Dáil Éireann debate -
Wednesday, 9 Nov 1938

Vol. 73 No. 3

In Committee On Finance. - Insurance (Amendment) Bill, 1938—Committee.

Sections 1 and 2 agreed to.

Question proposed: "That Section 3 stand part of the Bill."

Mr. Norton

Arising out of this section, the striking part of the discussion on this Bill has been the apparent inability of the Minister to give us any indication as to what sum of State money will be necessary to financially rehabilitate the companies and to restore solvency to them. We have been repeatedly told that this is a Bill designed to protect the policy holders, although the more one reads the Bill the more it becomes apparent that other people besides the policy holders, and chiefly the directors, have been very adequately protected. So far, however, we have not been able to get from the Minister any indication as to the amount of State money which it will be necessary to utilise in order to prop up whatever solvency exists in these companies. I would like to know from the Minister now whether he can give the House any approximate idea as to what amount of State money will be required to do that, and what the position relatively is of each of the participating companies who are parties to this agreement. Can we have any precise information from the Minister as to which of the companies are solvent, which of them are insolvent, and what is the degree of insolvency measured in terms of cash? That is information we ought to have, and the House ought to be in possession of that information in order that it will know to what type of cheque it is signing its name when it passes Section 3 of this Bill.

There is another matter to which I would like to make reference on the Bill, and that is the agreement proper. I notice on reading the scheduled agreement that it has been negotiated by a number of persons representing the participating companies. The persons who have negotiated the agreement are directors and, under the terms of the agreement, are going to receive very substantial compensation. I take it that all the participating companies have capital, and that all the capital has not been subscribed by the directors, that there are individual shareholders and that, under the articles of association of the company, the directors have some responsibility to the shareholders. I would like to know from the Minister whether he is satisfied, before asking the House to ratify and give legislative effect to this agreement, that the directors are not doing anything in negotiating this agreement which is in conflict with their duties and responsibilities to the shareholders, and whether they are being given any immunity from litigation at the instigation of a policy holder or at the instigation of a shareholder, litigation to which they might be liable if it were not for the fact that the State gave statutory authority to this agreement. These are considerations upon which the House should be informed. We ought to have some information on these points, namely, the degree of solvency of any of the participating companies and whether the directors are entitled to negotiate this agreement and whether, in doing so, they are acting within their articles of association, and with due regard to their responsibility to the shareholders and the capital of the participating company.

Mr. Cosgrave

On the occasion of the Second Reading I raised the question of what amount the State was being asked to put up in connection with this transaction. I find that the Minister stated that the sum would be approximately £500,000. This particular clause that we are now considering is to validate the agreement. There is a very large sum of money involved and, presumably, the Minister is fully aware of the importance of having on the Board of this terminating company directors on whom a very great responsibility will rest in future years, in fact, from the inception.

I wonder if the Minister has considered, in connection with this matter, that the names that were before the public in connection with the directorate included two, one of whom had experience of fire and accident and the other, if I am not mistaken, was an insurance expert. In what manner his expert knowledge is specially directed, I am not in a position to say. This insurance company will have very large sums of money to invest and it is quite clear that the persons appointed should be persons having more of a knowledge of insurance business than the country has had experience of in connection with Irish companies during the last 20 years. Has the Minister considered appointing a person fully experienced in life assurance and industrial insurance, or is there any such person in the country?

In the history of the most successful undertakings of all kinds, particularly in the older-established countries, individuals were largely responsible for the earlier operations of successful companies. In our experience here in recent years we have gone in for the synthetic type of director rather than the natural growth of a director. Having regard, first of all, to the importance to policy holders of the revenue that is going to be collected, the premiums that are going to be collected in future years, and the large amount of money that the State is putting up to facilitate and make a success of this undertaking, I think the House is entitled to some indication from the Minister as to the type of directors he intends to appoint, whether they will be merely part-time directors, whether any one of them will be a whole-time director and, generally, the steps that be proposes to take to ensure that there will not be more money lost.

During the last 20 years we have been told about the great advantages that Irish insurance was conferring upon the country. It is quite clear from this measure that people more or less recognise that Irish insurance was not a success during that period. However, we can let that pass. But steps ought to be taken now to ensure that, so far as it is humanly possible, the management and the directorate of this new company will be composed of persons qualified to do the work, competent to look after the moneys that are being entrusted to them, efficient in management and careful to husband the resources, not only of the policy holders, but of what is left of the shareholders and the money that the State is going to put up. If this is going to be merely one of those nominations to public companies that we have seen during the last few years, then I think it would be better for us to vote against the measure now than to allow it to pass. I am quite sure that the Minister is fully aware of the grave responsibility that rests on him and the Government in this connection.

Mr. Lemass

Deputy Norton made reference to what he described as my inability to give, in his own words, any indication of the amount required to be furnished by the State to make good the deficiencies of the amalgamating companies. I do not think that is a fair description of what I said here on the last occasion. I cannot give, for obvious reasons, a precise figure, but I gave an indication which I think was reasonably good in the circumstances. The Deputy said I gave no indication, but that is not true. It is anticipated that the amount required to be furnished by the State will be approximately £500,000. But the amount of the deficiencies of the companies will be calculated as at the transfer date, a date several months ahead, and nobody can say now what precisely will be the position of these companies at that date.

There has been a fall in security values recently. That is going to affect the position of the companies and it might increase the deficiencies, if there are deficiencies. If that fall continues between now and the transfer date, it will further increase the deficiencies. If, on the other hand, the security value should rise, then the assets of the companies will appreciate in value and the deficiencies will be less. It is not possible to say now what the precise figure will be, nor will that be possible until the transfer date itself. The valuation of the assets and liabilities of these companies could not have been started until the agreement was signed. It is now in progress. It will not be completed for some time to come. Therefore, more definite information cannot be given to the House at this stage.

It is necessary to be clear as to what precisely we are talking about. These companies will have between them an actuarial deficiency amounting approximately to £500,000. The State is going to furnish £500,000. It is not throwing in £500,000 to make good a deficiency; it is not money which the State is going to lose. The State is going to get for it shares in this company, shares which will have a definite value, an appreciating value, shares which may in the course of time become a real asset, an asset valued in excess of the amount which the State will contribute. In so far as these companies are concerned, because of the existence of a deficiency, the amount of shares in the Terminating Company which will be transferred to the amalgamating company will be reduced. The shares instead of going to the amalgamating company will go to the Minister for Finance. If the company has no deficiency, if it is able to transfer assets instead of liabilities, then the shares will become the property of the shareholders of that company. On the other hand, if the company cannot transfer assets equivalent to its liabilities, the deficiency will be made good by the Minister for Finance who will get the shares.

Deputy Norton referred to the compensation payable to directors. In so far as compensation is payable to directors or members of staffs or for any other purpose, the assets available for transfer will be reduced and, because they will be reduced, the number of shares to be transferred will be less. The policy-holders will not be affected by that. They will gain in so far as they will be going to a company about whose solvency there will be no doubt; whereas doubts might reasonably be entertained in respect of a great number of them at the present time. We protect the companies adequately against the possibility of legal actions being taken against them later by policy-holders or shareholders. We set out to ensure that the companies will have full power to enter into the amalgamation.

Mr. Norton

What is the position of the directors vis-a-vis the shareholders?

Mr. Lemass

These directors are responsible to the shareholders.

Mr. Norton

Have they any authority to make this agreement?

Mr. Lemass

I think so.

Mr. Norton

Is the Minister satisfied that there has been a meeting of the shareholders approving of those agreements?

Mr. Lemass

I am quite satisfied that those agreements are authorised.

Mr. Norton

By the shareholders?

Mr. Lemass

Certainly. These directors are acting for the shareholders who elected them. Deputy Cosgrave referred to the directors of the new company. This Bill and the agreements contemplate the establishment of two companies. One of these is being constituted the permanent company. The board of the permanent company has not yet been constituted. Deputies must not come to the conclusion that because certain people have been chosen to act on the board of the permanent company, that those persons are not as competent as any persons in life insurance business to look after the type of business that the permanent company will have to do. The company will have very large resources. It will have a large amount of money at its disposal for investments. The amount of business to be done will be very big. The main business of the company will be to see that its resources are properly invested. It is not contemplated that any director other than the managing director will be whole-time. The arrangement that we contemplate is that the managing director of the permanent company will be a person associated with life insurance business in this country in the past.

Deputy Dillon referred to the position in which the British and other foreign companies were when they were at the same stage of their development as the Irish companies are now. Those British and foreign companies amassed large fortunes, but they amassed them by methods which we could not now allow to be practised. Deputy Dillon said that if the Act of 1936 had not been passed, Irish companies would amass large fortunes in the same way as those British and foreign companies did. But it is because the public suffered in the process of the amassing of those fortunes by insurance companies that legislation of that kind to protect the public was introduced here, following similar legislation in other countries. We cannot allow the conditions under which British and foreign companies amassed great fortunes to be reproduced here. That is what the 1936 Act tried to secure, and that is what this Bill seeks to implement. The element of competition, which was the originating cause of the abuses in the working of the insurance companies, can to a large extent be eliminated. We have got a board of directors that are not merely competent to carry on life insurance work, but to do so on the lines I have indicated. I have no doubt they will be successful in that.

Mr. Everett

Will they be citizens of Eire?

Mr. Lemass

Not merely will these companies be Irish but the articles of association, as set out, make it impossible for them to become anything else.

Mr. Everett

Will the managing director be a citizen of Eire and have a knowledge of the Irish language?

Mr. Cosgrave

As a matter of fact they do not want that knowledge in the investing of money in sound securities.

Mr. Everett

It is only for small posts that Irish is insisted on.

Mr. Cosgrave

I want to ask the Minister what is to be the guiding principle in the investment of money.

Mr. Lemass

Security, actual security in the assets of the company in which the money is invested.

Mr. Cosgrave

Let us be clear on this matter. There have been a great many flotations in this country in recent years and I presume we will have many more of them. In the event of this board of directors being faced with the prospect of getting shares in one of these companies whose prosperity depends upon legislative facilities being granted to them, is the money to be invested in such companies? One of the great advantages which the British companies had was that their investments could be made in connection with industrial and other activities which were expanding in such a way that they were of considerable advantage to the insurance companies. In this country a certain amount of money has been lost. The Minister said that I had made a mistake in saying that the policy holders' money was lost. Well if it was not lost it was in grave danger and difficulty until this measure was introduced.

We need not have debating points about this Bill. I was quite aware that there were two companies, the terminating company and the permanent company. As far as I know there is no statutory power to appoint the members of the permanent company yet nor does the Minister's name appear on the agreement though he is a party to it. I would like the Minister to give the House some assurance, in connection with the investments to be made, that they are not going to be investments which will arise out of flotations within the next three or four or five years. In other words that the money will be invested in something in which there is more than reasonable security of its being there when required. I am inclined to disagree with the Minister in regard to the valuation of the assets. It is quite true that there has been a fall in the market value of some securities.

Take War Loan as a case in point. It may go to 106, but well-managed companies write it down in their balances as 100, even though it might be at 106, and if they do that when it is 106, they have a right to do it when it is 99. It is more than likely that, when the valuation is made, it will be made when the crisis is not so pronounced as at present, and, in any case, it is a small sum—5 per cent. or 6 per cent. at the most. That is one point on which I would like some assurance—that the money is to be invested as if it were the property of the directors themselves, as if they were entirely dependent on it, and that it is not a speculative investment. Secondly, I should like to know, in connection with the distribution of shares, what will happen in the case of broken amounts. The shares are valued at 2/- each. It might happen that there was a company—there is no such company but let us assume there is—with £20,000 of present capital. If it happens that the actual valuation of the company turns out to be £1,000, it is not possible to divide £1,000 amongst £20,000 worth of shareholders with 2/- shares. What is going to happen if each share were valued at 1/1?

Mr. Lemass

I do not think there is any case where the company will get a transfer of shares less in nominal value than its existing capital.

Mr. Cosgrave

The case is certainly becoming more and more puzzling, if that is so, because it would appear as if there was an asset about which nobody knows anything.

Mr. Lemass

The assets are the insurance funds of these companies. They have not merely their subscribed capital, but the accumulated funds which have been constituted out of the premiums paid by policy holders. These funds may not be equal to the liabilities they have to policy holders, but they nevertheless represent amounts substantially in excess of the subscribed capital of each company.

Mr. Cosgrave

I quite understand, but surely if there is a deficiency which the Minister estimates at £500,000, the paid-up capital of those companies must be very small. It must have disappeared. There is a paid-up capital in the whole lot of them of about £90,000. Obviously, if the Minister is going to put £500,000 into the deficiency, the £90,000 must have disappeared. I can give the Minister the figures from memory. There is one company with £45,000, a second with £17,000, a third with £16,000, and a fourth with £12,500. The sum total is round about £90,000. Now there is a deficiency. Surely the first call on the deficiency, unless we are all mistaken, is whatever capital has been paid-up. The second, then, will be the Minister's. I do not want to take any one of these companies so as not to give any indication of what my view is as to the relative solvency of any one of them, but it could so happen that there was but one-sixteenth of the capital of any one of them still available as a result of this formula, and, in that case, what is to be done where the shares, assuming the whole of the share capital is distributed among the shareholders, will be worth, say, 1/4 a share? Is there any provision made for that?

Mr. Lemass

When the Deputy asked me what was to be the policy of this company with regard to the investment of its funds, I answered in one word: "Security." That is the answer I must give him now. I want to make it clear that this company is not being constituted, with a large fund available for investment, for the purpose of creating that fund, with the ultimate idea of having that money made available for Irish industrial enterprise or any other purpose, however beneficial or desirable. That fund is the property of the policy holders. It is their security that they will be paid the amount they have insured when their policies fall due and, therefore, the primary policy of the company must be to protect these funds. Its sole purpose will be to see that these funds are so invested that they will not depreciate in value, but, on the contrary, will appreciate, or, at any rate, to ensure that the funds will be available when the policies issued by the amalgamated companies fall due for payment, so that the policy holders will get what is due to them in full. It is not possible to contemplate a company operating on any other basis, and if there was the slightest suggestion of funds being used for the purpose of speculation, or any other similar risky purpose, the immediate intervention of the Government would be called for to check that tendency.

Mr. Cosgrave

But will it? Where is the provision for it?

Mr. Lemass

The Deputy must not assume that people are all going to go suddenly mad. That is the essential idea behind the whole scheme—to ensure that this separate company will be set up which will operate a closed fund to which the policies of the amalgamated companies will be subscribed, and against which policies there will be put, either from the assets of the amalgamated companies or the State, funds which will enable these liabilities to be covered in full. That is the primary purpose of the scheme, so that policy holders of the amalgamated companies will be secure, irrespective of what else may happen. Another company is being set up which will carry on the business of industrial insurance in the country. It will issue no policies, but will act as agent for the terminating company and do the actual business of collecting premiums, dealing with policy holders and so forth. Only the permanent company will do new business. The terminating company will do no new business whatever, but it will continue in existence until all these policies which have been transferred by this agreement have been discharged.

Mr. Cosgrave

That does not appear from the agreement, unless I am very much mistaken.

Mr. Lemass

That is the purpose of the agreement.

Mr. Cosgrave

I know, but it does not appear from it. I will look up the particular clause or clauses dealing with it. I gathered from the Minister's speech on the last occasion that this terminating company was to continue, whereas I gathered from the agreement, from my interpretation of it, at any rate, that the terminating company was to be wound up.

Mr. Lemass

It will continue in existence so long as any of its liabilities continue in existence. As soon as the last claim on the last policy has been met, the company will have no further reason for remaining in existence and it will terminate at that stage.

Mr. Cosgrave

I am glad to have the Minister's statement on that point, although I have not got that impression from my interpretation of it. I want to bring up the particular point again. Apparently this terminating company will get a huge slice of funds, a considerable sum of money, into its hands. The Government is going to put up some money, and, if it is going to put up some money, the directors and management must come into possession of very considerable sums. That money will require to be invested. Could the Minister give the House any information as to the anticipated interest upon which the scheme is based? Is it 3½ per cent.?

Mr. Lemass

It is provided for in the agreement.

Mr. Cosgrave

I know. I think 3½ per cent. is mentioned. In that case, presumably, it ought not to be impossible to invest the money. Now, could the Minister point out any clause in the agreement which shows that these investments have got to be reported, in some way or another, to some Government Department? The Minister of Finance is putting in some very considerable sums of money. He has nominees, but there is no direct contact between his nominees and himself, nor is there anything to show that there is any further contact between them, once he has appointed his nominees.

Mr. Lemass

No. Of course, that is the function of the company. The Deputy's question, in a sense, amounts to asking whether there is any danger of a company, in connection with which the Minister for Finance has nominees and so on, engaging in, say, the manufacture of boots and shoes instead of engaging in the manufacture of cement, which it was the purpose of the company to manufacture. There is, of course, in the 1936 Act, full provision for the submission of returns by the company to the Minister for Finance, and also, I think, for the publication of the returns to the Dáil.

Mr. Cosgrave

Returns of what sort?

Mr. Lemass

Of all the activities of this company, so that there will be available to the Deputies the information, anyway, prescribed by that Act. It may be that the Deputy does not consider that information sufficient, but I want to make it clear that this company has no other reason for its existence than the safeguarding of these assets and their utilisation for the purpose of discharging the liabilities of the amalgamated companies.

Mr. Norton

If, say, one of the participating companies issued a policy early this year, surely it is not meant that, thirty years hence let us say, the terminating company would remain in existence until that liability was discharged, or would it be a question of the transfer of assets against it?

Mr. Lemass

It will remain until that liability would be discharged. Of course, it may be discharged by agreement. I do not know what the possibilities are of arranging by agreement to terminate one policy of one company and issue another policy of another company. I know that was frequently done in connection with other cases. For example, it is quite common for people engaged in business to transfer their liabilities from one company to another.

Mr. Dillon

No. It is prohibited under your own Act.

Mr. Lemass

I am not talking about that. I am talking about what has been frequently done in connection with businesses. However, in theory, this company remains in existence until the last claim under the last policy has been discharged.

Mr. Cosgrave

I am not concerned with the question of bringing in cement or boots or shoes. All I want is to be assured that the money is not going to be lost. It does not matter whether a company is producing either one or the other as long as these particular spheres of activity depend upon statutory privileges that are given by the law. What I am concerned with is this. We have at the present moment, by our statutory enactments, probably approached more nearly to the totalitarian States as regards regimentation, inspection, and so on, than any other country in Europe. We have it in local government in connection with the local authorities. We watch everything they do. We send down inspectors to watch what they are doing and to see how they are doing it, and whether they are acting according to the Minister's desires, and so on. The Minister appoints a nominee in this case. There is no provision in this measure, either in the agreement or that portion of the Bill which gives statutory authority to the agreement, to ensure that those people will report to the Minister on what they are doing or how they are doing it. Having lost all this money or, if the Minister objects to that particular terminology, having found that by reason of what has happened in the last 20 years, we have now got to put up £500,000— I want to ensure that that money is not going to be lost, or any part of it. That is not unreasonable. I am sure the Minister will not say that that is unreasonable. If there is anything which qualifies the Minister or entitles him to get a report regularly, week by week or month by month, whenever investments are made, or according to whatever suits the convenience of the administration either of his own Department or the Department of Finance, I want information to be given to them as to what is being done with regard to the money or the investment of the money. I think the Minister will agree that that is not unreasonable. That is not here, however, and I am concerned about that.

I suppose the quotations of our own Stock Exchange can be regarded as reliable. We have further the question of the approval that is being given to the flotation of loans by local authorities. Take the case of the two most important local authorities in the country, the City of Dublin and the City of Cork. There is a four per cent. investment there. It has only one danger which is that, by reason of the Government's policy, these two municipalities now have got to borrow that portion of the indebtedness, for which the State is responsible for a proportion, and consequently their liability is increased, but other than that, and the difficulty of cashing that particular security, assuming that large sums were acquired, there is a four per cent. investment there. Now, presumably, the Minister will agree with me that an investment of that sort is safer than putting the money into a business which has to endure all the ups and downs that are inseparable from commercial activities. I want him first of all to assure the House that he will amend this Bill to the extent that the nominee in each case will produce a monthly return of the investments made by the company.

Mr. Lemass

I do not know whether or not the Deputy is going too far in that regard.

Mr. Cosgrave

Well, I am prepared to hear the Minister on it.

Mr. Lemass

The Deputy is suggesting that the responsibility for all decisions with regard to investments is going to be taken by the Minister for Finance and not by the board of the company. I think that the people responsible must be the board, and I think that it would rather tend to weaken the sense of responsibility of the board if they were to be subject to constant supervision of the kind the Deputy suggests, whether by the Department of Finance or the Minister. I think that there would be a tendency to attach responsibility for bad investments to the shoulders of the Department or of the Minister. You have the obligation of the Minister to select persons in whom he has confidence and to appoint them, and if at any stage the Minister for Finance is not satisfied that the business of the company is being properly conducted, the resultant remedy is to get new directors.

Mr. Cosgrave

Yes, when the damage is done. We appoint professional men all over this country. We have them appointed by local authorities, and, not even that, but by the Local Appointments Commission. Not satisfied with that, however, we send around other professional men to examine and report on what they have done, to check them in every respect and to point out, week after week, and month after month, certain things which the Minister thinks should be done in a certain way. Now, here we have a matter concerning our money to the extent of £500,000, and the objection is that the Minister would be saddled with responsibility for bad investments, supposing they are made. Why should he not be? What are we asking? We are asking that, if £10,000 worth or £50,000 or £100,000 worth of Dublin Corporation stock is purchased by this insurance company, the Minister should be informed about it.

Further, if the Port and Docks Board has an issue of £50,000 at 4 per cent. that the Minister will hear about that. Does not the Minister know, or has he not learned even during the last couple of months, that certain activities have been examined by an expert commission and that there has been a severe judgment in respect of them? We have put up this company or that company, or this body or that body, and if the only objection to making the members of that body report what they are doing is that it is putting the responsibility on the Minister, are we only to hear about the damage when we have to meet the bill?

Mr. Lemass

Where is the safeguard?

Mr. Cosgrave

The safeguard is this. Suppose an insurance company decides to buy a block of shares in a very prosperous British company or a very prosperous Irish company, that the Minister would hear about that and that the Minister can say "No".

Mr. Lemass

Does the Deputy think that the Minister for Finance should have the right to step in at any time and say to this company: "You must buy these shares or you must not buy those?"

Mr. Cosgrave

If he wants absolute security in respect of the money we are putting into it, I say "Yes" unhesitatingly. What is the alternative? That the Minister could select a man more competent than himself.

Mr. Lemass

Is not that precisely what is going to be said? Is not that remark typical of what is going to be said about every politician in every country who puts himself in that position? Is not that precisely the difficulty that the Deputy is shirking? If you put on the Minister the responsibility, that is what is going to be said about him. If you take a group of business men and put them into the company and say: "You are responsible for the investment of the funds and no politician is going to interfere with you," is not that a very much better position to be in?

Mr. Cosgrave

I do not want the word "politician" to be there.

Mr. Lemass

I mean somebody subject to pressure.

Mr. Cosgrave

There is a Department of Finance. I do not regard that as a political entity, although it may be used as such; any Department of State can be used as such. I am not regarding it as such when examining these investments. What I am concerned with is this: that once the Minister puts his hall-mark on a man, no matter where he gets him, the Minister says to us: "Do not interfere with him; the Minister discovered him; he must not be criticised; he must not report to the Minister; we are not entitled to hear anything about what he is doing; he is the Minister's appointee; if he loses every penny we have, that is his loss; we will kick him out when it is lost, but until it is lost, he will remain, he will be immune from criticism, immune from examination, and immune from giving any information to the people who are the custodians of the money put into this."

Mr. Lemass

The Deputy is a shareholder, I am sure, in a number of companies.

Mr. Cosgrave

I am not.

Mr. Lemass

The Deputy knows people who are. Does he think that these shareholders go to the annual meeting and say: "I am going to vote for John Smith and Patrick Burke to be directors of the company, but they must write me a letter every week telling me what they are buying and what they are selling and how many gallons of oil they have in stock; I must have the right as a shareholder to say, `You must not buy this or sell that'; I must veto your decisions"? Does he think any company could be carried on in that way or that it is a sound method of business? The Minister for Finance is in the position of a shareholder in this company. He appoints the directors who are responsible to him as a shareholder, but the day-to-day activities of the company must be directed by them. If you are to have a system in which you say to the directors: "We do not trust you; you must not do a thing with the assets of the company without prior sanction", why have any company at all? Why not transfer the assets and liabilities to the Department of Finance and let the officials of the Department deal with them? It would be a much simpler arrangement.

Mr. Cosgrave

What the Minister said is correct, with this difference, that if I had money to invest, the first thing I would do before investing it would be to have a look at the balance sheet and at the previous one, if I could get it, and the one before that, if I could get it.

Mr. Lemass

I am not asking what he does when he invests, but what he does afterwards.

Mr. Cosgrave

The Minister told us about certain circumstances. These are not comparable circumstances at all. I told him what I would do and would recommend anyone to do. I have very little money to invest and that would not concern me very much. I would look at the last three balance sheets and then at the directors, and if I were satisfied with both and were asked for my advice I would say "Yes, you can invest there". What are we doing? We have not got that company at all yet. There is an untried, inexperienced and uninitiated directorate that exists only in the Minister's mind at present. We are asked, before we know anything about their competence or experience of management or their usefulness on a board, to put our entire confidence in them. In other words, in one case I look at something that had got a natural growth and had years of business behind it. In the other we are asked to accept this synthetic company about which nobody knows anything. Into its hands are going to be given £300,000 or £400,000, possibly £500,000, and once the Minister's hall-mark is on them as directors nobody will say a word. He is to get no information about them.

I would advise the Minister in this case to talk to people who have some experience, who know something about business-he is not speaking now in Thomas Street or any place in his constituency—or, alternatively, to his own Ministry who know nothing about business. I want to know has the Minister any objection to getting a return made to the Ministry of Finance regarding investments made, and, if he has, let him ask the Ministry of Finance whether it would not be a good thing to do. If they are not politically minded they will tell him.

Mr. Norton

I want to get some further information as to the precise commitments under this Bill. We are told by the Minister that the approximate amount of the insolvency of the four companies is £500,000; it may be more or less at the date of the transfer, according to actuarial examination. Is that £500,000 of money to be utilised solely for the purpose of making good the existing deficit on the four companies? Are we to take it, therefore, if the State raises £500,000 and hands it over to the directors of the new terminating company that that is going to be used immediately only to restore the solvency of the companies?

Mr. Lemass

It is provided to ensure that the new company will be immediately equipped with assets equal to its liabilities.

Mr. Norton

What does the Minister mean by assets?

Mr. Lemass

Cash, securities, property, or anything like that.

Mr. Norton

I take it that these four companies have a share capital to the extent of £90,000. Let us say, the four are insolvent.

Mr. Dillon

I do not know why you should say that.

Mr. Norton

Let us assume that three of them are—that may satisfy Deputy Dillon. I take it that the capital of the three insolvent companies is gone and, if a dividend is being paid to-day, it is being paid on notional capital and not actual capital. How can an insolvent company have capital? How can an insurance company, transacting business still, have capital while having a deficit? Surely the capital has been utilised long ago in trying to get business or to prop up its existing financial basis. I understand the position is that in valuing the assets of an insurance company the actuary sees what are the liabilities of the company under the policies which it has written, on the one hand, and, on the other hand, what are the assets. An examination of the policies may disclose that the liabilities of the company amount to £1,000,000. Then he looks at the other side of the account to see what there is against the £1,000,000. After totalling these up, he may discover that they have £900,000 on the other side. That includes the capital.

In that set of circumstances, the company is insolvent to the extent of £100,000. When you put £100,000 into that company you have nothing more than the solvency of the company. The £100,000 which you inject into the company does not create an asset. It may create a lien on the company in the form of shares. But what assets are there against the £500,000 capital which the State is going to put up seeing that, in fact, the £500,000 is going to be utilised to make good a deficit? Does the Minister hope ever to get back this £500,000 which the State is putting up? Does he ever hope to get dividends on it? What makes him talk in such eulogistic terms of the investment in this company? Is all the £500,000 to be utilised to make good the deficit or is any portion of it reserved as capital for the terminating company or the other company mentioned here? That is information which has not yet been given to the House. We are entitled to know what is the position of the State in regard to this investment. I regarded the 1936 Insurance Act as a desperate remedy for a still more desperate disease. The companies were in danger of insolvency and unless the policy-holders were to be dealt with in an unfair manner something had to be done. To what extent are we now committing the State in investments in the new companies and what are the prospects that the State will ever retrieve any portion of the money which it is now going to invest?

I move to report progress.

Progress reported; Committee to sit again to-morrow.