SOUTH BRITISH INSURANCE COMPANY. MEETING OF SHAREHOLDERS. AN UNFORTUNATE HALF-YEAR. COMMITTEE OF INQUIRY ACCEPTED.

Te Aroha News, Volume VII, Issue 410, 12 October 1889, Page 5

SOUTH BRITISH INSURANCE COMPANY. MEETING OF SHAREHOLDERS. AN UNFORTUNATE HALF-YEAR. COMMITTEE OF INQUIRY ACCEPTED.

Auckland, October 9. The general meeting of shareholders of the South British Fire and Marine Insurance Company was held at the Company's office, corner of Queen and Shortland-streets, this morning. There was a £ood attendance of shareholders, and Captain W. C. Daldy, Chairman of Directors, occupied the chair.

REPORT AXD BALANCE-SHEET. The report and balance sheet for the year ended 31st August last were taken as read. They were as follows :—: — The niivclots h;i\e tho honom of placing l.e.oie ttie t-hareholdeis the statement of ac tJi'iith and balance-sheet fot the year ended olntof August iavSt. Ttie income, including i.ul.mcc brought forwaid from last year, i-, J. 232,525 L'ls 7d ; the general e.\penditu>oih J.29J.J65 1?- Cd : tho balance to debib to pu tic and loss acrount at the clos.<e ot tho books wa-i i:7,^40 5s lid. It will be the duty of the thnieSioldcrs to r -loi.'t two directors :n ihe place oi A. BuoU'ancl and R. Bobb^, Ei,qrs., who retire vt accordance with the articles of association, bub who ate eligible, and otter themselves for re-election, and to elect auriiimsin the place of A. Boauiman and J. Jb'iiar Clarke, Esqs., whoietire, and offer thernsehes for re-election. The directors have convened an extraordinary general meeting 1 for the purpose of electing 1 a diiectoi-in the place of J. Howard, Esq., deceased. For the Board of Directors.

The Chairman, in moving the adoption of the report and balance-sheet, said: "Gentlemen, — In view of the various reports that have appeared in the daily papers from time to time, showing the losses both in fire and marine to have been exceptionally heavy during the past year, you will doubtless have anticipated that the report for the past year's operations would prove untavourable, and I regret to have now to confirm those anticipations. You will naturally inquire, and it is proper that I should explain as briefly and clearly as possible, the reasons for such results aa arenow shown. I will therefore commence with a few figures taken re the Fire Department. I find here that the loss ratio amounts to 86 per cent., and that our individual losses of more than £1,000 each are only five in number, those over £100 being 222, while the amount of claims representing losses under £10C reaches a total of £27,000, or one and a-half per diem. I think, gentlemen, this clearly shows that we have not erred on the side of " speculative " underwriting, but have been conservative and prudent in our limits. To instance the exceptional nature of the fire losses during the past twelve months, I would point out that five towns have been completely wiped out by conflagration, and as a further proof of the cautious policy carried out by the management, I may add that in the fire at Seattle, where we lost £3,640, our average amount retained on the risks accepted was only £216. It is only fair to add that but for the foresight of our present San Francisco manager, who had, during the previous six months, reduced our liabilities very considerably on this and other towns, our losses would have been very much heavier. Now in reference to the Marine Department, the loss ratio is also large, 77 per cent., andhere again exceptional losses have occured to the very boat class of vessels, in many cases owing to collision, which is beginning to assume formidable propor- . tions, and is giving the marine underwrit- ' ing community a large amount of anxiety. The figures in this section show that we have received 56 claims for over £250 each, and 41 claims over £100, while the small loßees under £100 amount to £8,803. Fifteen vessels, all first class in character, have become total losses for a liability of £30(, 739, an average of £2,050 per vessel;

which I do not think any shareholder can cribicise as the result of rash underwriting. In these disasters we have been associated with the leading companies of the world, and I confidently assert that in every case the business was such aa the most prudent underwriter would desire toobtainashare of. I am happy to inform you that we have reduced the ratio of expenses from 25 per cent., as*per last year's statement, to 22£ per cent., or a decrease of 2J per cent. At the same time this has not been arrived at at the cost of efficiency, for I may say that there is hardly any centre where our managers aie nob our own men, specially trained to the system and policy of the Company, and perfectly in touch with the desires of the head office. I would explain to you that our properties have not been re- valued this year, as we considered the recent re-valuation in 1888 was sufficient ; in fact, I feel quite certain that if such action had been taken, the results would have been in all probability an appreciation in value. I would also point out that the majority of our investments comprise fixed deposits and other securities, easily convertible so as to meet any emergency that may arise. Inspector : In consequence of the purchase of the Adelaide Company, which has, I am glad to say, turned out a profitable venture, we have been able to appoint the late manager of that branch, Mr'Kirker, as the Company's inspector, which, it is hardiy necessary to say, is an absolute necessity to a company like ours, operating in all parts of the world. Well, gentlemen, you now have heard a few remarks on the operations of the pasb year, which will, I maintain, prove there has been no imprudence in underwriting, and it is perfectly clear to mo that the present unfavourable balance-sheeh is due to abnormal and exceptional losses. When you consider that, out of a gross premium income of £373,497, tin' amount of £95,460 has been re-insured, being 25 percent.; also that a sum of £3,200 has been expended in leinsuring unprofitable foreign treaties, nevertheless our revenue has increas d. The sum of t'1,637 refund arose from a dispute in settlement of the re-insur-ance of the Adelaide fire business in London in 1887. it was ultimately referred to arbitration, and given against us. I can assure you, we have a valuable business that has taken many years to build up, we have been gradually eliminating those portions of our businoss that have proved unremunerative, and I am perfectly satisfied that the organisation of our Company, and the quality ot our business, has never been of a sounder character. Of course, it is impossible to guarantee that we uhall nob ha\e to contend with similar abnormal losses in the future ; still, I am confident that in their absence, with the conservative lines that have been adopted, a profitable futuro is before us. You must expect fluctuations in this class of business, which is so largely controlled by the elements of nature, and with such a connection as we have now secured, the coming year should show the results of patient and prudent management. It may be rather early to predict the pi'esent outlook, but I may say that by the returns from e\ cry branch, except one, the results are most satisfactory. It is hardly necessary to mention that the past ye ar hns been one of great anxiety to your directors, and they consider it is only right to take this opportunity of recording their appreciation of the services of the general and branch managers, and confidence in their ability to administer our widespread business, and also our indebtedness to the gentlemen forming the local boards at our various centres? In conclusion I would refer to the loss of our friend, the late Joseph Howard, Esq., who had been a Director since the inception of the Company, and whose decease is greatly regretted by myself and brother directors. I also regret to say that Thomas Morrin, Esq., resigned his position as a director; and at the request of the Board, W. S. Wilson, Esq., accepted his position. I now move the adoption of the report and balance-sheet now read. Mr Alfred Buckland seconded the motion for the adoption of the balance-sheet, and expressed concurrence with theremarksmade by the Chairman. There was no dividend, it was true, but shareholders must remember that they had passed through a very severe time of depression. At the same time he was convinced there wa3 nothing to cause any feeling of alarm. From their recent returns he was of opinion that had a balance been struck at the present time instead of in August, a different result would have been obtained. The shareholders were very much indebted to their respected chairman and to the officers for the great deal of attention they had paid bo the Company's business. Mr D. Goldie said no doubb the shareholders would be somewhab pleased at the report and balance-sheet just presented, and also with Mr Buckland's remarkfc, if they could be accepted as being correct, that was to say, as to the future proceedings of the Company, and as to bhe class of business the Company was now engaged in. He (Mr (Joldie) did think, however, bhab bhis meeting, should determine and adopt some different course of action to that adopted in previous years. He therefore proposed the following amendment: "That bhe adoption of the report and balance sheet be deferred, and that this meeting stand adjourned till this day fortnight at 11 o'clock in the forenoon ; and that Messrs Elkin, James, Edson, Edmiston, F. L. Prime, Lovett, Mason and bhe mover be a commibtee bo examine fully into the operations of the Company, and report to bhe adjourned meeting as to the causes of the present unsatisfactory condition of affairs, and as to the remedy that .should be applied to restore the Company to its former prosperity." Mr GolHie added that he wanted to show just how bhe Company sbood bo-day as compared with its position five years ago. He said that if this comparison were instituted shareholders would see the real value of the statements made by the chairman as to the sabisfactory condition of the Company's business. In 1885 the South British had a reserve fund and undivided profits amounting to £101,000. To-day, taking the losses of (he lasb year into accounb, their reserve and undivided profits stood at £75,524 ; so ' that they had lost over £25,476 of their reserve fund and undivided profits during the last five years. Now, if all the other Companies working on the same lines as the South British had done the same kind of thing, they could have understood that the blame should be laid outside of the directors, and that their misfortunes were attributable to the force of circumstances, but this was nob so, The Union Insurance Company in 1885 had a reserve fund of £60,285 and today their reserve fund was i 74,082, so that while the South British had lost £25,476 of their reserve fund the Union had added to their reserve £13,797. If they took the New ZealandlnsuranceCompanyitwasfoundbhab in 1885 their reserve fund amounted to | £232,865, and now they had a reserve fund of £245,372 ; so thab during bhe same period \ that the South British had reduced the | reserve fund, the New Zealand had been adding to their reserve. The National, which, he understood, had joined with the South British in this foreign policy, had simpl e the same mistake. The re-

serve fund of the National, which, as he had said, had joined wit>h the South British in what he thought was very wild policy — taking the world as their market — the reserve fund of the National in 1885 was £195,000, and now it was £181,953, so that they had lost something like £13,047 working on fche same line as the South British. The Union, on the contrary, had built up this reserve of theirs on a very much smaller business than the South British had been doing, for the Union during the last 5 years had on a premium income of £515,059 made a clear profio of £25,631, including the profits for the year which closed in September last of £11,809, the New Zealand Company during the same period, viz., the last 5 years, had an income amounting to £1,127,000, and they had made a clear profit of £87,300. The South British during the same period had taken £1,254,000, or about £127,000 more in | premiums than the New Zealand, and had made an absolute loss of £48,204. It was not by t-iking the balancesheet of to-day, bub by going back for the last 5 or 6 years to examine into the whole thing, that they would be enabled to see the causes of their losses and the remedy to be adopted for the alteration of this state of things. The difficulty which they had to contend with appeared to him to be this — In the early days of the Company its operations were confined to New Zealand and Australia, wheie they were well-known, and they took the bost of risks. They determined, however, upon taking the world for their market, and to this cause their subsequent misfortunes were directiy attributable. In order to illustrate his argument Mr Goldie asked the meeting" to imagine an insurance company that had been started in Fiji or Samoa coming to New Zealand to do business. It would be taken for granted at once, he said, that a company started in Fiji or Sarroa, and bringing its operations bo this market would have to take up the refuse of business. The South British appeared to be exactly in the same position. They had gone into the market ot America and into the English market, where they were barely known. It stood to i eason that the people in England and America would do business in their own strong local companies in preference to those that were not so well known, and any business which the Auckland company would get wouldsimply be the business which the American or English office could not take. Captain Daldy had told them that during the last twelve months they had experienced exceptional losses. He had bold them that five towns in America had been wiped out of existence. (The Chairman : " Nob five towns in America ; five towns.) Well, five towns at all e\entb had been wiped oub of existence. A thing of this kind could never have happened in New Zealand or Australia, and he drew abtenbion bo the matter to show the volue of taking up business like that. He (Mr Goldie) felt sabislied that if the Company confined its operations to something like a reasonable area, to places where they were well known, and to places where they could look for good work, better results would be obtained. The South British had gone so far afield, taking doubtful risks ; they had leceived the largest amount of premium of any New Zealand Company, but it was not the amount of business done, bub the safeby of bhe business, a3 any cociiinoicial man knew, that should be kept in view. If a man had goods to sell he could sell them right enough ; the difficulty was bo sell bhem profitably. The directors had evidently laid themselves out to do a large business rather than a safe business. He thought these facts would show the pressing necessity that existed for the shaieholders to appoint a committee from among thomselves to look into the affairs of the Company. The directors, no doubt, had had some anxiety, but they should bear in mind that the shareholders experiencd some anxiety also, while he knew of others amongst them who were dependent on receiving a dividend. Mr Nelson seconded the amendment. He thought it was in tho interests of the shareholders to hove a committee of investigation appointed to ascertain the reason of their unprofitable working in the past, and to devise a remedy for the future.

X3AtiAi\Ußi OiIJiJST. Dr. £ s, d. £ s. d. Do Capital— Paid up 129,256 0 0 le-insurance ßeserve 80,000 0 0 nvestment Fluctuation Reserve.. .. 1,160 9 9 210,416 9 9 L,ess Profit and Loss 7,440 5 11 202,976 310 Jnpaid dividends 154 6 4 Appropriation for unpaid losses . 29,470 0 0 )utstanding accounts 491 9 4 £233.091 19 6 Cr. € s. d. £ s. d. 3y landed properties and loans on mortgage 84,280 7 11 Stocks, debentures, Government bonds 39,769 15 1 rixed deposits with banks 42,238 5 9 }ashi on current account with various banks, and bills of exchange in transitu 6,571 810 172,859 17 7 3alances at branches and agencies 40,930 4 0 Bills receivable 2,545 11 3 Dutstai ding accounts 7,056 6 a )fflce furniture 3,700 0 0 £233.091 19 6 J. Friar Clarke, l Auditorg A. BOARDMAN, j Auditors.

P±\OFIT AND LOSS ACCOUNT. Dr. £ 8. d. £ s. d. Fo dividend paid Oct., 1888 5,170 4 10 Dividend paid April, 1889 5,170 4 10 10,340 9 8 Fire and Marine Losses— Paid and outstanding 225,665 8 8 Agents' commissions, salaries, and other expenses . ... 52,939 12 3 Advertising, print ng, stationery. . 4,553 18 8 Underwriters' Association and Fire Brigades 2,040 18 11 SovernmentLcensesand rates and taxes 2,498 19 6 Loss arbitration case 1,637 10 1 Bad debt written off .. 289 1 9 £299,96b 19 6 Cr. £ s. d. Bv balance 31st August, 1888 . . 10,551 15 11 tire and marine premiums (less re-insurances) 274,8£8 10 8 [nterest due and accrued . . . 7,145 7 0 Balance 7,440 5 11 £299,965 19 6

STATEMENT OF ACCOUNTS FOR THE YEAR ENDED 31st AUGUST, 1889.