THE NATIONAL INSURANCE COMPANY.

Otago Witness, Issue 1582, 18 March 1882, Page 21

THE NATIONAL INSURANCE COMPANY.

An extraordinary meeting of the shareholders of the National Five and Marine Insurance Company of New Zealand was held in the large dining-room at Watson's Hotel on Vriday afternoon, to consider the resolutions submitted by the Board of Directors for increasing the nominal capital of the Company to £2,000,000There was a numerous attendance, aboiat 100 shareholders being present.

Mr Ritchie (chairman of Directors), who presided, called attention to an alteration it was proposed to make in clause 10 of the resolutions—viz., the omission of all the words after " due," the resolution as amended being — " Shareholders may pay all or any of the said calls before the same respectively shall become due." Tho effect of this alteration was to avoid a certain amount of dubiety that oxisted, and to leave it to the shareholders to pay up calls when they pleased, receiving 7 per cent, interest upon all such sums as they might pay up to the date when the new shares would have the same advantages as the old shares— viz., 31st March, 1884. As worded before, the Chairman thought the clause was open to possible misconstruction, and therefore the resolutions would be submitted with this amendment.

Mr Hill Jack (the general manager) road tho advertisement convening the meeting, and on the suggestion of the Chairman the resolutions were taken as read. They were as follow:—

1. The present nominal capital of the Company ol one million pounds shall forthwith be increased by tho further nominal sum of one million pounds, auch further sum being divided into one hundred thousand shareß (hcreinattor called "now shares") of ten pounds each. " 2. The said 100,000 new shares shall be offered fas hereinafter mentioned) to the shareholders of the Company whoso names shall appear in the register of shareholders upon the 10th day of March, 1882, each of such shareholders being hereby entitled to take up so many of such now shares as shall be equal In number to the old shares then standing in hisor her name in the oaid rsgister, Bubject to the following- conditions : - 3 The new shares shall be offered to such shareholders as aforesaid in manner following :- A written or printed notice, or partly written and partly printed, under the written or printed signature of the general manager of the Company, shall be sent by post to each of such shareholders as afoieaaid, directed ;to him or her at his or her address in New Zealand mentioned in tho said rogiß'er of shareholders, or tailing such address, then to hh or her or to hw.or her agent's last known i.dilrossin New Zealand ; ai\d in such notice tho numbor of the said new shares whiuh each such bharchohler respectively is entitled -to take up shall bo specified, and such shareholder shall be thereby give" * ne option of taking up such number of new shares, or any less number thereof, at a premium of 15s por share, and shall be informed as to thH time limited, ua hereinafter mentioned, for tance of such offer. \

tho accepi

4. Such notice as aforemid, shall be accompanied v by a printed form (hereinafter entitled " the said notice of acceptance ") (or the signature ol each shareholder, signifying Mb or her acceptance of such specified number of shares aB aforesaid, or any less number (to be theroin stated), at the said premium, and subject to paymont of all callß which shall be duly made in respect thereof. j B. The Baid notice of accep ance shall be addresied to the general tnanijrer of the Cumpany at Dunedin, and shall be either delivered at the oßke< of the Company la Dunedln or sent by post to that

addreaj. .■ i ■ ■ 6. The time for accepting such new shares as aforesaid Is hereby limited to the 30th day ol June, 1882 ; and if, on or before that day, no such notice; of acceptance as aforesaid shall have been received from any shareholder or shareholders, or the exeoutotß or administrators of any deceased shareholder or shareholders at the Company's office in Dunedin, then such shareholder or shareholders or the executors or administrators of such deceased shareholder or shareholders from whom no such notice shall have been so received shall be deemed to have ;deulined to accept such new [shares as shall have beeD so offered to him, her, or them as aforesaid : Provided always that it shall be in the discretion < of, but not obligatory upon, the directors to receive and treat as valid the notice of acceptance from any •hareholder at any time within fifteen days after the said 30fch day of June, 1882, in any case in which the non-receipt of such notice in due time shall be proved ' to their satisfaction to have arisen from miscarriage of the post or other accident j beyond the control of such shareholder. j 7. All such new sharea as shall not be accepted and taken up by existing shareholder in manner aforesaid shall be disposed of by the directors in such manner as they shall deem most beneficial to ithe Company. i

8. Upon each of the new shares which shall be so accopted by such Khareholders as aforesaid, the sum of 10a per share on account of capital, and the sum of IBs por share being the paid premium, making together the sum of 26a jper share, shall be payable in calls of the respective sums and at the respective dates next hereinafter mentioned— i.e. to say, 5s per share on or beforeHhe 15th day ef April next ; 5s por share on or before' the 30th day of June next ; 2a Gd p« share on or before the 3 1st day of December next ; 2s 6d per share on or before the 31at day of March, 1883; 2s 6d per share on or before the 30th June, 1883 ; 2s Gd per share on or before the 30th day of September, 1883 ; 2s 6d per share on or before the 31st day of December, 1883; aud 2s 6d per share on or before the 31at day of March, 1884. And the said several and respective calls above mentioned shall be deemed to have been duly made upon the 10th day of March 1882, pursuant to the regulations of the Company inj respect of calls, and shall become due and payable by the shareholder* upon th- several and respective days hereinbefore mentioned : Provided that ' the directors »hall, on or before the 15th day of April next, give one notice to each and every shareholder whom it may concern, embracing and specifying the whole of the above-mentioned calls.

9. If before or on the day hereinbefore appointed for payment any shareholder shall fail to pay the amount of any of the said calls, then such shareholder shall bo liable to pay to the Company Interest for the same at the rate of £.10 per cent, per annum from tho diy appointed for payment thereof to the timo of actual payment.

10. Shareholders may pay all or any of the said calls bi-foro the wvme respectively shall become due.

11. At the time of the ileclarathm of ordinary halfyearly dividends upon the old shares in the Company, the directors shall from time to time, until the 31at day of March, 1834, pay to the holders of the new shares a dividend at the rate of £7 per cent, per annum and no wore up'Ui the amount of such calls ai aforesaid, as shall for the time Imjuijj have been paid upon or in reijiuct of suuli new stuuvs; and after the said 31st day of March, 18S4, the said new shares shall in respect of tho amount i«f dividend* payable thereon, and the re-p cfcive times when tho same shall be declared and bec-»mo payable, and in respect of the manner in which the re mainim? unpaid capital upon or in re-pecb of ttw s.iid new shares shall be cilled up, aa in all other respects, be deemed and dealt with by the director* as on the same footing as the old shar a constituting the original capital of tho Company.

12. The amount of fcho paid premium of 16a per share payable upon the new shares shall, (is and when received, be earned to tho Company's ie or vu fund. 13, The resolution which was passid at tho extraordinary general meeting of the Company lie d <>■ ihe 27th (Ivy of July, 1574 aid confirmed at a sjni.uir moei.irnf' hMd '"»• f,h-o s0 ''"/. °f i'optomber, lt>74. thereby ttie tiuml'or of ihaius in the Oom u my which any onu (OniohoMi-r or firm could kwfuilyJioJd «• s 1 mi oil tolfiOO shares as therein motioned, tahurob} lep alctl ami the following rejjiilaMon is Mihvilited in lio i theruo'- i c. to say :— '• Ie shall not bu lawful for iniy person, firm, company, or body corporate, either liiicctly or indfn et'y, fo hold or bu bonoficia ly interested in morr than 3000 shares in the Comi any: and if ;wy such person, firm, company, or b >dy corporate Btta 1 at Any time hereafter infringe this regulation, he, she, or they shal' be liable to forfeit, to tho Company, ax and for the absolute kooo"» and chattels of this said Company, all a;:l ulngular such shares as shall at any time be bo hold in exc<BH ( f the *aid number of 3Q0O ; am) tho direct ora ft ro horeby ompotvorod to doctor web tfhftfw which, tto»\\ ])9 w iwi4 to »xep»

to be, and the same shall thereupon be absolutely forfeited as aforesaid." 14. Subsection 7 of regulation 55 of the articles of asaoeiation of the Company is hereby repealed, and the following substituted in torn thereof— i.e. to say:— "The directors, by way of remuneration for their service*, may, out of the funds of the Company, appropriate a sum sufficient to pay a fee o{ two guineas to each director for each and every sitting which he shall attend, whether at Board or Committee meetings of the directors or any of them, and whether such meetings shall be ordinary or special, provided that hi no one year shall the total of such fees avoeed the sum oi one thousand pounds."

The Chairman said : Gentlemen, it devolves upon me now as chairman of this meeting to move the adoption of these resolutions, in number fourteen, as they are printed on these slips, with the alterations I nave just called your attention to. In doing so I do not wish to detain you longer, as I really have not much to tell y<Ju more that was conveyed in the remarks which I had prepared for you at the meeting in November, and which I was prevented from delivering personally, but which Mr Ramsay was good enough to read. In that speech I indicated in a general way the direction in which your Board had found it necessary to move in conducting the affairs of the Company. The main point which was referred to there was the necessity for the extension of the field of operations j and this reason, with the consequences which follow, together with a second reason — namely, an increasing demand for money, for larger sums of money, which is wanted even in thehome field, for the purpose of lending in various directions to draw business. These two reasons, I may say, are all we have to advance for the step we now ask your authority to take. I will make a few remarks first upon the question of extension of field. I dare say you are aware that this is the most important principle underlying the success of all insuraiice business. It is very dangerous to take even thoroughly good hazards in few numbers ; the principle of safety lies in having a proper average even of good hazards, and therefore, at all times, the wider your field the more ground you can operate upon and obtain business from, so as to increase the number and average of your risks, the safer it is for your business. This principle has been recognised for a long time, and for some years past has been forcing itself more and more on the notice of the directors. The reason is plain to anyone who thinks on the subject, but , it might be well, perhaps, if I read you a short extract from an excellent authority taken from a London paper on this point. It puts matters in a plainer and more concise and distinct way than possibly I can do, and will show you what good authorities have to say on the subject. This article is by an insurance agent and broker of some authority in London, who was giving his opinion' upon the question of business in the United Statesof America, and the expediency of companies foreign to America entering the field for business. He says :— " Foreign companies generally (that iecompaniesforeignto American local comi panics) do snow a more profitable result than the American companies. There is but little doubt i that, speaking from a point of view justified by experience, American fire insurance companies are too provincial. That is to say, they | depart from an essential principle of insurance | — of concentrated capital and division of risk. It is true that many of the local companies' of the United States have concentrated capital, but they also' make a concentrated risk. America is, of oourse, a very large province, but it is, neverthelessj a province. The basis upon which this division of risk assures successful result to an insurance company is < that it secures an average, be that average big^or little. The company doing on a concentrated I capital a business scattered over a large area is I undoubtedly more certain to obtain an average I than in a small area. That average maybe big or little, I repeat, but is certain to ;be i obtained. If a company will only select 'its 1 risks, then its must reduce its business, under this mode of operation, to a certainty of success, for it is on the quality as well as the quantity of business that an average is to be gained. On a small business, the foreign companies have found that an average cannot be produced. The great certainty of Hnsurance, I say, is to try to keep something of an average on a large business."} I think that is all I need read to you out' of this ; it goes on to amplify the same idea — namely, that the essential point for success is to widen the field of operations. The necessity for this was made still more pressing upon us by the fact that our business at home has changed very much during the last four or five years. I need not tell you of the increas^ of 1 competition in Australia and New Zealand. As a matter of fact there are 30 offices doing i business in New Zealand, instead of 12 as in i lß73— over double and a-half more since that time. The consequence is that tariffs have been br >ken ; there is not a tariff anywhere, except in one place in New Zealand ; competition is, I might almost say, reckless. I believe in places ratesper cent, arenotquoted. It is quoted as a lump sum for the whole thing, and there are evidences all round that the consequences are seriously dangerous, Of oourse, this has been partly brought about by the establishment of new companies (three new companies), and partly by the influx of oompanies from Home — companies of enormous wealth, which have established themselves in these Colonies on a very broad and substantial basis, employing highly paid men, having influential boards, and giving evidence that they mean to have business, and to remain here and do the best they can. Of course that has told upon us very seriously. I could, if necessary, go into figures to show you how it has told upon us in the way of shrinkage of revenue and shrinkage of profits. Local influence, which used to give us a great deal of help, seems to have declined altogether; at least, as you know, sentiment disappears when the pocket is touched, and the consequence is that so long as the company is good the company that quotes the lowest gets the business. I cannot explain this better than by saying that though in Dunedin there are held £6$ out of every £100 worth of stock ; though the head office, the board of directors, and all the paraphernalia of the Company are here, yet for the last four years we have had no branch that has done worse than the head office at Dnnedin ; and yet we have had no exceptional ill-luck here as regards losses. These facts made the proposed extension come home as a necessity. As you are aware, three or four years ago wo went to America. We went in a very cautious way, giving small limits and joining another company, which— without saying a word against the other oompany—was a disadvantage to us, but which we were compelled to do by tho smallness_ of our capital compared with our competing neighbours in that field. Wo have had no' reason whatever to complain of our Kiiccoss there, and the importance of that field is —well, it is enormous. One can hardly estimate the oxfccnl to winch that field in I capable of being worked. I have a few particulars here with reference to that field which I may read to you, to give you a» idea of what it is. This is from an article in the London Insurance Record of October 15th, 1881. It states : " That the United States is one of the most important fields in the world for insurance business, and from its wealth of natural resources promises long to be so, has Hong boen known to underwriters," And it

goes on to state : " Wide as has been the field for insurance enterprise in the United States in the past, it promises to much further increase in the future : and it is no wonder, with the facts as to the profitable nature of the business before us, that so many British offices during the past two years have been seeking admission to share in the business of that great and rapidly developing country." We have had no occasion to regret foing to the United States. Similarly, in iondon we have made an extension by joining two other companies which have offices open. We have made a very good arrangement, certainly ; but of course there are certain disadvantages in joining with other companies instead of occupying the field for ouraelvea, which we thought it would be unwise to do until we were stronger than we were. We have a very fair prospect of increasing our business there by reciprocating marine business chiefly with other companies ; and it is impossible to say to what extent we may be abje, if we choose, to expand in that quarter. Well then, gentlemen, all these facts— which are only just the skimming of the surface of what has come before your directors during the past two or three years— have brought this home to us over and over again : That^ although in our home field we are strong enough, and 'our figures are large enough, and our reputation is everything that is required to enable us to carry on the best business and the most business, yet ? when we go abroad into other countries, matters are very much changed. We are very small, comparatively speaking, apt to be lost sight of amongst the gigantic companies that surround us, and with whom we have to compete. Important and large English companies, whose figures deal in millions, and American companies with large solid reserves have the pull in every way, for 1 policies are more closely spanned in those new countries than here, and it is not every company's policies of insurance that will take. It is necessary for a company that wants to do business on equal terms to be as strong aa Eossible, and that is the first reason why we aye been compelled to advise the increasing" of our capital, and we have had confirmatory opinions from outside pressed upon us again and again of the necessity of the step, and confirmatory opinions since the step was taken of the favourable way in which it has been received. The second reason that I named is the increased demand for money even here, to lend out in directions where we can obtain business through such lending. This is a matter that cannot be overlooked nowadays ; it has become a very favourite leverage for the purpose of obtaining insurance business. The Home companies have such enormous sums of money that they are always able to offer to companies which have business to give, and they can lend money to them on favourable terms, always supposing the security to be good, and a little abatement on current interest goes a long way to induce and command business which otherwise we should not be able to get. I could give numbers of examples, and will just mention one in which a London company offered a concern that had large marine business a large sum of money at 3* per cent., and another a sum at 4 per cent. Well, we may have to consider if we should not do something of the same kind, provided the business off ered is sufficient. Then here there , are constantly loans being asked for freeholds where insurance business ia attaohed, and as we have gone along we have secured a good deal of business of that kind, but our funds are limited; and when scattered about' in a Colony like this, they soon come to an end, I do not know that I nave more to say in reference to this matter. The necessity of maintaining a strong company ought never to be lost sight of. At any time we might have un* usual misfortune or extra losses, 1 which it ia well to provide against, and place ourselves in such a position that we could get through without having in any way harmed ourselves. Tho strong companies, so long as they can meet emergencies, always get stronger; whereas weak companies, if they meet with misfortune, always < get weaker. With reference to the increase in the capital^ supposing we only get 6 per cent, interest on it, if we add both capitals together it will only reduce our dividend by 2^ per cent., supposing we do not get a penny of additional advantage from new business ; but I need not tell you that in a matter like this the directors would not have entered upon it had they not- been satisfied that the advantage of commanding business would have been considerable. But supposing our anticipations fail, the worst that can happen is that the dividend of our business remains the same— is reduced to 174 per cent., and of course on the other side there are all the chances for additional business, which are really very good. Ida not think I need take up your time any longer on this question, but I shall move, as I said when I rose, that these resolutions which are now pat before you by the Board be passed, with the exception of all the words after "due," in the third line of number 10 w.hich are taken out. Mr K. Ramsay seconded tho motion.

Mr Henry Walter asked if the capital of the Company could not have been increased equally well by making calls on the present shareholders.

The Chairman : Well, Mr Walter, of coarse probably the money could have been raised, but you will easily see how very difficult a matter it would be. Supposing you made calls upon the present shareholders you would have to pay a dividend on the full amount called, and you would have no means pf paying that dividend except by obtaining increased business ; so that supposing you called up £50,000 or £100,000 from the present t shareholders, every present shareholder could 1 only get 6 per cent, on that— your dividend would be brought down ; whereas by thi» means we take advantage of the increase in the number of shares m the open market, wo issue them at a price which will pajr the present shareholders, and we get a considerable sum upon which dividend is not required, while the shares will also be very much more, as it places so many more in the market. Mr Shrimski, M.H.R., theught it would have been better to have wound up the present Company and to have started a new one with a larger capital. Tho present proposal, so far as he could see, was only likely to militate against the shareholders. If the new shares were to be issued at 253 to present shareholders, at w hat pricewould they be issued to strangers ? The Chairman replied that it never entered into tho ininds of the directors to wind np the old Company ; it was too well established and too prosperous. The interests of the tihiireholdcrs would be better conserved by building upon the foundation of the present Company than by pulling the whole thing down and starting a new one, which would only be of advantage to the shareholders in the new concern. As to the second question, he thought that must bo left to the direc; tors to deal with to the best advantage for tho Company. It was, he thought, very unlikely that the shares would not be taken up ; but if any shareholders did not take them up when they could make a profit on them, their aelf-aaorifice would bo for the benefit of the Company. Mr Shrimbki did not think his question had been answered, and wkgd. if the outnido puUi9

were' to get the 1 same advantages as the shareholders who had made the Company. Mr Ramsay said it would bo impossible to say at what price shares not taken up by shareholders would be offered to the public ; that would depend a good deal upon the reception of the scheme. He thought that might well be left to the directors. Mr Robert Stevenson (Oamaru) thought the question a proper one. and asked if the shares would be offered to the public at 255. Mr K. Wilson : No no ! Mr Stevenson : Well, what would be the f)ITLCO « The Chairman replied that if any were not taken up by the shareholders they would be sold at the highest price obtainable. , The Hon. Mr Oliver believed that every uhare would be taken up. The estimation in which the scheme was held by the public was pretty conclusively proved by the ruling price fdr.the shares. When the scheme was first made public the shares were selling at from 33s ,to 345, while the present price was 325. When the directors elaborated the scheme they anticipated that the prospect of placing so many more shares on the market would bring down the current market price, and they expected the fall in the price wouldhave been muchmore than it was found to be.' This he considered proved that the scheme was acceptable, and the matter , of. dealing with shares that were not taken up'might safely be left to them. He looked forward to a profitable extension of business as a consequence of the proposed increase of C *Mr R. Wilson said that he knew of offers of 2s 6d per share having been made for the right to take up the new issue, and the new wsue would be as saleable as the old. He did not doubt that they would see the day when 403 would be paid for the new issue. Mr C S. Reeves said that the new scheme had undoubtedly had the effect of reducing the value of the' shares. He?had not taken shares in the Company as a speculator, but as a share- , holder, and he had sold out because he did not want to take the new shares. Life assurance was the moat profitable business. _ There was an opening for it in connection with the Comoanv, and he believed the proper extension of the operations of the Company would have been to have reconstructed the Company with a capital of £2,000,000, and to have established 1 in connection with it a life assurance business. He had made this suggestion to the directors some time since, and now asked if the Board had taken it into consideration. . The Chairman said |that the directors were well pleased to have hints from the shareholders, such as had been thrown out. He could not say that the directors had seriously considered the suggestion, as they had been very busy in order to maintain the position of the Company, and in devising means to prevent it falling back. The suggestion had not been overlooked, and it would receive the attention . it' was worthy of as soon as practicable, . Mr, WALTER asked if those who paid for the shares in full would be allowed 7 per cent. On Ahe full amount. > The' Chairman-.. Yob. . » .MrXoBEOKi inquired, if provisional certificates would be, issued to enable the share- , holders to deal, with the new shares. . . ■ i (The Chairman : Yes. There wdl be new «crip issued, which will bear endorsed on the • i.face.of it .the amount paid up, or it canjbe endorsed at the will of the shareholder. ' # „ . Mr. Lubkoki said he had full confidence, in the present directors, but as at some future time needy directors might be in office w^hp would meet more frequently than was neqessary, he would propose to modify the clause , referring to the remuneration of directors jby the addition iof the words " providing that in no one year shall the total of such fees exceed ftjjum.of.£looo." , TheCHAiRMAN expressed the willingness, of the. directors to accept Mr Lubeckis proi tiQHftl { ' i • } Mr W. C. Roberts seconded the amendment,moved by Mr Lubecki, which was car- - iMr Shbimskx proposed that the directors' remuneration should .be one guinea per Hitting, but subsequently withdrew this amendment \ ■ ' A Shareholder thftught the directors should (Undertake to support at the next annual meeting the introduction of a provision. by which one director should retire annually, and not be, eligible for re-election, so as to give an outsider an opportunity of obtaining a Seat on the Board. The Chairman was not prepared to make such a promise. The directors had no advantages which other shareholders did not possess. They did not hold at present anything like the number of shares among them that several other shareholders had. The suggestion, how- - should be considered. (

Mr C. S. Reeves knew that the opinion of the shareholders was very strong on this matter, He would not vote for the increase in the remuneration unless the directors wo ( uld promise to adopt the suggestioia just made, and Re called upon other shareholders not to vote for the increase, unless that were done. , The CHAIRMAN did not think there was any necessity for him to assure the shareholders that the directors would entertain and meet in a proper spirit any generally-expressed wish, but he could not give an answer to the question, as it was a matter for the consideration of the ■ Mr 'Shsimski moved— "That the first portion of clause 13 be repealed," but on being told that if that were done a person could ( not hold 3000 shares, readily withdrew it. The Chairman: I thought you were not going to take up the shares.— (Laughter.) Mr Gr. Fenvviok suggested that clause 11 should be amended by the insertion of 8 per cent, instead of 7 per cent. The interest proposed was, he thought, too low, and the result might be that some of the shareholders would be unable to take up the new issue. The Chairman said that the interest had been stretched as far as possible, and it was questionable whether the payment of 7 per cent, would not leave a loss to the Company. Mr Fenwick thought the explanation was to some extent satisfactory, but that it did not cover the case. He had heard that many shareholders were not in a position to take up the shares, and to do so they would have to borrow money, which they could not do at 7 per cent, on the security of the shares. He thought the interests of these shareholders should be considered by the Board. The Chailman said he would be glad to advance to the full amount on the security of the new snares at 7 per cent. • Mr Walter seconded the amendment moved by Mr Jfenwick. Mr Ramsay spoke against the amendment, on" the ground that if carried the directors would be seriously handicapped, for all the shares would probably be paid up in full, and there would be more money received than could at once be judiciously invested. The Hon. Mr Oliver opposed the amendment on the ground that that it was a proposal to pay a dividend out of capital, unless the money could be lent on the same day on which it was paid in. Mr Fbnwiok took exception to the statement made by the Hon. Mr Oliver. Part of the interest might be paid out of the profits of the Comum > tort hw ft could be wid to be ft jpro»

posal to pay it out of capital he would like to know. _ ... The Chairman understood Mr Fenwick's idea to be that it would be only fair that those who took the new shares should benefit to the extent proposed out of the general business of the Company. Mr R. Wilson pointed eufc that the new shares would be benefited by the amount placed to the credit of the reserve fund. On the amendment being put to the meeting it was lost. Mr Reeves wished to propose a resolution referring to the retirement from the Board of one director annually, who should not be eligible for re-election. The Chairman did not think it was competent for any shareholder to move such a resolution at the meeting, and the opinion of Mr James Smith, the solicitor t», the Company, was requested. Mr James Smith said that any amendment .proposed must be germane to the subject of the resolutions— no entirely new matter could be introduced. The motion to adopt the resolution as submitted by the Chairman was put, and carried unanimously.