INSURANCE.

New Zealand Times, Volume XXIX, Issue 4213, 21 September 1874, Page 3

INSURANCE.

TO THE EDITOR. Sir, —At a time when any call upon the public for money, whether to float companies or for any other legitimate object, is responded to so readily as at present, it becomes necessary to exercise, caution and carefully to examine any prospectus that may be issued. Having perused the interesting article headed “ New Zealand Insurance Company,” from tho Southern, Cross, September 12, which appeared in your issue of this morning, and my attention being drawn to the prospectus therein published, I endeavored by careful analysis to inform myself as to whether the conditions .upon which the 50,000 new shares, are offered to the public are in reality so liberal and equitable as at the first blush might be supposed. * I now offer for what they may be worth the results of my examination, confining myself to the. simple statement of such results, and leaving others to draw their own inferences as to the liberality or otherwise of the present shareholders. f Applicants for 50,000 shares at 90s. pay £225,000—0f "touch sum £125,000 is for the benefit of present holders, and £IOO,OOO goes into' the new concern. Present holders take 50,000 shares at 405., or put £10.0,000 into the concern, and £40,000 reserve fund handed over. Thus the total assets amount to £IOO,OOO, plus £100,000 ,plus £40,000; together £240,000. But as present owners receive all premiums till the 30th November, all the losses on risks represented by these premiums will have to he paid out of the above assets. The item of risks hanging out must run from a few days to twelve months, and will average about six months. The average losses of .this company in. six months are £40,000, it-is, therefore, necessary to treat the assets as reduced from £240,000 to say £200,000. ■ Half, these assets belong to the new shareholders, who pay £225,000 for £IOO,OOO, and half the goodwill, which leaves £125,000 as the price of half the goodwill. _ The present market price of shares is £9O; which, with 2500 shares,makes the value,of the company £225,000; and by last balancesheet, their assets were £227,370; so that half the goodwill of a business is offered for £125,000, while the whole of the goodwill, with £227,370 assets added, only fetches £225,000 in open market. The following statement shows approximately what profit the present holders expect to make by the transaction if carried through successfully: — Cash.

So that a Company worth yesterday £226,000, will get £457,370 for, or they value this Company at £450,000, in 100,000 shares at 90s. Accountant. Wellington, September 18.

1. Premium 60s. on 50,000 shares ... £125,000 2. Present assets, £227,370; less reserve fund handed over, £40,000 and capital paid on new shares 87,370 taken up, £100,000—£140,000... 3. Profits to end November, which 20,000 last half were £20,000, say ... Shakes. 4. 50,000 at 90s., the value they place 225,000 upon them ' £457,370 Deduct market value of what they give up (thepresent Company)... 225,000 Profit on transaction ... ... £232,370