NEW ZEALAND GOVERNMENT LIFE INSURANCE ASSOCIATION.

New Zealand Mail, Issue 691, 29 May 1885, Page 23

NEW ZEALAND GOVERNMENT LIFE INSURANCE ASSOCIATION.

FIRST ANNUAL MEETING. The first annual meeting of policyholders in the New Zealand Government Life Insurance Association was convened for 2 o’clock Wednesday afternoon at the Athenaeum. At that hour Mr H. D. Bell took the chair, about 25 persons being present; and in accordance with notice published in the papers, the meeting was formally adjourned till 8 o’clock at the Drillshed. l , . At 8 o’clock the Drillshed was attended py about 250 persons. Sir Julius Vogel (Colonial Treasurer and Chairman of Directors) occupied the chair, and there were with him on the platform Messrs G. Fisher, M.H.R., G. V. Shannon, H. D. Bell, G. S. Graham, J. C. Gavin (Secretary to the Treasury), J. H. Bethune. N. Reid, and R. C. Hamerton (Public Trustee), all members of the Board of Directors of the Association, THE CHAIRMAN’S SPEECH. Sir Julius Vogel said he should first ask that the report (already printed and circulated) should be taken as read. This was agreed to, and the clause of the Act authorising the meeting was read. , , , , . , ~ Sir Julius Vogel said he had now to ask the policyholders present to. approve the annual report. Before doing so, he might be allowed to make a few remarks upon the nature of the business. The report showed that they were doing an enormous business, and that they had accumulated an immense fund, or rather that an immense fund had been handed over to the Association as now incorporated. He thought he might safely express the opinion that the incorporation of the Association would largely increase the business ; for the incorporation was a step in the direction of popularising the institution by handing over the business to the policyholders, who were the proprietors and shareholders of the Association. The change, however, could not be effected in ft day, and he thought it very satisfactory that the Government, on so short a notice, had been able to hand over the undertaking They had now a million of accrued funds, of which only L 480,000 was in Government securities. Seeing how largely the funds had been employed m. Government investments, and how, in a Colony like this, the investment of money affected an institution, the policyholders must say, he thought, that the handing over in such a condition of the Association was most satisfactory. The object of the Act passed last session was to give the management of the institution into the hands of the shareholders through a board of directors, of whom three were to be elected. There were also to be local boards, and upon that question he should have more to say later on. Meanwhile he would refer to the work done, by the Central Board. First of all, they had decided, to abolish the industrial branch of the institution. Years ago—in 1874, he thought—the industrial branch was first started, and after it had been in work for about eighteen months the then Government, after mature . deliberation, decided that it was not expedient, and abolished it accordingly. It was again instituted, he believed, with some idea that it

would lead up to a system of national insurance, and now the Board had unanimously decided that it would be undesirable to continue to carry the branch on. The branch encouraged insurers in most extravagant manners. The profits depended largely upon the resources of insurers, and a large number of lapses had taken place. Out of 2675 policies issued in that branch last year, 2186 were on female and infant lives, and business of that kind would not, he thought, commend itself to the approbation of policyholders generally. Another step that the Board had determined upou was to increase the rates Qf premiums. Their present terms were very much less than those of other companies, and the increase they proposed to make would still leave less than other companies. The actuaries had recommended that step as in the interests of the policyholders. By charging higher premiums they would be able to give larger bonuses; and such an arrangement, he need hardly say, would be very much in the interests of existing policyholders. That course had been adopted upon the strong recommendations of their actuarial advisers. .The Board had also purchased properties in various parts of the Colony, and he wished to make further reference to that matter. Properties were purchased in Wellington and Dunedin before the new Board came into operation—that in Wellington some months before and Dunedin just previously. The intention was that the purchase should not be made in Dunedin without the approval of the Board, and Mr Luckie, who went to negotiate, was instructed not to conclude it .without the. consent of the Board being obtained. But it appeared that several people were after the property, and his colleague, Mr Stout, recommended that the purchase should be concluded, and, accordingly, the purchase had to be made without waiting for the approval of the Board. That purchase was undoubtedly a good one, and he was informed that an offer had been made in Dunedin of an advance of LIO,OOO upon the price paid. The property yielded a rental, of six per cent, and was not fully occupied. They had also purchased properties in Auckland and Christchurch. The feeling of the Board was that they should not be behind in regard to the premises in which they conducted their business, and they could not have a better investment than city property in each district; for these properties would yield at least six per cent besides the Association having free offices, the capital value of which increased year by year. Most ridiculous stories had been circulated all over the country in respect to these purchases by idle persons. There was one statement that the purchases would reduce the amount for distribution at the next quinquennial distribution. He need scarcely say that there was not a shadow of truth in such an assertion ; the distribution would depend upon the amount of the Association’s liabilities and assets. The buildings were certainly worth. what was paid for them, and therefore they could not reduce the amount of distribution. If the valuation were made at the end of this year, these buildings would go in as assets, and they might even increase the distribution. Then with regard to the staff the Board took over. They took over the staff from the Government of all the old officers, and they had retained it since, with the exception of a few, who had obtained better employment elsewhere. They had only increased the salaries of two officers, and they had decided that in future, in engaging officers, they would incur none of those liabilities incidental to the service under the Government, such as superannuated allowances. Engagements would be subject to one month’s notice, unless otherwise determined, on either side. He had a few words to say about Mr Luckie. The Board had considered it very undesirable to place Mr Luckie in such a position as to lead him to feel aggrieved if, subsequently, any person was appointed to a superior office. They recognised that gentleman’s devotion and services to the institution, but they also felt that he had not had that experience in large offices which would justify their placing him in such a position as to preclude their placing anyone in a superior position, and Mr Luckie acquiesced most cheerfully in the decision of the Board. He might say that no steps had been taken to appoint anyone to such a position, nor, as far as he was aware, did the Board contemplate anything of the kind. They had simply acted so as to enable them to make what appointment they might, at a future time, consider necessary. He hoped he had said nothing which might be construed as derogatory to Mr Luckie; for, in any case, it was hoped that that gentleman’s services would be retained by the Association as long as possible. (Hear, hear.) They had under consideration a proposal for increasing the efficiency of the agencies in all parts of the Colony, and to endeavor to obtain the assistance of policyholders in obtaining new business. Policyholders should realise that they were more largely interested than anyone else, inasmuch as they shared in the profits. They proposed to offer, therefore, small concessions to policyholders placing new business in the hands of the agents throughout the country. He rather regretted that none of their female policyholders had attended there that evening, for he looked upon them as a valuable source. A benefit arising from the connection of the Association with the Government was that of being able to keep its funds closely invested. The Board had concluded to invest a considerable portion of the funds in mortgages and real property, in respect to which they would exercise great caution. The Act at present permitted them to loan up to 50 per cent., and they proposed to ask Parliament to extend that limit to twothirds, because they found that would be necessary in order to get the best securities. They also proposed to ask Parliament, to give, them permission to sell outside the Colony, believing that such a course would be very remunerative. He brought up the estimates of revenue and expenditure for the present year, which ought to have been sent out in the report. They must not place great reliance upon ic, because, as they would be aware, the amount of revenue, as well as of expenditure, would depend upon the new business done, upon which agents’ commission had to be paid. The question had been asked in print, why the Board did not publish the proportion of its expenditure to its income. The writer evidently knew very little about insurance business, or he would have known that the expenditure must of course increase with the business. Last year, expenditure was remarkably small in proportion to the income, representing only 10 per cent., and he hoped the expenditure would. be larger this vear, because that would indicate that they "were getting a larger amount of new business. In regard to the expenditure last year, he had already told them that they had not increased any salaries as yet. They were constantly making fresh appointments, as officers were seduced away by other companies, and they occasionally also got other officers. These appointments were recommended by the Finance Committee, and almost always adopted by the,Board. He mentioned that fact in order to show how ridiculous were the statements frequently made, that he made the appointments. He was a member of the Committee, but he very seldom attended its meetings. There was not a person appointed yet with whom he was person-

ally acquainted. A proposal was 'nowbefore the Board that they should ask. one of their elected members to pay a short visit to England for the purpose of selecting: one or two young men at a moderate salary to come out and join the staff. They thought this desirable, because, although they had a very large staff, there was only one gentleman upon it who had had experience in other parts of the world in insurance business, and that gentleman had gained his experience in the Australian Colonies. They felt sometimes the want of that experience which was gained in large offices. That was simply an idea which they had under consideration. He had nothing more to say about their present business, and he would now come to the question of BO*AL BOARDS. Yesterday he received a telegram' from Mr A. L. Wilson, chairman of a meeting held in Invercargill, at which the following resolution was passed That in the opinion of this meeting the proposal of the Central Board to create local boards in Auckland, Christchurch, and Dunedin is premature.; and, further, that before local boards are established a vote of the policyholders should be taken on. the subject.” He had also had a private telegram, which said that the meeting was “got up by his political opponents; that there were 25 people present; that the meeting was a hole-and-corner one, advertised only on the morning of the evening it was held ; and that a majority in Invercargill was in favor of local boards. Now it was ■’ absurd, Sir Julius Vogel continued, to suppose that the Boaid had any personal feeling on this matter. It had been insinuated that he wished to get these Boards appointed, but the idea that he wished to use political patronage to get gentlemen appointed at a a salary of LIOO a year was contemptible. There was no greater nuisance to be met with , than the distribution of political patronage; for in using it for every person you pleased you displeased ten or twelve. These appointments rested with the Board—not with him, and. he hoped those gentlemen would be too conscientious to make such appointments other than in the interests of the Association. Really, he , ought to apologise to the meeting for referring to the subject of these rumors and statements. A rumor spread through the Colony that there was a political issue in question in connection with this matter. There had been, it was true, a difference of opinion on the Board is respect to it, but the subject had been argued out harmoniously, and on its merits. They had not been able to agree, and he thought he might say on behalf of . a majority of the Board, that it would be satisfactory to have the opinion of the policy-holders upon it. (Hear, hear.) Hethought that opinion ought to be taken. He had proposed local boards because he considered that they would extend the powers of policyholders, and that was, the object he had in view allalongin the incorpo-* ration of the Association. If the Boards were appointed many thousands of policyholders would have local Directors, and they would have a large discretion in the selection of their Directors. As regarded the cost, that would be a mere trifle to an institution with such an income as theirs. For LIOO each, a clerk’s salary, they would get Directors, gentlemen.of position and influence, who would . be invaluable in representing the institution and getting business for it. At present they had agents all over the country, but they had no iu-' fiuential gentlemen in the centres who would help the agents and help to disabuse the stories industriously circulated to the discredit of the Association.” These Boards would, be of. great assistance in enabling the Association to invest money. He did not say that they should give to those Boards the power of investing money, but when they had applications for investment . it would be very satisfactory to be able to refer to disinterested persons whom they knew, and whose opinions were reliable. He had heard it stated that local boards could not be trusted ; that if they were allowed to invest money, or recommend investments, they would misuse the money. He must say he thought that was a libel, upon the gentlemen of other cities. Surely it would be possible to obtain gentlemen in other parts of New Zealand than Wellington, who were worthy to be entrusted with responsibility. If the argument he alluded to held good, then the elective . principle was a mistake altogether. For. himself, he was anxious for the time to arrive when the elective principle would be more fully carried out; and he looked forward to the time when the Government would give entire control to the shareholders. (Hear, hear.) Members ot these local boards, as business increased, would become members of the Central Board, so that in time tho elective element in the Central Board would be largely increased. In his opinion, if the policyholders were unwilling to have these local Boards, they ought immediately to increase the elective interest in ; the Central Board to give policyholders a larger share in the management. . He wanted to increase the power of the policyholders as far as it was possible to do so. There were one or two things, however, which tho Government, he thought, could not part with, even if they gave up control to the policyholders. The Government must determine what should be the nature of the investments of the Association ; the approval or disapproval of the basis upon which the business was carried on ; and the approval, more or less, of the officers appointed to fill the higher offices. These points, it seemed to him, the Government must retain, and that wa3 the ultimate result to be looked to. In his opinion that result would be brought about by local boards. The Government * was giving a guarantee, and while they gave that guarantee they expected to get a certain amount of control in return. He desired to see this matter of local Boards fully ventilated, and therefore it had been decided to allow any policyholder to move a motion without notice ; and upon such a notice a poll could be demanded by two policyholders. In the poll proxies would be allowed. In conclusion, Sir Julius cautioned the policyholders that many reports were spread about in reference to the conduct of the Association. Policyholders should remember that they were shareholders, and if it was found necessary for them to make complaint or inquiry, he was quite sure that the members of the Board, so far as lay in their power, would give any information. He formally moved the adoption of the report. Sir Julias had spoken for nearly any hour at the conclusion of his speech. Mr H. D. Bell seconded the motion. Sir Julius Vogel would be glad to answer any questions. In answer to a question, the Chairman said the proposed increase of rates would not affect present policyholders. The Board would, of course, keep faith in all contracts they had made. Mr George Fisher, M.H.R., said the only point on which he differed with the hon Chairman was that he had been too general. The hon gentleman was most amiable and genial, and it was therefore very hard to differ from him ; but affability and geniality would not make elevenpence into a shilling.. In regard to the purchase of costly properties, that expenditure was, he considered, unjustifiable. Gentlemen who had been directors of local companies would understand in what manner this expenditure would interfere with their

promises. The Dunedin expenditure was objectionable on general as well . as legal points, since the Act provided, in section 76, that the Board should only purchase such land and premises as were necessary for its business. However, the mischief was done, and he only mentioned it in order that similar mistakes in the future might be averted. The practical working out of this would be that the properties would not return 6 per cent. The Dunedin property was not returning that percentage now; and even if it were,. what sort of business had they drifted into ? On -the site they had purchased were some shops and an hotel, and as soon as they had completed the purchase they received a. request to paint the hotel and to make certain alterations in it, or the Incensing Committee would not grant the license. Thus they had drifted into shop and hotel renting. The Board was too late to stop the Dunedin purchase, but they were not too late to stop the Auckland one At proposal was mad© tliat tncy should make a purchase of this property for L 22,000, and eventually they got it for 119,000. A motion was proposed by himself that the purchase should be deferred until after this meetin" : but, by the casting vote of the Chairman Mr Tole, an Auckland gentleman who was not insured in this Association), the motion was lost. The building purchased at Auckland would have to be rebuilt before they could make any use of the site. 1 hat was what be called a fundamental .mistake. But a fundamental defect in the constitution of the Association, was the connection of the Association with the Government. A great deal was made of the State guarantee, but to sup pose that this guarantee was absolutely necessary was a great mistake. The Association •was not leaning upon the Government- -the Government was leaning upon the Association. They had now accumulated funds of a million, and how much had the Government in use of that amount? 1658,000. And yet the hon. gentleman had told them what a great advanta"e it was for the Association to be able to go to°the Treasury and borrow 120,000. He (Mr Fisher) would like to quote some figures in respect to the money held by the Government, and made up, assuming the sum to. be 8559,000. The Government held L 309,000 at 4 1 per cent. With interest compounded that would return L 88.379 at the end of the qninquennium; but if it were placed (as it could be) among the mercantile community, at 6 per cent, it would yield in the same time 1/121,215, showing a loss to the Association of L 32.836; and at per cent, L 132.865 showing a loss of L 44486, or at an average of 6i per cent., a total loss of L 39,000. I he 1,200,000 held by the Government at 5 per cent, would return 1/55,256 ; at 6 per cent, 1,67,524. showing a loss of L12.26S ; at per cent., L 74.017, showing a loss of L 15,761; or a total loss by the money not haying been invested with the mercantile community of 1/45,104 at 6 per cent., and 1/63,247 at 64 per cent. So that they lost 1,45,000, which ou"ht to come into their pockets, but did not do so. It really meant that a large proportion of the people of the Colony who were not insured in the Association benefited from the investments of policyholders. That was most unfair to the policyholders. The Colonial Treasurer ought not to be Chairman of this Board, for he was a large borrower; and ought he to sit and adjudicate upon his own applications for loans? If the principle were good, then every man who applied for a loan should take the chair. In fact, the hon. gentleman had himself expressed his wish to be relieved of the duties he now fulfilled. . Sir Julius Vogel.: The sooner the Colonial Treasurer gets off the Board the better. Mr Fisher : So I think, sir. Sir Julius Vogel: You will have to get someone whq understands the business. . Mr Fisher said that was very cutting sarcasm. As to the proposal to employ a general manager, he might as well sav at once that he would oppose that proposal. Why should they not give these good billets to their own good men ? First of all it was supposed that they must have this new man ; now it was not so essential. His own opinion was that in Mr Kichardson they had a gentleman who was quite equal to filling the position. And the institution was extremely fortunate in having in its service Mr Franklyn, another very talented gentleman. These gentlemen had not, perhaps, stood in high places ; but he looked at a man’s ability, not at his age or reputation. As to local boards, the Central Board had considered that this _ was a Question upon which the policyholders should be consulted. Did the Dank of ew Zealand, the Loan and Mercantile Company, or the New Zealand Shipping Company, have local boards scattered all over the. country? If it was desired to give several gentlemen LIOO a year, for Heaven’s sake give it to' them, and let them hear no more aboutut. If the local boards ever had power to deal with the funds, then good-bye to the Association. Mr Fisher having been frequently and loudly applauded, resumed his seat with the hope that he had said nothing which would be construed as personal. Mr H. D. Bell hoped it would not go forth that the utterances of Mr Fisher were the views of the elected Directors. He must say with reference to the Christchurch purchase, M.r Fisher was the gentleman who went to Christchurch to inspect the site, and Mr Fisher was the gentleman who recommended the purchase. Mr Fisher, in fact, was making statements, •not perhaps knowingly, which must not be believed. (“What about the Auckland purchase ?”) He (Mr Bell) went into that question, and, as a business man, he came to the conclusion that the purchase was a fairly good one, and be believed that they could get to-day more than they paid for it. Did the policyholders •consider it a fair thing that the platform. of this meeting should be used for a speech which would be published in all the papers next day, and would be used by all agents of other companies against them. Was it wise that it should go forth that this was a concern run for the purpose of the Government? The main thin" which enabled the agents to get business was °the State guarantee. Yet a member of the Board said, and the meeting cheered the sentiment, that the sooner they got rid ’of that guarantee the better. Nothing had been Written, said, or done which would be so disastrous to the Association as the speech just delivered ; and he asked whether the policyholders thought the Directors had so little probity or trustworthiness as to allow the affairs of the Association to be carried on as Mr Fisher had said. Mr Fisher made a personal explanation. The Christchurch Droperty was purchased for D 10,225, and with it they got a brand new building - built in the most modern style of architectural art. Bet the meeting mark the difference between the character of that and the Auckland purchase. Mr G. S. Graham said he must reply to Mr Fisher. That gentleman contrasted the two purchases. So far as the Christchurch property he would ,say nothing.. As regarded the Auckland purchase, Mr Fisher did not direct the attention of the meeting at the same time to the fact that of that property they had LSOO a year rent for one part, L2OO for another, and they were to get L 350 per annum in a few weeks. That was in return for an outlay of L19.00Q. As to local hoards, he should heartily coincide with any movement to place the matter in the hands of the

policyholders. For the present e thought these boards were not required.

Mr F. A. Krull was sorry that the dirty linen had not been washed at home. He was "lad to hear certain alleged irregularities exposed by Mr Fisher, and if what that gentleman said about the Act was true then they should have to put Mr Jellicoe on to the Board. But looking at the gentlemen by whom the Chairman was surrounded, he felt entire confidence in them. He hoped it would not go forth that Wellington people were selfish—that they wanted all the good buildings, and . would ’ allow none to he established in other parts of the Colony. Let the policyholders be united in the effort to make their institution superior to any in the Colony. He hoped the meeting would support the Board, and give them handsome offices and local boards if they wanted them Other companies might be larger than this at present, hut this one would excel them all if the policyholders only stuck together. (Applause). Mr W. G. Tustin, jun., rose to object to the adoption. He pointed out that it was stated in the report that, as a large majoritv of the Board was in favor of the proposal for local hoards, it was not considered necessary to place it before the policyholders Yet the only members of the Board who were placed there Vy the policyholders objected to that proposal. He thought Mr Fisher had acted in a thoroughly proper manner. Mr E. T. Gillon asked whether the adoption of the report would preclude a motion being brought up in reference to local Boards.

The Chairman replied : No ; that the adoption of the report was simply the acceptance of a statement made by the Board. Sir Julius Yogel, replying, said the Board rather wished that the opinion of the policyholders should be taken on the question of local Boards ; and it would probably be better, now, after what had been said, to have a poll. There was a great deal of truth in what Mr Bell said about Mr Fisher’s speech, but it was only fair to say that the speech, as a whole, was a very fair one, and was calculated to do the Association some good. As to the legality of buying premises, that question had been submitted to the solicitors, and they had held that the Board had the power, to make the purchases under another section. (Mr Fisher : “ No, it was the other way about.”) His idea was that they should not be behind other offices in the way of buildings. They were going to put up a fine building here, and they had no doubt but that they should let it as far as they wanted to. They ought to have the best sites and the best buildings, as compared with other similar companies. As to the profit of the investment, if gentlemen knew to what an enormous extent properties had gone up in the Colony, they would feel assured that there could be no loss on that account. Mr Fisher remarked that the Australian Mutual Provident Society gave L 14,000 for a magnificent corner site at Auckland, but this Association had given a larger price for a barrack.

Sir Julius Yogel said that Company had a very good site, but it was not, he believed, so good as theirs. (Laughter.) They must bear in mind that they must not look, at these matters from a too local point of view. He hardly thought Mr Fisher was correct in saying that as the Government owed the institution money, the latter couldnot go to the Government and borrow money. The securities were held by the Government for a certain amount, and the investment was a very great concession to the Association. It was absolutely essential, if the Government was to give the Association guarantee, a certain amount of the Association’s funds should be invested in Government securities. They had not turned away one single application for money; and, while the Association had had those securities the Government had been badly in want of some means for investment of Government funds—so much so, that only the day before yesterday he had to telegraph Home authority for the investment of L 120,000 of trust funds. Mr Fisher would excuse him for saying that he knew nothing about the business of such an Association as this. For him to propose to the policyholders that they should do away with the Government guarantee was to propose that they should be idiots. No person would be so stupid as not to see that it would be much better to invest with a company like this, which had a large guaranteed reserve, than witn an ordinary mutual company. Policyholders in this Association had this advantage, that if the actuarial calculation was that the liabilities would be larger for any period than the assets, then the Government had to guarantee the deficiency. What other mutual office in the world, he should like to know, offered such advantages. As to appointing a manager, Mr Fisher’s remarks upon that head were hardly wise, but he (the speaker) agreed with him in so far as concerned the appointment of a colonial man if possible. Mr Fisher had said that the Bank of New Zealand had. no local Boards, but the managers for that institution in Dunedin and Wellington did not probably get less than L2OOO a year, and if they (the Government Association) could get similar gent’emen for a few hundreds a year, they would be very lucky. Then Mr Fisher said, “If local Boards have control of the funds, good-bye to the institution.” It was very unfair to suggest that immaculate persons fit to handle the funds of the institution were only to be found in Wellington. There were men just as capable, and just as honest, in other centres of the Colony. And if Mr Fisher believed what he said, then, to him, the sooner they did away with the elective element altogether the better. (Applause.) The motion for the adoption of the report was then put, and carried unanimously. LOCAL BOARDS. Mr G. Beetham, M.H.R., moved, “That the appointment of local Boards be referred to the policyholders of the Association, and that a poll be taken.” Mr Howorth seconded the motion. Sir Julius Yogel pointed out that, this motion did not give the meeting the option of expressing an opinion upon the local Boards. Mr Beetham explained that his sole object was that the whole of the policyholders in the Colony should express an opinion. (Applause.) Sir Julius Vogel repeated that this motion did not decide the question either one way or che other. Mr Beetham thereupon moved, “That it is undesirable that local Boards should be established in the chief centres of the Colony.” Mr Howorth seconded the motion. Mr Krull said the motion was a trap ; the mover wanted the meeting to express its disapproval of the proposal. The latter motion was put, and carried by a large majority. A poll was thereupon demanded by Mr Beetham, who explained that he wished the matter to be referred to the whole of the policy-holders. Sir Julius Yogel announced that in accordance with the demand of two shareholders a poll of the policyholders would be taken on the question on that day one month, in Wellington. The motion originally moved by Mr Beetham was not put, and the meeting terminated about 11 o’clock with a vote of thanks to the chair.