RAPID GROWTH

Dominion, Volume 12, Issue 271, 12 August 1919, Page 8

RAPID GROWTH

THE STATE FIRE OFFICE

ACCUMULATED PROFITS EXCEED £230,000

REDUCED RATES POSSIBLE ' The growth of tho Stale Fire Insurance Office was described by the Minister in Cha,rgo (Kou. "\V. D. S. Mac Donald) yesterday in the course ol' a speech at the 'laying of the foundation-stone of the new 'building on Lambton Quay. The office started business on January i, 1905, on a capital of ,£2OOO, which had all been expended before tho doora were opened, s&id the Minister. Hut such had been it? success that it had never required further financial assistance. Without any direct financial assistance from tho Government, but purely its own business operations, it had repaid, its initial loan with interest, and at present commanded accumulated funds of over ,£230,000. Its first year's net income amounted to jSi3,OOO. At the end of the first seven years tho net income was ,£55,900, and at tho end of tho second seven-year period its' net income amounted to .£99,458. For tho first seven years the profits amounted to ,£12,437, and for tho second seven years the profits amounted U< JBIGO.SSI. The funds consisted entirely of those gained in ordinary business operations at rates very much 'below those existing in this Dominion before the entry of the State Office into the business.

"In accordance with tho law, up to the present moment no figures have been given disclosing tho gross income' of tho State Tire Office," said tho _ Minister. "Net ficures after deducting reinsurances, eto., only have been Riven. It has recently -been decided that all insurance offices 6.ha.ii supply their gross incomes to the Government. Statistician, and the reasons for withholding tho (cross figures no longer exist. The gross income of the Stats Fixe Office for 1918 amounted to iiist over ,£IBB,OOO, and it is estimated that the figures for 1919 wilt not be less than or about one-tenth of the total income from tho whole fire insur'aiic.fi business for the Dominion. ,•

"Bach yea<r for several years past shows .•>. Fmtw surplus than the previous year. Thfi surplus under tlio office's revenue account for year ending 191S was J342.265; frn.ni this sum has to be deducted £W>, from unearned premium and investment Situation reserve, and .£13,792 for incim* tas, leaving a net balance on last pjiiv'a trading of The income ten paya'b'ie on the past tliree years' operations amounted I© .£II.OOO. There has bean etwee demand recently for a reduction in fire insurance rates. It has .been asserted that tho profits were larger than nooß&y.ry. It is true that the sum of ■£52,000 has been added to reserves durjsir the past two years, but at the same time <£4,751),001) has been added to t'Us underwritten liabilities of the office. 'Jflte JJ32.000 added to reserve is not a ."arprer sum of safeguard to tho increased liability thnn was accessary, tho reserves held previously being insufficient, , Tho income tas paid during the past two years is equivalent to 12-i per cent, per annum on the rates. Tho sum paid in income tai, although not a direct reduction in rates, is indireotly a reduction, for the reason that had the sum not been paid by the State .Fire Office'it would have been collected in other forms of. taxation.

''It must be . remembered that tho war prices hay« greatly increased the cost, of running tho business. Increase in salaries d'P.t'i to the cost of living, together with increased cost of motor-cars and, eyelets, and iucrcase in "Cost of paper and postages, have atidor! ov»r ,£)9&'> per ;«ar ts> the coat of conducting the 'business, but fcno rates have remained tlio same—in some cases they have even been reduced. Tn other words, the whole extivx cost has been borne by tho office and not passed on to tho consumer, as has been the case in nearly all other forms of commercial businesses. It is only by careiul underwriting and most economical working Mat such good results c.ould bo shown. The public, must not forget that on tho avorajy; the rates are 25 per cent, lower than was the case before the State entered into the business.

"The rates in New Zealand to-day, taking into consideration the f.oss ratio, are lower than tho«e of any of the Australian States. However, it is not sugfiwted that the rates cannot bo further reduced. The reserve funds aro now well ui, to requirements, and it is hoped no distant date that it will be possible, and I think it will, to give further concessions to the public. It is not the intention to run the office for the purpose of making big profits, and further reductions in ratos may ba looked for in the future, but when an office such as this takes on large liabilities without any subscribed capital, reserves must be built up against those liabilities before further concessions can be granted.. Having built up those necessary reserves, the question of what further concessions can be given wfcl receive earnest consideration."