COLONIAL INSURANCE COMPANY OF NEW ZEALAND.

New Zealand Mail, Issue 978, 28 November 1890, Page 33

COLONIAL INSURANCE COMPANY OF NEW ZEALAND.

; , .nmiinarv general meeting? ofshare- ; AnWt r£ Company was held at the of Commerce on Monday, to consider authorising the sale of the Com- :; Rations » Th wag a falr]y large • Aiceandthe Chairman, Mr J. B. Harin opening the meeting* said : ? ii.men the object in calling you to--®tatd submit a proposal to dispose . Company’s business to the Commercial Assurance Company of London, and circular issued to you on Octocer jrt® „,.i n ine the resolutions which are subyou to-day for your consideration, that these negotiations were first T® need about the 21st August last and Emitted to writing on the 29th ; this same f #i«r also requested the shareholder receivfTto consider the information conveyed as **fctaitial* now it was a matter of surprise ;■ that the contents or rather the reso- ; S anpeared not only in the local press, K were communicated by the Press Associa- : E n to all the leading papers in the Colony, tl °? ‘ rG published on the following morning. : Ss that some shareholder handed the ! • l«r to the representative of another insuri and he, no doubt thinking that ■ advantage might accrue to his own com--Jfnvbv this information being made public, P tof the upper part cf the circular and sent 2 resolutions only to the local press, etc., : “ nnblication. There has also been some mmment and dissatisfaction expressed at some r»‘her extensive purchases of shares having ten made in Wellington since these negotiaS commenced, and it has been insinuated Lt the buyers were favoured with inforir.ato by those connected with the Company, V j,y giving such information, violated the tot reposed in them. This, like the jnformaf don re the circular, admits of an explanation, which I trust, will be considered satisfactory to those who feel injured. The Commercial Union have had for some time past business connections in New Zealand, and on entering into these negotiations advised with its repreKntative in this city and informed him of the proposed purchase. This information came to ijtoin the ordinary way of business, and teeing a good investment, did not hesicate to Uke advantage of his opportunity. Your Directors have since ascertained that the intended sale was also known in Auckland »nd in Dunedin. They exceedingly regret that those Bales have taken place, but. at any v rate, the information was not supplied by them, and they have not taken advantage ‘of their position to increase their holdings. They did consider the propriety of communicatihg with shareholders, but it was decided (hat it could not be done without risking great injury to the Company’s business. I will now refgr to the special business which lias brought where to-day, and to fairly place the matter before you for your consideration it may not be rat of place to briefly sketch the history of the Colonial Insurance Company from its inetpfion, ar,d give you in as few words as possible nnoutliue of the fluctuations in the fortunes of the Company. Early in 187 b the great success which had attended first the New Zealand, to the South British, and afterwards the National, Standard, and the Union Insurance Companies, induced a few gentlemen, who desired that Wellington should have some of the good things going, to take the necessary ifepe to secure a local Insurance Company. ! Io this the first Directors took a most active

psrti.and it was largely owing to their exertions tbit the Company was brought into existence. -Be Company was registered on the 27tli April, 1818, and forthwith commenced business with i Board of Directors, composed of HonC. J. Phw&zyn (chairman), G. Randall Johnson life-chairman), and Messrs Jacob Joseph, E. fW, Mills, A. de B. Brandon, I. W. Nathan, and the Hon M. S. Grace. Mr G. S.

Graham was general manager, with Mr Frank Allen as assistant manager. The first fire policy taken out in the Company was on May Sib, 1878, by Mr E. W. Mills, for LIOOO, and the first marine policy on May 31st, 1878, for 1120, by Mr Jacob Joseph, and of the original Directors, these two gentlemen only, who gave r the Company its first business, now remain on the Board. At the first meeting of shareholders held in the Athenaeum Hall on the 23th April, 1879, the Chairman was able to present a most satisfactory balance-sheet shewing that for about nine months’ trade premiums had been received to the extent of 132,988, and a net profit of L 9935 had been tecured, out of which all the preliminary exBies were paid, amounting to L 3215, and 20 carried forward. Although this was rery good the balance carried forward was less than that carried forward at the first meeting of shareholders of any of the other recentlyjwned New Zealand Insurance Companies. The next in order being the South British, Jith L 7564 for six months’ trading, the National, with L 17.000 for same period, the Union with L 14.000 for nine months, and the Standard with L 9900 for twelve months, so that even these early figures indicated that the golden days were on the wane, and the Chairman regretted that the losses has been so toe, many of which might be traced to incenmanem, probably the result of bad times which «en commenced to break over the Colony as “ 8 result of the “land bo.om’’ of 1878. The •econd year of the Company’s operations thowed a premium income of L 61,780, and the b sn an a S a ' n regretted that the losses Had been heavy, and were largely owing to the “tnmercial depression, but nevertheless the wmpany, with the sum of L 6720 brought fur’Whad a credit balance of L 15.109, out of *mch a dividend of ten per cent was paid to “8 shareholders, LIO.OOO placed to a reserve SJy. an d L 629 carried forward. At this . attention was called to the severe . competition which had then Bet in, in insur- , 08 r& to, and which were below what allowed reasonable margin for the risk incurred. In «port . containing statistics relating to Fire kmi . £nsura nce Companies of New Zea* “on compiled.for the Government with the Joct of furnishing information for the purthe Property Tax, it was therein stated Jr' the figures furnished it must be appnontthattherates of premiums were as a whole ad«n / an<£ cons ?que»tly the profits were not ruinate to the liabilities incurred; yet these y.. and lower were continued. The third *om f ti Company's career ended with a , iAiJj .11,234 for disposal, out of which a i idaJ , °f 1® per cent was paid and LSOOO hlSorin ° A he r . eaerVo fund, making it now J hi-ti™! 0 ’ "t this meeting the greatest satis»esr n waa expressed at the results of the - laltiL . most sanguine hopes were enterthefJL a \ t . othe£utute o£ the Company. At v f “®e reference was made to the low '‘•letv TMmiums., which were far too low for Up to this period fair success had atthe new Company, but a change takes * n 1882, when the shareholders ttes*. i e " together, the report was not a Biljoiu'r j n ®* / The balance brought forward of disappeared, and L 7500, half of the ™ ‘tod, had also gone to pay the losses of

the year. There was therefore no dividend. 1 he following year fortune again.leaned a little towards the Colonial Insurance Company, and a credit balance of L 9158 was secured, out of which a dividend of 10 per cent was paid, L 2500 restored to the reserve fund, and L 1658 earned forward. This success was of short duration, for ; the following year, 1884, not only absorbed the balance of L 1658 brought forward, but ended with a deficit of L 4657, and again, to make both ends meet LSOOO, had to be taken from the reserve fund. It was then pointed out that of eight companies colonially owned and doing business in New Zealand, only three for that year could pay a dividend out of underwriting. Now the pinch of low rates and want of a large reserve and interest-earning fund was felt. The Company had been in existence six years with such varied fortunes as could not fail to be most unsatisfactory, and the Directors decided upon an entire change in the management. Mr Frank Allen, was appointed general manager, and with his characteristic energy at once entered upon the duties of reorganisation, which were no light work, as a good deal of bad business had been acquired, which was not so easy to dispose of as to obtain, and for two years the. new manager had his hands full. In these anxious times he was well supported by Mr George Harbroe, who had been appointed manager of the Wellington branch. Past experience had shown how unprofitable foreign business had been; and as there was no likelihood of improvement all the agencies outside of New Zealand and Australia and also Western Australia and Adelaide were closed, hut all this meant expense and reduction of premiums, and meanwhile losses continued to pour in. The result of all this was that at the meeting of shareholders held in 1886 the balance-sheet presented showed .that the whole of the reserve fund h*d disappeared, and instead of it thoro was a debit balanee of 1.2793, The losses for the year on underwriting amounted to no less than L 11,695, but bringing the interests on deposits and mortgages, &e ; , to account, the nett loss was LBB2B. Considerable dissatisfaction was expressed, and at this meeting it was suggested that the Company should dispose of its business to another company. At that time such a sale must have resulted in a very heavy loss to shareholders, some of whom about this

period disposed of their shares at about 3s per share. With 1887 the affairs of the Company began to mend, and the loss for this year on underwriting was reduced from L 11,695 to L 3285, and again bringing interest to account, the year was got over with a net loss of only L 61 5; but with L 2793 brought forward, the year ending March 31st, 1888, was commenced with a debit balance of L 3408 to be provided for. This was the year of the large fires in Sydney, Napier, and Wellington, by which the Company lost heavily. But the worst was past, and the corner had been turned. During this period the percentage of losses to net premiums received had been reduced from 91’5 to 77 per cent. During the year the business of the Company continued to improve both in New Zealand and in Australia, and although heavy losses were made by such misfortunes as the wrecks, at the terminations of their voyages, of the A 1 vessels Duke of Edinboro’, Lanoma, Pleione, May Queen, the year ended with a profit of L 3547, but unfortunately all this was swallowed up by the lawsuit in Adelaide into which the Company had been drawn. Owing‘ to these losses the year, the last of the debit balances, ended with L 3084 on the wrong side; but had it not been for these exceptional losses a credit balance of L 2138 would have been carried forward. The following year the shareholders were presented with a balance-sheet showing) that the deficiency of L 3084 had disappeared, also another legacy in the shape of losses by the Calcutta, etc., agents, amounting to L 945, had been provided for, and a credit remained of L 363 19s 2d, the first time for four years that a credit balance had been carried forward, thus showing how slow and how difficult the change had been to effect. The year ending March 31st, 1890, has a credit balance of LBll3, and again places the Colonial Insurance Company among the dividend-pay-ing institutions of the Colony after a lapse of five years, the last dividend having been paid in 1885. Since the Colonial Insurance was established it has received in nett fire and marine premiums, interest, &c„ L 567.568, and has paid in fire losses L 221,207, marine L 138,614, expenses of management and preliminary ex*

pensea L 169.329, and dividends L 24.478, equal to L 4 12s 6d per cent for the whole period. During that period the losses have been reduced from 91*5 per cent of the total nett premiums to 54'9 per cent, the lowest percentage for at. least the last eight years recorded by any colonial Company. The percentage of management has also been reduced even on the basis of a smaller premium income. Too much credit cannot be accorded to Mr Frank Allen, the able general manager, under whose care the improvement in the affairs of the Company has been uninterrupted from the first; and in concluding my remarks I cannot allow this opportunity to pass of expressing the satisfaction your Directors have of the manner the managers, agents and of the Company have in good repute and in bad worked together in the interests of the Company. Haying placed before you the various fluctuations in the fortunes of the Colonial Insurance Company it may interest you to know, as showing the extent to which cutting in insurance business is carried, that the total amount of underwriting profit received for the five years ending 1889 by the whole of the Liverpool and London offices on L 9,982,990 of premium was only L 494.883, or under 5 per cent, and but for the interest on investments companies would have a very precarious existence. In looking into the position of insurance matters in Australasia a cheerful picture is not presented, and, the inspection is not encouraging. The total income of all the Australasian insurance companies for 1889 was L 1,527,674. and. the losses paid for the same year amounted to L 1,075,940. After paying expenses of every kind the net amount available for distribution among shareholders out of this large sum was only L 27,609, the capital, reserves, etc, so employed was 1.3,023,481, In 1883 the net profits of the Australasian insurance companies amounted to L 185.570. While this decrease in underwriting profit has been going on, interest from investments has also been decreasing, and had fallen from L 185.825 in 1883 to L 154.520 in 1889. In seven years the total profits received from underwriting came to L 378,694, and from investments to L 1,180,196. New Zealand companies for the four years ending 1889 have come out very badly, as for .this period the whole of the companies combined have lost 1*52 per cent of their premium

income, which for this period amounted to no less than 1.3,450,720, This unsatisfactory position must be attributed to low rates caused by keen competition. Mr Harcourt added that the Directors, having this information before them, and knowing well the position of insurance matters in Australia, received an offer to purchase the business at the rate of 10s per share, the total amount of the paid -up capital. They considered it their duty to place this offer before the shareholders, who were now called together to decide whether what had been done was right. It was now for them to say whether the offer of the Commercial Union should be accepted. He moved the following resolutions:—

1. That it is expedient to effect a.sale of the assets and business of-the Colonial Insurance Company to another Company for the sum of L 50.000 (equal to ten shillings per share), and that with a view thereto this Company be wound up voluntarily; and that John Bate, man Harcourt, Edward William Mills, Jacob Joseph, John Kirkcaldie, and Georgo Mayo Kebbeli, be and they are hereby appointed liquidators for the purpose of such winding up. 2. That the conditional agreement dated the 21st day of August, 1890, as modified by the letterof the27th August, 1890, and by the telegram dated the 21st day of October, 1890, submitted to this meeting, be and the same is hereby approved ; and that the Liquidators be and they are hereby authorised to adopt the said agreement, modified as aforesaid, and carry the same into effect.

Mr E. W. Mills, in seconding the resolutions, said he did not do so with a great amount of pleasure. The Directors, however, had given the proposal careful consideration, and the majority of them felt a very great dislike to selling the Company, and so wiping out one of the institutions of Wellington, especially as, after some years hard work and careful management, they were just getting into fair paying order. After considering the matter fully it was thought that the offer would meet the wishes of shareholders generally, seeing that the shares weee standing at a low price—about 5s or 5s 3d each—and for some years no dividend had been paid, and the Com*

pany had no reserve, or bo small a one as not, to be worth mentioning. It was felt building up a strong reserve would take some years, and that the shareholders as a body would be glad to realise on so favourable an offer as was made.

Mr C. T. Richardson opposed the proposal, and said the Chairman had brought forward matters to write down the Company. All these reasons which had been mentioned existed twelve months ago, and in May last the Chairman brought down . a statement showing the Company to be in as fair and sound a condition as any Company could be. (Mr Allen : So it is now). The Chairman, replying to Mr Richardson, repudiated that gentleman’s inference that the Directors had altered their miuds since the last meeting. The Directors then had every confidence in the Company, which was even ‘ stronger now. It was true that the last six months had been an exceptionally successful period, but it could not be hidden that the Company had no reserve fund, and however cautious they might be, reverses might be met with, in consequence of which they would find themselves on the wrong side, instead cf having a credit balance. The tendency of the age was toward combination. Recently they had see the combination of two of the most powerful* trading companies ; that would goon and other companies with such capital as this had at command would be unable to compete against it. As showing the support given to the Directors, he mentioned that they held proxies of over 40,000 shares in favour of the proposal now made.

The resolutions were then put and carried, Mr Richardson dissenting. Mr Allen (General Manager) read the following statement: —I should not have deemed it necessary to make any remarks on the subject of the purchase of the Company’s shares which have taken place since August 21st, 1890, were it not that I feel bound to exonerate the head office staff in the matter. As regards the other members of the head office staff, up to the 23rd of last month, the day of the issue by the Directors of the circular convening this meeting, there were, as far as I am aware, but two members of the head office staff the W ellington branch manager and myself—acquainted with the fact that a provisional agreement had been entered

into for the sale of the Company. I have not any hesitation in stating my belief that Mr Harbroe has not given any information. As regards myself, I have not purchased any shares either directly or through any person ; I am not, have not been, nor shall I be, directly or indirectly interested in or benefited by the purchase of any shares. I have not given information to any person regarding the proposed sale of the Company, nor given information that would induce any person to purchase shares. lam aware of the proverb “He who excuses himself, accuses himself,” but, notwithstanding, I make these remarks, as I am of opinion that shareholders are entitled to know that the Company’s officers have been true. I much regret that shareholders who have waited so patiently for years should not have received when the time came the reward of their patience.

The Chairman said an extraordinary general meeting would be held on the 11th of December to confirm these resolutions. In reply to a question, the Chairman said the Directors held proxies for 41,000 shares. Mr Allen expressed to the Company’s agents, managers, and other employes, and es--pecially to Mr Harbroe and the head office staff, his appreciation of their services in the Company’s interest; and he thanked the Directors for having allowed him, without any interference, to manage the underwriting business of the Company. Mr Richardson asked whether shareholders would, at the next meeting, be furnished with a detailed statement of the business of the Company for the last period up to August. The Chairman replied in the negative. This was all the business.