ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1928.

Appendix to the Journals of the House of Representatives, 1929 Session I, H-08

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1929. NEW ZEALAND.

ANNUAL REPORT OF THE GOVERNMENT INSURANCE COMMISSIONER FOR THE YEAR ENDED 31st DECEMBER, 1928.

Presented to both Houses of the General Assembly pursuant to the Provisions of the Government Life Insurance Act, 1908.

Government Insurance Office, Wellington, 21st June, 1929. [ have the honour to submit my report regarding the position of the Department as at the 31st December, 1928, together with the Balance-sheet at that date, and the Revenue Account, and Statement of Business showing the operations of the Department during the year. The main features of the above-mentioned statements may be conveniently analysed and compared with those of previous years in the following manner : —- (1) Life Assurance Business :— 1926. 1927. 1928. £ £ £ (a) New sums assured .. .. .. 1,883,705 1,791,845 1,915,465 Annual premiums thereon .. .. 60,609 58,006 63,138 (b) Total sums assured (includingbonus additions) 20,218,404 21,277,350 22,084,471 Annual premiums thereon .. .. 575,420 595,780 617,642 (2) Annual Income: — £ £ £ Interest and rents .. ~ .. .. 383,739 401,697 419,592 Less land and income tax .. .. .. 11,965 15,235 22,194 Net interest and rents .. .. .. 371,774 386,462 397,398 Premium income including consideration for annuities .. .. .. .. 580,123 600,864 626,359 Total annual income .. .. £951,897 £987,326 £1,023,757 (3) Claims:—- £ £ £ Claims by death during year .. .. 179,988 198,130 197,620 Claims by maturity during year .. .. 237,267 275,069 315,077 Total claims during year .. £417,255 £473,199 £512,697 Total claims paid since inception of Department .. .. £11,244,750 (4) Funds: — £ £ £ Life-assurance funds .. .. .. 7,029,584 7,303,925 7,582,679 Investment-fluctuation Reserve and Accident and Fidelity Reserve .. .. .. 208,609 212,687 213,349 Total .. .. .. £7,238,193 £7,516,612 £7,796,028 The foregoing figures, which indicate the steady progress of the Department, do not call for any special comment except those relating to new business and income. In regard to the former, it will be observed that the slight falling-ofl in 1927 has been more than made up by the increase in last year's figures, which represent the largest amount of new business transacted in any one year in the history of the Department. I may mention, however, that, notwithstanding the fact that this business has been obtained at a reduced cost, it is not the policy of the Department to achieve mere " big figures," but rather to strive for net results —a point which was emphasized in my report of last year, and which is dealt with further at a later stage in this report. It will be noted that the annual income is now well over the million mark.

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The following statements show the influence of the expenses of management (including commission), and taxation, on premium income and total income respectively, and on the general progress of the Department: — 1926. 1927. 1928. (5) Expenses: — £ £ £ Expenses of management .. .. .. .. 58,238 58,656 56,076 Commission .. .. .. .. .. 42,021 38,496 39,669 Total expenses .. .. .. £100,259 £97,152 £95,745 Ratio of total expenses to — Per Cent. Per Cent. Per Cent. Premium income .. . . .. .. 17-28 16-17 15-29 Total income .. . . .. .. .. 10-53 9-84 9-35 These figures indicate a decrease both in actual and in relative expenses during the past two years, notwithstanding the fact that the Department now has the additional expenses of an annual bonus distribution. The relative decrease has been 2 per cent, of the premium income and 1-2 per cent, of the total income, and the significance of this may be illustrated by pointing out that if the Department had incurred the same relative expenses in 1928 as were incurred in 1926 (which were not unreasonable) the total expenses in respect of last year would have been increased by about £12,000. This saving, which has been effected concurrently with an improvement in the efficiency of the Department's services, is of the greatest interest and benefit to the policyholders, because obviously any reduction in expenses has a substantial bearing on the profits. 1926. 1927. 1928. (6) Taxation:— £ £ £ Land and income tax .. .. .. .. 11,965 15,235 22,194 Per Cent. Per Cent. Per Cent. Gross average rate of interest before deduction of land £ s. d. £ s. d. £ s. d. and income tax .. .. .. .. 5 14 9 5 15 4 5 16 0 Net average rate of interest after deduction of land and income tax .. . . . . .. ..5 11 1 5 10 10 5 9 9 The above statement shows that the increase which has been effected in the gross average rate of interest during the past two years has been more than offset by the increase in land and income tax, and that consequently the net average rate of interest is slightly reduced. In this connection it is worthy of notice that the amount paid by the Department under the New Zealand Land and Income Tax Act appears to be relatively, if not actually, higher than the corresponding payments of any other life-assurance institution operating in the Dominion. The Department consequently can fairly claim that it is bearing at least its full share, and perhaps more than its full share, of taxation. (7) Distribution of Assets : —■ r T . , Percentage of Class of Investment. Total Asfets. Mortgages of freehold property .. .. .. .. .. 39-6 Government securities.. .. .. .. .. .. .. 28-8 Local-body debentures .. .. .. .. .. . . 13-8 Loans on policies .. .. .. .. .. .. .. 12-8 Miscellaneous assets .. .. .. .. . . .. 3-2 Landed and house property .. .. .. .. .. 1-8 100-0 It will be seen from the above that the Department's assets, which are held in trust solely for the benefit of policyholders, are being invested in sound securities and are a substantial factor in assisting in the development of the Dominion. (8) Annual Bonus Distribution.—lt will be remembered that a system of annual distribution of profits was inaugurated last year, and accordingly I append the report of the Actuary, which discloses a net surplus of £212,519 (excluding interim bonuses paid during the year) in respect of this year. Of this sum, £200,287 has been allotted in the form of compound reversionary bonuses upon the sum assured and existing bonuses, the total reversionary bonuses thus allotted amounting to £324,871. The rates of bonus allotted under ordinary new endowment and whole-life assurances when taken as a percentage of the sum assured range from £1 18s. to £2 per cent, per annum for policies one year in force. These bonuses are at the same high rates which were distributed last year, and have been declared in conjunction with the maintenance of the stringent basis of valuation previously adopted. Consequently the results must be regarded as very satisfactory, and will undoubtedly attract an increased flow of new business. It has to be noted, however, as indicated in my report of last year, that on account of the unavoidably high cost of placing new business on the books (about 40 per cent, of the total expenses for last year was for new business) a too rapid increase in this direction tends to reduce the profit-earning capacity of a life-assurance institution. This fact, which is generally recognized by competent authorities, is of special importance to those already having policies with the Department. The actual cost of obtaining new business does not vary greatly as between different well-established life-assurance institutions, but it is a relatively heavier burden in the case of one such as this Department, which charges premiums which on an average are lower than those of other life-assurance offices. General. —The course of business during the year has been distinctly favourable. New business has been satisfactory—indeed, as previously mentioned, the amount written represents the largest ever transacted by the Department in any one year, and expense ratios show a substantial reduction. The funds have been kept closely and profitably invested, and the net average interest earnings, although slightly lower than those of 1926 and 1927, are still nearly 2|* per cent, in excess of the valuation (3 per cent. OM) rate. And the mortality experience continues favourable. In conclusion, I desire to express my appreciation of the good work performed by the office and field staffs, which has contributed in a great measure to the success which has been achieved by the Department. A- E. Allison, Government Insurance Commissioner.

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Revenue Account of the Government Life Insurance Department for the Year ended 31st December, 1928. £ s. d. £ s. d. Amount of Funds at Ist January, 1928 7,303,924 14 10 Death claims under assurance policies, Renewal premiums — Assurance, An- including bonus additions .. 197,492 9 10 nuity, and Endowment .. .. 543,462 0 5 Endowment Assurances matured, inNew premiums (including instalments eluding bonus additions .. 305,939 12 0 of first year's premiums falling due Endowments matured .. .. 9,136 19 0 in the year) .. .. .. 59,527 7 7 Premiums returned on endowments .. 127 19 3 Single premiums—Assurance and En- Bonuses surrendered for cash .. 8,796 2 10 dowment .. .. .. 6,215 9 8 Annuities .. .. .. 23,184 10 10 Consideration for Annuities .. 17,153 16 0 Surrenders .. .. .. 41,311 13 7 £ s. d. Loans released by surrender .. 53,268 7 0 Interest and Rent .. 423,221 18 3 £ s. d. Less land and in- Commission, new* .. 35,389 611 co m eta x, „ renewal 4,279 9 3 £22,193 9s. 5d.; — 39,668 16 2 property expenses, Contribution to Public Service Super£3,63o 6s. Id. .. 25,823 15 6 annuation Fund .. .. 710 0 6 397,398 2 9 Expenses of management— Salaries— £ s. d. Head Office .. 22,534 12 1 Branch offices and agents .. 12,226 1 3 Extra clerical assistance .. .. 2,749 17 4 Medical fees and expenses .. 3,963 6 1 Travelling-expenses 689 3 10 Advertising .. 489 0 8 Printing and stationery .. 1,644 4 3 Rent .. .. 5,758 10 0 Postage and telegrams 1,715 10 4 Exchange .. 54 6 4 General expenses .. 3,280 5 10 Services rendered by Government Actuary .. .. 260 18 4 55,365 16 4 Transfer to Investment Fluctuation Reserve Account .. .. 10,000 0 0 Amount of funds, 31st December, 1928 7,582,679 3 11 £8,327,681 11 3 £8,327,681 II 3 — * Including agents' allowances. Balance-sheet of the Government Life Insurance Department on 31st December, 1928. Liabilities. Assets. £ s. d. £ s. d. Total Assurance, Annuity, and En- Loans on policies .. .. 999,041 5 o dowment Funds (as per Revenue New Zealand Government securities 2,263,002 0 0 Account) .. .. .. 7,582,679 311 Municipal Corporation debentures .. 194,287 8 7 Claims admitted, proofs not yet com- County securities .. .. .. 104,190 16 10 pleted .. .. .. .. 31,981 18 3 Harbour Board debentures .. 29,300 0 0 Annuities .. .. .. 918 3 4 Town Board debentures .. . . 32,051 18 0 Commission .. .. .. 1,305 14 10 Road Board debentures .. 21,800 0 0 Medical fees .. .. .. 389 0 6 Drainage Board debentures .. 1,819 6 4 Premium and other deposits .. 8,133 11 5 Power Board debentures .. .. 706,046 7 0 Sundry creditors .. .. .. 3,742 7 4 Landed and house property .. 140,710 4 6 Accident and Fidelity Fund .. 3,441 18 5 Landed and house property (leasehold) 1,775 9 3 Investment Fluctuation Reserve .. 209,906 11 10 Mortgages on property .. .. 3,105,305 7 1 Sinking Funds on Local Body Loans 7,732 110 Properties acquired by foreclosure .. 5,033 19 11 Overdue premiums on £ s. d. policies in force .. 8,564 10 9 Outstanding premiums due but not overdue 53,210 11 4 — 61,775 2 1 Overdue interest .. 6,889 8 1 Outstanding interest due but not overdue 9,753 16 3 Interest accrued but not due .. .. 101,690 18 9 118,334 3 1 Agents' balances .. .. .. 9,207 0 10 Sundry debtors .. .. .. 1,352 14 9 Cash in hand and on current account 55,197 8 5 £7,850,230 11 8 £7,850,230 11 8 A. E. Allison, Commissioner. H. Rose, Secretary. Government Life Insurance Department, 26tli March, 1929. The Audit Office, having examined the Revenue Account and balance-sheet, and compared them with the relative books, documents, and securities, hereby certifies them to be in accordance therewith. —G. F. C. Campbell, Controller and Auditor-General.

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Statement of Business

TOTAL. 7 Whole-life and Term Assurances. YEAR 1928. . , — — i Annual Annuities. Annual 1 Sum | Sever- Premiums. I. Immediate or N Sum Premiums. JNO - .assured. 1. Ordinary. entered upon. ' assured. °1. Ordinary. ! Bonuses.j g Extra. 2. Deferred. 2. Extra. POLICIES ISSUED AND DISCON- £ £ £ s. d. £ s. d. £ £ £ s. d. Policies in force at 31st 66,85619,303,9101,973.434 ] 593,755 6 422,858 16 2110,7633,946,161 630,671 / 98,352 16 2) December, 1927 1 2,024 19 2 2,054 18 4f 1 880 7 10 J New business .. .. 5,802 1,915,465 .. f 63,002 6 1 1,648 12 4) 236 123,415 .. j 3,794 5 5 ) 1 135 4 3 J t 19 5 0 } Bonus allotted .. .. .. 305,504 .. .. .. .. 37,834 Total.. .. 72,658 21,219,381 2,278,938 ] 656,757 12 5 24,507 8 6110,999 4,069,576 668,505 (102,147 1 7 1 | 2,160 3 5 2,054 18 4) \ 899 12 10 f Policies discontinued 4,096 1,244,800 169,048 1 41,087 18 1 1,256 6 6) 691 285,003 47,320 f 7,113 14 2) during 1928 \ 187 8 4 186 3 6 f g 96-18 7) Total policies in force at 68,562 19,974,581 2,109,890 ( 615,669 14 4 23,251 2 0( 10,3083,784,573 621,185 ] 95 ,033 7 5 1 31st December, 1928 1 1,972 15 1 1,868 14 10 J \ 802 14 3] ll PARTICULARS OP POLICIES DISCON How discontinued. By Death .. .. 553 152,321 45,981 ( 4,507 10 9 1,429 0 0| 302 91,734 37,153 f 2,106 10 3 1 I 54 5 7 j { 51 17 11 J Maturity .. .. 1,103 249,557 64,017! f 10,564 19 81 l\ 16 3 81 Surrender.. .. 1,459 490,926 47,512!] 15,903 18 01 .. 258 117,658 9,498 f 2.S70 19 3 1 I 69 4 11 J. | t 29 15 8 | Changes to other 77 37,739 809 1 1,182 16 81 .. 37 24,489 146 1 799 14 2 TojblGS ( • • Cancellation .. 131 37,400 25 I 1,139 1 31 13 10 01 7 3,150 .. I 103 5 11 t 1 10 Of \ t 110 0 Lapse .. .. 773 276,857 10,704 ] 7,789 11 9 (—)186. 3 6| 87 47,972 523 ] 1,233 5 5 ] t 46 4 2 (+)186 3 6J \ 13 15 Oj Total discontinued during 4,098 1,244,800 169,048 f 41,087 18 1 1,256 6 6) 691 285,003 47,320 ] 7,113 14 2) year 1928 t 187 8 4 186 3 6) t 96 18 7 f PROGRESS OF BUSINESS OP THE GOVERNMENT LIFE INSURANCE Total issued .. .. 196,444 52,948,441 5,354,542 j ® ® } 114,008 18 4 50,26816,296,17912,227,336 j g Total void .. .. 127,882 32,973,860 3,244,652 | | 88,889 1 6 39,96012,511,6061,606,151 13 lo} Total in force .. 68,562 19,974,581 2,109,890 615,669 14 4 25,119 16 10 10,308 3,784,573| 621,185 95,033 7 5 Extra Premiums .. .. .. 1,972 15 1 .. .. .. .. 802 14 3 £817,642 9 5 £95,836 1 8 Note.—The " ordinary " premium is the premium charged

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at End of Year 1928.

A. E. Allison, Commissioner. Geo. W. Melville, Actuary.

ASSURANCES. SIMPLE ANNUITIES. ENDOWMENTS, Endowment Assurances. ! Annuity Assurances. INVESTMENTS, ETC. j Annual !• Sum Annuities. I Annuities. Sum Annual No Sum sionarv Premiums. L or Annual No Annual I 1. Immediate or No a a8 £™' Premiums - assured. r,. n , 100 y 0 1. Ordinary. JNO# ; entered upon. Premiums. Premiums. | entered upon. 1. Ordinary. B0nuses - »■ Extra. BoZses. I*- ; »■ Defied. Bonuses. *• Extra ' TINUED DURING THE YEAR 1928. £ £ £ s. d. £ £ a. d. £ s. d. £ s. d. £ s. d. £ £ s. d. 53,669 14,950,8681,321,640 (482,100 6 10) 41 j 6,185 603 5 4 1 249 11 3 402 518 5 10J 22,255 10 10 1 1,981 | 400,702 12,534 6 3\ \ 1,143 11 10j ( 1,154 1,454 18 4) j 600 0 0 / \ 19,969 0 19 6j 5,4001,763,250 .. I 58,323 5 51 .. .. .. .. 20 .. ( 1,648 12 4 ) 146 f 28,800 884 15 31 { 115 19 3} j j 1 .. ) 264,130 .. .. 133 .. .. .. .. .. .. 3,407 59,069 16,714,118 1,585,770 (540,423 12 311 41 j 6,185 603 5 4)249 11 3 422 518 5 10 ( 23,904 3 2)2,127(429,502 13,419 1 6} \ 1,259 11 If I ( 1,287 1,454 18 4 J { 600 0 0 J { 23,376 0 19 6> 3,188 896,835 119,046 1 30,677 10 1) .. f 250 ( —)186 3 6 I 12 8 8 30 .. j 1,442 10 0 1 187 j 62,712 3,284 5 2l 1 90 9 9J I \ 96 (+)186 3 6 J .{../( 2,586 .. J 55,881 15,817,2831,466,724 (509,746 2 21 41 J 5,935 789 8 10 1237 2 7 392 518 5 10 ( 22,461 13 211,940(366,790 10,134 16 41 \ 1,169 1 4) 1 1,191 1,268 14 10 / j 600 0 0/ ( 20,790 0 19 6/ TINUED DURING THE YEAR 1928. 219 58,987 8,828 j 2,353 4 9) .. .. .. .. 29 .. (1,429 0 0 ) 3 ( 1,600 47 15 9> I 2 7 8/ \ .. \ .. .. 1,046 242,145 62,208 j 10,304 12 11 I .. ( ... 1 .. .. .. .. .. 57 ( 7,412 260 6 9 1 16 3 8 / 1 95 / ] 1J14 1,120 333,368 38,013 (10,282 8 3) .. J .. I .. .. .. .. .. 81 ( 39,900 2,750 10 6 t 39 93/ j I/ .. •• 40 13,250 663 j 383 2 6 J .. .. .. .. .. .. .. j .. .. j 118 33,050 25 j 995 6 8 j .. .. .. .. 1 .. j 13 10 0) 5| 1,200 40' 9 6) 645 216,035 9,309 ] 6,358 15 0| .. ( 250 ( —) 186 8 61 12 8 8 .. .. 41 ( 12 600 185" 2 8) I 32 9 2 / ( ( + )186 3 6 \ j 872 .. } 3,188 896,835 119,046 ( 30,677 10 II .. I 250 {—)186 3 6 ) 12 8 8 30 .. (1,442 10 0) 187 1 62,712 3,284 5 21 I 90 9 9 f 1 96 (+)186 3 6 / | .. / | 2,586 .. / DEPARTMENT SINGE DATE OP ESTABLISHMENT TO 31st DECEMBER, 1928. 137188 35,410,423 3,084,630 j 3 gj 1,106 | 16 1 57,49716 68,619 15 8 1,114 866 6 8 56,511 1 10 6,768 1 3^'2 fJ 9 g} 81,30719,593,1401,617,906 j \ ®j 1,065 | 155,439 1210 8,382 13 1 722 348 0 10 33,449 8 8 4,823 j } 55,881 15,817,2S31,466,724 509,746 2 2 41 j 1 2,058 3 8 237 2 7 392 518 5 10 23,061 13 2 1,940 | 10 ' 134 16 4 1,169 14 .;'| 0 19 6 £510,915 3 6 £237 2 7 £518 5 10 £ 10,135 15 10 at the true age; the "extra " the additional premium charged for any reason whatsoever.

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ACTUAEY'S REPORT OP THE VALUATION OF THE GOVERNMENT INSURANCE DEPARTMENT AS AT 31st DECEMBER, 1928.

Presented to both Houses of the General Assembly pursuant to Section 40 of the Government Life Insurance Act, 1908.

Wellington, 22nd March, 1929. In accordance with your instructions and in compliance with section 40 of the Government Life Insurance Act, 1908, and amendments, an investigation and a valuation in respect of the assurance and annuity contracts of the Department has been made in respect of the year ending 31st December, 1928, with the object of ascertaining the net surplus which may be distributed amongst the policyholders, and I have the honour to report as follows : — The total contracts consisted of 68,562 policies, assuring £22,084,471, inclusive of bonus additions and £25,120 immediate and deferred annuities, per annum, the Office premiums thereon amounting to £617,642 per annum. H§ The average net rate of interest earned by the funds of the Department during the year was £5 9s. 9d. per cent, after deduction of taxes, and the expenses of management were 15-29 per cent, of the premiums, or 9-35 per cent, of the total income. The corresponding rates of the previous year were £5 10s. lOd. per cent, and 16-17 per cent., or 9-84 per cent, respectively. The experience of the Temperance and General Sections during the past year have been separately investigated in accordance with the Act, and this investigation has disclosed that the bonus rates recommended below should be declared in both sections. The bases adopted for the valuation (the details of which are required by sections 36 and 37 of the Act to be supplied triennially) were as follows : — (а) The British Offices 0™ Table, 1893, and the British Offices Annuity Tables, 1920, were employed in the case of assurance and annuities respectively, at 3 per cent, interest; and (б) The net premium method of valuation has been followed in arriving at the value according to the above tables of the liabilities in respect of the Department's contracts, and where necessary additional reserves have been made for future bonuses, expenses, and other contingencies. The valuation has disclosed a total surplus of £216,115, as follows : — £ Total funds at 31st December, 1928 .. .. .. .. 7,582,679 Less value of liabilities .. .. .. .. .. .. 7,370,160 Net surplus .. .. .. .. .. 212,519 Add interim bonuses paid during the year . . .. .. 3,596 Total surplus .. .. .. .. .. £216,115 The results of this valuation have been carefully considered, and I recommend that the following rates of compound bonus should be declared on the sum assured and existing bonuses in respect of each full year's premium paid during the year : — Policies issued under present premium tables : — Per Cent. Whole-life assurances, and long-term endowment assurances maturing at £ s. d. age 80 (Tables A and B) .. .. .. . . ..200 Endowment assurances (excluding Tables A and B) .. . . .. 118 0 Double endowment assurances and pure endowments. . .. ■ ..176 Policies issued under premium tables which have been closed : — Whole-life and endowment assurances .. .. .. ..1160 Double-endowment assurances .. .. .. . . . . 1 10 0 The above bonuses will absorb £200,287, and I recommend that the balance of the net surplus— viz., £12,232 —should be carried forward.

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lii my report in respect of the previous year attention was drawn to the sources from which the bonuses of a life-assurance institution are mainly derived —viz., interest earned in excess of the valuation assumption, combined with adequate security of investments, favourable mortality, and economical management. The profit derived from those sources during the past year has been satisfactory, and the financial strength of the Department has been fully maintained in conjunction with the continuance of the high rates of bonuses declared at the previous valuation. I have, &c., Geo. W. Melville, F.F.A., Actuary. The Government Insurance Commissioner, Wellington.

Approximate Cost of Paper.—-Preparation, not given; printing (1,450 copies), £13 10s.

Authority ; W. A. 6. Skinnek, Government Printer, Wellington.—-1929.

Price 6d.]