ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1887.

Appendix to the Journals of the House of Representatives, 1888 Session I, H-12

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1888. NEW ZEALAND.

ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1887.

Presented to both Houses of the General Assembly pursuant to the Provisions of " The Government Insurance Amendment Act, 1874," " The Public Seventies Act, 1882," and " The New Zealand Government Life Insurance Act, 1886."

Wellington, 31st May, 1888. 1 have the honour, in accordance with statutory provisions, to submit the accounts of this department for the year ended the 31st December, 1887, together with tables specifying in detail the business done in the period reported on, and indicating the progress of the department since its establishment in 1870. New Business. The number of proposals received and dealt with for the year was 4,517, representing the sum of £1,121,095 18s. Id. During the year 3,124 proposals were completed and became policies, 405 were declined or deferred. The remaining proposals were not completed. The amount insured under these policies was £766,952 2s. 4d., being £49,487 12s. lid. in excess of the amount of assurances effected in the year immediately preceding. The 3,124 policies issued were classed as follows: In the General Section, 2,607 assurance policies, amounting to £662,702, and 29 endowment policies, assuring £2,965 2s. 4d.; in the Temperance Section, 477 assurance policies, representing £101,285. The policies issued included 11 contracts for annuities, for which the annuitants paid £3,075 19s. 3d., the annual payments under these being £346 Is. 3d. The new annual premiums represented by the business above specified amounted to £22,061 3s. 9d., besides £7,659 11s. 9d. received as single premiums, and as the price of annuities granted as above mentioned. Mortality and Claims. Claims by death were preferred under 177 policies, arising through the decease of 166 insured persons, and representing an assured sum of £59,973 95., including bonus additions. Claims on endowment assurances matured numbered 15, the amount payable, including bonus additions, being £3,462 3s. The number of children's endowments which matured were 7, insuring the sum of £800. One annuitant, the annual payment to whom was £50, died during the year. A sum of £30,305 ss. 3d. was paid as cash value for reversionary bonuses surrendered. The mortality of the yeax is considerably under the expectation, although the accidental deaths during the period were 23, equal to very nearly 14 per cent, of the total mortality experienced, and representing claims paid amounting to £9,355, exclusive of bonuses, or nearly 17 per cent, of the total amount insured under the policies emerged by reason of death. Of the 23 accidental deaths 9 were caused by drowning and 4 by suicide. This large percentage of accidental deaths would appear to exhibit the low mortality referred to in a still more favourable light. Annual Income and Inteeest. The gross income for the year from "all sources was £268,372 6s. 5d., showing an increase on the income of the previous year of £11,220 17s. lid. The interest on invested funds for the year amounted to £66,380 Is. Id., being £8,104 3s. Id. above that credited in the preceding twelve months, and £2,144 9s. Id. in excess of the total amount payable for claims arising during the year, and bonuses thereon. The average rate of interest on the mean funds of the year was £5 3s. Bd., which was an increase of 3s. lid. on the rate for the previous year. The Accumulated Fund. The accumulated fund on the 31st December, 1887, amounted to £1,328,493 6s. 2d., showing an increase for the period of £96,535 lls. 3d., notwithstanding that £30,305 ss. 3d. was paid for reversionary bonuses surrendered, and £1,562 for bonuses on claims payable in the preceding year.

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Tontine Savings Fund. With a view of mooting a popular desire, and at the same time rendering policies more enduring, there was, in the latter half of the year, introduced in the department a description of insurance termed the Tontine Savings Fund System. The object of this mode is to ressrve all profits accruing on Tontine Fund policies, and at the close of the period to divide these profitspro ratd among the survivors whose policies are in force at the time. The scheme has been eminently successful, and promises to accomplish the object aimed at —a more permanent class of insurance business. General Eemabks. Notwithstanding the continued commercial and agricultural depression which existed during the year, and to which is mainly due the high lapse-rate experienced in common with all other offices in this part of the world, and despite the continued unscrupulous opposition of several foreign offices, whoso agents appear systematically to misrepresent this department, the new assurances completed by the department show an increase over the previous year, and the business of the future presents a healthy and steadily improving aspect. With reference to the rivalry of private institutions abovementioned, it may be stated here that the specific form of unfair competition, which cannot be too strongly condemned, is that agents of some societies resort to the practice of obtaining assignments of policies from policyholders of the Government Department by means of misrepresenting the comparative advantages of that department and those of the competing offices. Thus they frequently mislead our policyholders, inducing numbers of them to make assignments to persons who are used as " dummy " assignees, of whom the clients have no personal knowledge, and from whom they do not receive adequate consideration for the policies they have been induced to give up. In my report presented to Parliament last year the fact was announced that the Consulting Actuaries had reported a nominal deficiency in the Temperance Section, a consequence of the brevity of the period which had elapsed since its establishment. By reason of that deficiency, and the consequent non-allocation of any bonus to temperance policyholders, a decided check was given to the progress of business in the Temperance Section. Mr. Frankland, the Government Actuary and Statist, was of opinion that, although the Consulting Actuaries could not, in view of the wording of the prospectus, have dealt with the Temperance Section otherwise than as an entirely distinct fund, it would nevertheless be actuarially sound, and more in consonance with the objects for which the Temperance Section was founded, to amalgamate the funds of the General and Temperance Sections and differentiate the profits in so far only as the mortality experience of the two sections proves to bo dissimilar. Mr. Frankland devised in detail a scheme by which this result could be with strict mathematical accuracy accomplished. This scheme he submitted to the Department's Consulting Actuaries during his recent visit to London, and at the same time suggested, in consequence of the great labour which rigid adherence to this strict mode would entail, that an approximate determination of profit from mortality might be found preferable. With this suggestion the Actuaries concurred, and specifically recommended a mode of distribution which they regard as substantially equitable. It is proposed this year to ask legislative powers for carrying into effect this arrangement, by which the policyholders of the Temperance Section will benefit by whatever proportional longevity they may be found to enjoy in comparison with the policyholders of the General Section, while at the same time they fully share with these latter any profits arising from sources other than favourable mortality—these sources being excess of interest over the assumed rate, saving in management expenses, and other sources of a miscellaneous nature. During his visit to England Mr. Frankland brought other matters of importance under the notice of the Consulting Actuaries. These are more fully specified in a parliamentary paper recently laid before the Legislature by command of His Excellency. It is only necessary to mention here one of the subjects discussed therein—namely, the method of allocating bonuses amongst individual policyholders, which at the present stage in the history of the office, now some eighteen years old, requires modification. The method recommended by Mr. Frankland has for its object the securing to the older policyholders in the allocation of profits their due share of the profit produced by the excess of interest over the assumed rate. This recommendation also the Consulting Actuaries have approved as the proper course to bo followed for the future. The Industrial Branch is now practically closed. The investment of the department's funds is carefully supervised, the statutory Board of Investment having charge of the mortgage portion of the business. The amount invested is specified under the respective headings in the table of assets in the certified balance-sheet. Applications for loans on mortgage of freehold property continue to be received in considerable numbers. The majority of these applications are for loans of moderate amounts under the system of repayment by instalments. By the figures in the balance-sheet it will be seen that the total amount of investments on mortgage at the end of 1887 was £266,498 75., as against £209,480 at the same time in the immediately preceding year; showing for the last year an increase in this class of investments of £57,018 7s. The amount lent during the year under the repayment-by-instalment system was £29,385, distributed among 104 mortgagors. D. M. Luckie, Government Insurance Commissioner.

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Eevenue Account of the Government Life Insurance Department for the Year ended 31st December, 1887. £ s. a. ; £ s. d. £ s. d. Amount of Funds (Ordinary and Indus- j Death claims under policies, trial) at 31st December, 1886 .. 1,231,957 14 11 Assurance, including bonus Renewal premiums — Assurance, An- additions .. .. .. 59,973 9 0 nuity, and Endowment .. .. 174,163 2 3 Endowment Assurances maNew premiums on 3,113 policies, assuring tared, including bonus ad£766,952 2s. 4d., and yielding an annual ditions .. .. .. 3,462 3 0 revenue of £22,061 3s. 9d. (including Endowments matured .. .. 800 0 0 instalments of first year's premium i Bonus on claims paid in 1886 .. 1,562 0 0 falling due in the year) .. .. 20,08114 0 ' Bonus surrendered for cash .. 30,305 5 3 Single premiums—Assurance and En- : Annuities .. .. .. 3,834 8 0 dowmont.. .. .. .. 4,583 12 6 j Surrenders .. .. .. 25,081 511 Consideration for annuities granted .. 3,075 19 3 Commission, new .. 8,348 1 5 Interest .. .. .. .. 66,380 11 „ renewal 1,222 3 11 Fees .. .. .. .. 87 17 4 . 9,570 5 4 Property-tax .. .. .. 4,502 3 2 Expenses of management,— Salaries—Head Office 10,273 19 0 „ Branch Offices and Agents 5,278 18 2 Extra clerical assistance 910 5 2 Medical fees .. .. 3,706 2 1 Travelling expenses .. 2,345 8 4 Advertising .. .. 543 15 2 Printing and stationery 1,743 17 8 Rent .. .. 1,423 5 2 Postage .. .. 1,001 2 6 Telegrams .. .. 742 6 1 Exchange .. .. 159 14 1 Office furniture depreciation .. .. 288 11 7 General expenses .. 1,531 2 3 Quinquennial expenses 2,343 14 1 Compensation for loss of office .. .. 447 14 2 32,745 15 6 Amount of funds at 31st December, 1887 1,328,493 6 2 £1,500,330 1 4 £1,500,330 1 4

Balance-sheet of the Government Life Insurance Department on 31st December, 1887. Liabilities. £ s. d. Assets. £ s. d. Total Assurance, Annuity, and Endow- Loans on policies .. .. .. 185,387 9 3 ment Funds (as per Revenue Account) 1,328,493 6 2 Government securities .. .. 586,100 0 0 Claims announced not paid .. .. 10,130 13 0 Railway debentures (guaranteed by GoSurrenders .. .. .. .. 6 8 5 vernment) .. .. .. 79,850 0 0 Annuities .. .. .. .. 163 13 0 Municipal Corporation debentures .. 71,572 0 0 Commission (new) .. .. .. 1,866 18 8 County securities .. .. .. 1,000 0 0 Medical fees .. .. .. 778 11 6 Otago University debentures .. .. 15,000 0 0 Postage .. .. .. .. 250 0 0 Harbour Board debentures .. .. 10,000 0 0 Property-tax .. .. .. 2,603 1 1 Landed and house property .. .. 90,035 18 9 Mortgage on property taken over by the Office furniture (Head Office and Association not yet paid .. .. 10,000 0 0 Agencies) .. .. .. 2,499 18 2 Premium deposits .. .. .. 3,085 7 3 Mortgages on property .. .. 266,498 7 0 Valuation-fee deposits .. .. 15 5 0 Overdue premiums on Fire-insurance moneys in suspense .. 7,948 8 0 policies in force .. £7,743 19 5 Outstanding premiums due in December, 1887 17,314 12 5 ■ 25,058 11 10 Interest outstanding .. 1,135 7 0 Interest accrued not due 14,141 9 1 15,276 16 1 Agents' balances .. .. .. 959 11 10 Sundry accounts owing .. .. 428 9 9 Cash on current account .. .. 15,174 4 11 £1,364,841 7 7 £1,304,841 7 7 Government Insurance Office, 31st March, 1888. D. M. Luckie, Commissioner. Audited and found correct. James Edward FitzGerald, Controller and Auditor-General.

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Particulars of Policies discontinued during 1887.

Progress of Business of the Government Insurance Department since Date of Establishment to 31st December, 1887.

Statement of Policies issued and discontinued during the Year ended 31st December, 1887.

Authority : George Didsbuey, Government Printer, Wellington.— 1888.

[Approximate Cost of Paper.— Preparation, nil; printing (1,375 copies), £i ss. Od.]

Assurances. Endowments and Investments. Annuities. Total. Whole Life and Term. Endowment. Annual Premium. No. Annual Premium. No. Sum Assured. j^ZfuL N°- Premium A«™^ Annual Premium. a. No. Sum Assured. Annuity. Ordinary. Extra. 'A Ordinary. Extra. Ordinary. Extra. Total Policies ini force at begin- [ ning of year j Aaa Policies is- 1) suea auring the I year .. J 14,597, £ s. a. 4,478,540 15 2 £ s.a. £ s. a. £ s. a. 118,739 6 24,293 9 5 9,109;2,155,462 16 0. £ s. a. £ s. a. 77,830 3 10 847 8 1 939 8,000 16 1 46 13 7 29 £ s. a. 36,737 13 8 £ s. a. 1,800 10 6 126 0 7 69 £ s.a. 19 19 2 £ s. a. 4,232 6 5 24,71* £ s. a. 6,670,741 4 10 £ s. d. 198,389 19 8 £ s. a. 5,140 17 6 £ s.a. 4,232 6 5 1,980 ■j 543,742 0 0 13,660 6 2 227 7 4:! 1,104 220,245 0 cJ I ! 2,965 2 4, 11 .. I 346 1 3 3,12* 766,952 2 4 21,787 2 10 274 0 11 346 1 3 Total .. 16,577 5,022,282 15 2 : : I ! 133,399 12 4 4,520 16 9 10,213 2,375,707 16 0 4,520 16 9 10,213 2,375,707 16 0 334 4 9 991 221,159 16 0 85,830 19 Hi 894 1 8 968J 7,951 6 4 88 15 4 172 39,702 16 0' 1,926 11 1 80 SO 19 19 2 14,578 7 8 27,838; 7,437,693 7 2 5,414 18 5 4,578 7 220,177 2 6 Deauct Policies') aiscontinuea I auring the year] 251 17 9 1 | i,aao 380,029 0 0 9,834 15 5 334 4 9 991 221,159 16 0 4,571 5 2 51 2 4 2,399 605,760 1 2| 18,037 19 6 423 0 1 51 2 ■ Total Policies'! in force at ena [ of year .. J 15,342 4,642,253 15 2 122,564 16 Hi 4,18612 Ol 9,222 2,154,548 0 0 77,879 13 7 805 0 4 796 05,131 10 10 1,674 13 4 79 19 19 2 4,527 5 4 25,439| 16,831,933 6 0] 1202,139 3 0! 4,991 18 4 4,527 5

How Discontinued. By Death Maturity .. Surrender .. Lapse Changes Other causes 130 250 853 42,628 0 0 89,924 0 0 245,477 0 0 1,163 4 4' 2,301 18 8 6,001 12 8 91 17 3 276 2 11 80 2 11 47 15 75 1 7 212 168 8 2 715 6 4 10 4 7 3 2 334 4 9 991 13,100 0 0 3,150 0 0 59,515 0 0 144,894 16 0 509 18 11 263 8 10 2,050 1 7 5,073 12 5 36 10 1 17 14 6 2 0 8 1 12 8 39 12 7 37 19 9 7 9 8 7 27! 137! 800 0 0 1,116 0 4 2,613 18 5 44 9 7 65 11 11 140 10 3 1 50 0 0 •• 178 22 489 1,705 55,728 0 0 3,950 0 0| 150,555 0 4 392,985 14 5 1,673 3 3 307 18 5 4,417 12 2 11,215 14 11 128 7 4 295 3 5 82 3 7 1 12 8 114 14 2 206 7 11 13 14 6 4 7 3 50 0 500 0 01 1 16 0 i' 2 4 i' 2 2,000 0 0 41 6 5 •• 5! 2,541 6 5 2 .. Total void dur-) ing the year .. j 1,236 88 15 4 2,399; ! 605,760 1 2 18,037 19 6 ; 423 0 1 380,029 0 0, 9,834 15 5; 221,159 16 0 7,951 6 4 172 4,571 5 2 1 251 17 9, 51 2 4 51 2 ]

Total issued 123,8317,411,142 6 2199,586 15 38,5431910 15,6543,811,348 16 0187,64213 51,89215 4 1,60072,320 2 813,635 14 9,103 1124 11 3;5, 603 14 8 Total void ..8,4892,768,888 110 77,02118 414,357 7 10 6,4321,656,800 16 a 59,762 19 101,087 9 0 804;37,188 11 10'l,<J61 1 5 24 104 12 11,076 9 4 Total in force 15,342 4,642,253 15 2,122,564 16 114,180 12 0 1 9,2222,154,548 0 0 77,879 13 7 805 0 4J 796j35,131 10 10 ll,674 13 4 1 79 19 19 2!4,527 5 4 41,18811,294,811410340,989 14 810,436 15 25,603 14 8 15,749^4,462,8771810138,850 11 8 5,444 16 101,076 9 4 25,439J 6,831,933 G o'2O2,139 3 OJ 4,991 18 4 4,527 5 4 796j35,131 10 io|l,674 13 4l 79 19 19 2!4,527 5 4] Note.— The Ordinary Premium is the premium at the real age; the extra, the additional premium imposed for any reason whatsoever.