H.—l3.

2

The department was liable at the same date for 4,958 assurances for £1,833,819, 21 immediate annuities of £1,2-49, and 10 annuities of other description of £985. The premiums payable under these several contracts amounting to £57,510 per annum. In order to determine the sufficiency of the fund to meet these liabilities, we had to consider upon what basis the valuation should be made. No sufficient experience has yet been acquired of the mortality among assured lives in New Zealand or in any of the Australian colonies; but having regard to the climate and character of the people, there is reason to believe that it will not differ materially from the corresponding mortality in England. We consider, therefore, that the most suitable table of mortality for the present investigation is that known as the Institute of Actuaries, Hit, and we have adopted it accordingly for the assurance risks. This table exhibits the mortality among 130,243 male lives, assured at ordinary rates of premium, by twenty of the principal companies in Great Britain, between the years 1797 and 1863. The number of years of life passed through was 1,283,034; the number of deaths, 20,521. And from the care and pains bestowed upon all the details of the work, as well as from the reliance to be placed upon the accuracy of the facts, there can be little doubt that this table is the most trustworthy exponent of the mortality of assured lives that has yet been published. The annuities have been valued by the Carlisle Table, the Hm Table not being suitable for this class of liabilities, many annuities being granted upon female lives. As regards the rate of interest, the 36th and 37th sections of "The Government Insurance and Annuities Act, 1874," direct that all moneys received under the Act shall be paid into the Public Account, and may be invested in certain specified securities. For any uninvested part of such moneys interest »t the highest bank rate allowed at the time for other Trust Funds shall be credited to the Insurance Account. From the last Report of the Commissioner, it appears that, with the exception of a small working balance, the whole fund is invested in Treasury bills, bearing interest at the rate of £5 2s. 6d. per cent. per annum. This may, perhaps, be a somewhat higher rate than will be always obtainable in future, but we think that there can be little doubt that for some time to come the rate of interest will be materially higher in New Zealand than in England. And we consider, therefore, that, for the purpose of the present investigation, we shall be quite justified in assuming for our calculations 4i per cent, as the rate of interest-, and have done so accordingly. This rate is employed in the calculations of the Insurance Department of New York, and of several other of the United States of America, and, in our judgment, is the best suited for the Insurance Department of New Zealand. To make provision for future expenses, profits, and contingencies, the value of what is called the " loading " has been computed and reserved : that is, a special calculation has been made for each policy of the bare premium which would be sufficient for the risk according to the table of mortality and rate of interest assumed for the valuation, and the difference between the premiums actually payable, and the premiums thus computed, has been capitalized and reserved. Provision is thus made, among other things, for the heavier mortality expected among those lives on which extra premiums have been charged for health or occupation. The additional annual premiums form in this manner a special fund available to meet the increased annual mortality. The summary and valuation of the Ordinary Branch made on these principles will be found in the annexed schedule. The general result is as follows : — Fund ... ... ... ... ... ... £109,967 Estimated liability ... ... ... ... ... 97,776 Surplus ... ... ... ... £12,191 Having regard to the rates of premium charged, we think that this result is satisfactory ; but we wish to add that, in our opinion, this surplus would not be properly divisible. As no division is to be made until another five years have elapsed, the question does not now arise. But when that time shall come, wo think that a further reserve will have to be made for the future bonuses on those policies on which a limited number of premiums only is payable, and which constitute about 11 per cent, of the number. If the loading on this class of assurances had been distributed equally over the whole term of life, and a corresponding reserve made on the present occasion, we believe, from some calculations we have made, that the surplus would have been materially reduced. The rates of premium are undoubtedly very low, especially at the older ages. They are below the prevailing rates in this country, and are lower than are generally charged by the principal Assurance Societies in the Australian colonies. No considerable surplus is, we think, likely under any circumstances to accrue from such premiums. Their sufficiency will depend mainly upon the cost at which the business will in future be conducted, and the rate of interest at which the funds will be invested. During the five years now under review, commission and expenses have absorbed more than 24 per cent, of the premiums; but by the last Report it appears that the rate of expense for the year ending the 30th June, 1875, was 192 per cent., and there is reason to believe that it will continue to decline. Tf, however, the rate of interest should fall materially in future, we think that the rates must then undergo a general revision; and under any circumstances we think that the premiums at the older age- are too low and ought to be raised. Ikdttsteial Bbanch. The money transactions of this branch show a deficiency of £501 3s. 7d. There have been granted 76 policies for assurances of £8,105, paying in premiums £5 ss. 7d. weekly. A valuation of these risks, made on the same principles as for the Ordinary Branch, results in an estimated liability of £53, so that the apparent deficiency is thereby increased to £554. This of itself is unimportant, as the business has been started so recently, and the amount is small; but it seems to us to be worthy of serious consideration whether the department should grant such assurances at all. The intention apparently was to undertake risks like those of Friendly Societies, or of the Prudential Assuranco