I.— Ha.

20

[J H. BICHARDSON

31 Mr Leslie stated that one reason for the very disappointing result was the reduction in the value of money; that, on account of the fall in the value of the society's securities, not only had they earned a less rate of interest, but they had had actually to fill the gap from profits. Is that a fail , reply to the change of position that is shown between the time when the proposal was made and its working-out at the end of the tontine?—l think that, to some extent, it is a reasonable explanation. I know that the society made considerable losses on its investments, especially in Australia, and these losses would have to be made up from somewhere. I presume they would try to apportion the losses equitably, as far as possible. 32. Are not the reserves set up for the purpose of meeting such a case as that in question? Or is this the theory that the reserves should be kept intact, but that if they are called upon, profits should be withdrawn for the purpose of replacing the reserves that have been taken to meet the losses?—l should like to explain the matter in my own way as it presents itself to me. When an office begins to find some of its securities shaky, it has to set aside out of profits sufficient to make up the deficiency This is what a prudent office would do Before distributing any profits they would have all securities carefully valued. Then, if they found that the securities were not worth the book value, an amount to meet the deficiency would be set on one side out of the profits, and that would be a reserve. They could either write down the securities by that much, or set that much on one side. If they took a certain amount out of profits, all the people who participated in the profits must suffer pro rata in some way It must get back to them. 33 Supposing the loss has been spread over ten years, and you have two divisions of profits, the loss would have to be made up during the last five years? —It may If the profits had been divided up to a certain period and the securities not been carefully gone into, the loss would have to be borne by those policyholders who were concerned in the last five years. 34. Mr Allen.] This example given here in this leaflet is this an actual example of what actually did take place ? Mr Leslie: It is shown there clearly, 1 think, that those are results that were achieved by another office. 35. Mr Allen.] Do you say so, Mr Richardson ?—We understand that they were results of a particular kind of policy in the Equitable Office of the United States. 36. They are no more misleading, are they, than what you issue?—l should not like to say that. We do not, however, issue any estimates. 37 But they are actual results? —Of a particular kind of policy —a life policy limited to ten payments, and there is no doubt that you cannot compare that kind of policy with all sorts of policies. 38. But it is an actual result, and is just the same as what you do?— This might relate to policies of the same nature, not to all sorts of policies. I did not want to introduce it, but in order that the position may be explained I suppose I must. Twenty-two years ago we had a little friction with the Colonial Mutual Society We found they were cutting into us a little, and we went into the matter of this particular kind of policy This particular policy is one of the Equitable Society's, we think, and the Colonial Mutual Society have based this pamphlet on that Equitable policy Well, now, here are the actual results Age 30 , premiums paid during the ten years, £223 6s. Bd., sum assured, £1,000 39. What is this you are quoting from? —It is a pamphlet that we issued twenty-two years ago, showing from our point of view that these estimates issued by the Colonial Mutual Society could not be realized. 40 Surely that is an actual result issued by them in that pamphlet? Is it an estimate or an actual result of, say, the Equitable Society's work?—We think it is based on actual results. But I should like to say that this policy is a very misleading one to use as an example, because it relates to a whole-life policy with premiums payable for ten years only 41 It says so on the circular, does it not?— Yes. This form of policy, under the American system of distribution, has a very high rate of bonus, and it is unfortunate that the Colonial Mutual Office should have adopted that particular policy It has a high rate of bonus on account of the limited premiums. 42. But what I want to get at is that it is an actual result? —Yes. 43. Mr Reed ] Is that circular that you have there and are referring to one that was issued by the Government Life Department? —It is the only copy we have. It lias a lot of confidential stuff in it. lam simply using it for the purpose of illustration 44. The Chairman.'] Can you let us have it? —I do not care about giving it in It includes modified tontine estimates issued by the Colonial Mutual Society, and shows the actual results that we worked out ourselves from their figures. If you insist, I shall have to give it, of course. (The Committee deliberated in camera. On the witnesses being readmitted—) 45. The Chairman .] You were proceeding to refer to some figures that you have, Mr Richardson ?—Yes. 46. The Committee now wish to ask you whether you have any pamphlets or tables that were issued by the Colonial Mutual Society in connection with their tontine proposals taken about the time that Mr Larsen's case originated and, if so, whether you will produce those pamphlets, together with the criticism by the Department as to the probabilities of the estimates being realized. The Committee wish to get all the light they can upon the pamphlets issued by the Colonial Mutual Society at the time this case originated?—l have no objection to putting in any pamphlets issued by the Colonial Mutual Society that we have got. I should like to read from this circular issued by the Government Office. We were at that time competing with the Colonial Mutual Society, and there was a good deal of difficulty with them.