COMPANY PROGRESS

Otago Witness, Issue 3995, 7 October 1930, Page 33

COMPANY PROGRESS

THE NORTH OTAGO FARAIERS’ COOPERATIVE ASSOCIATION, LTD.

When the lot of this association had not been a very prosperous one in recent years, it was scarcely to be expected that tlie past seaspn would effect any improvement The . result of the year’s trading has been a loss of £487, which, when charged against the surplus brought forward from 1928-29, reduces the balance at credit to £96. As the directors’ report states, the unfavourable conditions prevailing have been more particularlv felt by those engaged in connection with the agricultural and pastoral interests. It is uniortunate that the present slump has occurred so comparatively soon after the previous post-war depression. j fh? nature of the expenditure is fully detailed, but with the exception of depreciation, the relative figures are not given. The total of £16,094 is slightly under that of 1928-29. but there is a remarkable closeness about the amounts of the past three years. The cause of the annual trading balance being on the wrong side is due to the shrinkage in gross profit, which, after a series of seasons when it has mostly remained on the one level, has fallen to the extent of nearly £3OOO. Below are the relative figures of expenditure and gross profit since 1919:—

It is the allowance for depreciation on plant and fittings that causes the excess ot expenditure. on this occasion. The paid-up*capital remains at its prior figure which, as before, is less than that ot deposits. The deposits at £55,588 have been reduced by over £lO,OOO, and to judge by the position of the bank account, there is a further sum available for the same purpose. It does not appear what the special security, if any, for the deposits may be but the association is fortunate to be able to borrow so large an amount without having recourse to issuing debentures with their consequent lien over the assets. A slight reduction has taken place in customers’ credit balances now standing at £lB6l, while the ordinary trade and sundry creditors have risen to £2657. Over the whole, there is a decided reduction in the oustanding liabilities. Among the liquid assets, stock occupies premier place. During the year it has i isen to £39,162, a movement which, when taken in conjunction with the lower prices now prevailing, would indicate that the quantity has appreciably increased. Its position in relation to sundry debtors has altered, the latter having fallen to £38,747 which may account to some extent for the larger value of stocks held. Sundry debtors have been subjected to a certain deduction, the amount of which is not stated, for bad and doubtful debts reserve. The bank account looks in a healthy condition with £3OOO on deposit and an almost equal amount on current account. Possibly there Y as some intention to reduce the indebtedness shortly. -.-l-bere is no change in the book value land and buildings, aggregating ,062, of , w i lic b £25;723 is freehold and £3339 leasehold. There is still no provision made for depreciation on the buildjngs, part of which is erected on leasehold property. The aggregate of £4262, to which the plant and fittings have been reduced, is arrived at after writing off £563 for wastage, which, being equivalent to over 11 per cent, on the gross value, may be said to be a generous allowance, even when motor cars and motor wagons are concerned. It must be satisfactory to shareholders to learn that, notwithstanding the depressed conditions, the morerapidly deteriorating properties of the association are being carefully supervised m that respect. .

SOUTH ISLAND MOTOR UNION MUTUAL INSURANCE ASSOCIAGeneral Unexpired Risk Net June 30 Reserves Reserve Surnltis 1930- £15,532 , £11,257 £6,403

This association is still in its early years of existence the past year being its fourth. Established as a mutual concern, it has no funds from shareholders’ capital to assist it in its initial stages, which must necessarily be the most difficult Its progress is apparent, when it is able to announce a net surplus of £6403, which, when .added to prior accumulations, has the effect of increasing them by approximately 70 per cent. In the directors’ report it is claimed that the association has been the means of reducing premium rates by 30 per cent’, and of extending policy benefits, while its policyholders have already received a bonus. Assets aggregating. £31,026 are shown in the balance sheet, against, which there are liabilities of £4237. There is thus a surplus of assets of £26,789, of which £11,257 is held against unexpired risks, and the balance is termed general reserve, but might also be designated as accumulated funds. For the most part the assets consist of New Zealand Government stock and other securities (£26,732) while a further £2OOO is placed, on fixed deposit. The latter sum is entered under investments, but, in view of the bank balance being; as low as £627; it is conceivable that in the event of a large claim being allowed, the deposits might be reqiiired to assist to meet it. Sundry debtors stand at £1077, but how far they may consist of premiums due or overdue does not appear. The fact that office furniture and equipment at £156 is the only fixed asset points to the business as yet being op a small scale. The depreciation allowance upon them is the generous one of 10 per cent.

In their total of £4237 the liabilities comprise a variety of items, but it may be assumed that unpaid claims form the largest part. For the greater lucidity ot the balance sheet, unpaid claims a'lmost deserve a heading to themselves. The total of the outstandings stands in marked contrast to the comparatively small balance of cash in hand and in bank indicates was expected that settlement would not be required for some time to come.

a n<;t Premium income of £23,010, the net claims come to £9474, or equivalent to 41.17 per cent. As from the nature of the business, claims are likely to be as prevalent in the earlier years as later on, in proportion to the business transacted—the ratio looks satisfactory. The term “special discounts” as applied to insurance business has a somewhat unfamiliar sound. As the sum of £1235 appears under that designation, or nearly 5£ per cent, of the net premiums received during the year, those discounts evidently play an important part. The charges amount to £5686, or 24.71 per cent, of tlie premium income, while in addition there are the allowances of £2099 and £464 for unexpired risks reserve and investment fluctuation respectively. The latter scarcely amounts to 2 per cent, upon the securities, but as an unstated amount consists of Government stock, it is probably chiefly on account of the balance employed in unnamed investments that the provision is considered necessary. The return in interest averages approxiniately 4 per cent., but the actual rate, in view of a part of the money not having been invested for the full period, will be higher. The progress made by this association indicates that, in spite of the presence of many competitors in the field, it is finding ample scope for its activities among the motoring community.

STATE FIRE INSURANCE OFFICE.

Although the surplus for 1929 has fallen below that of the preceding year, it is considerably in excess of those shown in earlier years. The revenue continues to increase, while, if general expenses show a rise (mainly due to heavier income tax) the fire lossses are reduced. After various allowances, aggregating £21.000, are made, there is a surplus of £57,277, or £4324 less than that of 1928, to be added to reserve fund.

The net premium income, after deduction of reinsurances and rebate,, comes out at £190,782. This is some £5500 higher than that of the previous year, while a reduction of over £6OOO in the losses further improves • tjie position. The larger turnover has accordingly resulted in bringing the proportion of losses to premium income under 40 per cent., a position they have not occupied since 1925. For the past 10 years the relative positions have been as follow:—

It would seem that 1927 had been especially unfavourable in the matter of losses, and that the experiences of the year preceding and succeeding were also unfortunate, although not to the same extent. The annual average over the 10 years since 1919 comes out at 37.10, which is still under the proportion of the past owing to the exceptionally favourable ratios in the earlier seasons. It remains to be seen whether 1929 was a normal season, or whether possibly tlie period taken is too short to arrive at a reliable result.

The capital of £lOO,OOO, authorised to be raised for the purpose of this department, has not been required so far. and each year that passes makes its utilisation less probable. The accumulated funds are comprised under the heading of resei ve fund, which, with the addition of the latest annual surplus, will amount to £644,394 It is not clear why the surplus alone is termed “ amount of fire insurance funds, ’ as the designation might equally apply to the total of general reserve. In fact, the statement that the fire insurance funds at the end of the period amount to only £57,277 is rather misleading. Reserve for unearned premiums, swelled by £2543 appropriated from the annual working, has reached £87,196, while bonus rebate reserve at £28,500, after receiving £lOOO, exceeds the latest yearly rebate to policjdiolders. Reinsurance reserve by an appropriation of £lO,OOO has been raised to £45,000, but how it stands in relation to the amount of,reinsurances is not shown. The total of reserve funds is brought to £821,091 by the inclusion of investments fluctuation reserve which has been raised to £16,000 by the allocation-of £6OOO from revenue account. The strong position occupied by reserves is apparent. Liabilities aggregate - £41,195. The claims for losses outstanding amount to only £6136, which as an estimate is not likely to be under the mark. Taxes represent £15,836, nearly all of which would be accounted for by income tax if still outstanding. Sundry creditors are entered at £6313, but there are further amounts/ which might come under that heading, aggregating £11,638, the largest 0 „ which:, is reinsurance premiums at £8705. This is practically balanced by the premiums outstanding on the other side.

The fixed section proportionally occupies a prominent place among the assets, being the largest individual item. After allowing £3313 for depreciation and writing off £4OOO, land and buildings are reduced to £210,926. This leaves them at almost the same figure as, at December, 1928, the year’s capital expenditure upon them having been balanced.■- The liquid investments total £590,868, Government securities at £336,296 predominating. Local authority investments employ £110,396, while an almost similar sum is lodged on fixed deposit and at .short call. Rural advances and intermediate credit bonds make up £34,175. From’the nature of the investments, it would appear that

thiiir fluctuation would be slight, but tin step taken several months ago to strengthen the investment fluctuation reserve by £6OOO has been justified by P vei .™- Gash in bank and. in transit.coma — to £41,700, or just sufficient to meefi the total liabilities at the closing date. A surplus of assets of £821,091 speaks well lor a quarter of a century’s growth commenced on a loan of £2OOO.

GOVERNAIENT LIFE INSURANCE DEPARTAIENT.

The past year appears to have been the most successful that this Government department has yet experienced. The increase of approximately £50,000 in the’ revenue brought out is accompanied by a tall in administration expenses, while tlie claims are more than met by the premium income. The net result, after providing £4300 for property depreciation and £20,000 for investment fluctuation reserve, is an addition to the accumulated funds of £343,846, which must SU Aft b e a record for any single year. Alter a succession of annual rises aggregating £112,425 in three years, the claims have lallen appreciably, while the pi emium income has made a substantial r \ se l, The result is that the relations or the two are on a more favourable rooting than they have been during either or the past two years as is seen below:—

The premium income continues annually to rise steadilj-. The fluctuating nature ot the claims is seen in the annual increases of greater extent, and one or two decreases. Over the latest nine years, which would seem a fair period to strike ??-’ 1 a n-r e J age ’ , tlle c^aims have risen by riAl’nZ?’ f, th* 3 P rem >um income by £1J4,051, the average annual excess of the latter being £2553. Considering the volume of business put through, the margin is small enough to give an indication or the keenness of competition existing in this connection. ° Out of an aggregate of £50,431 representing liabilities to outsiders, elainvl admitted come to £33,464. As this is only slightly over 5 per cent, of the annual total, prompt settlement is indicated. The amount is liable to vary considerably in accordance with the value ?i claims made towards the close of the financial period. Sundry creditors, which comprise £8428, is the next largest umt, while deposits in premiums and otherwise, and sundry outstanding charges make, up the balance. Reserves are chiefly included under investment fluctuation, which received an addition of £20,000 at December, 1929. In view of how the investment market has shaped in the interval, possiblj’ a larger allowance may be considered desirable for the current j'ear. Accident and fidelity fund stands at £3912, while the further reserve sinking fund on local body loans has risen to £11,161, or, nearly £3500. The landed and house property is entered at £144,027, or approximately 1.75 per cent, of the total assets. Comparatively speaking, the part it plays as employment for the investment or the surplus funds is small,' although there uiay be a tendency to make more use of it in the future as business increases. The income from rent being not entered separately, it is not possible to arrive at an estimate of the return, but the assumption is that the rent is mainly received from the department itself as chief tenant. The depreciation allowance of £4300 comes almost to 3 per cent. The sum of £7.858,594 represents the amount placed in liquid investments with mortgages on property at £3,365,033 as the largest section. Although mortgages continue to increase, the property acquired by foreclosure is as small as £1394, speaking well for the judgment exercised in selection of the security. New Zealand Government securities •at £2.273,160 have slightly risen, but the difference may be due to the nearer approach of the dates of maturity rather than to the employment of new money. Debentures of public bodies have also risen, their total of £1,120,251 being contained to the extent of over 60 per. cent, in power boards. The loans against policies are up to £1,014.921, lender and borrower being, if not identical, mutually dependent. The gross revenue from in< terest and rent amounted to £441.989, or equivalent approximately to two-thirdi of the premium income.

Overdue revenue amounted to £15.485, of which £7194 represented interest, and the balance premiums. It may .be assumed that the interest concerned loans either on property or on policies. Outstanding interest and premiums, the due ■date for which had not permitted time for collection when the books were closed, make up a further £65,939, while the interest accrued- comprised, £107,582. Cash in hand and on current account stands at what would seem to be the low figure of £3584, while sundry creditors, swelled by a refund of income tax over three year, look large at £18.319. The tax applicable to 1929 that was due to be refunded has been deducted from the expenditure for the year, while the amount (£10,563) applicable to the other years has been entered separately. The surplus of assets over liabilities as taken from the balance sheet now amounts to £8,164,494. Since 1922, the figures have been as follows:—

The following appeared in last week’s Second .Edition.

Paid-up General Net DiviJuly 31 Capital Reserves Profit dend £ £ £ P.c. 1920 37,500 29,948 13,728 8J 1921 37,500 18.147 73,358 7 1922 50,085 8,863 79,284 5 1923 50,270 5,439 71,344 5 1924 50,310 1,669 241 1925 50,860 307 38 . 1926 50,860 1,671 _ 3,364 1927 50,860 1,375 1,954 1928 50,860 ♦966 2,133 5 1929 50,907 583 2,284 1930 50,907 96 7487 * Subject to income tax. 7 Loss.

- Gross Expenditure Profit Ratio £ £ P.c. 1919-20 19,002 32,730 58.06 1920-21 20,354 16,996 119,76 1921-22 17,922 8,638 207.48 1922-23 16,452 15,107 108.90 1923-24 15,700 16,791 93,50 1924-25 18,571 18,610 99.79 1925-26 15,284 18,648 81.96 1926-27 14,747 16,701 88.30 1927-28 15,953 18,086 88.21 1928-29 16,125 18,409 87.59 1929-30 16,094 15,607 103.12

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 458,513 169,249 59,567 38,878 1924 490,007 190,300 62,984 31,131 1925 568,062 207,418 59,960 35,917 1926 623,622 233,546 70,425 40,738 1927 670,061 243,496 69,157 35,883 1928 744,271 252,004 66,878 61,601 1929 821,091 258,995 75,650 57,277

Premium Fire Income Losses Ratio £ £ 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 1925 159,260 56,998 35.79 1926 172,975 79,063 45.71 1927 181,846 98,135 . 53.97 1928 185,213 81,585 44.05 1929 190,782 75,317 39.48

Investment mlnlstraDec. 31, 1920 Funds. £ 5,542,552 fluctuation tion exreserve. £ 288,686 * Revenue. £ 730,908 penses. £ 93,219 1921 5,726,356 288,730 755,519 101,071 1922 5,922,825 288,733 778,648 88,483 1923 6,222,485 207,024 814,639 91,025 1924 6,448,658 202,247 854,591 95,296 1925 6,731,118 204,323 910,148 99,699 1926 7,029,584 206,099 951,897 99,545 1927 7,303,925 209,707 987,326 96,375 1928 7,582,679 209,907 1,023,757 95 745 1929 7,926,525 222,896 1,073,005 94,306 ’'After deduction of land property expenses. and income tax and

Claims. Premium • income. Ratio 1920 £ 450,041 £ 460,796 per cent. 97.67 1921 468,000 471,438 99.27 1922 493,964 483,734 102.11 1923 499,741 499,214 100.11 1924 531,921 522,741 101.76 1925 526,833 560.365 94.02 1926 • ■ 543,172 580,123 93.63 1927 605,833 600,865 100.83 1928 • * 639,258 626,359 102.06 1929 • • 621,117 654,847 94.85

Total ’ assets. Liabilities. Gross surplus. Dec. 31, £ £ £ 1923 ,. 6,489,868 59,159 6.430.709 1924 .. 6,712,888 60,413 6,652,475 1925 .. 6,994,229 56,748 6,937,481 1926 .. 7,295,023 56,830 7,238,193 1927 7,584.401 67,789 7,516,612 1928 .. 7,350,231 46,471 7,803,760 1929 .. 8,214,925 ■50,4318,164,494