SOUTH BRITISH INSURANCE COMPANY.

Te Aroha News, Volume VII, Issue 464, 19 April 1890, Page 4

SOUTH BRITISH INSURANCE COMPANY.

Auckland, April 14. Circulars have been forwarded to the shareholders of the South British Insurance Company to the following effect: — Your directors regret that the business of the past half-year has not been such as to enable them to declare an interim dividend. It was explained at the annual meeting of the shareholders that the Board had already taken steps to withdraw from several foreign countries in. which business had proved unprofitable. The directors now desire to state that they are still further pursuing this policy of withdrawal from foreign fields where the prospects are nob satisfactory, and ate confident that with these changes, judiciously made, the business will give profitable results in the immediate future. For the Board of Directors. (Signed) W. C. Daldy, Chairman. The enclosed report received by the directors from the committee appointed to confer with them on the business of the Company has also been issued Your committee have to report that a careful examination of the accounts of the Company from each of its branches, both in New Zealand and other parts of the world, from 1883 to 1589, and of tho published balancosheets, gives the following results : —The very heavy losses of the last six years have been mainly due to the foreign business of the Company ; though a few colonial agencies, which should have shown, under more careful management and supervision, better results, have also contributed to those losses. In addition to tho losses on theinsurance business proper, therehas been a further considerable loss through the ex tension of the Company’s operations in foreign countries, by reason of the diminished income on interest account which has resulted therefrom. Thus, in the four years ending 1881, the interest income averaged £II,OUO a year, equal to a dividend of 11 per cent, on the then paid-up capital of £100,003, the reserve fund being then £70,000. In 1882, the interest income was £11,154; in the last balance-sheet the amount is £7,145. There are always of necessity amounts lying entirely unproductive in the hands of agents. The extension of the business to foreign countries involved a large increase in the number of the Company’s branches, and, therefore, a large increase of the funds lying at branches yielding no income. In 1881 the amount under this head was £11,937; last year it was £46,930, which is £34,993 in excess of the former amount. Further, to commence and carry on the foreign business, it was necessary to invest considerable sums in foreign countries, which are yielding an average of £3 17s 6d per cent. This has also contributed to the decrease of interest income. It is true, lower rates of interest have ruled in the colony, bub during the period under review there has been an issue of new shares, and the combined amount of paidup capital and reserve for the year’s 1882 to 1889 has averaged over £42,000 a year beyond their combined amount in 1881, and this ought to more than compensate for any reduction of interest on investments in New Zealand and Australia. The accounts examined show that, had the extension to foreign countries nob been made, a regular dividend of 10 per cent, might have been paid, and a fair margin carried forward to tho reserve fund. It would thus appear that a large premium income is not necessarily synonymous with large or even moderate profits, and that a less or more concentrated business may be expected to yield fair results. As stated at the last annual meeting, the directors have closed several foreign branches where large losses have been made, as in Norway and Sweden, Germany, and a few other places, and they have also largely reduced the number of sub-agencies in America ; they have, however, decided to continue to carry on some foreign agencies which have been very unprofitable, hoping that under thenew branch managers which have been appointed, and with new arrangements in some other cases, the future may show better results than the past. Your committee, however, are fully convinced, from the examination of the accounts which they have made, that a further considerable curtailment of the foreign business would be to the interest of shareholders. Very clear summarised accounts of the actual profit and loss of each branch and agency for every half-year from 1882 to 1889 have been placed at the disposal of your committee. Auckland, 29th March, 1890. The report is signed by David Goldie, Jonathan Elkin, J. Edson, A. Boardman, J. Waymoutii.