SATISFACTORY YEAR

Evening Post, Volume CXVIII, Issue 33, 8 August 1934, Page 12

SATISFACTORY YEAR

NEW ZEALAND INSURANCE.

SEVENTY-FIFTH ANNIVERSARY.

Sound Policy Pursued

Continued confidonco in the progress of the company and the sound policy pursued by tho directors was expressed at the annual meeting of the New Zealand Insurance Company, Limited, yesterday. Mr. Oliver Nicholson, chairman of directors, presided. In moving the adoption of the report and balancesheet, Mr. Nicholson stated:—

Your directors have much pleasure in submitting to you the report and balance-sheet of your company for its seventy-fifth year, which ended on May 31 last.. As the statement of accounts has been circulated for somo days, I assume that you will take them as read, but before I make any reference thereto it will be necessary under the provisions of the Companies Act now in forco for the auditors' report to be read to you, which I will now ask the general manager to do. Before dealing with the financial affairs of the company it is my sad duty to record tho severe loss sustained by the company and. by the community as a whole in the passing away of our old friend and colleague Sir Alfred Bankart. Sir Alfi«ed joined the board on October 5, 1926, and during the years in which he represented you exercised his widely-recognised ability and acumen in the interests of the company.

In filling the vacancy created your directors considered it wise to vary tho usual practice by endeavouring to obtain a director who was representative of other parts of tho Domiiiion.

Your board was fortunate in securing the services of one so widely known and influential throughout the Dominion and elsewhere as Sir Robert Anderson, and his appointment, it is felt, will meet with universal approval. Following the usual custom, ho offers himself today for re-election. , .

It is pleasing to note that in these difficult times your company has been exceptionally ■ fortunate during the period under review. It is the usual experience of world-wide companies that, even in good years, several fields of operation are unremunerative. During tho past year almost 'without exception branches at' all points have been contributors to the favourable results 'shown in the accounts .of the company. The figures placed before you today should^ bo regarded.as particularly fortuitous. It is, however, gratifying to find -that this exceptionally good result coincides with the year in which we commemorate our 75th anniversary, to which I will make reference later on. UNDERWRITING. Low values of commodities prevailed during the year, and it was only by the much-appreciated efforts of tho company 's staffs at all poiilts that premium income was prevented from unduly falling. I am sure you will regard with satisfaction/ that" tho drop from £1,008,530 to £1,001,328 (some £7207) was not greater. That' this income is well selected and carefully underwritten is evidenced by the fall in losses from £622,039, or 61.68 per cent of income, to £553,886, or 55.3 per cent, of income.

Expenses totalled £330,848, or 33.64 per cent. of income, as , against £333,386, or 33.06 per cent, of income. Tho closest economy is exercised, compatible with equitable treatment of the company's excellent staff and with efficiency in management and control. Thp increase is more than accounted for by taxation. The underwriting profit resulting from the.year's operations amounted to £110,593, markedly above the average of recent years, which has been round about £80,000. As;already indicated, this profit has been contributed to by all fields of our wide operation, but Ht requires a 'lot of optimism to expect that a repetition will be experienced. .

Losses in New Zealand have shown a. recent marked reduction, which, it is hoped, will be maintained. For years this field has been'a most difficult problem to practically all companies, and the Government Statistician's figures (fire and accident) -for all companies State and mutuals, for the twelve years ending December, 1932, show that the profit on £41,042,648 of premium income was but 2.95 per tcenti If the three leading companies' figures are abstracted the rest wrote £26,804,873 o# income for a profit of 0.56 per cent.—l.ls per cent, loss on fire and 2.75 per cent, profit on accident. ' INVESTMENTS. Shareholders will be fully alive to the difficulties in remunerative investment of funds today—a position which is unlikely, to improve for some time. With interest rates at a low point and taxation, it is hoped, at its peak, it is impossible to maintain earnings. This year the net earnings of the company's funds amount to £117,701, as against £120,043 for the preceding year. This year's total has been affected to a greater extent by taxation than last, which more than accounts for the drop of £2342. The net percentage of earnings this year is 4.05 per cent., as against 4.31 per cent, last 'year. Turning to capital values, a more satisfactory position arises. The market values of the company's securities at the close of the year are considerably above the value thereof as shown in the balance-sheet, as you will gather from a statement in the auditors' report. . This being the case, your directors have considered that there does not now exist any particular necessity for keeping the investment fluctuation account at such a largo figure as previously, and they havo decided to transfer therefrom the sum of £100,000 to "general reserve," making the latter £500,000. The investment fluctuation provision will now amount to £52,664, and there must bo a considerable drop »in the value of tho company's securities before this provision is trenched

upon. « With a view of complying with the provisions of the new Companies Act certain reserves held for contingencies in past years, but not then specifically disclosed, appear as a separate item in the balance-sheet, under the heading contingencies reserve, which amounts Ito £145,999. As a result of these various changes the capital and reserves of the company now amount to £ 2,820,311, constituting a very strong position. DIVIDEND. Funds available for distribution are underwriting profit £110,593, interest and rents £117,701, and amount carried forward from last year £104,853, in all £333,147. From this must be deducted the interim dividend of £75,000, leaving £258,147. Tho recommendations which your directors, put before you today for your approval or otherwise are that the usual dividend of Is per share be paid (making 2s per share for tho year), absorbing £75,000; a bonus of 6d per shafo to mark the fact that this year your company has attained its 75th anniversary, £37,500; transfer of £20,000 to the trustee department in trust to augment tho company's staff pension fund, and £10,000 to taxation reserve, bringing it up to £30,000. In recommending to you a bonus of Cd per share, the board not only felt

it fitting that the occasion of the passing of the three-quarter century milestone should, bo recognised, but also that in those difficult times more general good is achieved by putting funds into circulation than by hoarding unnecessarily. The board feels sure that shareholders will understand that this is a bonus ■ granted for a special occasion, and that they will regard it as containing no element of the establishment of a precedent for future bonuses. In putting forward these recommendations, your board would like to emphasise the value which your company is to the Dominion, a point which is at times overlooked. Success always evokes adverse criticism, much of which is unsoundly based. An examination of our figures shows that in the past ten years we havo earned in not underwriting and in net return on investments in New Zealand an amount available for payment of dividend of £423,455, whereas in the same-period we have paid out to shareholders resident in the Dominion £1,278,938. We have, therefore, brought into- New Zealand for distribution in the period mentioned no less than the consequential sum of £850,000. SEVENTY-FIFTH ANNIVERSARY. Referonce has been,made to the fact that this is the 75th anniversary of the company, and Tarn sure shareholders will be interested to learn a little of its histqry. In 1859, when the population of the colony was about 60,000, somo enterprising citizens of Auckland considered the time opportune to form an insurance company, the outcome being this company. -In 1861 their thoughts then turned to banking, and a meeting ot citizens was called for the purpose of forming a bank, to be called the Bank of New Zealand. That meeting was held in the office of the New Zealand Insurance Company. Of these institutions not only shareholders, but all citizens, have reason to be proud. That our early directors were enterprising and far-seeing its evidenced by the feet of almost immediate departure fromHhe idea of being a purely local company. In 1861 an agency was opened in London and Australian business entered upon in 1863. The next movement was to San Francisco, in 1875. We have operated. 53 years in India and Africa, 52 years in China, 51 years in Japan, and 48 years in the Argentine. In 1905 the company was involved in its only serious disaster by the great fire of San Francisco. It says a great deal for the foresight of directors in engendering a policy of paying smaller dividends than results, of earlier years warranted, and thereby building up strong reserves, that the company was able to meet the heavy loss then sustained and still pay its annual dividend. It is a continuance of that policy which has enabled the company to face the 'difficulties of recent years and maintain its strength. At all points of operation the company enjoys the highest of reputations in "the insurance world, and its officers have built up a, name for it that must also be of value to the Dominion, with whose name it has been associated for so long in many lands. DOMINION INSURANCE FIELD. Before closing, I would again touch on the difficulties which are developing in our home field. __ It appears to be a prevailing opinion'that insurance is a veritable gold mine, and today in New Zealand "mutuals" are springing up with great frequency. In a previous portion of this address I detailed the figures, which show a loss of 1.15 per cent, in the fire departments of all companies, mutuals and other competitors, excluding the three larger ones, on an income of nearly £28,000,000, written in the past twelve years. . . It is an axiom in insurance that the wider the average the better the chance of profit and of more steady results. The founders of this company were fully alive to this fact, and to that must be largely attributed the position in which we stand today. An ■examination of results of many companies as old as this, but which did not expand widely, will demonstrate the point. Eeductiona in fire rates will follow, it is true, but past results of most companies'show that anything in the nature of reduced rates may spell insecurity of protection by any but old-established companies .with ample reserves. TRUST DEPARTMENT.

Improved results have been achieved by this important department of the company's .activities, and a substantal increase in the trust funds handled ia disclosed. In order to extend the value of tho department a local board of advisory directors has been formed in Wellington, and we have been most fortunate in securing such strong appointees as Sir Alexander Boberts, Sir Henry Buekleton, and Sir William Hunt to act for us. Continued efforts to increase the importance of the company in this field of operation will be made and shareholders can assist materially, in this direction. . STAPF. Results attained during the past difficult year' speak for the work done by the personnel of the' company at all points. Your board again has pleasure «at this opportunity of < expressing to' you their great appreciation of the efforts of each individual officer —an appreciation in which they feel the shareholders will join wholeheartedly. The report and balance-sheet were adopted. At a subsequent meeting of directors Mr. Oliver Nicholson was re-elected chairman of directors and Sir James Gunson deputy chairman for the ensuing year.—(Extended report published by arrangement.)