INSURANCE PROFITS.

Evening Star, Issue 18137, 29 November 1922, Page 12

INSURANCE PROFITS.

to the zmxon.

Sir,—An advertisement in a recent Issue of your paper contains an unauthorised reference to this company. Lest anyone should by such reference be misled into thinking that the business of insurance is S gold mine from which great profits may be obtained by those who get in early 1 wish to draw attention to the following remarks extracted from the chairman’s speech at this company’s annual meeting last month: —“During the first eighteen years of the company’s existence the underwriting result was a low of £61.659. In 1890 it was decided to write o2 capital to ihe extent of £64,628. 'lhis was subsequently restored, but the underwriting

surplus over the first thirty-eight years was not more than 4.75 per cent. The balance at credit of underwriting account for the half-century waa 7.95 per rout.” _ The explanation of capitalisation from reserve funds is therefore not large underwriting profits. Tho explanation is the pursuit of a definite policy not to distribute any portion of underwriting surplus, but to accumulate same for tho_ greater protection o! policy-holders. It is solely owing to the directors having regarded their position as in tho nature o? a trusteeship of funds to bo available for meeting any loss that may occur that the moderate annual surpluses have furnished tho peat security the company now affords. If the underwriting surplus had _ annually been distributed by way of dividend it would have attracted no attention. Neither would the company bo in any better position to-day to fulfil its mission than it waa fifty years ago. Indeed, It would probably have long since gone into liquidation owing to insufficient resources to meet exceptional losses which periodically occur. Tho great Melbourne fire may be quoted as an illustration. Tbp lop amounted nearly to the whole of the paidup capital of all tho Australian and New Zealand insurance companies then doing business in Melbourne. , ■

It may be added that to pay commissions for placing shares of insurance companies and to issuo paid-up shares to promoters are novelties wholly foreign from tho principles referred to above, in the accounts of no successful insurance company that I am aware of has capital credited as paid up not been represented by oaAi or its equivalent, nor nave ( commissions paid in respect of shares masqueraded as an asset.—l am, etc., P. H. Upton, General South British Insurance Co., Ltd. November 23.