ANNUAL BALANCE SHEETS.

Otago Witness, Issue 3828, 26 July 1927, Page 15

ANNUAL BALANCE SHEETS.

STATE FIRE INSURANCE OFFICE.

Although the surplus brought out by the past year’s business is nearly £5OOO in excess of that of its predecessor, the results generally do not compare so favourably. Apart from the different allocations to reserves and to writing down the value of office premises, the surplus amounted to £51,238, as against £63,417 for 1925. A satisfactory growth is recorded in both sections of the income—premiums and miscellaneous—but the increases are more than neutralised by the heavier lire losses and higher Government taxes. Salaries also contribute towards the smaller surplus, having jumped up £4OOO during the period, while the necessary appropriation to reserve for unearned premiums keeps step with the larger premium income. After the deduction of reinsurances and the bonus rebate to policy-holders, the premium income comes to £172,975. It has to be remembered that the rebate operating during 1926 was 12A per cent., while for the prior 12 months the rate was 10 per cent. Taking the relation to losses for the past seven years gives the following proportions: —

I.ast year may have brought exceptionally heavy losses, but it is noticeable from the above columns that as the premium income has incre ised the tendency is for the losses to rise more than proportionally until in 1926 the difference in premiums is exceeded by that of the other. Tho liabilities consist chiefly of Government taxes, reinsurance premiums due, and fire losses outstanding. Income tax’ has absorbed nearly 50 per cent, more than in 1925. This office claims that in recent years it has paid far more in income tax on fire income than any other office. Presumably the reference is to New Zealand alone, and in this respect it gives useful assistance to the country’s revenue. The liabilities total to £37,897, leaving surplus assets of £623,622. Reserves, swollen by the year's act surplus, and by appropriations, are larger by £55,560. Notwithstanding the heavier losses, they have made a higher leap upward than in the years prior to 1925. As there is neither Government nor shareholders’ capital to provide for, they represent the difference between the assets and tho liabilities, and are distributed tn the proportion roughly of one-third in land and buildings, and two-thirds in cash and investments. The cash balance of £57,458 well exceeds the aggregate of the liabilities. A larger balance is kept on fixed deposit and short call, making a total sum of £122.458 available on short notice. The investments are mainly in Government securities—war loans and otherwise. It is not stated whether the valuation adopted is cost or market price, but in _ either case there should lie an appreciation as the dates of redemption draw nearer. Local authority securities appear to have been much favoured recently, and, at £66,245, have more than doubled since December, 1925. The fixed assets at £222,076 are slightly reduced. There is nothing to indicate the proportions occupied by land and buildings respectively in that figure. The premises have been subjected both to depreciation and writing down, tho allowance for the former being £3369. Taking this at an average rate would make the value of the buildings considerably exceeded 1?

that of tho land. When in addition a sum of £4009 is written off annually, it may be assumed that the valuation of land and buildings is a conservative one. lhe progress made of late years would seem to justify raising the question whether the original rebate rate of 15 per cent, on tire premiums could not be restored.

STATE FIRE INSURANCE OFFICE (ACCIDENT BRANCH).

? P » fc <i yCar ,as c,von a further mpeti -; to the progress of this section of the Government s insurance activities, lhe revenue, which showed an approximate increase of £lO,OOO in 1925. has made a similar increase during 1926. the net premium income having risen by £8374 luxation has been reduced by nearly onehalf, and although larger liabilities nave brought larger claims, there" is, after all items o f expenditure have been met a surplus of £14.333 to be added to ’the accumulated funds. The consequent increase to the assets has coincided with a general re-distribir *ion of the invested funds. Debentures, at £lO,OOO, remain as before, but realisation has taken place among the war' loan portion of the New Zealand Inscribed Stock. Mortgages on property are reduced by 90 per cent, to £4575, while .ocal authority securities have risen to £78,503, or three times their former amount. In addition a sum of £15,000 now appears on fixed deposit and short call which with the cash balance of £11,328. brings the total cash and investments to £22.907. There is no fixed property to add. The work must, therefore, be carried on in rented premises, which, while affecting the expenses, of management, leaves the founds of the branch in a liquid form and cm ployed in gilt-edged securities. The additional premium income has been acquired without a corresponding increase in commission. Other administration expenses, notably salaries, have risen, and this makes the total expenditure bear approximately the same proportion to the premiums received as before. Unearned income is up by some £l2OO. and the revenue is further assisted by reduced taxation. It comes as somewhat of a surprise to find that, with an increased income. the taxation lias fallen to such an extent. Placing the annual claims opposite their respective premium income since 1919 gives the undernoted relations—viz :—

The fall in the ratio of the past two years has been maintained. Recent legislation has increased the benefits to workers and, coming into force at January 1. 1927, may materially affect the result in that department. The chief liabality is claims in process of settlement, entered at the round figure of £10,090. This may seem a large proportion out of the total for the year, but it is smaller than that at December. 1925, The probability is that the claims are estimated, and are likely to be rather over than under. Other liabilities, with the exception of Government taxes, are small, and the settlement of them will make no serious encroachment on the. cash assets. The reserves are mainly in the general reserve fund, which is steadily augmented by each year’s surplus. A further sum ts set aside annually as an appropriation for unearned premiums, forming a special reserve of £26,253. Investment fluctuation remains at. £3OOO, which l.ooks an ample allowance in view of the nature of the investments. With reserves aggregating

£191,202, and likely to continue growing as long as a surplus can be shown on each year s working, the position of the Accident Branch*is steadily becoming stronger.

Total General Dec. 31. Reserves. £ revenue. £ expenses. £ Surplus. £ 1920 ... 316,057 135,670 54,115 47,210 1921 ... 361,138 150,073 66,174 39,325 1922 ... 410,006 156.476 60,576 46.403 1923 ... 458,513 ... 490,007 169,249 59,567 38,878 .1924 190.300 62,984 31,131 1925 ... 568,062 207,418 59,960 35,917 1926 ... 623,622 253,546 70.425 40,738

Premium Fire income. losses. Pntio. £ £ p.c. 1920 ... 124.538 21,182 17.01 1921 ... 136.429 38,126 27.95 1922 ... 142,591 46,090 32.32 1923 ... 143,168 46,178 32.25 1924 ... 143,065 60,817 42.51 1'325 ... 159,260 56.998 35.79 1926 ... 172,975 79,063 45.71

Deserves. Bevenr.e. Administration Surplus. expenses. Doc. 31 £ o £ £ 1920 ... 108.241 31.805 23,212 8,449 1921 ... 131.171 41,70(1 11.472 9,828 1922 ... 132,949 39,456 21,069 6,621 1923 ... 133,825 41,476 29,089 10,178 1924 1925 ... 135,845 ... 1 79,043 46,805 57.075 38.538 8.391 10,431 13,130 192G ... 191,202 67.470 11,333 15.201

Net premium iucon.e. Claims. Ratio £ £ p.c. 1920 29,852 14,975 50.17 1921 35,932 16,786 4G.71 1922 33.343 20,330 G0.96 1923 35.268 22,402 63.52 1924 39,614 24,764 62.51 1923 49.9G7 30,553 61.15 1926 58,340 33,854 63.03