLATIONARY TEMPO SLACKENS

Press, Volume XC, Issue 27435, 23 August 1954, Page 15

INFLATIONARY TEMPO SLACKENS

N.Z. Insurance Year Reviewed , The lower tempo of Inflationary J tendencies and the reduction in the { cost of certain important raw materials had their due effect on the income of < the New Zealand Insurance Company, « Ltd., in the past year, said the annual , man, Mr A. U. Wells, at the annual < general meeting of shareholders held { in Auckland on Tuesday, August 17. 1 At £6,923,875, the premium income ( showed nothing like the rate of in- i crease of previous years, but never- , theless it was a record and £63,537 < above the previous year’s figures. ] Any reduction in commodity prices, < said Mr Wells, particularly for raw j materials, was reflected im- 1 mediately in a decline in fire and , marine premiums, not only in the coun- ‘ tries producing the raw materials but 1 also in those importing them for con- ; sumption or use in manufacture. ; It was obvious that the company could not expect to continue recording ' the rate of premium increase so ap- i parent in recent years. However, the ' directors welcomed the signs of i stability as a move in the right : direction. They preferred to be able to promote a steady growth in activities in preference to violent fluctuations in commodity values and unhealthy increases in prices, bringing ; in their train attending increase in expenses. Indeed, said Mr Wells, one of the : problems which would face the company, in common with most trading concerns, would be to relate the current high expense cost to the drop in values, as it seemed to be true that charges and expense commitments did not recede from their high level in the same ratio as the fall in commodity values. It became increasingly apparent that the virtues of thrift and the benefits of increased production would assume their rightful importance in the programmes of many countries in their efforts to offset this fall in global prices, for it was true of all industries, including insurance, that the only way to continue to operate successfully was to keep costs in their correct ratio. Strength of Sterling The undoubted strength of sterling currency today was a most hopeful sign, of Britain’s recovery from the economic ills which beset her in the difficult post-war period, said Mr Wells. The unremitting efforts of her people were at last being rewarded by the easing of controls, the abandonment of rationing and the prospect of better living conditions than ever previously experienced. “Great Britain’s prestige has been enhanced by her dogged determination to regain financial independence,’* said Mr Wells, “and the confident tone of her communications is evidence that the goal is already in sight. It is not too much to say that, apart from the supreme efforts made by Britain herself, the success of British companies with overseas interests has helped to improve the stability of sterling currency in world markets. “In this connexion insurance companies, including your own, responsible as they are for such a large proportion of existing invisible exports, have played a most important part in bringing about the very much strengthened position of our sterling funds in relation to other curtencies. It is in the earning of hard currencies that this company assists in building up dollar assets for Great Britain and the Dominion, thereby establishing resources which are available to the Commonwealth. ” The results of the year’s operations were reasonably satisfactory, as in the very nature of its calling an insurance company might not always couht on a fairly fixed loss cost, nor upon internal security or sound economy in all the countries where it operated, said Mr Wells. For these reasons it was important to maintain expenditure at a low figure in relation to the claims ratio. Shareholders would have noted the fact that this was the first time for many years that t¥e world had been free of warlike operations, and, given a return to stable peace-time conditions, the company was conditioned to enjoy the advantages which would most certainly follow. The nationalistic tendencies in various countries were no less in evidence than in previous years, and it was a matter for pride that, in fair competition, the company continued to hold its own and in some places even to advance s \its interests and influence. During the year, said Mr Wells, he had visited the United States and Canada in connexion with the company’s affairs, which in North America had assumed an increasing importance In the company’s operations. As a result of this visit, certain measures had been taken which would result in Increased co-ordination between the head office and these important fields. Marine Income Reduced The past year’s underwriting surplus of £310,886 represented 4J per cent, of net premiums and an advance of £57,380 on the underwriting profit in 1953, said Mr Wells. The decline in the company’s world-wide marine income envisaged last year was now more apparent, but, generally speaking, the company’s return from fire, marine and casualty business was well balanced and the company was able to absorb repercussions in any one department without too great a disturbance to the whole account. The directors felt it advisable to curtail operations in certain fields where conditions of trading had proved increasingly onerous* while on- the other hand the company had expanded in other directions offering a more stable prospect of profitable underwriting. Tile company had maintained its busi: ness in the Far East in spite of the diffi- 1 culties which were encountered during the year owing to a continuation of unsettled conditions and the war in Indo-China. The effect of die division of the country had still to be felt, but must inevitably bring about a reduction in revenue from this area. The company continued its policy of making adequate provision for reserves, as was indicated by the addition of £119,000 to the reserve for unexpired risks. The total of these reserves was now £4,244,000, representing 61.3 per cent, of the net premium income, a provision quite adequate, for the unexpired risks on the books at May 31. The company derived a large proportion of its business from the United States, where insurance contracts might customarily extend for periods up to five years, demanding a consequential increase in the reserve ratio. Losses increased in ratio and amount during the year, said Mr Wells. Each department contributed to the increase in losses and in the marine section especially. the tendency to widen the scope of cover to meet increasing competition was having its due effect. Underwriters generally felt that the time had comb when extraneous covers, as an extention to the ordinary marine policy, would need to attract suitable extra premiums. In the accident department the efforts of public communications everywhere .to reduce the toll of the roads were at last having an effect. Although the loss was still far too high, it was expected that underwriters would be able to halt the rising cost of insurance for comprehensive covers and, as the position Improved, give the resulting benefit to the insuring public. World-wide Operations Mr Wells mentioned some specific losses in which the company was involved to illustrate that, whereas the company drew its revenue from so many different parts of the globe, it also felt the effect of widely diversified losses and disasters. The destruction by fire of the General Motors plant in Michigan resulted in total claims paid of 34 million dollars, of which the New Zealand Insurance Co., Ltd.’s net proportion was 105,000 dollars, or £NZ37,500. The company paid net claims of over £60.000 following the Adelaide earthquake and contributed its relevant proportion of the covers on the two Comet planes to the extent of £13,000. Its share of the Singapore airliner crash was £7BOO. Although the company conducted its business as economically as possible, it was involved, like the rest of the business community, in the rising cost of living and salary factors which had been so much in evidence in recent years. There was rea- • son to hope that this trend had reached its peak and signs were not wanting that a more stable economy would be enjoyed in most of the countries from which the company derived its revenue. New business in the trustee, executor and agency department again exceeded the £2 million mark, said Mr Wells. The volume of new business could not be gauged with any accuracy and one would be foolish to predict that the record figures of the past two years would be maintained. It could be said, with confidence, however, that new business would continue to be substantial. The appointment of the company as executor and trustee was in no way contrary to the interests of the estate solicitor. The services of the department and the legal profession were complementary and not exclusive. The report and balance-sheet were adopted. The retiring directors, Messrs R. D. Horton, C. I. Nathan, and A. U. Wells, were re-elected to the board. At a subsequent meeting of the boarC Mr Wells was reappointed dudnnian Mr Borton deputy-chEirman 1