ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1931.

Appendix to the Journals of the House of Representatives, 1932 Session I-II, H-08

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1932. NEW ZEALAND.

ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1931.

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

Government Insurance Office, Wellington, 30th June, 1932. I have the honour to submit the following report upon the transactions of the Department for the year ended the 31st December, 1931, and the position at that date. The Revenue Account, Balancesheet, and Statement of Business are appended. New Business.— During the year 4,033 policies were completed assuring £1,506,449, and providing for annuities amounting to £4,499. The annual premiums on new policies amounted to £40,529. The purchase-money on the immediate annuities granted during the year was £18,066. Business in Force. —The total business now in force, including immediate and deferred annuities for £27,635, comprises 71,075 contracts, bearing an annual premium income of £660,399. The sum assured, payable at death or maturity, is £21,472,761, to which reversionary bonuses amounting to £2,580,587 attach. The total business on the books therefore amounts to £24,053,348. Income.— The total income amounted to £1,143,730, made up as follows : Premium income, £662,380; interest income (net), £463,284 ; annuity purchase-money, £18,066. The total for the year exceeded that for the previous year by £29,408. Outgoings. —During the year 552 policies became claims by the death of the policyholders, and 1,056 policies matured," the payment involved being £484,013. This is £47,995 less than the amount for the previous year. The sum paid in claims since the inception of the Department amounts to £12 753 940 'Accumulated Funds.— Assurance, Annuity, and Endowment Funds, apart from special reserves of £275,547, now stand at £8,568,627, an increase of £319,780 over the previous year. The Balance-sheet— On the 31st December, 1931, the total assets of the Department amounted to £8,912,858, and were invested as shown in the following statement, which also gives the distribution of assets at the end of the previous year for the purposes of comparison : —

Interest Rate. —After deduction of land and income tax, the effective rate of interest realized on the Assurance Funds was £5 13s. 4d. per cent. The corresponding rate calculated on the whole of the funds —i.e., including Accident and Fidelity Fund, and Investment Fluctuation Reserve, was £5 9s. cent.

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As at 31st December, 1930. As at 31st December, 1931. Class of Investment. ' 7 7~ . , Percentage of Percentage of Amount. Totftl A * ets Amount. Total Asget3 _ £ f Mortgages on freehold property .. 3,677,924 43-0 3,777,109 42-4 Loans on policies .. .. •• 1,073,398 12-5 1,198,959 13-5 Government securities, including Rural 2,283,555 26-7 2,321,029 26-0 Advances bonds Local-body debentures .. .. 1,167,698 13-6 1,179,864 13-2 Landed and house property .. 145,023 1-8 126,584 1-4 Miscellaneous assets .. .. .. 210,965 2-4 309,313 8,558,563 100-0 8,912,858 100-0

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Expense Rates. — The ratio of expenses to (a) total income and (6) premium income show a further reduction. The figures for 1931 and the two preceding years are as follows :— 1929. 1930. 1931. Katio of expenses— Per Cent. Per Cent. Per Cent, (a) Total income .. .. 8-79 8-41 7-71 (6) Premium income .. .. 14-40 13-88 12-96 It will be observed that the difference between the ratios for 1931 and 1930 is much greater than the difference between those for 1930 and 1929. A part of the improvement must be attributed to the fact that the new business for 1931 was less than that for 1930. In all life-insurance offices the procuration of new business is very costly, and the payment of commission, medical fees, and other expenses absorbs the greater part of the first year's premiums. If the new business remains practically constant from year to year, the expense ratios will not be affected to an appreciable extent, but a substantial increase or decrease is at once reflected in the expense ratios. Annual Bonus Distribution. —The attached Valuation Report, furnished in compliance with section 40 of the Government Life Insurance Act, 1908, disclosed a net cash surplus of £236,318 (excluding interim bonuses paid during the year). Of this sum, £228,646 was divided in the form of compound reversionary bonuses upon the sum assured and existing bonuses at the same rates as for the past two years. The total reversionary bonuses thus allotted amounted to £377,533. The maintenance of such high rates cannot but be regarded as eminently satisfactory. In view, however, of the operation of the Mortgagors' Relief Acts and the reduction in interest rates provided for by the National Expenditure Adjustment Act. it is not possible to forecast even the immediate future of the probable course of bonuses. In the past, reserves have been constituted with a view to equalizing profits in the event of any extraordinary contingency, or in the event of a sudden reduction —enforced or otherwise—in interest rates. A reduction in interest quickly reduces the fund from which bonuses are derived. If the recent legislation, combined with the results of the world-wide depression, does result in lower profits, policyholders may console themselves with the reflection that they suffer in common with insurers generally, as already practically all companies have been compelled by the exigencies of the times to reduce their bonuses. It is certain that a cautious judgment of the position from time to time is necessary until more stable conditions are reached. General. — The economic depression has, of course, affected the Department in common with similar institutions. In the circumstances, new business for the year cannot be regarded but as highly satisfactory. As might have been expected, the overdue interest is much greater than usual, but there is no reason to believe that the bulk of this overdue interest will not be paid. The Investment Fluctuation Reserve Fund, which was formed in 1890 to make provision for loss or depreciation in respect of the Department's securities, has been strengthened as a precautionary measure. This fund now stands at £270,694 12s. 10d. The wisdom of the fund will be manifest at the present juncture. During the year a family income policy was introduced, and the applications for- this class of business have justified its introduction. A commencement was also made with the demolition of the Head Office building. This familiar landmark was erected about 40 years ago. Being of three storys only, it had long been realized that the building was uneconomical, having regard to the value of the site, but it was not until the Hawke's Bay earthquake had shown the danger of structures built in brick without reinforcement that it was decided to erect a steel-framed building which would prove a sound investment and do justice to one of the finest sites in Wellington. It has been found during the course of the demolition that the condition of the old building more than justified the decision to rebuild. Life insurance is a highly competitive class of business. It is only obtained by intensive canvassing, and, when it has been obtained, strenuous efforts are required to keep it on the books. For these reasons, it is fitting that I should express my appreciation of the good work performed by the members of the staff (office and field), which has materially assisted in maintaining the position of the Department in the forefront of life offices in the difficult times we are passing through. A. E. Allison, Commissioner.

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Revenue Account of the Government Life Insubance Depaetment foe the Year ended 31st December, 1931. £ s. d. £ s. d. Amount of funds at Ist January, 1931 8,248,847 5 9 Death claims under assurance policies, Renewal premiums—Assurance, an- including bonus additions .. 200,425 5 0 nuity, and endowment .. .. 611,608 16 6 Endowment assurances matured, inNew premiums (including instalments eluding bonus additions .. .. 274,286 18 0 of first year's premiums falling Endowments matured .. 9,149 0 0 due in the year) less reinsurance Premiums returned on endowments .. 151 17 7 premiums .. .. .. 45,889 6 6 Bonuses surrendered for cash .. 14,954 10 11 Single premiums — Assurance and en- Annuities.. .. .. 23,756 16 8 dowment .. ... .. 4,881 14 7 Surrenders 0 6 Consideration for annuities .. .. 18,065 18 11 Loans released by surrender 88,428 16 1 £ s. s. £ s. d. Interest and rent .. 484,526 13 11 Commission, new* .. 28,288 9 1 Less land and income „ renewal .. 4,466 4 0 tax, £18,753 Is. 3d.; 32,754 13 1 property expenses, Contribution to Public Service Super£2,4B9 ss. 7d. .. 21,242 610 annuation Fund .. .. 725 6 9 463,284 7 1 Expenses of management — Salaries. £s. d. Head Office .. 19,949 4 0 Branch offices and agents .. 11,872 17 4 Extra clerical assistance .. .. 3,129 18 0 Payment to Treasury under Finance Act, 1931 (No. 2) .. 2,748 18 0 Medical fees and expenses .. .. 1,868 3 6 Travelling-expenses 466 7 1 Advertising .. 397 15 11 Printing and stationery .. .. 1,520 3 3 Rent .. .. 4,888 410 Postage and telegrams .. .. 2,550 2 8 General expenses .. 4,729 18 9 54,121 13 4 Contribution to Hawke's Bay Earthquake Relief Fund .. .. 500 0 0 Cash lost in Hawke's Bay earthquake.. 51 6 5 Written off on account of demolition of Head Office building .. .. 15,000 0 0 Property depreciation .. .. 1,250 0 0 Transfer to Investment Fluctuation Reserve Account .. .. 40,000 0 0 Amount of funds, 31st December, 1931 8,568,627 5 0 £9,392,577 9 4 £9,392,577 9 4 1 — * Including agents' allowances. — Balance-sheet of the Government Life Insurance Department on 31st December, 1931. Liabilities. Assets. £ s. d. £ ( s. d. Total Assurance, Annuity, and Endow- Loans on policies .. ..• .. 1,198,959 12 11 ment Funds (as per Revenue Account) 8,568,627 5 0 New Zealand Government securities .. 2,235,460 0 0 Claims admitted, proofs not yet com- Rural Advances Bonds .. .. 85,569 0 0 pleted .. .. .. .. 33,523 16 0 Municipal Corporation debentures .. 262,910 3 5 Annuities .. .. .. 220 10 4 County securities .. .. .. 122,070 1 7 Commission .. .. .. 640 14 4 Harbour Board debentures .. .. 26,500 0 0 Medical fees .. .. .. 131 5 0 Town Board debentures .. .. 27,129 911 Premium and other deposits .. 8,309 8 2 ; Road Board debentures .. .. 21,800 0 0 Sundry creditors .. .. .. 7,237 19 1 Drainage Board debentures .. 1,727 4 0 Accident and Fidelity Fund .. 4,851 18 5 Power Board debentures .. .. 717,726 17 5 Investment Fluctuation Reserve .. 270,694 12 10 Landed and house property .. 124,746 0 1 Sinking Funds on Local Body Loans 18,621 010 Landed and house property (leasehold) 1,837 15 8 Mortgages on property .. .. 3,777,109 0 10 Properties acquired by foreclosure .. 10,042 7 0 Overdue premiums on £ s. d. policies in force .. 10,788 5 2 Outstanding premiums due but not overdue 60,238 13 1 71,026 18 3 Overdue interest .. 50,992 13 1 Outstanding interest due but not overdue 15,072 15 2 Interest accrued but not due .. .. 116,832 0 8 182,897 S-4J Agents' balances .. .. .. 51 19 5 Sundry debtors .. .. .. 733 11 5 Deposited with bank .. .. 20,000 0 0 Cash in hand and on current account.. 24,560 19 2 £8,912,858 10 0 £8,912,858 10 0 A. E. Allison, Commissioner. Government Life Insurance Department. H. Rose, Secretary. 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. 0. Campbell, Controller and Auditor-General. 2—H. 8.

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Statement of Business

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TOTAL. Whole-life and Term Assurances. YEAR 1931. i . 7 i I" ' ' " ' ■ a T 7Annual Annuities. Annual Sum ! ever " Premiums. i. Immediate or No Sum J 6 ™'" Premiums. No- ! as f ured . j = J, ~''' B —. POLICIES ISSUED AND DISCON- £ £ £ s. d. £ s. ā. £ £ £ a. d. Policies in force at 31st 71,86821,418,413 2,426,621 / 663,655 16 10 23,686 8 0) 9,388 3,430,314 595,645 / 88,144 13 8) December, 1930 j 1,790 14 9 1,465 17 2 } \ 630 11 of New business .. .. 4,033 1,506,449 .. f 40,462 6 10 1,827 19 0 ) 99 56,100 .. I 1,965 15 9) | 66 7 11 2,671 4 0/ \ 17 1 0 f Bonus allotted .. •• •• 371,096 .. •• 35,787 Total . "75^90122,924,8622,797,717 / 704,118 3 825,514 7 01 9,487 3,506,414 631,432 / 90,110 9 5) I t 1,857 2 8 4,137 1 2 J \ 647 12 0 } Policies discontinued 4,826 1,452,101 217,130 j 45,430 16 3 2,012 0 4) 594 239,332 49,503 / 6,148 9 8 j during 1931 | | 145 9 4 4 0 4 / \ 73 10 9 f I -- Total policies in force at 71,075 21,472,761 2,580,587 / 658,687 7 5 23,502 6 81 8,893 3,267,082 581,929 / 83,961 19 9| 31st December, 1931 I 1,711 13 4 4,133 0 10) 1 °74 1 3 J PARTICULARS OF POLICIES DISCON How discontinued. By Death .. .. 552 151,818 49,833;/ 4,456 18 6 2,012 0 4) 260 83,246 36,067 / 2,008 13 6 1 1 11 59 i9 H J t 5116 7} Maturity .. .. 1,056 222,321 59,695jj 8,404 10 101 .. .. - .. Surrender .. 1,834 568,528 75,935 1 / 17,922 6 3 •• I 179 75,905 9,393 / 1,953 3 10 1 1 30 6 10 4 0 4J t 6 17 5 f Changes to other 61 27,700 1,234 / 777 5 01 .. 13 11,750 .. j 279 11 5 i Tables * I • • ' ' • • ' Cancellation .. 170 54,100 91 | 1,426 12 2| .. 3 3,400 .. j 100 11 0 j LaDse 1,153 427,634 30,342 / 12,448* 3 6) .. 139 65,031 4,043 / 1,806* 9 11 j F " j 44 16 5/ I 14 16 9 ; Total discontinued during 4,826 1,452,101 217,130 / 45,430 16 3 2,012 0 4 594 239,332 49,503 / 6,148 9 8) year 1931 ( 145 9 4 4 0 4) 1 73 10 9 | PROGRESS OF BUSINESS OF THE GOVERNMENT LIFE INSURANCE Total issued .. .. 212,021 58,319,812 6,402,858 ) w } 122,22° 4 4 50,70816,537,654 2,336,914 ) 14 101 Total void .. .. 140,946 36,847,051 3,822,271 f ( 94,584 16 10 41,81513,270,572 1,754,985 Total in force .. 71,075 21,472,761 2,580,587 658,687 7 5 27,635 7 6 8,893 3,267,082 581,929 83,961 19 9 Extra Premiums .. .. .. 1,711 13 4 .. .. .. .. 574 1 3 £660,399 0 9 £84,536 1 0_ Note.—The " ordinary " premium is the premium charged

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at End of Year 1931.

A. E. Allison, Commissioner. S. Beckingsale, Acting-Actuary.

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ASSURANCES. " SIMPLE [j T ANNUITIES. ENDOWMENTS, Endowment Assurances. Annuity Assurances. INVESTMENTS, ETC. No - aslSSd Sontl'y No ' I "«"vet l 1 ' Immediate or Annual N Annual or No assured. Pr A e ™m s . Bonuses. J; i , penary PrM ™' P™ms. No. 2 BeverJ BoriuseB. p e jerrea. 2. Deferred. Bonuses S. Extra. TINUED DURING THE YEAR 1931. £ £ £ S. d. £ £ s. d. £ s. d. £ S. d. £ S. d. £ £ g. d. 59,861 17,430,1401,807,262 J 563,467 1 6) 25 j 5,747 288 4 9)210 9 6 411 91 12 6 123,398 3 3 1 2,183 } 532,206 11,741 19 8 j 1 1 ' 10b 11 y i I 1,318 1,165 17 2 j 1 300 0 0 [ | 22,396 3 12 0) 3,223 1,08a,086 .. j 34 ' 25(18,550 •• I 714 16 1 30 .. f 1,827 19 0 ) 656(346,713 3,202 13 3[ 332,018 .. '132 ' ' 1 ;; ' _ I 3,159 4 _ 8 °i 68,o8 " 8,M5,2M8,Mo n : s 1 o ii 5 TS 161,907 | 37,963 11 11| .. j 50 )S]1018 .. ( 2.012 0 . } 226 | 6M» ..,15 3 8 ( 59,12617,362,0631,974,373 J 560,082 11 41 50 | 24,247 288 4 9 ) 921 14 7 393 91 12 6 ( 23,214 1 11 1 2,613(819,369 13,629 9 3) 1 11 j 1 1,449 3 ' 83d 010 f 1 300 0 Of j 22,836 8 0 Oj TINUED DURING THE YEAR 1931. j - I - 238 66,372 13,766 j 2,.15 d 2, .. ,. j .. „ „ ,, ,» 410 , »96 2.4,921 57,962 8,115 8 0, 1 ;; > j „ J 1,552 462,623 66,541 (15,231 15 7 ) .. ( 50 I 3 11 n mo 1 1,733 " ! 23 9 5 1 4 '6 4 '• •' 103 29 ' 950 733 15 10) 48 15,950 1,234 | 497 13 7) .. .. .. .. ' 145 39,250 91 ( 1,226* 0 6 I | ' | '• '• •• •• •• .. 22 j 11,450 100 0 8) 979 354,053 25,313 j 10,477*14 1J „ 1 fl 8,958 1,153,169 164,907 j 37,963 11 11 11 ..".J 50 .. j 3 11 0 48 .. j 2,012 0 4 J 226 | 59,550 1,315 3 8| DEPARTMENT SINCE DATE OF ESTABLISHMENT TO 31st DECEMBER, 1931. 50,980 39,939,850 4,013,621 j2| j 1131 j 179,100 j 60;t78 0 109,360 10 9 L.205 866 6 8 62,047 3 6 7,997 I 663 ' 208 40 ' 930 17 10 1 31,854 22,577,787 2,039,218 j 7 jjg ff) 1,081 { 154 | 8 g 3 j56,051 15 38,438 16 2 812 774 14 2 38,533 1 7 5,384 { 7J 59,12617,362,0631,974,373 560,08211 4 50 j 24 > 247 1 4,121 5 7, 921 14 7 393 91 12 6 23 514 111 2 613 J 819,369 13,629 9 3) 1 ' ' ' ' 1 22,836 j 1,129 12 1 .. I .. .. ; ' I -— " " 8 0 0 £561 ' 212 3 5 £921 14 7 £91 12 6 l: 13,637 9 3 at the true age; the "extra " the additional premium charged (or any reason whatsoever.

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EEPOBT ON THE VALUATION OF THE GOVERNMENT INSURANCE DEPARTMENT AS A.T 31st DECEMBER, 1931.

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

Wellington, 10th March, 1932. In accordance with your instructions, a valuation of the annuity and the assurance contracts of the Department has been made for the year ended 31st December, 1931, with the object of ascertaining the net surplus available for distribution amongst the policyholders, and, in compliance with section 4.0 of the Government Life Insurance Act-, 1908, and amendments, I have the honour to report as follows : — The business to be valued consisted of 71,075 policies, assuring, inclusive of bonus additions, £24,053,348, and £27,635 immediate and deferred annuities per annum ; the Office premiums thereon amounting to £660,399 per annum. The bases adopted for the valuation were as follows : — (a) The British Offices Oμ Table, 1893, and the British Offices Annuity Tables, 1920, were employed in the case of assurances and annuities respectively, with 3 per cent, interest, and (6) The net premium method of valuation has been followed in arriving at the value, according to the above tables, of the liabilities in respect of the Department's contracts. Adequate additional reserves have been included for future bonuses, expenses, and other contingencies. As shown below, the valuation has disclosed a total surplus of £24.0,010, of which the sum of £3,692 has been applied to the payment of interim bonuses during the year, the balance —£236,318 —being available for distribution. £ Total funds at 31st December, 1931 .. •• •■ ..8,568,627 Less value of liabilities .. .. . ■ • • • • .. 8,332,309 Net surplus .. .. .. 236,318 Add interim bonus paid during year .. .. .. •• 3,692 Total surplus .. .. .. ■■ •• ■• £240,010 As required by the Act, separate investigations of the sources of surplus in the General and Temperance Sections have been made, the results of which indicate that the same rates of bonus should be allotted to policies of the same class in both sections. I accordingly recommend that the following rates of compound reversionary bonus 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 (Tables A, B, £ s. d. and A special) .. .. •• •• ■• ..220 Endowment assurances (excluding Tables A, B, and A special) .. .. 118 0 Double endowment assurances and pure endowments . . .. ..176 Policies issued under premium tables which have been closed— Whole-life and endowment assurances . . • ■ • • .. 116 0 Double endowments .. .. • • :• • ' • ■ .. 110 0 The above bonuses will absorb the sum of £228,646, and I recommend that the balance of the net surplus —£7,672 —be carried forward. S. Beckingsale, A.1.A., Acting-Actuary. The Government Insurance Commissioner, Wellington Approximate Cost of Paper, —Preparation, not given; printing (1,415 copies), £14.

By Authority : W. A. G. Skinnek, Government Printer, Wellington.—l 932. [Price 6d.

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