THE AUSTRALIAN MUTUAL PROVIDENT SOCIETY.

Evening Post, Volume LV, Issue 125, 28 May 1898, Page 2

THE AUSTRALIAN MUTUAL PROVIDENT SOCIETY.

• ANNUAL GENERAL MEETING. A HIGHLY SATISFACTORY REPORT. The 49fch annual general meeting of the members of the Australian Mutual Provident Society was held at Sydney on 13th inst. Sir Joseph Abbott presided. •" THE CHAIRMAN'S ADDRESS. The Chairman, in moving the adoption of the report, said:— "When last I had the pleasure of addressing you from this platform 1 stated that the result of tho year's operations which I then communicated to you appeared ' to indicate that the clouds which overcast the financial horizon in 1893 were beginning to lift .... that not only did there appear to have been an increasing power in the community to effect new assurances, but an increased capacity on the part of those already assured to keep their policies hi force.' lam very glad to be in a position to state now that the results of the past year's work fully justify these anticipations. Both the new assurances effected and the net increase to the volume iv force are larger than in any year since 1892. During the year 1897 we completed and received the first premiums for 12,442 policies, assuring £3,157,404, and we added to the volume in force at the end of the previous year 5488 policies and £994,810 of sums assured. To have secured a net increase in the sums assured of nearly a million sterling is, I think, a result on which we may well congratulate ourselves. Dealing first with the revenue account, I find that our total income for the year has been £2,080,565 (I give you even figures merely) — au amount which exceeds the income of 1896 by upwards of £50,000. The amount received for interest, however, is only £4670 in excess of that for 1896. You will naturally conclude from this that our funds have, not been as remuneratively employed during 1897 as they were duriug 1896. Tins is quite true, for while we realised an effective rate of £5 Os 3d during 1896, the rate last year was only £4 17s 6d, a decrease of 3s 5d per cent. Now, it 'is only right that you should know what are the causes of this reduction. It is only partly accounted for by the increasing difficulty of finding safe and remunerative investments, which is only a passing phase of commercial life, and by the change in the character of investments to which I shall refer later on. You will remember that some three or four yean ago our uniform charge for loans on policies was 7 per jent. As a result partly of persistent agitation on the part of borrowers and partly of a desire by the Board to adapt the circumstances of the Society to advancing needs, and to meet the times, that rate has been from time to time altered until it is now 5, 0, or 7 per cent., according to the amount and term of the loan. The result is that an investment which ut-ed to yield 7 per cent, returned last year an average of only 6 per cent., and this average fell from £6 6s 7d per cent, in 1896, to G per cent, in 1897, and the teudency is still downward. Now, as we' have about £3,000,000 lent on policies, this fall of 1 per cent, in the rate means a reduction of about £30,000 per annum in the surplus, and £30,000 is about 4s 3d per cent, on the average of our funds in 1897. The figures on the outgo side of the account afford in nearly every item abundant cause for congratulation. Notwithstanding the increased sum at risk during the year, the claims by death, including bouus additions, are less by £66,635 than they were in 1896. Of course, the mortality of 1896 was somewhat heavier than usual, and these fluctuations are always to be expected ; nevertheless, the death-rate for 1897 was very light. A few statistics regarding the deaths to which allusion has not been previously made may be of interest. In the first place, I notice that the average bonus per £100 has been £36 12s, aud, of course, a number of the members who died had already surrendered some of their bonus additions for cash. Then the amount paid was just about 2k times the amount of premiums received on tlie policies which became claims. In the next place, the proportion of deaths from violence keeps very high. Last year it was 10i per cent. ; in 1896, it

was 94 per cent. ; and in 1895 103 per cent. Then the lives who died duriug the first year of assurance were 42 per cent, of the total ; in 1896 the ratio was 3*4 per cent., and in 1895 it was 27 ; while in 1894 it was 44 per cent. Fi nally, 1 observe that the average claim (iucluding bonus) per life was £418. In 1890 it was £476, and in 1895 £409. If you look at the lablo of discontinuances on pa^e 7 of the report you will see that the average sum assured (excluding bonus) is — For each policy void by death £350, by surrender £332, and by forfeiture £255. It will be obvious, therefore, that the small policies, which entail the most difficulty and involve proportionately tjie largest expense to obtain, are the most liable to lapse. You . will observe what a considerable sum is being paid on account of matured endowment assurances— j Uhl on £200,000 for last year. There is no uncertainty about these sums, of course, as we know many years in advance how much we shall have to pay out. The sums becomiug due under endowment assurance policies are now increasing so rapidly that we expect by 1908— that is, 10 years hence— %e shall be paying upwards of £500,000 per, annum on ihis account. The amount paid for surrenders is £53,000 below the amount for 1896, and this, it is hoped, may be regarded as another evidence of decreasing financial difficulty among our members. The expenses of management are both relatively aud absolutely less than they were in 1896. We have followed our usual course of not only charging to current expenditure all sums spent in improving the ollice premises, but we have written a further sum of £8500 off their value. We have also reduced the values of our foreclosed properties by £14,290, and we have reserved a further small sum of £10,564 to provide against any possible loss on doubtful securities. The reserve for these now stands at £288,488. As a result of these operations we have added just over threequarters of a million to our accumulated funds, which at 31st December last stood at just under 14 £ millions sterling." Referring to the investments of the Society, Sir Joseph continued: "Loans on mortgage have increased by about £460,000 ; loans to municipalities b} r about £82,000 ; and loans on policies by £129,000. Now, I want to say a word about this last-named investment. In the course of a discussion at our meeting two years ago I expressed the opinion that members ought not to be encouraged to borrow on their policies. An enterprising opponent took hold of this and construed it to mean that I ' gave expression to a sentiment which we presume is beginning to exercise the minds of those entrusted with the management of the institution/ and a very doleful tale has since been repeatedly told as to the disastrous effect which this practice of lending on policies must have on the interests of the office and the welfare of the members. Well, I need scarcely tell you that we are not at all exercised in our minds about the matter, but we are intensely gratified at the enormous advantages which our members are able to enjoy owing to the facilities which we offer them for obtaining loans on their policies. In order to illustrate these advantages I have had a little table prepared in connection with the deaths which occurred last year. You have seen that in 1897 we had 873 deaths of members. Of these no less than 267, or 30*6 per cent., had loans on their policies at the date of death, while 177, or 203 per cent., were in debt to us for overdue premiums, and some of those who had loans also owed premiums. Now, had we declined to lend on these policies or to keep them in force when the premiums became overdue, it is highly probable that the members would have surrendered their policies, and the protection represented by nearly £200,000 would have been entirely lost to their families. We have increased our holding of Government securities by over £300,000. These, of course, are not as remunerative as mortgages, but there can be no doubt about their safety. There is a small increase in the sum represented by office properties owing to the fact that the expansion of our business in Now Zealand necessitated the purchase of additional land aud the erection of a new building in Wellington and the purchase of premises in Napier. Notwithstanding this increase, however, the sum charged as office rent is less than it was in 1896. Owing to the sale of some foreclosed properties and the writing off to which I have already referred, the sum represented by this asset has been reduced by £43,173. You will observe that the sum on deposit with banks has been reduced by £180,000, and we expect ; to still further reduce this during the current year. You will not expect me to deal at any length with the valuation, because that is fully, and I think clearly, explained in the Actuary's report. I think, however, that we may congratulate ourselves that the change from the use of 4 per cent, to 3£ per cent, in the valuation, to which we commenced to give effect in 1894, has now been completed, and that all the participating policies have now, for the first time, beeu valued at the rate of 3£ per cent. lam informed that the reserves now held for the policy liabilities are probably £700,000 in excess of what the}" would have been had we continued employ the 4 per cent. rate. The addition of so large a sura to the reserve for the policies in so short a time has, of

course, had a depressing effect on the annual surplus available for division amongst the members. Now that the change has been accomplished this disturbing factor will no longer exist, lou will observe that the surplus of assets over liabilities is £407,09:3. This, of course, iucludes a sum of £72,L!57 held back last year to assist in passing to the increased reserve rendered necessary by the adoption of the 3£ per cent. rate. We do not, however, propose to distribute tho whole of this sum, and various reserves amounting to £22,458 have been made, leavinga divisible surplus of £445,235, which is now in process of division among the members. The average rate of cash bonus over the whole business is a somewhat larger proportion of the premiums paid than was the case last year ; but inasmuch as there has beeu a further fall in the rate of interest, and as endowment assurance policies are more affected by the rate of interest than are whole life policies, the bonus to the former will be somewhat less than it was last year. There is one matter to which no reference is made iv the report to which I might allude. You will remember that in the last amendment of the bylaws finally agreed to in February, 1897, provision was made to enable the Hoard to grant further assurances on the lives of members resident outside of the Australasian colonies. Some delay took place in carrying through the necessary registration in Great Britain, but towards the close of the year we were enabled to inform our members in the United Kingdom that we were prepared to cousider proposals for further assurance on their lives. We are receiving a very gratifying responsp, and we expect to obtain a considerable acquisition of new business from this source. A reference to page 6 of the report will show you that we already have on our London agency register 1048 policies, assuring £506,589, and yielding an annual premium revenue of £15,6G7. Our total revenue in Great Britain is over £22,000 per annum, and our disbursements of all kinds about £J 2,500 per annum, while we have investments there of £160,000." Referring to foreign criticism of the Society, Sir Joseph read an extract from the Chicago Independent eulogising the character of the institution. He welcomed the representatives of the local Boards in the other colonies. " With the close of the current year," Sir Joseph added, "we shall close the first half-century of our existence. If I continue to occupy my present position a year hence I shall have something to say to you on the subject of a development which is, I think, without a parallel in the financial history of Australasia, a development which has seen the growth of the unpretending, modest little venture of 1849 into the largest mutual life office in the British Empire."