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Reserve Funds and Loss Ratio. —The substantial increases in the reserve funds of the Office have been a pleasing feature of the last three annual balance-sheets. The total of these funds now stands at £48,213 7s. 2d., and I consider no efforts should be spared to further increase this sum, in order that it may become ample to meet all claims which may arise in future. This office has been particularly fortunate in its average loss ratio ; for the past three years the average has been only 50"16 per cent, of the annual premium income, which is a considerably lower average than has been experienced in the fire-insurance business of the Dominion on the whole. A continuance of the most watchful care in underwriting, however, cannot ensure that this low ratio of loss, with a correspondingly enhanced profit, can be maintained over a number of years. Periods in which there will be heavier loss ratios are to be expected: such periods inevitably occur in the history of all fire-underwriting institutions. Dominion Fire Waste. —This Dominion is in the unenviable position of having to shoulder per capita probably the largest consumption of wealth by fire of any civilized country to-day. The United States of America is, however, a close competitor. A loss of over half a million sterling is a serious matter for so young a country with so small a population. Wealth consumed by fire is a national loss. Although calls may be readily met by insurance offices, it must not be overlooked that in turn the insuring public are taxed by way of insurance premiums in ratio to the losses incurred. Whilst losses remain high the premiums paid must be relatively high. The total fire losses over a period of ten years probably exceed £6,000,000. The question which naturally arises is, "How can this huge loss be minimized?" Generally speaking, the reply is, in my opinion, as under : — (a.) By preventing numbers of attached wooden buildings being erected without efficient breaks or brick dividing-walls sufficient to check a fire. (b.) By insisting that brick, stone, or concrete buildings shall be provided with noncombustible floors and structural interiors, and that exposed openings shall be protected where such buildings are erected in closely built areas. (c.) By preventing the erection of faulty brick fire-stacks. (d.) By taking steps to eliminate as far as possible overinsurances. To meet (a) and (b), building regulations having the force of law should be provided, and (c) and (d) by efficient systems of inspection. Overinsurance is, in my opinion, one of the chief factors in causing the present loss ratio. It could be largely prevented if joint action were taken by all the insurance offices. The office which now declines to insure up to the full value, or to overinsure, loses the business to some other office with more elastic regulations. I can unhesitatingly state chat at the present moment there are many hundreds of policies current in the Dominion which cover property for more than the value, and which afford a strong incentive to incendiarism. Overinsurance is, of course, not confined to New Zealand : it is now attracting some attention in the United States, which country is running New Zealand closely for the doubtful honour of having the highest loss ratio in the world; and until the insurance offices associate to fight the evil wholeheartedly and Jionestly, many thousands of pounds will continue to be sacrificed yearly. In concluding this report, I would like to say that the excellent results of the past three years are very largely due to the efficiency and enthusiasm of the staff. The work throughout the Dominion has been carried on in a most commendable manner. C. E. C. Eobibson, General Manager.

Eevbnue Account of the State Fikb Insurance Office fob the Year ended 31st December, 1912. £ s. d. a a. a. Amount of fire-insurance funds at the Losses by fire (after deduction of reinsurbeginning of the year .. .. 12,437 13 5 ances) .. .. .. .. 25,111 9 5 Premiums after deduction of reinsurances 54,380 2 7 Appropriated to reserve for unearned preOther receipts—lnterest and commission 1,934 16 10 miums (in addition to £19,097 16s. sd. already reserved) .. .. .. 2,654 i 7 Interest on capital raised, guaranteed by Government .. .. .. 68 6 8 Commission .. .. .. .. 4,333 15 0 Salaries .. .. .. .. 6,137 17 0 Contributions to Fire Boards under the }-;- Fire Brigades Act, 1908 .. .. 918 3 0 Expenses of management— £ s. d. Travelling-expenses .. 333 8 7 Printing, stationery, and advertising ... .. 708 17 10 Rent .. .. .. 746 7 3 Exchange .. .. 14 17 9 Postages, telegrams, cablegrams, and sundry charges 1,097 3 11 Office equipment written off 166 15 8 3,067 11 0 Profits appropriated to Reserve Fund, this j sum being the amount of fire-insurance funds at 31st December, 1912 .. 26,461 6 2 £68,752 12 10 £68,752 12~10 14th February, 1913. C. E. C. Eobieson, General Manager. Examined and found correct. —Eobebt J. Collins, Controller and Auditor-General.

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