FRIENDLY SOCIETIES

Otago Witness, Issue 2915, 26 January 1910, Page 16

FRIENDLY SOCIETIES

THE UNITED OTAGG DISTRICT, A.O.F. VALUATION REPORT. The valuation report, dated the 24 th December last, on the United Otago District, A.0.F., as at the 31st December, ISO 7, has been received from the Friendly Societies Office by the District Executive. It is in the following terms: PROGRESS OF MEMBERSHIP. The last preceding . valuation of the society was made as at 1902, the numoer of courts valued being 22, with a membership of 2003. Two of these courts have ceased to exist, but three otheis are included in the present valuation, making a total of-23 courts, with a membership of 3214. In table I, appended will be found particulars of the numbers entering-, lapsing, etc., during the quinquennium, exclusive of the courts which have ceased to exist. SICKNESS. (a) Comparison With Expected. The object of comparing the actual sickness experience with the expected (or, in other words, with the standard tables) is twofold. In the first place the'comparison serves to show clearly whether the sickness has been above or below the stairdiaird, and incidentally whether there has been a saving or a loss in this respect; whilst in the second place it serves as a test of the applicability of the standard tables to the valuation in question. In making' the comparison, of course, the ages must be properly taken into account. The aggregate amount of sickness experienced in the five years ended 1907 among males was 20,412 weeks, as against 21,909 expected under the New Zealand Friendly Societies' table. The sickness cost was £12,329, as against an expectation of £14,000. The experience of males was therefore favourable to the extent of £1671, or about 12 per cent: in point of cost. In the case of females the cost was £/96, as against £432, according to the male standard table. Thus there was an excess of £354, or 84 per cent. Table V shows which courts made a gain or a loss as compared with the expectation, and tables VI and Vla give an analysis of the total sickness according to duration. It will be seen from table V that all the, male courts except three had a favourable experience, and from table VI that the saving too'k place principally in sickness of under six months duration—i.e., just the point where the money value is greatest. The female sickness was excessive in the acute and subacute divisions '(first six months and second six months), and this anight possibly indicate a want of supervision.. The foregoing figures relate only to those courts whose experience was taken out. (b) Comparison With Previous Periods. It is of some interest to examine whether the fundamental rates of sickness in the society show an increase or a decrease as compared with previous quinquennia. Table VII presents a superficial examination' of the matter, and indicates that herei has been a consistent increase in the rates of sickness per member for 30 years past. It is, however, not properiy disclosed how far tih© figures in this table are affected by variations iir the ages of members. If we ascertain what percentage the actual sickness in each quinquennium bears to the amount that would be given by the standard table for persons of like age 3, wo shall have a better basis of comparison.. This has been don© in table VIII, and it is seen that the rates of sickness arc now lower as compared with the standard than was the case 15 years ago. Reading the two tables together, then it can be' said that whilst the eicknee rates at fixed ages show a tendency to deca-ease, an increase in the amount of sickness per members is nevertheless shown owing to the gradual increase in the number of old mombers. MORTALITY. Here again a comparison of the actual experience with the expected serves as a test of the applicability of the particular table to the valuatiorr. Comparing the experience of five years with the New Zealand Frendly Societies' mortality table, w© find that there were 124 deaths as against 116 expected by the table.' If we take the experience of 20 years we find .the following result: Mortality Experience, 1888-1907. Deaths expected by the population table 394 Deaths expected by the Friendly Societies' table 320 Actual deaths 332 The mortality is, therefore, considerably lower than that of the outside population huh a little higher than that given by the Friendly Societies' table. If we analyse this according to age group? we find as follows: Mortality Experience, 1888-1907. Deaths by N.Z. Friendly So- Actual DifFeirAges. ties' Table. Deaths, ence. Under 35 ... SO 90 - 35 to 65 ... ... 166 165 1 65 and over ... 64 77 +l3 All ages ... 320 332 +.12 It would, therefore, appear that the excess took place at the higher ages. GENERAL REMARKS ON THE SICKNESS AND MORTALITY EXPERIENCE. On the whole, therefore, it is demonstrated that the New Zealand Friendly Societies' sickness and mortality tables (which have been employed in the valuation) do not depart very, greatly from the actual experience of tlh© society except in the case of females. The society's mortality has been a little greater than the tables would provide, whilst the sickness in the last five years has been a little less than the standard. Li the case of the sickness the difference is accounted for by a fall in the society's own fundamental rates, which may or may not b© a permanent feature. As matters stand now the valuation would appear (so far as sickhc&s and mortality are concerned) to be a trifle on the str-iaHzswfc side as compared with a valuation by the society's own. recent experience. In the case.of females the valuation has been mad© on the basis of sickness rates exoeediing' the male rates by 25 per cent. , This ishuig'sfe arbitrary and is probably an insufficient mai'gin. INTEREST. The rates of interest earned by the counts are shown in table IV, and on reference to this we find th© following results: —Number of courts earning- over 5 pep .cent, per annum ,for: -the quinuuen-

nium, '4; over 4 per cent., 8; over 3 per cent.. 5: over 2 percent., 4; under 2 per cent., 2;—total, 23. It can be seen that 12 of the courts realised more than the rate of 4 per cent., which should be regarded as the minimum rate necessary for success under ordinary circumstances. The remaining 11 are not complying with one of the conpditions essential to success. The district funeral fund earned the good rate of 5.45 per cent. • '. . Taking the district as a whole, the interest earnings must bs conceded to be very good indeed, as the total sick and funeral funds have earned 4.89 ner cent. It is principally the courts with email funds that are backward, and the central investment fund is likely to be of considerable assistance to these. MANAGEMENT FUNDS. Though management funds arc of course excluded from the sick and funeral fund valuation, still it may not be out of place to refer briefly to them here. In table! Ha will be found a list of management fund balances at the valuation date. It will be seen that two of the management funds were in a deficiency. The aggregate of the management funds, after deducting these deficiencies was £2391 7s lid. Benefits. The benefits payable out of the sick and funeral fund are as follows: Sickness Benefits. Males. Females, per week, per week. During first six months' ..sickness .... 20s 10s second six months' sickness 10s 6s 6d During remainder of illness .:. ...... ... 5s 5s Funeral Benefits. On death of member... £2O £lO On death of wife ... 10 Widows of members may also continue their insurance of £lO. Some of the female courts provide for smaller sick beqafits —namely, 10s, ss, and 3s 6d, and one of the male courts has members at the higher scale of 20s, 13s, and ics. ■ !■■;. • Contributions. The contributions to the sick and funeral fund. payable ,; by new entrants are graduated according to age and .at the valuation date' ranged from 26s to 52s per annum for males for the ordinary scale of benefits, and 15s 2d to 30-, 4d for females. The contributions are divided; so that a specific payment s is made to the district funeral fund in'the case- of each member , The'"Valuation. I shall first take the district funeral fund. This-fund bears-.the funeral liabilities, and in return receives specific contributions on account of each member, according to the age of entry. I. append a valuation balance sheet of the fund on the basis of the New Zealand Friendly Societies' mortality at 4 per cent. Valuation Balance Sheet of the District Funeral Fund as at the 31st December, 1907: Present value funeral liabilities ...£24.691 Surplus ... .... 3,507 £28,198 Accumulated fund ..._ ... £13;D03 Present value contributions receivable ... .., V ... ...• ... 15,135 £28,193 This fund, standing by itself, has a surplus of £3507, but of course the fund is not altogether a separate compartment, and in considering the result wo must also take into account the position of the courts' sick funds. I present a consolidated valuation balance sheet of the courts' sick funds, remarking bv the way that it is only for purposes of illustration, as it is evident that unless the courts are consolidated their figures cannot in practice be added together in this way. Consolidated Valuation Balance Sheet of the Courts' Sick Funds as at the 31st December, 1907. Present value sicfeni&ss liabilities ... £112,734 Present, value funeral liabilities ... 25,598 Present value contributions to funeral fund,./ : ..:........' 15,477 £153,809 Sick funds of courts £41,773 Present value funeral benefits re- , assured ... < 25,598 Present value contributions veceiv- , able 83,604 Deficiency < 2,834 £153,809 Taking the sack--funds as a whole, then, thro is a deficiency of £2834, and I wish it to be particularly "noticed that this is exclusive of the surplus in the district funeral fund. As these two balance sheets are' mutually exclusive, we have to add their results together to arrive at the position of the society as a whole. We have therefore: Position of Society as a Whole at 31st December, 1907. Surplus in district funeral fund (as above) , £3507 Deficiency in courts (as above) ... 2834 Net surplus £673 Comparison With Last Valuation. At the 1902 valuation a net deficiency of £4184 was disclosed, and as there is now a net surplus of £673, it is quite evident there has been a considerable improvement. This improvement is due to (1) interest earned over 4 per cent, (2) favourable- sickness experience, (3) interest earned on 1902 surpluses left unappropriated, (4) profit from lapses, (5) other causes. It is, however, important to ascertain how the deficiency courts have fared, as the above improvement is made up largely of increases to surpluses, which do not help to clear away deficiencies. At 1902 there were 14 courts with defioierroiee totalling £8415, whereas now tihero are also 14 counts with deficiencies which amount to £9015. Here there are two things to be remembered. In the first place the sickness liabilities of the female members have been specially increased on this occasion to the extent of about £2OOO to provide for expected excess sickness. No such action was taken at 1902. In the second place the deficiencies are reducible by any share to which the courts are entitled in respect, of the district furseral fund surplus. I have not allotted them their share of this surplus, as it would bequite useless to do so unless action were taken to give effect to such' division. I shall deal with this point further on. If we "exclude female courts from tihe comparison, and look only at the male deficiency courts, we find that their deficiencies on thifi- Occasion total £6830 (reducible

by share of district funeral fund surplus), as against £7727 at 1902 (not reducible). Altogether, then, it can 'be saad that the male deficiency courts are £897 better oft than at 1902, and the deficiency courts as a whole are about £I4OO better off (when, we deduct the £2OOO extra liabilities charged against females on this occasion); and the improvement would be still greater if the district funeral fund surplus were apportioned out so that these courts got their share of it. There is no doubt whatever, then ; that there is an improvement in - respect of deficiency courts as a whole, as well as in the society as a whole. . . Causes of the Deficiencies. The causes of the deficiencies are various, but in general it may be said that when low contributions such as were paid by the earlier members are combined with, poor interest earnings or an unfavourable experience, a deficiency is bound to be the result. Even now the position of several courts would he immediately improved if theninterest earnings could be brought up to 4 per cent., and not allowed to fall lower. One court (Robin Hood) lost, a very large sum of money in a hall, and is still very much hampered by this item, whilst another has written down its hall. THE SCALE OF CONTRIBUTIONS. For the information of the society, I append a. comparison of the society's scale of contributions with an adequate scale constructed on the experience of New Zealand Frinedly Societies, with interest at 4 per cent.

It will bo seen that at most ages the annual difference is not great. At two age groups, however, the scale is unduly lov?. As regards female members, I shall only remark here that their scale of contributions is not even quite adequate to provide for a rate of sickness no higher than the male standard, and it can, therefore be: seen that it would require to be r aised a good deal to provide for such high sickness rates as they have actually experienced. Female sickness is so universally in excess of male rates that female members should pay on a special .scale. The preparation of a scale for females is a difficult matter, and I should prefer to deal with it separately, which I will do if required. SPECIAL REMARKS RE THE DISTRICT FUNERAL FUND SURPLUS. The surplus in the district funeral fund is, of course, largely produced by the lighter rate of mortality at which the fund has been valued on this' occasion. This very same cause operates adversely to the position of the sick funds. The surplus in the district funeral fund is, therefore, somewhat similar to a transfer from on© pocket to another.. The fund should not be looked ait. by itself only, and here 1 wish to point out that it would be an entire mistake to suppose that this surplus could be considered as a fund to increase benefits generally. There is no justification for increasing funeral or sick benefits in any court which is in a deficiency. Any portion of the district funeral fund surplus which such court might be entitled to should be regarded as ear marked towards that deficiency. I have already indicated that I have not carried down the district funeral fund surplus to the credit of courts, for the reason that any such action would be futile unless it were backed up by an actual apportionment. The queston then arises. What is to be done with this surplus? The most obvious course is to- determine upon an appointment amongst courts, and give effect to the same. I shall not enter into details here, as these could be gone into later if such a plan were decided upon. The result would be that each court’s position would at once be improved by the amount of its share. This course would be quite proper and unexceptionable. _ n. At the same time, I would point out to the executive that, as there is probably no urgent necessity for immediate action on these lines, the alternative might be considered of holding the surplus over for the present, as a nucleus for a possible future consolidation of the district, when it would go a long way towards assisting the district to start such a scheme on a solvent basis, without in any way touching the declared surplus of any particular courts. If not required for that purpose, it could be apportioned at any future time as decided upon. Before passing to another heading, I must say that the society’s district funeral fund is constituted upon a proper basis, and is one of the few that can be passed over without adverse criticism. CONSOLIDATION. I have touched slightly upon the matter of consolidation. This is a question which is well worthy of consideration, but I do not intend to enlarge upon it here, beyond remarking that when a district as a whole is capable of improving its funds at nearly 5 per cent., as in this case, a consolidation would very soon dispose of deficiencies. Even the mere fact of consolidation would at once improve the valuation position, for it would justify an all round valuation at 4 per cent., whereas at present some- 10 of the courts are valued, at lower rates. In the event of any consolidation no court should be asked to sacrifice its declared surplus. RECAPITULATION. The principal points of this report in brief are as follow: The membership .shows an increase. The sickpess experience of. males was favourable to the extent of £1671, or about 12 per cent., whilst that of females, so far as taken out, was unfavourable to the extent of £364-, or 84 per cent. A comparison of the experience of males with previous quinquennia shows that there has been no increase in sickness rates other than the normal increase due to change's in ages of members. There has been rather a slight decrease at fixed ages. The ■ mortality ' eXpeivenc6' 'for. 20 years

past has been a tittle abov« the New Zealand Friendly Societies tab'*, the excess cecurrin<r at the higher ' The' tables used in t: aation agree fairly wall with the exnerie-.oe. but if anything are very slightly on the stringent side. , , . Whilst, the funds as a whole earned interest at nearly 5 per cent., there were 11 courts that failed to earn 4 per cent. The central investment fund is likely to help soiro cf those considerably. The management fyhds amounted to £1847 at. the valuation date. The district funeral, fund scows a. surplus of £3507. and the" sick funds a deficiency of £2834, the; net result for the whole society being a surplus of £673. Not only does the societv as a whole snow an. improvement, but the "ncsition of ficiency courts is also better The scale, contributions for males ia capable of improvement Some special remarks are given in referenda to the district fund surplus, and also reconsolidation. The district general fund is one of the few properly constituted funeral funds in New Zealand. RECOMMENDATIONS. In respect of the solvent courts there is little to be said except in regard to the scale of contributions, vide below. In rftgjaffd to deficiency courts, to avoid more drastic stops every endeavour should be made to increase.'the interest earnings. It a case biich as that of Court Robin Hood, the hall should foe written down to such a sum as will the return up to 4 per cent. net. after allowing- for expenses, depreciation, am sinking fund: or. m the alternative, it should be sold. U t - selling price exceeds the figure so arrived at it will, prima facie, pay to f o:1 it. Ihe officers of deficiency courts phoidcl also watch the sickness careifullv 'o so? that there is no extravagance. If they cannot improve', the position by economy and increased interest it may be necessary to call for increased -ooyments from present members. The scale of contributions charged to new members should be revfe-Sdi and improved. The figures I have given" will furnish a guide to the executive in : dealing with the matter. . A considerably higher scale than that, at present in operation, should be charged to new female entrant-, in addition to exercising a strict supervision, over the sickness. I need not repeat the remarks under the heading of funeral fund, surplus, and consolidation. CONCLUDING REMARKS. I may mention here that some particularly interesting remarks as to the working, of a friendly, eocictv. will -bo found in the report on Court Pxido cf Dunedan. with figures deduced from the- working of that court, and I would refer readers of this 'resort thereto. ....... In concluding this report I wish to say that I have been impreseeoV-'with the nany evidences which have desclosed themselves' of strong and capable management. In thia respect the societv has been more than usually, fortunate, and an asset, of this kind is of the very greatest, value. A. T. Travebsi, Actuary and Valuer.

W OJ W M w H 1 co c/i cn o — d 6j oj c>j ro ro A £€. o co CJ1 o Oi o ° Contributions t3$Hggg?ckvg'd by the society to S. and F. oo'Mcof-o refund per annum. piAdequate scale N.Z. co to o' to co- f rlenc |ly societies o' 01 O' o' to 01 --at 4 per cent. Difference. w o -li O O O'-