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Tuesday, 13th July, 1886. (Mr. Ormond, Chairman.) The Chairman: I have received the following from Mr. Bell, which he desires to be read as part of his evidence : — Sib,— Wellington, 9th July, 1886. I have the honour to request that I may be permitted to add to my evidence given yesterday the following statement, which I ought to have made when referred to the question of a Board of Advice upon investments : " If I oould see any way in which a true representation of the policy-holders upon a Board of Advice or Control could be obtained, I should advocate the addition to such Board of Advice of elected members. But the policy-holders already number 23,000, scattered over all parts of the colony; and it is impossible for such a body to know enough of Wellington men to enable them to select the best. Obviously, all members of such Board must be resident in Wellington." I have, &c, The Chairman of the Committee on the Government Insurance Association. H. D. Bell. . Mr. George Fisher, M.H.E., in attendance, and further examined. 1098. The Chairman.] Have you any further evidence to give regarding the properties purchased for the association ?—I should like to make this one addition with reference to the Dunedin property only : that from the Ist April, 1885, to the Ist April, 1886, the rentals received show a net return of something less than 4|- per cent., and that since the property has been in our possession we have endeavoured to lease or sell one-half of.it, which is useless to us, but have been unsuccessful. 1099. Mr. Holmes.] Have you tried to sell the whole of it ?—No, not the whole. Finding that we could not lease the half of it, it was proposed that we should rebuild the Otago Hotel. I objected to an expenditure of the association's funds for such a purpose, and the proposal to rebuild the hotel was abandoned. 1100. The Chairman.] In reference to the Auckland purchase, can you inform us whether this telegram (produced) is the telegram which relates officially to that business ?—I copied this telegram from the original. It is a telegram received from Messrs. Moss and Co., Auckland, in reply to a telegram sent them by Mr. Luckie, offering them ten guineas for their valuation. It reads thus : "Thanks. Shall decline. Were to get 1 per cent, from Shera when offering the property, but got nothing. Forfeited claim through valuing for association. Graham never consulted us. Not our fault. Believe could have bought at our lowest valuation, £17,500. —Moss and Co." I took a copy of this telegram at the time of its receipt by the office. 1101. What other point do you desire to give information to the Committee upon?— There is one special point to which I wish to call the attention of the Committee, and it is this : A good deal has been made of what is called the Government risk. Some people say the Government takes all the risk in the matter, referring, of course, to its risk under the State guarantee. Now, I w r ant to point out that the Government risk is purely and entirely mythical. The effect of the " risk" is, that the colony annually absorbs profits to the amount of about £10,000, which properly belong to us, the policy-holders. There is not much room for complaint on the part of the colony there : the boot is on the other leg. I think the policy-holders, who invest their money as insurers in the association, are entitled to a return upon the investment of their moneys, equal to that which other life insurance companies get, namely, an average of 6or 6J per cent. For instance, the average rate of interest at which the funds of the Australian Mutual Provident Society were invested during the past year was £6 3s. 4d. per cent. The average rate at which the funds of the Government Life Insurance Association were invested during the past year was under 5J per cent., so that there is a loss in the investment of our funds of 1 per cent, as compared with the investments of other similar associations. I may explain the loss in this way : During the last year £559,000 of our money was invested in Government securities, £359,000 of the amount at 4-J per cent., which, compounded at that rate for the quinquennial period, would yield £88,379; whereas, at 6J per cent., compounded for the quinquennium, it would yield £127,379. There is a difference or loss to the policy-holders of £39,000. Then, the remaining £200,000 of the £559,000 is invested in Government securities, bearing 5 per cent, interest, yielding, at that rate for the quinquennium, a return of £55,256. At 6J, and compounded at that rate for the quinquennium, the amount would produce £70,256. This represents a difference or loss to the policy-holders of £15,000. Therefore, upon these two sums, in the difference between the 4-| and 5, and the 6J, there is represented a loss to the association, on the quinquennium, of £54,000. Then, again, I desire to point out that any investment at 4-J per cent, cannot possibly pay the association. It must necessarily involve a loss, because the actuarial valuations of the association are calculated upon a 4-J-per-cent. basis; that is to say, when the Actuaries take into account the liabilities of the office they assume that we shall get 4-| per cent, on our investments, so that, unless we invest at 4_- per cent., plus the cost of investing—by which I ' mean the cost of the Board, and the use of its officers and its machinery—we lose to that extent. In reality very little gain is derived from a 5-per-cent. investment. 1102. Then, do you come to the conclusion that in making the regulation that a certain proportion of the investments should be in Government securities the Board has entered into an unproductive business? —I say that any investment which yields less than 4f per cent, produces a loss. 1103. And you say that that has been done by resolution of the Board ?—lt was done before the Board came into existence. The Board has always insisted upon getting 5 per cent, from the Government. The sum of £359,000, to which I have been referring, is secured upon 4|-per-cent. debentures, issued under "The Consolidated Stock Act, 1884," which have a currency of seven years. That transaction was completed by the Government before the Board came into existence. 1104. Mr. Holmes?] You mean it is neither a losing nor paying business at 5 per cent., and, as we are only getting 5 per cent., is there not a very great risk that the colony will be called upon some day to make good the claims of the policy-holders ? —That question is very easily answered. The 5 per cent, is sufficient to meet all demands of any sort whatever, but I maintain that, the funds should be so invested as to return a profit to the investors—the insured—beyond the payment of all legal demands. It should be remembered that the moneys we are dealing with are the moneys of the policy-holders; they are not the moneys of the Government.

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