ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1936.

Appendix to the Journals of the House of Representatives, 1937 Session I, H-08

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1937. NEW ZEALAND.

ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1936.

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

Government Insurance Office, Wellington, 17th April, 1937. I have the honour to submit the following report upon the transactions of the Department for the year ended 31st December, 1936, 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.—New business for the year amounted to 8,337 policies, assuring the sum of £2,863,801, the premiums thereon being £66,769 per annum. Eighty-two annuities were also granted, the purchase-money being £56,502. The total business in force at the end of the year (including immediate, deferred, and contingent annuities for £81,527 per annum) comprises 74,691 policies, bearing an annual premium income of £670,433. The total sum assured is £23,761,253, to which reversionary bonuses amounting to £3,136,722 have been added. Income. —The total income amounted to £1,184,700, made up as follows : Premium income, £719,197 ; interest income (net) £409,001 ; annuity-purchase money, £56,502. The total for the year exceeded that for the previous year by £64,150. Outgoings.—During the year, 1,602 policies became claims by the death of the policyholders and by maturity, the payment involved being £534,558. The toal amount paid in claims since the inception of the Department amounts to £15,295,337. Accumulated Funds. —Assurance, Annuity, and Endowment Funds, apart from special reserves of £444,393, now stand at £9,952,311, an increase of £373,638 over the previous year. Investments. —On the 31st December, 1936, the total assets of the Department amounted to £10,474,030, and were invested as follows :— Class of Investment. Percentage of Total Assets. Mortgages of freehold property .. . . .. . . .. 37 • 2 Government securities, including rural advances bonds .. .. .. 32 • 5 Loans on policies .. .. .. .. .. .. .. 11-8 Local-body debentures .. .. .. .. .. ..11-3 Miscellaneous assets .. .. .. . . . . . . .. 4-9 Landed and house property .. .. .. .. .. .. 2-3 Annual Bonus Distribution.— I The usual bonus investigation was carried out by the Actuary, and his report, appended hereto, discloses a net surplus of £248,574 (excluding interim bonuses paid during the year) in respect of this year. Of this sum, £227,527 was allotted in the form of compound reversionary bonuses upon the sum assured and existing bonuses, the total reversionary bonuses thus allotted amounting to £369,083. The bonus at the increased rate declared last year has been maintained. Since the inception of the Department in 1870, £5,088,931 in cash has been distributed by way of bonus, the corresponding additions to the sums assured being £8,463,650. I—H. 8.

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Expense Ratios and Rale of Interest,. —The ratio of expenses to (a) total income and (b) premium income, and the effective rate of interest (after the deduction of taxes) earned on the funds for 1934, 1935, and 1936 are as follows : — Ratio of expenses to 1934. 1935. 1936. (a) Total income .. .. .. 7-51 8-62 9-17 (b) Premium income .. .. ..11-68 13-39 14-01 Net effective rate of interest .. .. £4 Bs. lOd. £4 6s. 9d. £4 ss. 7d. The expense ratios must be regarded as very satisfactory in view of the fact that the new business (and consequently the commission payable) was the highest in the history of the Department. General.—Summarizing the results for the year : — (1) The new business was again the highest ever transacted by the Department in any one year. (2) The total income increased by £64,150. (3) Claims increased by £43,084. (4) Total funds increased by £373,638. (5) Profits divided amounted to £227,527. In my report of last year I made reference to the conservative policy adopted in the investment of the Department's funds. Advances are now being freely made on first-class securities, and it is expected that the whole of the Department's funds will shortly be invested at a rate which will show a reasonable return to policyholders. While the surplus earnings of all life-insurance offices have been affected by the unusual economic conditions, it is safe to say that the Department has more than held its own in the difficult times of recent years, and that policyholders need have no misgivings as to the value and soundness of their insurance contracts. During the year, legislation was obtained enabling the Department to reduce the rate of interest on all existing and new policy loans to 5 per cent. So far as we are aware the Department's rate now is lower than that of any other office carrying on business in New Zealand. At the same time, the mortgage-of-policy form was amended so that, in future, borrowers will always pay whatever happens to be the current rate of interest. A new form of table mortgage in connection with loans on mortgage was also introduced during the year. Under the new system table loans are granted for terms of ten, fifteen, twenty, twenty-five, or thirty years. At the end of each period of five years the rate of interest is reviewed, and, if there has been any change in the Department's current rate of interest, the capital outstanding under the mortgage is converted into a fresh table loan for the balance of the term at the new rate of interest. Mortgagors are also given the right to repay the whole or a part of the loan at the end of each period of five years. The idea underlying the innovation is that the borrowers will pay, and the Department will obtain, the ruling current rate of interest. The new mortgage has met with a splendid response, and it seems possible that it will be adopted as the standard form of table mortgage. In conclusion, I should like to pay a tribute to the good work done by all members of the staff (both office and field). It is due to their efficiency, zeal, and loyalty that the Department holds such a high position in the keenly competitive field of life insurance. W. E. Abnold, Commissioner.

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Revenue Account of the Government Life Insurance Department for the Year ended 31st December, 1936. £ s. d. £ s. d. Amount of funds at Ist January, 1936.. 9,578,672 11 7 Death claims under assurance policies, Renewal premiums—Assurance, annu- including bonus additions .. 202,757 15 0 ity, and endowment, less reinsurance Endowment assurances matured, includpremiums .. .. .. 599,322 18 2 ing bonus additions .. .. 320,651 16 0 New premiums (including instalments Endowments matured .. .. 10,853 17 0 of first year's premiums falling due Premiums returned on endowments .. 294 14 5 in the year) less reinsurance premiums 57,869 9 10 Bonuses surrendered for cash .. 9,124 18 4 Single premiums—Assurance and en- Annuities .. .. .. 31,489 6 1 dowment .. .. .. 62,004 5 5 Surrenders .. .. .. 40,689 15 8 Consideration for annuities .. .. 56,502 2 4 Loans released by surrender.. .. 85,431 7 6 Interest, rent, and other £ s. d. £ s. d. income .. 434,941 15 4 Commission, new* .. 45,916 5 2 Less land and in- „ renewal 4,728 19 8 come tax, £24,645 50,645 4 10 7s. 5d.; property Contribution to Public Service Superexpenses, £1,295 animation Eund .. .. 727 12 2 Bs. 7d. .. .. 25,940 16 0 £ s. d. — 409,000 19 4 Expenses of management — Salaries .. .. 39,414 18 4 Extra clerical assistance .. .. 526 9 6 Medical fees and expenses .. .. 2,061 13 6 Travelling-expenses 676 8 0 Advertising .. 802 8 0 Printing and stationery .. .. 1,593 16 1 Rent .. .. 4,659 15 1 Postage and telegrams .. .. 1,802 18 11 Exchange.. .. 28 8 11 Audit fees .. 325 0 0 General expenses .. 5,421 12 2 57,313 8 6 Property depreciation .. .. 1,081 13 1 Amount of funds, 31st December, 1936 9,952,310 18 1 £10,763,372 6 8 £10,763,372 6 8 * Including agents' allowances. Balance-sheet of the Government Life Insurance Department on 31st December, 1936. Liabilities. £ s. d. Assets. £ s. d. Total assurance, annuity, and en- Loans on policies .. .. .. 1,235,647 13 9 dowment funds (as per Revenue New Zealand Government securities .. 3,403,545 0 0 Account) .. .. .. 9,952,310 18 1 Loans to local bodies .. .. 1,187,289 13 2 Claims admitted, proofs not yet Landed and house property .. 242,092 3 7 completed .. .. .. 43,781 9 6 Landed and house property (leasehold) 1,373 4 6 Annuities .. .. .. 590 8 0 Mortgages on property .. .. 3,901,032 4 6 Medical fees .. .. .. 273 0 0 Properties acquired by foreclosure .. 35,786 2 9 Premium and other deposits .. 12,480 2 7 Overdue premiums on £ s. d. Sundry creditors .. .. .. 9,001 13 9 policies in force .. 4,210 10 2 Accident and Fidelity Fund .. 5,000 0 0 Outstanding premiums Investment Fluctuation Reserve .. 439,392 14 6 due but not overdue 53,501 19 10 Sinking funds on local £ s. d. 57,712 10 0 body loans .. 11,041 18 8 Overdue interest .. 28,794 7 9 Interest accrued there- Outstanding interest on .. .. 157 14 10 due but not overdue 13,897 10 4 11,199 13 6 Interest accrued but not due .. .. 94,809 12 5 137,501 10 6 Sundry debtors .. .. .. 1,483 15 4 Income-tax paid in advance.. .. 20,000 0 0 Cash in hand and on current account . . 250,566 1 10 £10,474,029 19 11 £10,474,029 19 11 W. E. Arnold, Commissioner. J. W. Macdonald, Secretary. Government Life Insurance Department. 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. J. H. Fowler, Controller and Auditor-General. 2—H. 8.

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Statement of Business

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TOTAL. vcAo ,00* Whole-life and Term Assurance*. Y t/\r\ iaoO' ' -.— ■■■— — ■ ——-■ ■ —;- —— ■ ■ —— .———______ —_— , ■R_™v i Annual Annuities. 1.8am i „ Annual No Sum ijonS" Premiums. j j, Imme .diate or N assured. Eever " ! Premiums. No - assured. f o °^ s r J s I- Ordinary. entered upon. No - 2. Deferred ,fZZl 1. Ordinary. Bonuses,. g fefra. | 2. Deferred. Annuity. ! BonUBeb - <>. Extra. ' POLICIES ISSUED AND DISCON- £ £ a, s. a. £ p. a. £ £ £ s. a. Policies in force at 31st 69,982(22,050,27613,001,016] 636,811 6 230,141 14 3) 10,171; 4 136 624 530 544 (103 199 7 2 I December, 1935 \ l,S60 3 4 38,927 5 2} 30,333 12 8 .p.aJ ( 's67 3 8| New buBiness .. .. 8,419)2,863,801 .. I 66,666 5 8 5,039 7 2) 1,626 765,316 ; .. 115 152 5 3 1 _ 1 102 7 211,180 2 8} 8,935 4s. p.aj ' 61 3 4 f Bonus allotted .. .. .. 350,381 .. .. .. 40,075 Total.. .. 78,401 24, 914,0778,851,897 | 703,477 11 1035,18J 1 51 11,797 4,9Ol,94oi 570 619 f 118 331 12 S I I 1,662 10 650,126 7 10f 39,26816s. p.a. \ '628 7 Of Polioies discontinued 3,710 1,152,824 214,675 J 34,563 6 6 2,554 15 1) 555 268 754 45 966 f 5 559 4 8] during 1936 ( 144 0 8 1,228 14 2f 964 16s! p.a. \\ ' 34 IS 3 | Total policies in force at 74,691 23,761,253 3,136,722 ( 668,914 5 4 32,629 6 4)11,242 4,633,186 524 653(112 792 7 91 ■ 31st December, 1936 j 1,518 9 10 48,897 13 8] 88,304 p.a. { '593 13 9} PARTICULARS OF POLICIES DISCON How discontinued. ~~° _. ______^___^___________-__. ByDeath .. .. 68l| 151,274! 55,464 f 4,586 2 6 2,626 0 11 234 77,107 36 019 f 1808 1101 I ( 19 10 8 .. l ' q 4 n Maturity .. .. 1,109! 254,495! 74,424U 10,164 2 7) ' |1 22 10 0 f Surrender.. .. 1,032 321,233 51,2561] 9,734 0 0 .. ) 88 44,499 4 849 f 1047 0 4 1 1 61 9 7 288 0 0 ( 144 p.a. ' 4 16 0 Change to other 69 27,101 2,070 f 650 7 10 .. i 24 10 049 88 1 149 17 <i Tables | 10 4 0 192 12 i) U 4 Pa 8 14 S Cancellation .. 105 35,583| 139 f 917 16 11', .. 13 ! 7 474 14 | ig 5 511 It 0 10 0) I ! 0 10 0 Lapse .. .. 874 363,138 31,322 ( 8,510 16 8 -71 5 10] 196 129,625 4 996 2 418 19 3) 1 29 16 7 j 748 1 10) 67616s. p.a. j ' n 5 0 Totaldisoontinuedduring 3,710 1,152,824 214,675 ( 34,563 6 6 2,554 15 1| 555i 268,754 45 966'f 5 559 4 8) year 1936 j 144 0 8 1,228 14 2) 96416s. p.a. !| ' 34 13 3 | PROGRESS OF BUSINESS OP THE GOVERNMENT LIFE INSURANCE Totalised .. .. |237, 343. 67,235,057J 8,094,654 { 2 10 " I 192,116 17 0 55,789 19,056,467 2,511,704 i^l'l 52 2 7 l ' I 41,212 16s. p.a. I -*■" ' ' 9 _: 16 8 [ I Totalvoid .. .. Il62,652| 43,473,804 4,957,932 j lb «.llS } 110,589 17 0 44,547 14,423,2811,987,051 I 378 ' 939 U 1O 1 I l 2,908 16s. p.a. I 18,201 2 11J Total in force .. 74,691 23,761 S 253J 3,136,722 668,914 5 4 81,527 0 011,242 524,653 Tl27792~TT 38,304 p.a. Extra Premiums 1,518 9 10 .. .. .. .. 598 13 9 _ J £670,432 15 2 £113,386 1 6 Note.—The " ordinary " premium ie the premium charged

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s

at End of Year 1936.

assurances. , simple l: annuities. endowments, Endowment Assurances. Annuity Assurances. INVESTMENTS, ETC. I , s ., m ! Annual 1 ' 8um Annuities. Annuities. !■ Su ™ Annual assured. ? ever " ! Premiums. assured, j, Immediate or Annual Nn Annual [ 2 . i mme diate or No Premiums - No - 2 Deferred ■ 0 ™*/ 'i 1. Ordinary. No ' 2 ,^ n e ™£- enters «po». Premmms. No ' Premiums. entered upon. No ' I. Ordfaan/. Annuity, j BonUBes -1 ». Extra. \\ ionwZ. ]*■ De f erred - I Bonuses. *' Ea:tra - TINUED DURING THE YEAR 1936. I I I ** , £ £ £ s. d. £ £ s. d. £ a. d. £ 8. d. £ s. d. £ £ s, d. ! 55,11716,018,3482,446,240 (511,110 4 9.1 21 f 4,99V 248 19 4 1184 9 2 472 35 15 6 I 29,895 14 11 1 4,20lJ j 1,890.307 22,281 9 ?l 7,290 p.a. 1 979 1 8J M l>677 1,093 13 2f 1 810 0 Of ( 22,555 13 18 0J "5,447 1,417,727 .. ( 44,797 8 6| .. I 50 / \ 4 8 0 82 ..I 5,039 7 2 ) 1,264 ( 680,708 6,712 4 01 2,232p. a . 1 37 7 10} 1 118 8/ I 30 0 0( \ .. 3 16 0) 307,6361 .. ! .. 117 .. .. .. .. .. .. 2,553 60 564 17 436,075:2,753,876 (555,907 13 21 21 ! ( 5,047 248 19 4 1188 17 2 554 35 15 6(34,935 2 115,465(2,571,015 28,993 13 71 9,522p.a.; \\ 1,016 9 6 f M 1,794 1,095 11 10 J { 240 0 0 J \ 25,108 17 14 0J 2,871 795,931 165,9541 ( 27,594 4 41 li ( 100 i 71 5 10 1 19 8 6 28 .. f 2,626 0 111 255] 88,039 1,390 9 0) U4p.a. I 108 2 5/ \\ 184 119 18 2 J 1 J \\ 2,571 1 5 0]\ 57 693ll6,640,144;2 587,9221 (528,313 8 101 20 1 4,947 320 5 2)169 8 8 526 35 15 6(32,309 1 2 15,210(2,482,976 27,603 4 7) 9,378p.a. { 908 7 If \\ 1,610 975 13 8 f \ 240 0 0 J \ 22,537 16 9 0| TINTED DURING THE YEAR 1936. 251 69,867 19,445 f 2,729 4 51 .. .. .. .. 28 .. ( 2,626 0 111 8 4,300 48 16 3 I 1 10 6 6} 1 ■ .. } 1,046 245,845 72,122 ( 9,834 12 6) .. .. \ .. .. .. .. .. 63] 8,660 329 10 II ( 22 10 0 ) .. 133/ ( 2,169 .. f 878 251,534 46,406 ( 8,265 8 2) .. .. \ .. .. .. .. .. 66 26,200 42111 7 144 p.a. ! I 56 14 7 j I 1/ 42 15,952 1,932 ( 485 4 11 j 1 100\ .. .. .. ...... 2 1,000 9 19 2 I 1 4 9 j ! 50/ 48 12 4 5 6 4 84 24,759 125 j 741 3 2}j .. .. ■ .. .. .. .. .. 8 3,350 41 7 10 570 187,974 25,924! ( 5,538 11 2 [ .. .. / -71 5 ioi\ 14 2 2.. .. .. 108 | 45,539 539 4 1) I 17 6 7 j \ \ 71 5 lOi/ I 402 15 Of 2,871 795,931 165,954(27,594 4 4 I II 100 -71 5 10 I 19 8 6 28 .. ( 2,626 0 11 ) 255 f 88,039 1,390 9 01 144 pa 1 108 2 5 f |1 184 119 18 2/ 1 •■ 1 1 2,571 1 6 Of I i DEPARTMENT SINCE DATE OF ESTABLISHMENT TO 31st DECEMBER, 1936. W.«»^g t 22e,ei7,iei|( l '«'S » J M31 f I7 9 9 ;dj6O ( 174 19 69,864 18 911,467888 2 2 80,U6 5 p.a. J \^^^>^M\ 9 i}>.»M 1T t:B} w ' OT ° 89 ' 19610 x b L_ 8 i7 ' m 4 ' w {^St'^li" 1} 57,693 16,640,144 2,587,922 528,313 8 10 20 { ll,296 18 10 169 8 8 526 35 15 6 32,549 1 2 6,210 j 2 ' 48^'^ 27 ' 608 _ 4 7 l 9,878 p.a. ■ ( ' ) ' ) » ■■ •■ .. 908 7 1 .. ., .. •• ■• •• 16 9 0 1 ; . ; . £529,221 15 11 £169 8 8 £35 15 6 £27,619 13 7 " at the true age ; the " extra " the additional premium charged for any reason whatsoever. i W. E. Aknold, Commissioner. S. Beokingsalb, F.I.A., Actuary.

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ACTUARY'S REPORT ON THE VALUATION OP THE GOVERNMENT INSURANCE DEPARTMENT AS AT 31ST DECEMBER, 1936.

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

Wellington, 10th May, 1937. In accordance with your instructions, a valuation of the Department's liabilities under its policies has been made for the year ended 31st December, 1936, with the object of ascertaining the net surplus available for distribution amongst the policyholders, and in accordance with section 40 of the Government Life Insurance Act of 1908, and amendments, I have the honour to report as follows : — The liabilities arise in respect of 74,691 policies assuring, inclusive of bonus additions, the sum of £26,897,975, and £81,527 immediate and deferred annuities per annum ; the Office premiums thereon amounting to £670,433 per annum. The bases adopted for the valuation were as follows : — (a) Endowments : 3 per cent, interest without mortality. (b) Temporary Assurances : The proportion of the premiums corresponding to the unexpired risk. (c) All other Classes of Assurance : The 0"' mortality table, with 3 per cent, interest. (d) Annuities : The a( m ) and a(') mortality tables, with 3 per cent, interest. The net premium method of valuation was employed in respect of groups (a) and (c) above, and, in addition to the liability brought out on that basis, reserves for future bonuses, immediate payment of claims, and other contingencies were included. The valuation has disclosed a total surplus of £253,256, as follows : — £ Total funds at 31st December, 1936 .. .. .. .. 9,952,311 Less value of liabilities .. .. .. .. .. .. 9,703,737 Net surplus .. .. .. .. .. 248,574 Interim bonus paid during year .. .. .. .. .. 4,682 Total surplus .. . . .. .. £253,256 As required by the Act, surplus arising from favourable mortality has been investigated separately for the General and Temperance Sections, the result indicating 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 maturing at £ s. d. ages 80 and over .. .. .. .. .. ..200 Other endowment assurances .. .. .. .. 1 15 0 Double endowment assurances and pure endowments .. .. ..150 Policies issued under Premium Tables which have been closed. Whole-life and endowment assurances .. . . .. 1 15 0 Double endowments .. .. .. .. .. 1 10 0 The above bonuses will absorb the sum of £227,527, and I recommend that the balance of the net surplus—£2l,o47—be carried forward. S. Beckingsale, F.1.A., Actuary. The Government Insurance Commissioner, Wellington. Approximate Cost of Paper.—Preparation, not given; printing (1,644 copies), £13 10s.

By Authority : G. H. Loubt, Government Printer, Wellington.—l9B7.

Price Sd.}

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