STATE FIRE INSURANCE OFFICE ANNUAL REPORT OF THE GENERAL MANAGER FOR THE YEAR ENDED 31st DECEMBER, 1938.

Appendix to the Journals of the House of Representatives, 1939 Session I, H-06

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1939. NEW ZEALAND.

STATE FIRE INSURANCE OFFICE ANNUAL REPORT OF THE GENERAL MANAGER FOR THE YEAR ENDED 31st DECEMBER, 1938.

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

State Fire Insurance Office, Wellington, 31st March, 1939. I have the honour to submit the thirty-fourth annual report of the State Fire Insurance Office for theyear ended 31st December, 1938, with the Revenue Account and Balance-sheet. The following ar6 the comparative figures for the last three years:— 1936. 1937. 1938. Income— £ £ £ £ £ £ Premiums .. .. .. .. 202,987 175,726 193,501 Other receipts, less land-tax .. .. 42,432 47,724 46,099 245,419 223,450 — 239,600 Outgo— Bonus rebate to policyholders .. .. 41,563 33,379 37,747 Claims .. .. .. .. .. 43,517 34,795 30,839 Working-expenses (exclusive of income-tax and Fire Board contributions) .. .. 53,347 53,781 58,657 Fire Board contributions .. .. .. 8,225 9,602 10,492 Income-tax .. .. .. .. 41,296 35,454 32,288 ——187,948 167,011 170,023 Carried to reserve for unearned premiums Surplus, apportioned as follows : — Written off Office premises .. .. 23,500 26,000 23,000 Reserve Fund .. .. .. .. 471 439 577 Bonus Rebate Reserve .. .. .. 33,500 Reinsurance Reserve .. . . . . .. 30,000 30,000 Investments Fluctuation Reserve .. .. .. .. 16,000 57,471 56,439 69,577 Total .. .. .. 245,419 ' 223,450 239,600 Reserves and funds at 31st December ..1,083,391 1,113,830 1,160,407 Per Cent. Per Cent. Per Cent. Ratio of claims to premium incomc .. .. 21-44 19-8 15-94 Ratio of working-expenses (exclusive of incometax and Fire Board contributions) to premium income .. .. .. .. ..26-28 30-61 30-32 Ratio of Fire Board contributions to premium income.. .. .. .. .. 4-05 5-46 5-42 Ratio of income-tax to premium income .. 20-34 20-18 16-68

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1. The premium income for 1938 increased by £17,775 over that for 1937 and is the largest increase secured in any year since 1926. 2. Under the graduated system of bonuses out of profits instituted in 1936, the total sum credited during the year 1938 to policyholders was £37,746, as against £33,379 for the previous year. This represents the equivalent of an average bonus of over 22 per cent, of the amount of renewal premiums, on which bonuses are credited. ; 3. The aggregate saving to the insuring public directly and ,indirectly brought about through the ■establishment and operation of the Stcitte Fire Office since its inception was referred to in my last report as amounting to not less than £15,500,000 at the end of 1937, and the year under review has increased that immense figure. 4. The loss ratio for the year is the lowest recorded in the history of the Office. This remarkable result follows a steady decline in loss ratio extending now over several years, but it is hardly to be expected that equally satisfactory underwriting figures will continue indefinitely. Fire losses appear to occur in cycles. It is not easy to explain what are the conditions which determine these cycles, but they seem to be rather of an economic than of a physical nature.. While improvements in fire-fighting facilities are to some extent responsible for the reduction, these improvements cannot bt? credited with the very noticeable decline during the last few years in losses in country areas where previously much, money was lost by all insurance offices, including the-State Fire Office. There cannot be any doubt that people are, consciously or unconsciously, exercising greater care than formerly to prevent fire. 5. Earthquake insurance is increasingly sought by the public. This tendency is, I believe, worthy of encouragement in the national interest in order to avoid the serious financial dislocation which is inevitable when loss from earthquake occurs without insurance protection. Prudence, however, puts a limit to the amount of risk which can be underwritten by this Office with present reserves plus reinsurance..facilities, and for many years to come it will be soufid policy to carry to reserves whatever surpluses it may be practicable to provide from profits. 6. Working-expenses show a slight reduction, but the cost of Fire Board contributions, which are levied on a flat basis without regard to underwriting results, are a very heavy charge on premiums. There was an increase in Fire Board expenditure during the 1933-37 period of 41-73 per cent., with a coincident reduction in premiums in Fire Board areas of 7-45 per cent. As a consequence, the percentage disbursed by insurance offices in contributions to Fire Boards out of premiums collected from Fire Board areas has risen from 6-92 per cent, in 1933 to 11-18 per cent, in 1937, and still rises. Out of every pound paid for insurance cover in Fire Board districts, more than 2s. 2d. is a tax paid fof'fire protection, while, in addition, insurance offices bear the whole cost of collection, including agents' commission. The substantial sain of £10,491 was paid in Fire Board contributions by the State Fire Office during 1938. 7. The recently published statistics of fire insurance for 1937 reveal the State Fire Office as again by far the largest taxpayer among fire-insurance offices operating in the Dominion. In the year mentioned the State Fire Office expended £37,412 in taxes, the next largest taxpayer contributing £7,683. 8. I desire to place on record appreciation of the work of the staff of the Office in achieving the yery satisfactory results recorded in the accounts. J. H. Jerram, General Manager.

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Revenue Account op the State Fire Insurance Office for the Year ended 31st December, 1938. £ s. d. £ 8* d. Premiums after deduction of reinsurances .. 193,500 11 1 Bonus rebate to policyholders .. .. 37,746 IB 10 Other receipts £ s. d. Losses by fire and earthquake (after deduction of Interest, commission, and rent 48,247 7 0 reinsurances) .. .. -. . - 30,839 9 6 Less land-tax .. .. 2,148 7 6 Income-tax.. .. .. .. .. 32,288 0 0 46,098 19 6 Commission .. .. .. .. 10,109 11 3 Salaries .. .. .. .. .. 32,347 16 10 Contributions to Public Service Superannuation Fund .. .. .. .• •. 430 0 0 Contribution to Fire Boards under the Fire Brigades Act, 1908 .. .. .. 10,491 12 7 Expenses of management— £ s. d. Travelling-expenses .. .. 2,824 0 2 Printing, stationery, and advertising .. .. .. 2,172 3 10 Bent .. . . 1,296 3 1 Exchange .. .. .. 54 6 4 Postages, telegrams, cablegrams, and sundry charges .. 3,380 9 2 9,727 2 7 Office equipment .. .. .. .. 2,322 12 4 Office premises: Depreciation .. .. 3,719 12 5 170,022 11 4 Investments Fluctuation Beserve .. .. 16,000 0 0 Beinsurance Beserve .. .. .. 30,000 0 0 Office premises : Written off .. .. .. 23,000 0 0 Amount of fire-insurance funds at end of year .. 576 19 3 £239,599 10 7 £239,599 10 7 Balance-sheet of the State Fire Insurance Office on the 31st December, 1938. Liabilities. Assets. Capital authorized by the State Fire £ £ s. d. £ s. d. Insurance Act, 1908 .. .. 100,000 Government securities .. .. .. 642,930 12 0 Less not raised .. .. •• 100,000 Local-authority securities .. .. .. 270,166 611 Nil. Bural Advances bonds .. .. .. 14,175 0 0 Bad. Debts Beserve .. .. .. .. 1,500 0 0 Fixed deposits and at short call .. .. 90,000 0 0 Beserve Fund .. .. .. .. 746,583 11 0 Land and buildings .. .. .. .. 164,892 3 2 Investments Fluctuation Beserve Fund .. 75,000 0 0 Outstanding premiums .. .. .. 12,187 18 7 Beserve for unearned premiums .. .. 104,246 911 Interest accrued but not due .. .. .. 10,359 13 3 Bonus Bebate Beserve .. .. .. 112,500 0 0 Bent accrued or due .. .. .. 3,725 13 11 Beinsurance Beserve Fund .. . . .. 120,000 0 0 Bent overdue .. .. .. .. 138 0 0 Premium and other deposits .. .. .. 1,257 7 7 Cash in Beserve Bank of New Outstanding fire and earthquake losses .. 2,275 0 0 Zealand at Wellington, or in £ s. d. Government taxes .. .. .. .. 32,96720 transit to Wellington .. 48,298 0 8 Sundry creditors .. .. .. .. 43,951 17 4 Imprest Account balances: Head Other amounts owing by the Office — £ s. d. Office and branches .. .. 946 3 1 Beinsurance premiums due .. 11,466 3 9 49,244 3 9 Commission .. .. 2,283 16 0 Printing, stationery, and advertising .. .. .. 64 8 0 Postages and sundry charges .. 3,146 16 9 16,961 4 6 Fire-insurance funds, as per Bevenue Account .. 576 19 3 £1,257,819 11 7 £1,257,819 11 7 14th June, 1939. J. H. Jerram, General Manager. L. H. Osborn, Deputy General Manager. 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.— J. H. Fowler, Controller and Auditor-General.

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