STATE FIRE INSURANCE OFFICE. ANNUAL REPORT OF THE GENERAL MANAGER FOR THE YEAR ENDED 31st DECEMBER, 1932.

Appendix to the Journals of the House of Representatives, 1933 Session I, H-06

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1933. NEW ZEALAND.

STATE FIRE INSURANCE OFFICE. ANNUAL REPORT OF THE GENERAL MANAGER FOR THE YEAR ENDED 31st DECEMBER, 1932.

Presented to both Houses of the General Assembly pursuant to the Provisions of the State Fire Insurance Act, 1908.

State Fire Insurance Office, Wellington, Ist September, 1933. I have the honour to submit the twenty-eighth annual report of the State Fire Insurance Office for the year ended 31st December, 1932, with the Revenue Account and Balance-sheet. The following are the comparative figures for the last three years :— 1930. 1931. 1932. Income — £ £ £ Premiums .. .. .. .. .. .. 221,909 216,007 208,493 Other receipts, less land-tax and bad debts .. .. 49,508 49,496 46,749 Profit on realization of investments .. .. .. 794 Outgo— Bonus rebate to policyholders .. .. .. .. 27,001 26,187 25,294 Claims.. .. .. .. .. .. .. 90,001 112,932 70,444 Working-expenses (exclusive of income-tax and Fire Board contributions) .. .. .. .. .. 52,624 50,479 47,967 Fire Board contributions.. .. .. .. .. 8,027 7,927 7,835 Income-tax .. .. .. .. .. .. 21,153 26,152 28,201 Cash stolen or burnt, Hawke's Bay earthquake .. .. .. 26 Per Cent. Per Cent. Per Cent. Ratio of claims to premium income .. .. .. 40-56 52-28 33-79 Ratio of working-expenses (exclusive of income-tax and Fire Board contributions) to premium income .. .. 23-71 23-38 23-01 Ratio of Fire Board contributions to premium income .. 3-62 3-67 3-76 Ratio of income-tax to premium income .. .. .. 9-53 12-11 13-52 £ £ £ Carried to reserve for unearned premiums .. .. .. 1,567 .. 15,482 Surplus, apportioned as follows : — Payment to Treasury under section 5, Finance Act, 1931 (No. 2) .. 2,612 3,484 Bad Debts Reserve .. .. .. .. .. .. 500 1,000 Written off Office premises .. .. .. .. 5,000 10,000 38,400 Investment Fluctuation Reserve Fund .. .. .. 6,000 7,000 15,000 Reserve Fund .. .. .. .. .. .. 45,336 21,687 2,134 Reinsurance Reserve Fund .. .. .. .. 15,000 Bonus Rebate Reserve .. .. .. .. .. 500 Total .. .. .. .. .. £71,836 £41,799 £60,018 Reserves and funds at 31st December .. .. .. .. £889,494 £918,682 £952,299 1. The fall in premium income during the year was accompanied by a more than proportionate fall in claims, with the result that the underwriting was more profitable than for the past seven years. Some of the improvement in the hazard is accounted for probably by economic conditions, but a most helpful factor is the recently instituted system of inquiries into all suspicious fires by the Police Department working in co-operation with the Inspector of Fire Brigades and Insurance representatives. 2. Administrative expenses, always very much lower than the average for all offices, have been reduced slightly, despite lower income. Income-tax (£28,210) constitutes a record, and is also a much larger sum than published records show as having been paid by any other fire-insurance office in any one year during the last ten years. In addition, the Office contributed £3,484 to the Treasury under section 5 of the Finance Act, 1931.

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3. In view of the uncertainty of all property values, the surplus for the year has been applied largely in writing down the values of office premises and in increasing the Investment Fluctuation Fund. i. The final report of the National Expenditure Commission, which was published during the year, makes not uncomplimentary reference to the Office, but I feel it my duty to dissent most emphatically from the recommendation which was made for an amendment of the State Fire Act to provide for payment of a part of the annual profits into the Consolidated Fund. An amendment having the effect suggested would constitute an arbitrary abrogation of the existing constitution, which makes provision for the return of surplus profits to policyholders by way of rebates, and which was given by the Legislature freely as an inducement to people to insure with the Office. That inducement has been instrumental in attracting and consolidating a large income and no part of the return due to policyholders could now be diverted without a breach of faith, if not of contract. Good faith is the essence of an insurance contract, and the effect of an amendment as suggested by the Commission might be most serious on the prestige of the Office. It is not to be implied from the foregoing that policyholders of the Office have been or are the only beneficiaries, for in practice the declaration of rebates under the provisions of the State Fire Act reduces all rates. The insurance companies have always followed the State Fire Office, and all payers of premiums, irrespective of whether insured with the State Office or not, receive consequential benefit from its operations. Also the Consolidated Fund derives a peculiar advantage through the particularly high proportion of income-tax which the Office pays, and the fund is assisted further from time to time, at some financial disadvantage to the Office, through investments in current issues at par, while private companies—mutual or otherwise —purchase stock in the open market. Thus, apart from the rate reductions effected in earlier years, the State Fire Office by (a) rebates, which since the first declaration have reduced premiums in the aggregate by £2,500,000, (6) income-tax payments totalling £274,000 in sixteen years, (c) investments, and (d) payments under section 5, Finance Act, 1931, has returned solid service to the community. J. H. Jerram, General Manager.

Revenue Account of the State Fire Insurance Office for the Year ended 31st December, 1932. £ s. d. £ s. d* Premiums after deduction of reinsurances .. 208,492 19 9 Bonus rebate to policyholders .. .. 25,293 17 9 Other receipts— £ s. d. Losses by fire and earthquake (after deduction of Interest, commission, and rent 47,129 13 5 reinsurances) .. .. .. .. 70,443 18 8 Less land-tax .. .. 380 9 2 Appropriated to Reserve for Unearned Premiums 46,749 4 3 (in addition to £88,763 19s. Bd. already reserved) 15,482 10 3 Income-tax .. .. .. .. 28,201 711 Commission .. .. .. .. 9,539 17 6 Salaries .. .. .. .. .. 24,263 14 0 Contribution to Public Service Superannuation Fund .. .. .. .. .. 508 17 7 Contributions to Fire Boards under the Fire Brigades Act, 1908 .. .. .. 7,834 11 1 Expenses of management— £ s. d. Travelling-expenses .. .. 2,370 15 5 Printing, stationery, and advertising .. .. .. 1,267 1 5 Rent .. .. .. 1,652 6 10 Exchange .. .. .. 47 14 9 Postages, telegrams, cablegrams, and sundry charges .. 3,994 18 8 9,332 17 1 ! Office equipment .. .. .. .. 1,269 13 6 Office premises: Depreciation .. .. 3,052 5 4 195,223 10 8 Payment to New Zealand Treasury under section 5, Finance Act, 1931 (No. 2) .. .. .. 3,484 11 0 Investments Fluctuation Reserve Fund .. 15,000 0 0 j Bad Debts Reserve .. .. .. .. 1,000 0 0 Office premises—Written off .. .. .. 38,400 0 0 { Amount of fire-insurance funds at end of year .. 2,134 2 4 £255,242 4 0 £255,242 4 0

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Balance-sheet of the State Fire Insurance Office on the 31st December, 1932. Liabilities. £ s. d. Assets. £ 8. d. Capital authorized by the State Fire £ Government war-loan securities .. .. 112,140 11 3 Insurance Act, 1908 .. .. 100,000 Other Government securities .. .. .. 304,950 0 0 Less not raised .. .. .. 100,000 Local-authority securities .. .. .. 135,308 9 6 • Nil. Rural Advances bonds .. .. .. 14,175 0 0 Bad Debts Reserve .. .. .. .. 1,500 0 0 Rural Intermediate Credit bonds .. .. 20,000 0 0 Reserve Fund .. .. .. .. 711,418 8 7 Fixed deposits and at short call .. .. 185,000 0 0 Investments Fluctuation Reserve Fund .. 44,000 0 0 Land and buildings .. .. .. .. 151,656 10 6 Reserve for unearned premiums .. .. 104,246 911 Outstanding premiums .. .. .. 11,834 2 1 Bonus Rebate Reserve .. .. .. 29,000 0 0 Interest accrued but not due .. .. .. 10,875 18 8 Reinsurance Reserve Fund .. .. .. 60,000 0 0 Rent accrued or due.. .. .. .. 195 610 Premium and other deposits .. .. .. 1,071 2 9 Rent overdue .. .. .. .. 46 6 2 Outstanding fire and earthquake losses .. 6,601 0 0 Cash in Bank of New Zealand at Government taxes .. .. .. .. 28,201 711 Wellington, or in transit to £ s. d. Sundry creditors .. .. .. .. 6,005 6 5 Wellington .. .. 53,750 8 4 Other amounts owing by the Office— £ s. d. Imprest Account balances : Head Reinsurance premiums due .. 2,803 18 -7 Office and branches .. .. 76 0 4 Commission .. .. .. 1,742 9 5 53,826 8 8 Printing, stationery, and advertising .. .. .. 15 2 1 Postages and sundry charges .. 1,269 5 8 — 5,830 15 9 Fire-insurance funds, as per Revenue Account .. 2,134 2 4 £1,000,008 13 8 £1,000,008 13 8 J. H. Jerram, General Manager. 2nd June, 1933. C. B. Redward, Accountant. I hereby certify that the Revenue Account and Balance-sheet have been duly examined and compared with the relative books and documents submitted for audit, and correctly state the position as disclosed thereby. — G. F. C. Campbell, Controller and Auditor-General.

Approximate Cost of I'd per.—Preparation, not given ; printing (1,760 copies), £3 15s.

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