NATIONAL MUTUAL LIFE.

Evening Post, Volume LXXXVII, Issue 55, 6 March 1914, Page 3

NATIONAL MUTUAL LIFE.

FOURTEENTH #CTUARIAL REPORT AN extraordinary general meeting of members of the National Mutual Life Association of Australia, Limited, was held at the head offices, Melbourne, on the 25th ult., for the purpose of receiving the actuary's report on his fourteenth investigation into the affairs of the association, and also the directors' rejioit thereon. Mr. Andrew Newell, chairman of directors, said : — Only two months ago we met to receive the report of the directors on the business of the association for the year ended 30th September, 1913. To-day I have to submit to you the report on the fourteenth investigation which was made by the actuary as at the same date. These two kinds of reports are peculiar to the business of life assurance owing to the nature of its transactions. The first contains particulars of the year's workj of how many new policies have been issued ; how much we have received from our members as premiums ; how much interest we have received ; how much wo have paid to our members as claims under policies or otherwise ; how much we have spent in expenses of conducting the business, and how much we have added to our funds. It also contains particulars of the manner in which the funds are invested. Now, important as all this information is, it is not sufficient to enable anyone 'to measure the actual progress that a life company is making. For that purpose periodical valuations must be made of the assets and liabilities of the company, and that is what we call an actuarial investigation. I will not _ at* tempt to tell you how these investigations are made — I know they involve an immense amount of labour — but from the results we are able to learn exactly how we stand They show us whether the premiums and interest we have >-eceived have been sufficieht after paying the expenses of managment, to pay the claims that have arisen under our policies, and to provide the reserves that we know will be required to meet such claims in the future. If it were found that they were more than sufficient, the whole of this surplus, after reserving such an amount as the directors think fit, out of abundant caution, to meet unforeseen contingencies, is in a purely mutual association such as ours returned to the members in the form of additions to their policies or reversionary bonuses. PROFITS. I will tell you very briefly what the investigation that has just been com* pleted discloses. The information is contained in the papers you have in your hands, 'but which you have not yet had time to examine. During the three years which ended on 30th September, 1913, we received a-s premiums £2,877,473, and as interest and fees £1,000,284. We paid, away to our policy holders £1,545,889 and we- added to the assurance fund £1,805,828. i When the investigation was completed it was found that the amount of the assurance fund was £650,02't 4s lid more than the amount that was required to provide for all our liabilities and that (£650,024 4s lid) is tho amount we saved out of the premiums and interest received during the three years, and we are now about to, hand it back to themembers, by increasing the sums assured under their policies. The increase to the total sums assured which this cash surplus will provide exceeds £1,100,000. (Hear hear.) Now, it may be asked^bow did we come to receive this large amount of over £650,000 during the three years in excess of the amount we actually required to provide the benefits promised under our policies? It may he said that the premiums we charged were too high, and that it would have been beti ter to leave the money in the pockets of i our policy-holders — and *.hat is true if they louid have made any better ( use of it t-hau wo have done in increasing their assurances. But in calculating the premium that should be charged for any particular benefit, several contingencies have to be taken into account that are subject to more'or less fluctuation— such as the rate of interest and the rate of mortality — and tho prudent actuary, ■after calculating the amount required according to the best data available, in order to provide against adverse fluctuations, and to make assurance doubly cure, adds a margin or loading to the premiums. If tHere are no adverse I fluctuations thto loading is in a mutual company credited to the member, and it follows -that, other things being equal, the larger the premium charged for any 1 particular kind of policy the larger the bonus should be. This is a point that io often overlooked in comparing results of policies. Our premiums are rather lower than tbe premiums usually charged by companies . INVESTMENTS Well, during the three years we have had no adverse fluctuations* . We assumed at the beginning that our funds [ invested in first-class securities would I yield 3£ per cent, per annum. This may seem a low rate, but you must remember that many of bur contracts last during the lifetime of the policyholder, so that- we have to look far ahead. Our investments actually yielded £4 17s Id per cent, per annum, or £1 7s Id per annum above the rate assumed. We assumed that a certain number of deaths would occur amongst our policyholders, according to the table prepared by the Institute of Actuaries of the rate of mortality amongst healthy males, known as the "H.M. Table." I am happy to say that our policy holders proved to be a remarkably healthy class, both males and females, | for the deaths during the three years were only 60 per cent, of the number that the tables led us to expect and provide for. Our expenses of raanagej ment were also well within the margin allowed. The . results which we now have before us far exceed any previous achievej ments of the association, and this we had a right to expect, for an institution that is founded on such sound pnn- | ciples is bound to progress unless those who are responsible for its management I culpably fail in their duty. PROGRESS. But oub progress has been greater than even the most sanguine of its early members could have looked for. Let me call your attention, to a few figures which illustrate this. The association was founded in this city of Melbourne on 20th August, 1869. _ It was established without any capital, and therefore there was no body of shareholders; neither was there any class of founders or policy-holders who were to derive any advantage from its operations that was not fully shared by every policy-holder. Tho articles of association provided that, if any surplus resulted from tho transactions of the association, it should be divided among the Policy-holders in proportion to their contributions to the surplus. This hns been strictly observed, and the distribution of the surpluses which ha/c accrued from time to time has added to the sums assured a total of over four and a-half millions. At the end of five years, the first investigation was made. Tho total income for the five years was £31,124. We receive practically this, amount now every week. The total funds were £15.564 at tho end of five years, now, at tho end of 44 yeai.s they exceed eight million:). Those wens the days of what looked like t-nidll thuu>a, but they ale nut to be doepibed. for duiing them the foundation!; wore- being laid broad and „ de«p, At lie end of 28 gears the n* j

come had increased to £283,000. At the end of 44 j'ears it was £1,395,000. The payments to policy-holders began with an amount of £3282 in the first five years. During the 44 years they have amounted to seven and a-half millions^ In tho first nine years of this association's existence, its operations were confined to Victoria, but in 1878, being well established here, the first move outwards Avas made, and a branch was established in Adelaide. Since then, as opportunity has offered, branches have been opened in all the capital cities of Australasia, and in London, Capetown, Colombo, Bombay, and Singapore. GROWTH OF THE OFFICE. These facts will givo you an idea of the great progress that we have made, the rate of which has been accelerated during the last three years, as this report shows. The full significance of the growth of the institution cannot be appreciated unless we remember the peculiar character of its business and constitution. It is a collection of individuals for the most unselfish purpose, to make provision for the dependents of those who die, and for the old ago of those who live. The administration of its affairs is in the hands of its members absolutely and without exception. A more beneficent institution than a mutual life association has never been devised by the mind of man. (Hear, hear.) Its benefits are 'not confined to its members only; they are _ distributed throughout the community. The premiums paid by the policy-holders, comparatively small and insignificant in themselves, when combined form a fund that is 'of ( immense value in assisting commerce and the development of the country. To settlers and other property-owners in the different countries in* which we transact business, we havo, in tho course of years, lent sums exceeding £10.000,000. At the present time over £5,000)000 of our funds is so invested, to the advantage of both parties. Before asking you to adopt tho report, which is the formal business of this meeting, I must acknowledge our indebtedness as members to the army of officers and agents at head office and the different branches, who are responsible in a large measure for the results of the last three years. They have done good work everywhere, and deserve our thanks. The work of the investigation has occupied the time of a part of our head office staff for many months. As I have indicated, an immense amount of work was involved, and it was done skilfully and expeditiously under the ' personal supervision of Mr. C. A. Norris, the secretary of the association, and Mr. A. L. Gower, our chief clerk. It now only remains for me 'to move tho adoption of the report. < MrJ Walter Madden, who seconded the motion, thought members should congratulate themselves on the striking success of tho association's operations. The future was most promising. Mr. R. Bowdler, who was deputed by a number of members in the Railway Department to ask a question, wanted to t know whether, in view of the new buildings being erected by the association, members who, like himself, joined the association nearly twenty--nvo years ago, were receiving any more bonus than those who recently joined. Mr. E. J. Stock, the actuary, upon being requested by the chairman to reply, said, "Oh, most certainly you do." The chairman announced that bonus certificates would be distributed on Ist March.