ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1927.

Appendix to the Journals of the House of Representatives, 1928 Session I, H-08

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1928. NEW ZEALAND

ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1927.

Presented to both Houses of the General Assembly pursuant to the Provisions of the Government Life Insurance Act, 1908.

Government Insurance Office, Wellington, 6th June, 1928. I have the honour to submit the following report upon the transactions of the Department for the year ended 31st December, 1927, and its position at that date. The Revenue Account, Balance-sheet, and Statement of Business are appended. New Business and Amount of Business in Force.—The amount of new business has been satisfactory, 5,555 policies having been issued for assurances, totalling £1,791,845, with annual premiums amounting to £58,006. Twenty-three annuities were granted, the purchase-money being £14,329. The total business now in force (including immediate and deferred annuities for £24,914 per annum) comprises 66,856 policies, bearing an annual premium income of £595,780. The total sum assured is £19,303,916, to which reversionary bonuses amounting to £1,973,434 have been added. Income. —The total income of the Department for the year was £987,326 —viz., premium income £586,535, interest and rents (after payment of land and income tax £15,235) £386,462, and annuity purchase-money £14,329. Outgo for Claims. —During the year 1,046 policies matured for £275,069, and 495 policies became claims by the death of the assured, the amount payable being £198,130. These figures bring the amount paid in claims since the inception of the Office up to the large total of £10,732,053. Accumulated Funds. —The total Assurance Fund now amounts to £7,303,925, being an increase for the year of £274,341. The Department also has an Investment Fluctuation Reserve Fund amounting to £209,707. The Balance-sheet. —On the 31st December, 1927, the total assets of the Department amounted to £7,584,401. The total investments increased by over £300,000, practically al! of which has been advanced on mortgages of freehold securities. Cash in hand and on current account stands at the low figure of £10,161 ss. 2d. Adequate provision has been made in respect of the item " £19,331 7s. 10d., properties acquired by foreclosure." Further, this amount has been reduced to £10,226 by sales since the accounts were made up. Bate of Interest.—The effective net rate of interest earned was £5 10s. lOd. per cent., as compared with £5 lis. Id. per cent, earned during the previous year. The slight decrease has been caused by heavier income-tax, but it is satisfactory to note that the rate is still considerably greater than the rates earned in previous years. Expense Ratios. —The expense ratios show satisfactory reductions, as will be seen by the following figures for the past four years : — 1924. 1925. 1926. 1927. (a) Total expenses to total income .. .. .. 11-29 11-08 10-53 9-84 (b) Total expenses to total premium income .. 18-46 17-99 17-28 16-17 Annual Bonus Distribution. —In accordance with statutory authority the Department is now for the first time in its history distributing its profits annually. The attached Report of the Actuary, pursuant to section 40 of the Government Life Insurance Act, 1908, discloses a net surplus of £207,351 (excluding interim bonuses paid during the year), and of this sum £190,500 has been allotted in the form of compound reversionary bonuses uponj the sum assured and existing bonuses, The total reversionary bonuses thus allotted amount to £305,484.

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The rates of bonus allotted under new endowment and whole-life assurances when taken as a percentage of the sum assured range from £1 18s. to £2 per cent, per annum, and increase up to £3 6s. per cent, per annum in the case of policies of longer durations. In regard to the results of this distribution, I would point out that the above bonuses are considerably greater than those declared at any previous division. The stringency of the valuation basis (the details of which are required by sections 36 and 37 of the Act to be supplied triennially) has been fully maintained, and an additional £10,000 has been transferred to the Investment Fluctuation Reserve. These results cannot fail to prove very gratifying to the policyholders, and will have a beneficial effect on the efforts of the field staff in obtaining new business. In this connection, however, I consider it wise to point out that, having regard to the substantial cost of writing new business, a life-insurance office can only absorb a certain amount without straining its profit-earning powers. There is such a thing as overtrading even in life insurance, and an extensive new business does not in itself constitute an index to prosperity. It is therefore not the policy of the Department to achieve mere " big figures," but rather to progress in a steady manner and on safe and economic lines in order to consolidate the interests of the policyholders. General. —The results of the Department's trading during the past year may be viewed with every satisfaction. The new-business figures have been up to expectation, and increased premiums and interest income have produced a substantial addition to the funds. The continued investment and reinvestment of the large funds of the Department naturally calls for a great deal of time and thought, but, taking into consideration the financial stringency through which the Dominion has been passing, the losses have been singularly few, and the rate of interest has been at a satisfactory level. The mortality experience has been favourable, and there has been a substantial decrease in the ratio of expenses, both to premium income and to total income. These favourable features are being well maintained, and they constitute the main source of the materially increased bonuses now declared at the inauguration of the system of annual profit distributions. The policyholders, therefore, can look forward to the future with every confidence. A. E. Allison. Government Insurance Commissioner.

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Revenue Account of the Government Life Insurance Department for the Year ended 31st December, 1927. £ s. d. £ s. d. Amount of Funds at Ist January, 1927 7,029,583 16 2 Death claims under assurance policies, Renewal premiums — Assurance, An- including bonus additions .. 197,785 19 0 nuity, and Endowment .. .. 526,769 4 4 Endowment Assurances matured, inNew premiums (including instalments eluding bonus additions .. 264,792 1 0 of first year's premiums falling due Endowments matured .. .. 10,277 7 0 in the year) .. .. .. 55,037 211 Premiums returned on endowments .. 343 11 4 Single premiums—Assurance and En- Bonuses surrendered for cash .. 11,604 17 10 do wment .. .. .. 4,72951 Annuities .. .. .. 23,002 4 10 Consideration for Annuities .. 14,329 1 2 Surrenders .. .. .. 39,087 13 11 £ s. d. Loans released by surrender .. 58,939 3 7 Interest and Rent .. 405,044 11 £ s. d. Less land and in- Commission, new* .. 34,450 14 6 come tax, „ renewal 4,045 13 1 £15,235 9s. 7d.; — 38,496 7 7 property expenses, | Contribution to Public Service Super£3,346 17s. Id. ... 18,582 6 8 annuation Fund .. .. 777 10 5 386,461 14 5 Expenses of management — Salaries. £s. d. Head Office .. 21,085 7 8 Branch offices and agents .. 1.1,952 12 6 Extra clerical assistance .. .. 2,590 11 9 Medical fees and expenses .. .. 4,309 410 Travelling-expenses 1,020 5 8 Advertising .. 445 16 5 Printing and stationery ... .. 1,931 6 2 Rent .. .. 5,772 18 0 Postage and telegrams 1,759 15 1 Exchange .. 42 18 5 ! . General expenses .. 2,816 011 Services rendered by Government Actuary .. .. 4,151 15 9 57,878 12 9 Transfer to Investment Fluctuation Ue.servo Account .. .. 10,000 0 0 Amount of funds, 31st December, 1927 7,303,924 14 10 £8,016,910 4 I £8,016,910 4 1 1 11 —— * Including agents' allowances. Balance-sheet of the Government Life Insurance Department on 31st December, 1927. Liabilities. Assets. £ s. d. £ s. d. Total Assurance, Annuity, and En- Loans on policies .. .. 978,496 .2 0 dowment Funds (as per Revenue New Zealand Government securities 2,205,010 0 0 Account) .. .. .. 7,303,924 14 10 Municipal Corporation debentures .. 205,934 18 9 Claims admitted, proofs not yet com- County securities .. .. .. 104,890 19 9 pleted .. .. .. .. 43,549 19 9 Harbour Board debentures .. 30,200 0 0 Annuities .. ~ .. 811 8 11 Town Board debentures .. .. 32,176 19 0 Commission .. .. .. 689 19 I Road Board debentures .. ~ 21,800 0 0 Medica! fees .. .. .. 389 11 0 Drainage Board debentures .. 1, 847 2 3 Premium and other deposits .. 12,429 5 0 Power Board debentures ~ .. 779,505 14 1 Sundry creditors .. .. .. 5,458 0 8 Landed and house property .. 140,385 19 1 Accident and Fidelity Fund .. 2,980 0 0 Landed and house property (leasehold) 1,757 5 3 Investment Fluctuation Reserve .. 209,707 7 5 Mortgages on property .. .. 2,875,494 14 4 Sinking Funds on Local Body Loans 4,460 16 5 Properties acquired by foreclosure .. 19,331 710 Overdue premiums on £ s. d. policies in force .. 8,760 2 3 Outstanding premiums due but not overdue 48,439 6 10 57,199 9 1 Overdue interest .. 7,127 10 4 Outstanding interest due but not overdue 8,924 3 7 Interest accrued but not due .. .. 99,489 7 7 115,541 1 6 Agents' balances .. .. .. 3,136 8 0 Sundry debtors .. .. .. 1,531 17 0 Cash in hand and on current account 10,181 5 2 £7,584,401 3 1 £7,584,401 3 1 A. B. Allison, Commissioner. H. Rose, Secretary. Government Life Insurance Department, 10th May, 1928. The Audit Office, having examined the Revenue Account and balance-sheet, and compared them with the relative books, documents, and securities, hereby certifies them to be in accordance therewith.—G. F. C. Campbell, Controller and Auditor-General.

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Statement of Business

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TOTAL. : Whole-life and, Term Assura?ices. YEAR 1927. : — —. Annual Annuities. ] Annual Sum Premiums. L Immediate or „ Sum Premiums. jN0 ' assured. 1. Ordinary. entered upon. 1 °- assured. ! o'" 1. Ordinary. Bonuses. Extra. j 2. Deferred. Bonuses. Extra. POLICIES ISSUED AND DISCON- £ £ £ s. d. £ s. d. £ £ £ a. d. Policies in force at 31st 65,39618,743,397 1,475,007 / 573,319 8 722,857.13 4111,054 4,007,241 576,435(99,077 13 9 1 December, 1926 \ 2,100 2 3 2,139 2 8J { 952 2 1 } New business .. .. 5,578 1,791,845 .. ( 57,913 14 1 1,446 6 6) 358 214,050 .. j 6,081 2 10) 1 92 5 10 .. ' J t 19 10 2 f Bonus allotted .. .. .. 664,296 .. .. .. .. 100,635 Total.. .. 70,97420,535,2422,139,303 ] 631,233 2 8 24,30-3 19 10111,412 4,221,291 677,070 (105,158 16 7| I 2,192 8 1 2,139 2 8 j | 971 12 3 f Polioies discontinued 4,118 1,231,326 165,869 1 37,477 16 4 1,445 3 81 649 275,130 46,399 / 6,806 0 5) during 1927 1 167 8 11 84 4 4 f { 91 4 5 | " Total policies in force at 66,856 19,303,916 1,973,434 1 593,755 6 4 22,858 16 2 | 10,763 3,946,161 630,671 / 98,352 16 2 1 31st December, 1927 I 2,024 19 2 2,054 18 4 j { 880 7 10 J PARTICULARS OF POLICIES DISCON How discontinued. j : By Death .. .. 524 154,751 44,738 / 4,792 6 10 1,492 7 8| 273 ! 89,398 34,401 f 2,258 13 10) I 69 16 11 j 56 11 io Maturity .. .. 1,046 217,388 55,884 / 8,284 9 4) \ 21 11 3) Surrender .. .. 1,556 503,751 50,990 / 14,491 0 4 .. j 246 117,287 11,139 ( 2,824 13 4 I 1 46 11 10 37 0 4| 1 18 6 7 f Cancellation .. 183 51,450 72 j 1,457 7 21 .. 12 5,200 .. f 107 11 7 | 1 3 2 Of ( ' Lapse .. .. 809 303,986 14,185 / 8,452 12 8 (-) 47 4 0| 118 63,245 859 1 615 1 8 1 1 26 6 11 ( + ) 47 4 0) \ 16 6 0 | Total discontinued during 4,118 1,231,326 165,869 / 37,477 16 4 1,445 3 8| 649 275,130 46,399 / 6,806 0 5) year 1927 | ( 167 8 11 84 4 4/ ( 91 4 5 [ PROGRESS OF BUSINESS OF THE GOVERNMENT LIFE INSURANCE Total issued .. .. 190,642 51,032,976 5,049,038 j } 112,360 6 0 50,03216,172,764:2,189,5021 g Total void .. .. 123,786 31,729,060 3,075,604 j 9 J® £ } 37,446 11 6 39,26912,226,6031,558,831 | J ®j Total in force .. 66,856 19,303,916 1,973,434 593,755 6 4 24,913 14 6 10,763 3,946,161 630,671 98,352 16 2 Extra Premiums .. .. .. 2,024 19 2 .. .. .. .. 880 7 10 £595,780 5 6 £99,233 4 0 Note.—The "ordinary ' premium is the premium charged

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at End of Year 1927.

A. E. Allison, Commissioner. Geo. W. Melville, Actuary.

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ASSURANCES. SIMPLE ANNUITIES. ENDOWMENTS, Endowment Assurances. Annuity Assurances. INVESTMENTS, ETC. Annual Sum Annuities, i Annuities. Annual No Sum sionarv Premiums. 2 aS Rever- >■ Immediate or\ Annual „ Annual | 1. Immediate or No I Premiums, assured. B nnl] c,21 I 1- Ordinary. | ' '■ entered upon. Premiums. Premiums. entered upon. ' ' i n . 1. Ordinary. * Kxtra. |i B ~el |«- Deferred. \ _ | ». Deferrel | Bonuses- * Extra ' TINUED DURING THE YEAR 1927. | i I £. £ I £ s. d. : £ £ a. d. £ s. d. £ s. d. £ a. d. j £ £ s. d. 51,86l| 14,335,469 882,492j (462,994 19 10) 43/ 6,835 572 12 8 V 339 7 9 407 518 5 10122,285 0 8 ) 2,031 f 393,852 10,389 1 5) t 1,147 0 8J 1 1,183 1,539 2 8 ) ) 600 0 0 ) \\ 14,897 0 19 6j 5,0721,527,345 .. f 48,697 0 9) .. .. .. .. 23 .. ( 1,446 6 6) 125 / 50,450 3,135 10 61 t 72 15 8} | .. J I • • ) 555,782 .. .. 379 .. .. .. .. .. .. 7,500 56,933 15,862,814 1,438,274(511,692 0 71 43 / 6,835 I 572 12 8)339 7 9 430 518 5 10/ 23,731 7 2 ) 2,1561 / 444,302 13,524 11 111 \ 1,219 16 4] ( 1,562 1,539 2 8 J } 600 0 0 J 1 22,397 0 19 6' 3,264 911,946 116,634 J 29,591 13 91 | 2 / 650 ((-) 30 12 8 1 89 16 6 28 .. / 1,475 16 4) 175 / 43,600 990 5 8} I 76 4 6j | 408 (+) 84 4 4 ) ( J ( 2,428 .. J 53,669 14,950,868 1,321,640 (482,100 6 101 41 / 6,185 603 5 4(249 11 3 402 518 5 10/ 22,255 10 1011,981 / 400,702 12,534 6 31 [( 1,143 11 10) t 1,154 1,454 18 4) \ 600 0 0J ( 19,969 0 19 6) I TINUED DURING THE YEAR 1927. 215 63,053 10,337 ( 2,472 14 2) 1 .. 16 11 4 .. 28 .. (1,475 16 4 1 7 ( 2,300 60 18 10) I 13 5 if ! .. \ 992 208,938 53,737 ( 7,980 8 10 1 .. / .. 1 .. .. .. .. 54 j 8,450 304 0 6( ( 21 11 3) 1 335 J ( 1,812 .. ) 1,231 365,264 39,792 ( 11,218 17 11 ) 1 I 300 .. I „ .. .. .. 78 | 20,900 432 9 1) ( 28 5 3 J 1 59 37 0 4 f ( .. .. 164 1 43,750 72 / 1,311 6 10 .. .. .. .... .. .. 7 I 2,500 38 8 9) I 3 2 0 j j .... | 662 230,941 12,696 / 6,608 6 0| .. / 350 }( —) 47 4 0 1 74 16 6 .. .. .. 29 / 9,450 154 8 6) 1 10 0 11 J | 14 j(+) 47 4 0 ) ( 616 .. ) 3,264 911,946 116,634 / 29,591 13 9 1 2 / 650 (-) 30 12 8 1 89 16 6 28 .. / 1,475 16 4) 175 ] 43,600 990 5 8) ( 76 4 6 | | 408 (+) 84 A 4) ( .. J 1 2,428 .. ) I I DEPARTMENT SINCE DATE OF ESTABLISHMENT TO 31st DECEMBER, 1927. 131788 33,647,173 2,820,500 | \ g} 1,106 { 050 j 57 - 49716 68,619 15 8 1,094 866 6 8 54,862 9 6 6,622 {986 33,3 |f X g X g} 78,11918,696,3051,498,860 J 6 12 8/ 1 ' 065 "[ } 55,439 1210 8,3 7 0 4 5 692 348 0 10 32,006 18 8 4,641 -J 2 °' 8 20 10 0^ 53,66914,950,8681,321,640 482,100 6 10 41 j 6,1 g® j. 2,058 3 8 249 11 3 402 518 5 10 22,855 10 10 1,981 | 40 g'g°y 12,534 6 3 " "j 1.H3 1110 I .. 0 19 6 £483,243 18 8 £249 11 3 £518 5 10 £12,535 5 9 ~ — I I = at the true age; the "extra," the additional premium charged for any reason whatsoever.

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ACTUARY'S REPORT ON THE VALUATION OF THE GOVERNMENT INSURANCE MP A RTMENT AS AT 31ST DECEMBER, 1927.

Presented to both Houses of the General Assembly -pursuant to Section 40 of the Government Life Insurance Act, 1908.

Wellington, sth April, 1928. In accordance with your instructions and in compliance with section 40 of the Government Life Insurance Act, 1908, and amendments, an investigation and a valuation in respect of the assurance and annuity contracts of the Department has been made in respect of the year ending 31st December, 1927, with the object of ascertaining the net surplus which may be distributed amongst the policyholders, and I have the honour to report as follows : — The total contracts consisted of 66,856 policies, assuring £21,277,351 inclusive of bonus additions and £24,914 immediate and deferred annuities per annum, the Office premiums thereon amounting to £595,780 per annum. The average net rate of interest earned by the funds of the Department during the year was £5 10s. lOd. per cent, after deduction of taxes, and the expenses of management were 16T7 per cent, of the premiums, or 9-84 per cent, of the total income. The corresponding rates of the previous year were £5 lis. Id. per cent, and 17-28 per cent, or 10-53 per cent, respectively. The experiences of the Temperance and General Sections during the past year have been separately investigated in accordance with the Act, and this investigation has disclosed that the bonus rates recommended below should be declared in both sections. The tables of mortality employed were the British Offices 0 M Table, 1893, and the British Offices Annuity Tables, 1920, in the case of assurance and annuities respectively, at 3 per cent, interest. The net premium method of valuation has been followed in arriving at the value of the liabilities in respect of the Department's contracts on the above bases, and where necessary additional reserves have been made for future bonuses, expenses, and other contingencies. The valuation has disclosed a total surplus of £211.335, as follows : — £ Total funds at 31st December, 1927 .. .. .. .. 7,303,925 Less value of liabilities .. .. .. .. .. .. 7,096,574 Net surplus .. . . . . .. . . 207,351 Add interim bonuses paid during the year .. . . . . . . 3,984 Total surplus .. .. ■. .. .. £211,335 The results of this valuation have been carefully considered, and I recommend that the following rates of compound bonus should be declared on the sum assured and existing bonuses in respect of each full year's premium paid during the year : — Policies issued under present premium tables : — Per Cent. Whole-life assurances, and long-term endowment assurances maturing at £ s. d. age 80 (Tables A and B) . . .. .. .. ..200 Endowment Assurances (excluding Tables A and B) .. 1 18 0 Double Endowment Assurances and Pure Endowments . . ..176 Policies issued under premium tables which have been closed : — Whole-life and endowment assurances .. .. .. ..1160 Double-endowment assurances .. .. .. .. 1 10 0 The above bonuses will absorb £190,500, and I recommend that the balance of the net surplus— viz., £16,851 —should be carried forward.

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In conclusion I would point out that the rates of bonus recommended above are substantially greater than those hitherto declared, and, in addition to calculating the value of the liabilities on a strong valuation basis, the Department has a substantial Investment Fluctuation Reserve of £209,707. The profit-earning capacity of a life-assurance company is dependent on the average rate of interest combined with adequate security of the investments, favourable mortality, and economical management. During the past year the Department's favourable experience in these respects has produced the excellent results disclosed by this valuation, but I consider it wise to emphasize that the future of the Department is dependent on the maintenance of these favourable features. Geo. W. Melville, F.F.A., Actuary. The Government Insurance Commissioner, Wellington.

Approximate Cost of Paper.—Preparation, not given; printing (1,450 copies), £13 10s.

Authority: W. A. G. Skinher, Government Printer, Wellington.—l92B.

Price 6<Z.]

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