MUTUAL FIRE INSURANCE.

New Zealand Times, Volume XXXIX, Issue 6692, 28 September 1882, Page 3

MUTUAL FIRE INSURANCE.

TO THE EDITOR OF THE NEW ZEALAND TIMES. Sib, —The fact of the Mutual Insurance Company of New Zealand having placed but 82,000 of the 200,000 shares offered to the public, and that they have commenced business with this subscription, and the further fact that another Mutual Company is projected in Dunedin, requires serious consideration. In ordinary commercial undertakings where capital is subscribed to carry out a particular business, the gain or loss thereby is the affair of the adventurers, and provided the object is legitimate, the public have no right to criticise their venture ; but the case is altered where an Insurance Company is projected and seeks public support upon a promise of admitting policyholders to a shore in the possible profits ; then insurers may properly take into consideration to what extent the scheme is likely to turn out for their individual benefit. In the first place ae to the security offered for the payment of losses ; in the second place, as to the probability of the share of profits they are likely to receive. I shall now give the probable receipts and expenditure of the Company lately launched upon a basis much In favor of the office. The allotment has been 82,000 shares, the payment thereon being 2s per share is £B2OO, No call can be made until Januarynext, and that call (if made) is intended to be the only one. I shall not ask what security present inrurers have for possible losses, but will suppose the January call paid, thus giving the Company a paid-up capital of £12,300. It must be evident that this capital can only cover risks to a very limited extent indeed. The net premiums received (vide statement) by the Colonial Insurance Company during the first nine months amounted to £27,100 ; add one-fourth of this amount to complete the year, ' and we have £33,900 upon a paid-up capital of i £37.500. 1 Now the Colonial at starting took far larger risks than the Mutual can or ought to ; never- i theless, its net premiums for the first period did - not reach the capital paid by £3600, Let us i say that the premiums of the Mutualwill not i reach the paid-up capital during the first year i a very liberal concession, as the business of I the Company must be confined to the chief , cities of the colony—and rates are much lower ( now than they were in 1878, when the Colonial j commenced business. Then, assuming that the , preliminary expenses and the lossses will be in < proportion to the Colonial’s, the following re- < turns of receipts and expenditure will be pretty 1 near the mark i

Receipts.—Premiums, net, £12,100 ; interest on capital, £656 ; total, £12,756. Expenditure. —Losses, 33 per cent,, £4033 ; commission, agency, &c.,) 15 per cent, on premiums, £lßls ; manager’s salary, £IOOO ; accountant, £350 | two clerks, at £l5O, £3OO \ office boy, £SO ; license fee, £100; Auckland Directors, £300; five Boards of Advice— Napier, Wellington, Christchurch, Dunedin, Invercargill, £6OO ; office rent, £l5O ; advertising, £3OO ; printing and stationery, £3OO ; petty expenditure, £l5O ; travelling expenses, £3OO ; preliminary expenses, £lO7l ; balance, £1037—£12,756.

Expenditure as above is by no means overestimated—probably the preliminary expenses will exceed the amount set down, the time for receiving applications for shares having been twice extended. The head office will oer tainly require the staff I have indicated, and the salaries of manager and accountant are as stated, if my information is reliable. The Wellington Board of Advice is to receive £IOO per annum, and I assume that the other Boards will be similarly treated. If my figures are correct, it will be found that eighty.one per cent, of the present paid-up capital, or fifty-four per cent, of the capital intended to be called up will be absorbed in the first year's expenses. The above statement shows a balance of £2037 to credit, but from this amount the loss upon unexpired policies has to be met. In England it is assumed that 40 per cent, of the premiums is a fair amount to reserve for losses on unexpired risks. In the present instance this will equal £3730 ; consequently the Mutual’s capital in the first year of their operations will be impaired to the extent of £1693. At the same time it is well to observe that the premium income will not exceed twothirds of my estimate should the insurance combination be broken up. The above is written not in any antagonism to the new Company, but simply to point out the risk attendant to the assured npon the prospect of working an Assurance Company with heavy expenses and a small capital, —I am, &e., C. W. Wellington, September 26.