STATE FIRE INSURANCE OFFICE. ANNUAL REPORT OF THE GENERAL MANAGER FOR THE YEAR ENDED 31st DECEMBER, 1931.

Appendix to the Journals of the House of Representatives, 1932 Session I-II, H-06

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1932. NEW ZEALAND.

STATE FIRE INSURANCE OFFICE. ANNUAL REPORT OF THE GENERAL MANAGER FOR THE YEAR ENDED 31st DECEMBER, 1931.

Presented to both Houses of the General Assembly pursuant to the Provisions of the State Fire Insurance Act, 1908.

State Fire Insurance Office, Wellington, Ist September, 1932. I have the honour to submit the twenty-seventh annual report of the State Fire Insurance Office for the year ended 31st December, 1931, with the Revenue Account and Balance-sheet. The following are the comparative figures for the last three years : — 1929. 1930. 1931. Income — £ £ £ Premiums .. .. .. .. .. .. 217,990 221,909 216,007 Other receipts, less land-tax and bad debts. . .. .. 41,003 49,508 49,496 Profit on realization of investments . . . . . . . . 794 Outgo — Bonus rebate to policyholders .. .. .. .. 27,208 27,001 26,187 Claims.. .. .. .. .. .. .. 75,316 90,001 112,' 932 Working-expenses (exclusive of income-tax and Fire Board contributions) .. .. .. .. .. 52,194 52,624 50,479 Fire Board contributions. . .. .. .. .. 7,709 8,027 7,927 Income-tax .. .. .. .. .. .. 15,746 21,153 26,'152 Cash stolen or burnt, Hawke's Bay earthquake .. .... .. 26 Per Cent. Per Cent. Per Cent. Ratio of claims to premium income . . . . . . 34-55 4-0 '56 52 • 28 Ratio of working-expenses (exclusive of income-tax and Fire Board contributions) to premium income .. .. 23-94 23-71 23-38 Ratio of Fire Board contributions to premium income .. 3-54 3-62 3-67 Ratio of income-tax to premium income .. .. .. 7-22 9-53 12-11 £ £ £ Carried to reserve for unearned premiums .. .. .. 2,542 1,567 Surplus, apportioned as follows : — £ £ £ Payment to Treasury under section 5, Finance Act, 1931 (No. 2) .. .. 2,612 Bad Debts Reserve .. . . . . .. . . .. .. 500 Written off Office premises .. .. .. 4,000 5,000 10,000 Investment Fluctuation Reserve Fund .. . . .. 6,000 6,000 7,000 Reserve Fund .. .. .. .. .. .. 57,276 45,336 21,687 Reinsurance Reserve Fund .. .. .. .. 10,000 15,000 Bonus Rebate Reserve .. . . . . .. .. 1,000 500 Total .. .. .. .. .. £78,276 £71,836 £41,799 Reserves and funds at 31st December .. .. .. .. £821,090 £889,494 £918,682 The published accounts of most insurance companies for the period under review show a severe contraction of income, due to prevailing economic conditions, and the consequential fall in premiums payable to the State Fire Office is no more than was to be expected. The application of reduced rates because of improved fire-fighting conditions in areas in which the Department has considerable business also contributed to the reduction shown. The surplus of £39,187 (after paying to the Treasury the 10 per cent, reduction in salaries under section sof the Finance Act, 1931 (No. 2)), was derived from income from investments, there being a loss in the underwriting account of £7,695. This was entirely due to the decision to make ex gratia payments to policyholders whose property was destroyed by fire resulting from the Hawke's Bay earthquake, but who had no legal claim against the Office. That the Office is able to show a surplus under the extraordinary circumstances affords justification of the prudent policy steadily pursued for many years past of building up reserves out of profits.

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As regards reserves, economic conditions, as well as the risks attaching both to the business of fire and earthquake insurance and to investments confined to one country, indicate that it will be necessary to continue to add to them, so far as surpluses permit and the proper regulation of rates allows, for a period which at present cannot be determined. On a steady adherence to this policy also rests the best safeguard for the public against increases in rates. Criticism is not infrequently expressed regarding the present system of indemnity insurance, under which an insured does not necessarily in the event of total loss recover the full amount tor w 10 he is insured, but only up to the actual loss which he has sustained ; and it has even been suggested that legislation is desirable compelling payment of the full amount of any policy, irrespective of value. It may be commented that the present form of contract generally meets public needs. JNo well-conducted insurance office seeks to over-insure, and in most cases reasonable precautions against _ over-insurance are undertaken when the insurance is effected. The present margin in premiums, however, is not sufficient to cover the cost of the more frequent expert revaluations which would be necessary if payment up to the full amounts of all policies were made obligatory. The contract, therefore, could not be extended as has been suggested, except by a general increase m premiums, which in the aggregate would absorb a sum greatly in excess of any loss of premium sustained by a comparative few as a consequence of their property being over-insured. Also it may be added that there is at least as much responsibility on an insured to see that over-insurance does not exist as rests upon an insurance office to avoid over-insurance. Even more important, perhaps, is the objection that if policies after a fire were worth the full amount of the insurance, irrespective of the value of the destroyed property, a very strong incentive would be afforded to dishonestly inclined people to make a profit by procuring fires. Consequent on the decline m values which has occurred recently, the Office is taking steps to specially reinspect its risks, with a view to reduction where necessary. % , The rebate for the year was 12| per cent., and cost the Office £26,187. Since 1923 the aggregate saving to the insuring public of the Dominion as a consequence of the declaration annually of State Fire rebates has amounted to the large sum of £2,300,000. Contrary to what is sometimes stated, the Office not only pays income-tax, but, according to the published returns of the Government Statistician, has paid for years past more in tax than any other fire-insurance office. In 1931 the amount paid (£26,152) constitutes a record. This sum is in addition to the levy under section 5 of the Finance Act, 1931 (No. 2), to which insurance companies are not I desire to take this opportunity of expressing thanks to the staff of the Office for the excellent work they have performed throughout the year under unusually difficult competitive conditions. Particularly would I mention the Napier Branch manager and staff, who, after the destruction of the Office building with its records in the fire following the earthquake, voluntarily remained m the locality to attend to Office requirements. Their cheerful assistance given under trying circumstances was most praiseworthy. J. H. Jerram, General Manager.

* Bevenue Account of the State Fire Insurance Office for the Year ended 31st December, 1931. £ s. d. £ s - d - Premiums after deduction of reinsurances .. 216,007 510 Bonus rebate to policyholders .. .. 26,187 5 3 ■Other receipts — Interest, com- £ s. d. Losses by fire and earthquake (after deduction of mission, and rent .. .. 49,968 7 7 reinsurances) ez gmUa payments, Less bad debts written off and Hawke a Bay earthquake 112,931 19 10 land-tax 472 5 8 Income-tax 2b,151 10 11 49,496 1 11 Commission .. • ■ 9,»14 4 L Salaries .. •• •• •• 25,739 7 4 Contribution to Public Service Superannuation Fund .. .. •• •• 636 19 9 Contributions to Fire Boards under the Fire Brigades Act, 1908 .. •• •• 7,926 13 9 Expenses of management — £ s. d. Travelling-expenses .. .. 2,134 2 8 Printing, stationery, and advertising .. • ■ 1 >202 11 1 Rent .. ■■ 1.800 8 0 Exchange ... • • 46 5 8 Postages, telegrams, cablegrams, and sundry charges.. .. 4,388 19 2 9,572 6 7 Cash stolen or burnt, Hawke's Bay earthquake.. 26 3 4 Office equipment .. .. •• •• 1,512 5 5 Office premises—Depreciation .. .. 3,203 19 7 223,702 16 1 Payment to New Zealand Treasury under section 5, Finance Act, 1931 (No. 2) .. .. 2,612 18 3 Investments Fluctuation Reserve Fund .. 7,000 0 0 Bad Debts Reserve .. .. • ■ • • 500 0 0 Office premises—Written off .. •• 10,000 0 0 Amount of fire-insurance funds at end of year .. 21,687 13 5 £265,503 7 9 £265,503 7 9

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Balance-sheet of the State Fibe Insubance Office on the 31st Decembeb, 1931. Liabilities. < Assets. £ d Capital authorized by the State Fire £ £ s. d. , Government war-loan securities .. .. 112 140 11 3 Insurance Act, 1908 .. .. 100,000 Other Government securities .. .. .. 284'950 0 0 Less not raised .. .. 100,000 1 Local-authority securities .. .. .. 131,149 14 5 x> j -p. ~ „ Nil- Rural Advances bonds .. .. .. 14 175 0 0 ad Debts Reserve .. .. .. .. 500 0 0 Rural Intermediate Credit bonds .. .. 20' 000 0 0 eserve Fund .. .. .. .. 689,730 15 2 Fixed deposits and at short call .. .. 0 0 Investments Fluctuation Reserve Fund .. 29,000 0 0 Land and buildings .. 191 376 13 5 Reserve for unearned premiums .. .. 88,763 19 8 Outstanding premiums .. .! " lo'4oB 3 4 Isonus Rebate Reserve .. .. .. 29,000 0 0 Interest accrued but not due .. .. 11217 2 6 Reinsurance Reserve Fund .. .. .. 60,000 0 0 Interest overdue .. .. .. .. '49 10 0 Premium and other deposits .. .. .. 1,301 011 Rent accrued or due. . .. 222 17 8 Outstanding fire and earthquake losses.. .. 9,109 0 0 Rent overdue " 125 3 4 Government taxes 26,15110 11 Cash in Bank of New Zealand at Sundry creditors . .. .. 5,423 8 7 Wellington, or in transit to £ s. d. Other amounts owing by the Ofnce— £ s. d. Wellington 51 341 9 4 Reinsurance premiums due .. 13,728 17 11 Imprest Account Commission 1,844 2 0 balances— £ s. d Printing stationery, and adver- Head Office .. 67 17 5 tising .. .. .. 14 10 4 Auckland .. 0 10 Postages and sundry charges .. 1,221 15 6 Hamilton .. 0 0 4 . 16,809 5 9 New Plymouth .. 90 19 8 tire-insurance funds, as per Revenue Account .. 21,687 13 5 Palmerston North.. 41 410 Napier .. . . 16 17 10 Nelson .. .. 44 810 Christchurch .. 0 0 9 Timaru .. .. 3 117 Dunedin .. 0 11 6 Invercargill .. 54 15 5 320 9 2 51,661 18 6 £977,476 14 5 j £977,476 14 5 J. H. Jebeam, General Manager. 2nd April, 1932. q_ g Redwabd, Accountant. I hereby certify that the Revenue Account and Balance-sheet have been duly examined and compared with the relative books and documents submitted for audit, and correctly state the position as disclosed thereby.— G. F. C. Campbell, Controller and Auditor-General.

Approximate Cost of Payer.—Preparation, not given; printing (1,765 copies), £4 10s.

By Authority: W. A. G. Skinner, Government Printer, Wellington.—l 932.

Price 3d.]

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