NATIONAL MUTUAL LIFE

Evening Star, Issue 20129, 20 March 1929, Page 5

NATIONAL MUTUAL LIFE

RESULT OF NINETEENTH INVESTIGATION An extraordinary meeting of policyholders of tho National Mutual Life Association of Australasia, Ltd., was held on February 26. The chairman, Mr J. H. MaeFarland, said: “ This meeting is called to, receive the report ort the nineteenth investigation of the business of the association, which was made as required by the articles of association as at September 30, 1928. I propose to use my discretion as chairman and take the report—which with the schedules attached covers some twenty-four' pages—as rend. “To the uninstructed reader tho schedules are not interesting, but we must print them to comply with the Companies Act, They contain particulars of the principles upon which tho investigation was made and illustrations 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 sale 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 tho proper valuation or the measure of tho liability that determines the correctness of an investigation. The threo factors that must be taken into account are tho probable rate of mortality amongst the policy-holders, tho rate of interest that the investment of the funds will yield, and the proportion of tho premiums to be paid by policy-holders that will be required to cover tho expenses of conducting the_ business. These are subject to fluctuation.

IMPROVED RATE OF MORTALITY, “ There are distinct signs of an improvement in the rate of mortality, nob 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, iuost improperly, we consider, to contribute to the deficiency in the revenue. “Most of our contracts are for long terms of years, and the first and paramount consideration in an investigation is to moke adequate provision for adverse fluctuations during the currency, of the contracts, and \re claim that such provision has been made on this occasion. The table of mortality that was used is known as the Hm table, which is based on the experience of assured lives, hut does not include the improved experience to which 1 have referred. Our actual death rate during the last three years was only 68 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 rare of interest during the last three years rvaa £5 Its _2d per cent, per annum. At the previous investigation the rale assumed was Si per cent, per annum, and the alteration now from 3J per cent, to 3 per cent, increases the neb liability by £1,234,317 12s. The expenses of conducting the business are well within tire loading or margin of the premium reserved for that purpose. BONUSES PAID. “The results of the investigation are stated in the introductory report. If the 3i per cent, basis had been used on this occasion the gross surplus for the three years ivould have been shown as £4.247,836 Os 6d, but this includes part of the 1925 surplus which was brought forward. The net surplus for the period is £3,431,634 13s Gd, V« 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 £1,234,317 12s, which, as I have already stated, will be reserved permanently to provide for the change of the interest rate from 3i per cent, to 3 per cent. This leaves £1,136,025 18h 6d to be allotted as further bonuses amongst the members, making 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, m fact, merely, returns to the members of the amounts contributed by them, as premiums on their policies in excess of the amounts that have_ been found to he sufficient to provide the benefits which are promised under the policies. The amount' of £1,136,025 18s 6d w r as contributed by not less than 190,199 members, so that the present allotment is equal to an average of a little less than £6 per member.

“The total amount allotted is equal to 40 per cent, of the annual premiums received during the three years on, policies which have participated, ami from this it would appear that wo could with safety reduce our rates of premiums, but our premiums are al-* ready lower than those charged by most offices, and the public have been educated to look for bonuses. Tu effect, when the premiums prove to he 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 provide* 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 ami 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 iin creased from £789,488 for the threai years ended 30th September, 1919, tn £3,013,518 for the three years ended 30th September, 1928. These figures justify tne statement in the directors’report that the association has madaj good progress. “T beg to move the adoption of report.” The report was adopted, and thai chairman announced that certificates for the bonuses that were now allotted would be sent to members at head office; and at all the branches shortly.—Puh<, lished by arrangement.