NATIONAL MUTUAL LIFE

Evening Post, Volume CVII, Issue 58, 12 March 1929, Page 6

NATIONAL MUTUAL LIFE

RESULT OF NINETEENTH

INVESTIGATION,

An extraordinary meeting of policyholders of the National Mutual Life Association of Australasia, Ltd., was held yesterday. The chairman, Mr. J. H. MacFarland, said:—

"This meeting is called to receive the report on the 19th investigation of the business of the association, which was made as required by the articles of association as at 30th September, 1928. I propose to use niy discretion as chairman and take the report—which with the schedules attached covers some 24 pages—-as read. "To the uninstructed reader the schedules are not interesting, but wo must print them to comply with the Companies' Act. They contain particulars of the principles upon which the investigation was made and illustrationi of the application of those principles. They enable those who are familiar with the business of life assurance to form an idea, if the principles have been properly applied, as to whether the results of the investigation represent correctly the position of the company, and whether it is steering a safe^course. They deal principally with what is called the method of the valuation of" the contingent liabilities. "Every policy or contract of assurance represents a liability as soon as it is issued. It is an undertaking to pay a specified amount on the happening of an event which depends upon the duration of human life, and it is the proper valuation or the measure of the lia; bility that determines the correctness of an investigation. The three factors that must be taken into account are the probable rate of mortality amongst the policy-holders, the rate of interest that the investment of the funds will yield, and. the proportion of the pre- | raiums to be paid by policy-holders that Will be required to cover the expenses of conducting the business. These are subject to fluctuation. : 1 IMPROVE!) BATE OF MORTALITY. "There are distinct signs of an improvement in the rate of mortality, not only amongst assured' lives, but in the general community; but we have in recent years had serious disturbances of the rate caused by war and pestilence. It is impossible to forecast the rate of interest, but it is not safe to assume that the present high rate will continue indefinitely, ■ and in the present condition Of public • finances there 'is the danger that we may be called upon, most improperly, we consider, to contribute to the deficiency in the reve« nue. "Most of our contracts are for long terms of years, and the first and paramount consideration in an investigation is to make adequate provision for ad-verse-fluctuations during the currency of the contracts) and we claim that suoi provision has'been made on this occasion. The table Of mortality that was used is known as the Em table, which is based on. the experience of assured lives; but does not include the improV- ! Ed experience td which I have referred. Our actual death rate during the last three years was only 58 per cent.; of the rate expected according to that table. It was assumed that the investment of the funds would yield interest at the rate of 3 per cent, per annum in the future, whereas our rate of interest during the last three years was &5 14s 2d per cent, per annum. At the previous investigation the rate assumed was 3^ per cent, per annum, and the alteration now from 3* per cent, to 3-per cent, increases the-.net liability by £1,234,317 12s. The expense*) of conducting the business aro well within 'the loading or margin of' the premium reserved for that purpose. BONUSES PAID. "The results of the investigation are stated in' the introductory report. Ii! the 3J per cent, basis had been used on this occasion the gross surplus for the three years would have been shown as. £4,247,836 Ob 6d> but this includes part of the 1925 surplus which was brought forward. The net surplus for the period is £3,431,654: 13s 6d. Wo have> already allotted as bonuses amongst our members since the last investigation £1,877,492 10s, so that there is now available £1,554,162 3s 6d. It is proposed to take £418,136 5s of this amount, and add it./to the amount brought forward, thus making a total of £1,234,3.17- 12s, which, as I have already stated, will be'reserved permanently to (provide for the change of the interest rate from 3J per cent, to 3 per cent. This leaves £1,136,025 18s 6a to be allotted: as further- bonusoH amongst the inemborß,.Bialdng a total of £3,013,518 8s 6d, as allotted during the three years. The real nature of the bonuses must not be overlooked. They are, in faut,. merely returns to the members of the amounts contributed by theni as premiums on their policies, in excess of the amounts that have been found to,.be sufficient to provide the benefits which' are .promised under the policies. The 1 amount of £1,136,025 18s •6d was contributed by not less than 190,109 members, so that the present allotment is equal to sw average of a little less than £6 per member. "The total amount allotted is equal to 40'pe't cent, of the annual premiums received during the three years on policies iwhichhave participated, and from this it would appear that we could with safety reduce our rates of premiums, but our premiums are already lower than those charged by most offices, and the public have been educated to look for bonuses. In^effect, when the premiums prove to be more than sufficient to provide for the benefits promised, the members are contributing for more insurance than they think they are contributing for, as the whole of the surplus belongs 'to them, and is applied to increase their policies. It is doubtful if they could make better use of the amount of the excess premiums if it were left in their hands. PROGRESS OF ASSOCIATION. "An investigation meeting provides a good opportunity for reviewing the progress of\ the'association. Since the association was established in 1869 we have received as premiums and considerations for contracts undertaken £44,357,786, of which £9,104,465 was received during the last three years. We have paid to policy-holders and their representatives £25,220,274 —£5,712,----388 during the last three years—and our funds at 30th September, 1928, amounted to £29,147,329. Our funds have doubled during the last eight years. The amount allotted as bonuses amongst the members has increased from- £789,488 for the three years ended 30th September, 1919, to £3,013,518 for tho three years ended 30th September, 1928. These figures justify the statement in the directors' report that the association has made good progress.

"I beg to move the adoption of the report."

The report was adopted, and the' chairman announced that certificates for the bonuses that were now allotted would be sent to members at head office and at all the branches on Ist March.

[Published by arrangement.]