NATIONAL MUTUAL LIFE

Manawatu Times, Volume LIV, Issue 6865, 21 March 1929, Page 8

NATIONAL MUTUAL LIFE

Published by Arrangement.

Result of Nineteenth Investigation An extraordinary meeting o£ policyholders of the National Mutual Life Association of Australasia, Ltd., was held last week. The chairman, Mr. J. 11. MacFarland, said: — * • xhis 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 my discretion as chairman and take the report which with the schedules attached covers some 24 pages —as read. “To the uninstructcd reader th« schedules are not interesting, but we must print them to comply with the Companies’ Act. They contain particulars of the principles upon which the 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 safe course. They deal principally with what is called the method ot 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 durations of human life, and it is the proper valuation or the measure of the liability that determines the correctness of an investigation. The three factors that must be taken into account arc the probable rate of mortality amongst the policy-holders, the rats of interest that the investment of the funds will yield, and the. proportion of ■the premiums to bo paid by policyholders that will be required to cover the expenses of conducting the business. Those are subject to fluctuation. Improved Rate 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 continuo indefinitely, and in the present condition of public finances there is the danger that we may be called upon, most improperly, vre consider, to contribute to tne douci* ency in the revenue. “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 adverse fluctuations during the currency of the contracts, and wo claim that such provision has been made on this occasion. The table of mortality that was used 3s known as the Hm fable, which is based on the experience of assured lives, but does not include tho improved experience to 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 tabic. 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 tho previous investigation the rate assumed was 31 per cent, per annum, and the alteration now from 3} per cent, to 3 per cent., increases tho net liability by £1,234,317 12s. Tho expenses of conducting the business are well within the loading or margin of the premium reserved for that purpose. Bonuses Paid.

“The results of the investigation are stated in tho introductory report. If the 34 per cent, basis had been used on this occasion the gross surplus for the three years would have been shown as £4,247,830 Os Od, but this includes part of the 1925 surplus which was brought forward. The net surplus for the period is £3,431,654 13s 6d. We have already allotted as bonuses amongst our members since the last, investigation £1,877,492 ]os, so that there is now available £1,554,102 3s Od. It is proposed to take £418,136 5s of this amount, and add it to tho amount brought forward thus making a total of £1,234,317 12s, which, as I have already stated, will be reserved pormaontly to provide for the change of the interest rate from 34 per cent, to 3 per cent. This leaves £1,130,025 18* fid to be allotted as further bonuSos amongst the members, making a total of £3,013,518 Ss Od as allotted during the three years. The real nature of the bonuses must not be overlooked. They are, in fact, merely returns to tho members of the amounts contributed by them as premiums on their policies in excess of the amounts that have been found to be sufficient to provide the benefits which arc promised under tho •policies. The amount of £1,136,025 18s Od was contributed by not less than 190,199 members, so that tho present allotment is equal to an average of a little less than £0 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, and from this it would appear that wo 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 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 ii good opportunity for reviewing the

progress of the association. Smce the association was established iu 1869 wo 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 £5.712,38S during the last three years—and our funds at 30th September, 192 S amounted to £20,147,329. Our funds have doubled during the last eight years. The amount allotted as bonuses amongst the members has increased from £759,458 for the three years ended 30th September, 1019,. to £3.013,518 for the three years ended 30th September, 1923. 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.” Tho 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. District Office: Rangitikei Street, Palmerston North. W. Grey, District manager. Travelling agents throughout the Dominion.