# The Story of Life Insurance/Chapter III

F
Elizur Wright's great distinction as a reformer in life-insurance rests upon the fact that he eliminated from it the element of forfeiture. In his ideal company every man received the exact insurance equivalent of every dollar he paid in. He waged an unremitting war against confiscation. Even while he "lobbied for the widow and orphan" in the Massachusetts legislature, the man who was so largely to undo his life work and re-establish the system on the basis of forfeiture and injustice had already become a marked figure in the life-insurance circles of New York. In 1858, when Wright got his legal reserve law through the Massachusetts legislature, Henry B. Hyde, then only twenty-four years old, had become the cashier of the Mutual Life. In 1861, when Wright forced through his non-forfeiture law, Hyde had already successfully launched the Equitable. Life companies had hitherto limited their activities to a single end—the insuring of lives. Largely owing to Wright's energies in the Massachusetts department, they had acquired wide popularity. Now came Hyde, who, by introducing numerous innovations, proceeded to deform the whole institution.
In those early Mutual Life days Henry B. Hyde was one of the handsomest and most promising young men in New York. Health and energy had written themselves in his every feature. He stood more than six feet high; was big-boned and strong-limbed—a splendid type of physical man. A keen and observant mind was reflected in piercing black eyes, partly hidden under dark overhanging eyebrows; determination and audacity were indicated in a square-jawed mouth, with an occasional play of harsh humor in the corners. He had persuasive manners and undoubted "magnetism"; enjoyed a certain popularity with the Mutual Life policy-holders, with whom he frequently came in contact; and by his office associates had already been marked out for success. Even then, however, Hyde was a good deal of a rattle-brain; he talked loudly and constantly, and frequently manifested more interest in certain grandiose plans of his own than the humdrum duties of his position. He had little sympathy with the go-as-you-please methods then prevailing in life-insurance. Striding up and down the office, he would entertain his associates with descriptions of what the Mutual, under energetic management, might become. Some day, he intimated, he might himself take a hand in this life-insurance game; already he had dreams of a new company, which, by using more aggressive methods, might equal, perhaps surpass, the Mutual Life itself. Then, clapping his hat on his head, he would rush madly down Broadway. In an hour or two he usually returned with an application for life insurance in his pocket. Indeed, even then he spent a considerable part of his time soliciting insurance. Already he had acquired some local reputation as a hustling agent.

## A Famous Life-Insurance Trio

From his earliest days Hyde seemed destined to a life-insurance career. He was born at Catskill, New York, in 1834, the son of a small country merchant. He had limited educational opportunities, and, at sixteen, found it necessary to shift for himself, As a boy he lingered wistfully around the dock at Catskill, whence the boats regularly sailed to New York—his highest ambition, a voyage to the "great city." Into his father's home, in the late forties, percolated a considerable assortment of life-insurance literature. The great mutual companies had recently started in Massachusetts and New York; and Hyde, as a child, spent many long winter evenings over the circulars and letters they scattered broadcast. What "Robinson Crusoe" and "Gulliver's Travels" are to most growing boys, were these crude advertising appeals to the youthful Hyde. In this enthusiasm the child received much encouragement and instruction from his old schoolmaster, one John C. Johnston, and from his father, Henry Hazen Hyde. For several years the three talked and thought of nothing else. Johnston finally abandoned his school and became an active agent for the Mutual Life. Henry Hazen Hyde followed his example. Both men met with such success that, in 1850, they determined on a wider field. Taking young Henry B. Hyde with them—he had just turned his sixteenth year—they started for New York. The departure of that trio from the village of Catskill marks an epoch in the history of American life-insurance. In a few years Henry Hazen Hyde became the most successful agent in the United States. He had that same fluency of speech, that same earnestness in persuasion, that same strength against discouragement which afterward carried his son to such unparalleled success. He also originated many of the agency methods which Henry B. Hyde later on so effectively used. He ultimately built up a business at Boston that yielded him an income of $20,000 a year. Schoolmaster Johnston had an even more remarkable career. After spending several years in the service of the Mutual Life he went West and, in 1858, helped found a company which has since become the Northwestern Mutual of Milwaukee. Henry B. Hyde found no immediate opening in life-insurance, and, perforce, accepted an uncongenial clerkship in a mercantile house. In a year or two, however, he obtained, through his father's increasing influence, a minor position with the Mutual Life.

## A "Proxy Election" in 1853

In properly estimating Hyde's career we must give due consideration to the moral atmosphere in which his apprenticeship was spent. The office of the Mutual Life, even as far back as the early fifties, could hardly be regarded as a training-school for high business ideals. Indeed, the recently deposed McCurdy-Winston dynasty first got its clutches on the Mutual in 1853; and thus enjoyed an unbroken succession of more than half a century. Young Hyde had hardly obtained his minor clerkship when the first great Mutual scandal upset the town. Organised as a mutual company in 1843, it maintained this character for less than ten years. In the early fifties one of its trustees, Frederick S. Winston, discovered that method of controlling mutual companies which now so generally prevails. Every Mutual policy-holder had a vote for trustees; and in those early days, when the company was small, did pretty generally exercise this suffrage. Winston, who was shaky financially, decided to obtain proxies sufficient to secure his own election. To this end he associated himself with Robert H. McCurdy and several other leading merchants in the dry-goods trade. They enlisted also as proxy collector the services of John C. Johnston, who had now become the leading Mutual Life agent in New York City, and closely identified himself with the Winston party in the board of trustees.
In three years Johnston collected a sufficient number of proxies to elect seven new Winston-McCurdy trustees; and, at a snap meeting held in 1853, Joseph B. Collins, the president, was deposed and Winston put in. The new management promptly voted $35,000, to Johnston—all under the guise of buying up an agency contract. For several years a bitter warfare existed among the trustees. In 1855 Joseph Blunt, the Mutual's counsel and a leading anti-Winston man, formally presented to the Board charges of mismanagement against the Winston regime. With the circumstances changed, &nd giving due consideration to the comparative smallness of the Mutual Life, there is a striking similarity to conditions recently revealed. Thus the Mutual's Board is now largely made up of financiers; and the recent investigation demonstrated the use of its money in Wall Street enterprises. In 1855, its Board was largely made up of dry-goods merchants; and then, according to Blunt, its funds were regularly used in the dry-goods trade. "Loans upon dry-goods paper," he declared, commonly figured among its assets. There was only one member of the finance committee, said Blunt, who had not borrowed from the company. Blunt also called attention to the "enormous and rapidly increasing expenses of the company"; and also charged that the trustees and officers took commissions on policies, Blunt's accusations caused considerable commotion, and there was even talk of a legislative investigation. Unquestionably Henry B. Hyde was an interested spectator.
Through all these early years Hyde kept constantly at work at his great scheme—the organization of a new life-insurance company. He had rooms at Irving Place and Fifteenth Street; and here, every evening, after his work in the Mutual office, he entertained his incredulous friends with descriptions of his forthcoming enterprise. Among these early friends was Mr. James W. Alexander—the recently deposed president of the Equitable—then a junior at Princeton College. Hyde had already joined the Fifth Avenue Presbyterian Church, of which young Alexander's father was the pastor, and had particularly displayed enthusiasm as a worker in the Y. M. C. A. He constantly buttonholed the influential members of Dr. Alexander's congregation 1n the interest of his proposed company. His propaganda was not unqualifiedly successful. His associates in the Mutual office ridiculed his enthusiasm; his older friends pointed out the difficulties in his way. The insurance law of 1853 required a capital stock of $100,000 in all new insurance companies.
How, Hyde's friends asked him, could a young man, without high social or financial influence, secure as large a sum as that? Hyde, however, had one supporter and one believer: his father, Henry Hazen Hyde, who frequently attended those preliminary conferences in his son's rooms and, in several substantial ways, assisted him in his enterprise,

## Hyde Dismissed from the Mutual

Now Hyde sought encouragement in another source—the Mutual Life office itself. In those days the Mutual would write only $10,000. on a single life, and consequently its agents had to take many applications elsewhere. Why, thought Hyde, should not his new company get this excess business? So one cold March night in 1859, he called upon Frederick S. Winston at his home. His reception was not cordial. Winston, of course, had already learned of his scheme; and that any one, especially a Mutual employee, should contemplate founding a rival company he regarded as little less than an impertinence. He informed Hyde that he did not favor the scheme; and, that, moreover, anyone even meditating such a plan could not retain his position with the Mutual Life. Hyde met this defiance in the proper spirit, and asked how soon his resignation could be accepted.
"You can call at the office Monday morning and deliver your keys and cash," replied Winston. "It will not take the actuaries long to examine your accounts."
And, with that, he shut the door on his presumptuous young cashier. That brief interview tremendously affected the history of American life-insurance. Forgiveness was not Henry B. Hyde's most striking characteristic; and the behavior of Frederick S. Winston, on this occasion, he never forgot. Winston himself little imagined how much humiliation and annoyance he had thus prepared for himself. Hyde had originally intended to work, in a measure at least, in coöperation with the Mutual; now he exerted all his energies to crushing it. For years he pursued Winston and company, got millions of business that would naturally have gone to it; and ultimately wrested from it its leadership in American life-insurance. The one striking fact in the life-insurance situation for the last fifty years has been the rivalry and hatred existing between these two companies. Even now a Mutual official bristles whenever the Equitable is mentioned; and to a loyal Equitable man the Mutual's name is still anathema. Winston, always ungenerous and unscrupulous, at once began his attacks. He even refused Hyde a letter of honorable dismissal; and went personally to the young man's backers in the Fifth Avenue Presbyterian Church, advising them to have nothing to do with young Hyde or his company. Hyde was organizing it, he declared, only for the purpose of selling out to the Mutual.

## The Era of Competition Begins

Hyde returned the attack in kind. He called the succeeding Monday morning, delivered up his keys and cash, and formally took his leave. Then he quietly rented a back room on the second floor of the very building in which the Mutual had its office! "It was a matter of sentiment with me," he frequently said, "to have my office directly over that of the Mutual Life." He borrowed a table and a few chairs; and placed a box of cigars on the mantelpiece, to give an air of congeniality and comfort. Then he had painted a huge sign, "The Equitable Life Assurance Society," in large white letters on a black background. He hung this directly over the Mutual's less conspicuous sign, making it appear almost ridiculous by contrast. In this one episode Hyde clearly revealed his own character and his future policy. Herein he displayed his abounding confidence in himself and his own destiny; he had no company, no money, no stock-holders, no charter, no legal right to the "Equitable's" name, which he thus bravely emblazoned. He had not even a single promise of support! His act in thus beginning business with no legal warrant is paralleled by numerous other happenings in his after career. Again he thus inaugurated that era of competition, always feverish and frequently unscrupulous, which has continued up to the present time and had such unfortunate consequences for the insured. Hyde, from the first, regarded the life-insurance field as his peculiar province. He started in to monopolize it, to wage war upon his rivals wherever they appeared. He regarded every company as a natural enemy; but above all, he selected the Mutual Life, because of its existing leadership, and because of his rough treatment in the early days, as his especial mark. Up to that time, the mildest competition had prevailed; but since that March morning in 1859, when Henry B. Hyde hung his Equitable sign directly over the Mutual's, life-insurance in this country has been an unremitting battle.
The episode illustrates another marked Hyde characteristic: his instinct for an advertisement. The onslaught of this unborn pygmy upon the Mutual giant was soon the talk of the town. Unquestionably it assisted Hyde in the important task in hand—the raising of that $100,000. capital stock. For several weeks Hyde canvassed influential New York. Few rich men successfully avoided his advances. He enlisted many supporters in the Fifth Avenue Presbyterian Church. He corralled others by promising them important positions in his society. He offered to make Dr. Edward W. Lambert medical director, provided he raise $25,000. of capital stock; and to make Henry Day counsel, provided he raised a similar amount. He showed his shrewdness by providing for a Board of fifty-two directors. He thus secured support and influence in many directions; and also a large number of initial policy-holders. He insisted that all directors show their confidence by insuring their own lives—a wise precedent, which has not been generally followed. Hyde himself obtained, from other sources, a large amount of insurance. In company with Dr. Lambert, he solicited business from door to door. Hyde, obtaining a prospective client, at once turned him over to the doctor for examination. Thus, before they left the candidate's presence, they were prepared to issue the policy. New York, in those early days, was not accustomed to these rapid-fire methods, and Hyde and Lambert did not always receive respectful consideration. "We were never actually kicked out," said the doctor later, "but unquestionably there were times when discretion saved us." When the Equitable opened its doors on June 1, 1859, Hyde had nearly $500,000. of insurance on the books.
Hyde made every show of respectability. He started his institution, as we have seen, amid an ecclesiastical environment. He also took Mr. William C. Alexander, a professional and social star, brother of the Fifth Avenue pastor, as his president. He had at first intended the presidency for himself; but quickly recognized the business advantage of an older and more conservative man. He carefully selected one, however, whom he could control. He relegated himself to the apparently sub-ordinate position of vice-president; but from the first, kept the active management in his own hands. He calmly appropriated as his company's name that of the "Equitable Assurance Society of London," the most conspicuous in the world. He chiefly depended for public confidence, however, upon his assertion that the Equitable was a "purely mutual" company. He had capital stock indeed; and the majority of this capital stock has always controlled the society; but that capital stock was a requirement of the state law. In 1859 you couldn't organize a mutual company in New York State. No law has more adversely affected life-insurance history. It created, in a dozen years, some forty-one stock companies, all, like the Equitable, with at least $100,000. capital. Of these only eleven survived. Most of the others—the Continental, the Guardian, the Widows and Orphans, the North America, the Universal, the American Popular—fell into the hands of financial buccaneers who, in the seventies and early eighties, repeated in New York State all the old English scandals. Hyde overcame the difficulty, however, by the pretense of apportioning the earnings of the company not among the stock-holders, but the insured. At an early organization meeting he loudly denounced certain wicked shareholders who wished to obtain more than the legal rate of interest on their investment. They timidly suggested ten instead of seven per cent. "Gentlemen," declared Hyde, shaking with wrath, "I have made up my mind that this shall be a purely mutual company, and if this provision, limiting the dividends on the capital to legal interest, is not put into the charter, I will take my hat and walk out of this room and shall have nothing further to do with the enterprise." He was at that time twenty-five years old; his shareholders represented much of the wealth and venerability of New York. The guilty ones, however, were silenced, and Hyde was given a free rein to inaugurate his philanthropy on the purely mutual basis. From the first, Hyde unblushingly insisted upon this point. He always officially declared that the Equitable was purely "mutual" ; and kept carefully concealed from public view his capital stock. In the interests of economy and strict mutuality, he also fixed his president's salary at $1,500. a year. He placed his own at the same modest figure; but this, as we shall see, had an interesting string to it.
Hyde started the Equitable with a definite program in mind. Most life-insurance companies were then making very leisurely progress. They didn't get more business, Hyde declared, simply because they did not go after it. They waited for it to come to them. They did not hunt it on the highways; did not pursue it in every office and at every hearth. The possibilities of an aggressive agency system, they little understood. Agents at that time hardly received enough to justify men in giving their undivided attention to the work. Many companies paid only five or ten per cent, of the first premium. Hyde had a theory that, by increasing these commissions, he could attract more aggressive men. He thus proposed to build up a great corporation, with the hustling agent as the fulcrum. From the first Hyde was never anything more than a great life-insurance agent; the greatest getter of new business the world has ever known. In the highest sense he was not a life-insurance man at all. Of its technicalities he knew little and cared less. We search his reports in vain for those enlightened discussions of life-insurance problems which illumine the papers of Jacob L. Greene and Amzi Dodd; his only thought was not how to improve conditions for his policy-holders, but how he might get more. He did not regard life insurance primarily as a great coöperative scheme for relieving human distress; but as a business. To get this business he sacrificed everything: honesty, the interest of the insured, even at times the stability of his company. He boasted openly that his aim was not to make the Equitable the best insurance company, but the largest.

## Evolution of the Modern Life-Insurance Agent

Thus, from the very first, he manifested the keenest intereat in the agency department. The dry routine he left to others; the direct solicitation of new business he must supervise himself. He became the active leader of the Equitable's forces in the field. He started with only two agents and an office-boy; but before the Civil War began he had more than two hundred men actively at work. Nearly all of these he appointed himself. He showed the life-insurance plodder, for the first time, what generoua treatment meant. He not only paid his men well, but showed consideration in other ways. He encouraged them to visit him; and never, even to the end, refused to see the humblest worker on his staff. He would frequently keep bank presidents cooling their heels in an outer office while he entertained a favorite "producer." He treated his successful solicitors with ten times the deference he showed his pompous trustees. "Directors are easy enough to get," he once informed his Board to its own face; "what I want are hustling agents." He had absolutely no dignity where they were concerned. Somewhat morose and distant with most men, with his active field force he was congeniality itself. A good application was usually rewarded with a hearty slap on the back; a large month's business was always recognized by a congratulatory telegram. He frequently entertained his men at dinner; and constantly corresponded with them. All advertising matter, all pamphlets, he supervised and usually prepared himself. He early adopted the practice of circularizing his force at regular Intervals. His famous "hints" to agents, issued In 1865, is still a classic in life-insurance literature.
If you wish to trace the evolution of the modern life-insurance agent, you will find it in this little compendium. Hyde herein imagines every situation in which agent might find himself, and furnishes precise instructions for meeting it. There is only one way to "get business," he declares; unwearied personal canvass. Make use of all your friends and associates. Get lists from your doctor of insurable people, and, if necessary, make it an inducement to him to smooth the way. Make your clergyman help you insure his flock; join literary societies and clubs—in order that you may insure the members. When you are in company note carefully all manifestly interested in the subject, and call upon them the succeeding day. Follow up every marriage and every funeral. What better wedding present than a life-insurance policy? What more persuasive argument than the death of a man uninsured? Detailed and separate instructions are given for canvassing tradesmen, professional men, merchants, and every other social class. "You will find," said Hyde, thus forecasting the modern attitude of cynicism toward the policy-holder, "that nineteen men out of twenty will let you decide for them." Hyde pursued his own agents as unceasingly as he advised them to pursue the public. While his dignified competitors took things easy in their New York offices he was whirling all over the United States, everywhere strengthening and inspiring the Equitable force. One week he dropped in on the Boston office; the nest he appeared unexpectedly at Philadelphia; a few days later at Chicago. He was always ready to lend a helping hand; always at the beck and call of any agent handling a difficult "case." In such contingencies he would himself visit the prospective candidate—and almost invariably with success. In more tangible ways he encouraged his men. He early inaugurated the custom of offering prizes for unusually meritorious work. Gold watches, silver pitchers, and salvers exuded from the Equitable office even forty years ago. He made bets with his agents to the amount of business they could or could not do, in a certain time. He liked to pit one successful man against another. Hyde himself became the agents' ideal; his men fairly idolized him. He early gave the Equitable that reputation, which it enjoyed for many years, the "agents" company." "Here lies the friend of life-insurance agents," an Equitable after-dinner orator once proposed as a suitable epitaph for Henry B. Hyde.

## "Stealing Agents"

In the earliest days Hyde participated in that pleasing life-insurance practice now generally known as "stealing agents." He raided in particular the forces of the Mutual and the New York Life. He pounced upon tbeir shining lights wherever they appeared, and tempted them away by unheard of commission rates. He had no fixed schedules; he paid precisely what, in the individual case, the circumstances justified. "I have do rule that I will not break" be freqnently declared. A single episode illustrates his methods. In the early sixties the New York life's most successful agent was one A. W. Russell, of Boston. At that time commission rates ranged from fifteen to twenty-five per cent of the first premium, and about seven per cent on renewals. Hyde offered Russell fifty per cent of the first premium and ten per cent on renewals. Mr. Theodore M. Banta, in behalf of the New York Life, appealed to William Barnes, Superintendent of Insurance of New York State, for protection against such outrageous competition. Mr. Barnes sent for Hyde, warned him that such methods must end in bankruptcy, and virtually ordered him to keep his hands off Russell. Hyde stormed about the office, pounded the desk, and told the Superintendent that he should pay his agents whatever compensation he chose." Suppose I should publish in to-morrow's Tribune," replied Mr. Barnes, "that the Equitable is doing business upon plans which I think disastrous?" Hyde still declared that he should manage the Equitable according to his own ideas. Mr. Banta then rushed up to Boston to lay the situation before Elizur Wright. Then Hyde capitulated. "While I was sitting on the piazza waiting for Mr. Wright," said Mr. Banta years afterward, recalling the episode, "Mr. Hyde drove up, and said that he would drop the matter." Though foiled in this particular case, Hyde succeeded in numerous others.
    1↑ Testimony of Theodore M. Banta before the Trustees of the Mutual Life, in the examination of charges against William H. Beers (p. 344 et seq. manuscript.)
"Stealing agents" has since become an indispensable talent of a successful life manager; and one of the chief causes for the increase in the cost of life insurance.
In five or six years the Equitable thus assembled what was unquestionably, judged by certain standards, the ablest agency force then at work. And its greatest and most successful agent was Henry Baldwin Hyde himself. He not only told his subordinates how to get the business; he showed, by his own example, how it could be done. He gave his days and nights to the society. He bustled into the office at an early hour. "How many new applications?" was always his first feverish inquiry. He spent the morning over his correspondence, usually with Equitable agents, in preparing circulars and advertising matter, and receiving callers. Casual droppers-in seldom got away from Hyde's office without signing applications for insurance, and usually leaving checks for the first premium. Hyde spent his afternoons and evenings personally soliciting insurance. He joined the ranks and worked side by side with the humblest agent. In every citizen he saw a prospective policy-holder. He utilized all his business associates; he made every one insure with whom he or the society did business. He forced in bis banker, his butcher, his barber, his tailor. He would stop strangers on Broadway and discourse on the advantages of an Equitable policy. "How well I remember," years afterward said Luther R. Marsh, "when, on a blustering March morning in 1860 a gentleman, then unknown to me, came into my office and attempted to effect an insurance on my life. The visitor was one whose countenance was a letter of introduction and whose presence and manner commanded attention, I listened; my prejudice melted away; my arguments were answered; and the result was that a $10,000 policy was issued that afternoon. That visitor was Henry B. Hyde." Hyde met endless difficulties and discouragements. He could hardly have started his company at a more inopportune time; he had barely completed its organization when the Civil War began and hard times set in. Hyde, however, kept valiantly on. In the earlier years, when the force was small, he was not averse to performing clerical work. He would frequently stay down at night addressing envelopes. He always insisted that all this advertising matter should be mailed at night; he gained just that much time on his competitors. On one occasion, after the force had worked well past midnight, the supply of stamps suddenly gave out. Hyde jumped into a cab, routed the postmaster out of bed, compelled him to reopen the post-office, and got his letters in before daybreak.
Hyde showed this unflagging enthusiasm until the end. On the subject of the Equitable he seemed, at times, almost insane. He worked the first twenty years without a vacation; and then, broken in health, toured the world. When he gazed at the Pyramids, he declared he saw nothing but the new Equitable building; the Taj-Mahal did not compare, in his estimation, with the architecture of 120 Broadway. Ocean voyages were irksome because they destroyed his communications with the home office. His worst enemies never gainsaid his devotion to the Equitable. Midnight strollers on Broadway, even in the late years, frequently noticed a few solitary lighted windows on the third floor of the Equitable Building; and little dreamed the real meaning—that the president of the society, hours after his clerks and office-boys had gone home, kept continuously at work. At certain seasons of the year he slept in the Equitable Building almost as frequently as at home. On Fortieth Street, at an early date, he purchased two adjoining houses; one he used for his home, the other he converted into an Equitable office. Once John R. Hegeman, president of the Metropolitan, hearing that Hyde was ill, called to express his sympathy; he found him surrounded by the doctors and nurses—and a stenographer on each side of his bed. He seldom made a railway journey unaccompanied by a clerical force; his breakfasts and lunches were constantly interspersed with dictation.
Hyde from the first became the Equitable's unquestioned despot. He suffered no rival near the throne. He inspired awe and trembling among the entire staff. He kept the office in a constant uproar. His nervous system apparently interpenetrated the whole Equitable system. In energy, in enthusiasm, all were miniature Hydes. His very appearance largely explains the infection. He was a giant in frame and stature. His head made him a curiosity to the medical profession. He wore an eight-and-a-half hat! Occasionally his trustees, many of them the leaders in metropolitan finance, distrusted and would question his plans. Many the time he has stalked into his Board room, with practically every member of his Finance Committee against him. At the sight of that huge frame and that searching eye, however, their opposition immediately melted away. He never hesitated, on occasion, openly to defy them. "I would have you all to understand," he once informed a rebellious Board, "that any director who does not agree with my ideas has the privilege of resigning!" " You don't seem to realize," he once howled at a protesting trustee, stuffing his hands in his pockets and rising on his toes, "that you are talking to Henry B. Hyde!" He had a voice that penetrated the utmost recesses of the Equitable Building. He would frequently bellow his orders fifty or a hundred feet away from the person addressed. He was subject to fits of the most violent temper; and at times would fall upon a vice-president as quickly as an office-boy. He would rake James W. Alexander fore and aft; and scold Jordan, Mclntyre, and his other leading lights in the presence of strangers. Like most men of a harsh temper, he also had a vein of tenderness in his nature. He would take a sick clerk to his beautiful home at Bay Shore, Long Island, and there nurse him back to health.
He had the utmost pride and ambition for his family. He aspired to found a dynasty; and regarded the Equitable merely as a stepping-stone to this end. Early he began to pick up small blocks of stock. Hyde paid what his friends regarded as absurd prices for it. It netted only seven per cent as an investment; but Hyde early saw and utilized the unlimited possibilities its ownership gave in controlling the society. He proposed to make this ownership an appendage to the Hyde family. His earliest hopes all settled in his oldest boy, Henry Baldwin, Jr. The finest side of his nature is brought out in his associations with this invalid child. He called him "Caleb," and made him his constant companion. In the child's last illness—he died, in his tenth year, of heart failure—Hyde would suffer no one to nurse him except himself, and even insisted on cooking all the little patient's food. Hyde's associates always declared that he was never the same man after the boy's death. As far as possible he transferred his affections and ambitions to his younger son, James Hazen, He even transferred the pet name; after his brother's death James Hazen was always known to his father as "Caleb," Hyde coddled and petted him, constantly held before his eyes the splendor of the Equitable, and taught him to regard the property as his own. And so when the younger Hyde ascended the throne he imitated, in every possible way, his father. He, too, became the dictator. He, too, would bawl his orders to his trembling satraps; and at the slightest sign of revolt fly into paroxysms of weak rage. He treated James W. Alexander as a cumbersome inevitability. Mr. Alexander was the President; young Hyde proceeded to show who was Boss. Alexander issued orders; young Hyde countermanded them. Thus soon two Equitable factions arose. Herein again young Hyde manifested his inferiority to his father. As long as Henry B. Hyde lived there was only one leader one party, in the society.
How completely Hyde identified his family with the Equitable is shown by the fact that he erected a beautiful memorial window in the Equitable Building to his oldest son. In the Directors' room the most conspicuous paintings are those of himself and his father, Henry Hazen. The latter had only an incidental connection with the Equitable. He gave all his time to the Mutual Life, and died, in 1873, as its general agent in Boston. A less conspicuous picture is that William C. Alexander, the Equitable's first president. In other more sordid ways, as we shall see, did Hyde thus identify his family with the society.

## Hyde's "Extra Compensation"

Only such a man could have constructed one of the world's largest life-insurance companies out of nothing. From the first, however, Hyde met with unprecedented success. He wrote $100,000. the first day; by Christmas of 1859 he had scored his first million. He steadily increased his business, even during the hard times of the Civil War; and, at its close, had $27,000,000. to his credit. He had already demonstrated the success of his idea; had developed the modern type of life-insurance agent; had already passed by the sleepy Massachusetts companies; and was rapidly gaining on the Mutual Life. All this progress, of course, Hyde made at the expense of his policy-holders. Instead of piling up a surplus to pay "dividends," he drew upon it for agents' commissions on new business. In 1862 Hyde spent twenty-seven cents out of every dollar received, in expenses. The Equitable's charter required the distribution of surplus once in every five years. In this Hyde merely followed the established English practice. On January 1, 1865, therefore, he was called upon to pay his first "dividends." Much mystery exists concerning that distribution. In all probability Hyde did not have much surplus available for this purpose. In the New York State report for 1865, however, the Equitable reports a "dividend" distribution of $10,786.91, although lately it has put it at a much higher figure. Hyde paid another dividend that year; but made no official report of it. He allotted to himself, out of the surplus, $16,199.83. Those were the days of small things; but from the very first Hyde thus apparently safeguarded his own fortunes.
Hyde's salary in those years ranged from $1,500. to $5,000.; this extra sum was a pure gratuity. So far as can be learned, Hyde had absolutely no warrant to it. When the secret got out, some ten years afterwards, and Hyde, at the insurance investigation of 1877, was asked for an explanation, he declared that he had made a contract by which be was to receive two and one-half per cent, of the surplus every year, in addition to his salary. When asked if the contract was a written one, he was forced to admit that it was not. "It was simply a verbal understanding," he finally declared. Hyde was the only officer who enjoyed this bonus; William C. Alexander, the president, continued to worry along at $1,500. a year. Its payment entirely wiped out the Equitable's surplus. "I may say truly," Hyde remarked afterwards, "that we divided among our policy-holders" (and the vice-president he did not add) "nearly all the surplus which had accumulated during the previous five years. We thus drained our coffers." The same year as for many years afterwards, the Insurance Report contains this statement: "The Equitable is purely mutual; all profits must be divided among the policy-holders." Hyde not only kept this annual percentage a secret, but deceived the insurance department concerning it. In 1867, for example, the Insurance Department propounded to the Equitable this question: "Do any of the officers of the company receive a commission or percentage on any of the business of the Company, or retiring allowances, annuities, or any other remuneration besides a fixed and regular salary?" The query could not have been more specific. The Equitable replied: "No commissions paid to officers; they receive a specific sum, as per order of the Board of Directors at their regular meeting," That very year Hyde got a secret commission of $20,060.21.
    2↑ Insurance Investigation of 1877.

## A $4,000,000. Equitable Building

In 1865 Hyde instituted the first great reform. He conceived the idea of investing the Equitable's assets in a striking structure which should house his own company, and outwardly demonstrate to the world its greatness and financial stability. In other words, he discovered the advertising advantages of the modern office building. In this proposal Hyde again revealed that audacity which was the most striking part of his character. At that time the Equitable had only $1,500,000. of assets; the building then projected ultimately cost $4,000,000. Hyde proposed, in other words, not only to invest all his policy-holders' reserves in a most hazardous undertaking—but he had in his treasury only a fraction of its cost. He confidently depended upon his own energy to get the money when the bills came in. And he did. He began work on the first Equitable Building in 1867; he did not finish it until 1876. He constructed it upon a scale of extravagance that shocked and astounded the public, and gave rise to endless scandals. In response to frequent declarations that Hyde and others made money out of this building enterprise—as well as other criticism of management—the insurance superintendent, in 1877, made a special investigation. John A. McCall, then examiner in the Department, prepared the report. He said that he had carefully examined all expenditures, all purchases of material and labor accounts, and that while these "were large, they were in accordance with law." The money expended indicates either dishonesty or the most reckless waste. This first Equitable structure was only the wing of the present building. It had a Broadway frontage of eighty-seven feet; a depth of two hundred and twenty; an extension on the rear to Pine Street, and was eight stories high. The building itself, exclusive of the land, cost $3,200,000. In the early seventies, construction work in New York cost just about half as much as now. The new Trinity Building, a twenty-one story marble sky-scraper, several times as large as Hyde's first Equitable office, and much more elaborately decorated, was recently put up at a total expenditure of $2,500,000. Commonplace and dingy as the the first Equitable Building appears to-day, it was the architectural wonder of the age. It was as well known throughout the United States as is the Flatiron Building now. It brought the Equitable much notoriety; and much advertisement; and also much reproach. "Hyde's folly" the irreverent christened it. This Equitable structure never paid. All Hyde's spare time for the next ten years was spent in fruitless efforts to justify it. It pointed the way for other companies to extravagance and waste. The Equitable and other companies have invested millions in these buildings, in the United States and Europe—almost always at a loss. This policy has been an especially aggravated source of leakage. At the present moment, for example, the Equitable maintains fifteen large office structures. Up to last Juno it carried nine of these at a valuation of $26,000,000. All these, on that basis, earned less than three per cent. In order to maintain solvency, the Equitable must earn three and three and a half on its assats. Superintendent Hendricks has recently marked off $5,000,000. from this real estate—that $5,000,000. just so much money lost to the insured.
    3↑ The total cost (see Insurance Investigation of 1877) was $4,000,000. Of this $700,000. or $800,000. is given as the the cost of the land.
    4↑ Superintendent Hendricks report on the Equitable assets; Page 4.

## Mutual-Equitable War

All these evidences of energy alarmed the Mutual Life. Frederick S. Winston at last appreciated Hyde's ability. He now saw that he had let the ablest life-insurance man of his generation slip between his fingers. In seeking some way of checking the upstart, Winston finally hit upon the plan of paying annual cash dividends. In Massachusetts Elizur Wright had preached this system for several years; and public opinion demanded its extension. Herein Winston had Hyde at a distinct disadvantage. He had heaped up a goodly surplus from forfeited policies and thus had a large fund from which to pay dividends. Hyde, after paying his 1865 "dividend," had practically no surplus at all. Moreover, as he was spending money so lavishly in his hunt for new business, he could not hope to pay satisfactory "dividends" for some years. In 1866, therefore, the Mutual, with a great flourish, announced that thereafter it would distribute its surplus annually. Hyde was equal to the emergency. He promptly declared that the Equitable would also pay annual "dividends." He was deterred not at all by the fact that he had no money in his treasury with which to pay them.
Moreover, there was another stumbling-block; his charter stipulated the division of surplus once in every five years, and thus impliedly prohibited the annual system. Hyde, however, proceeded to pay "dividends" out of an empty treasury and to violate his own charter in doing it. In the annual "dividends" competition that ensued Hyde came off badly. He could not meet the Mutual's showing. The public regularly compared his "dividends" with the Mutual's and, as a result, more largely insured in the latter company. His own policy-holders became dissatisfied with his comparatively unfavorable record. Unquestionably, in these years, Hyde paid out "dividends" which he had never realized. In fact, this is a habit which he never outgrew. Recently Joel G. Van Cise, the Equitable's actuary, testified that Hyde attempted to compel him to calculate dividends which had not been earned. Hyde's annual "dividend" system, if not a boon to his policy-holders, was at least one to himself, for he now got his percentage every year, instead of waiting quinquennial periods. In 1867 he paid himself a dividend of $20,060.21; in 1868 of $28,000.; and, in 1869, of $28,000. By this time, too, his regular salary had been raised to $7,500.; so that, for a small company less than ten years old, Hyde was doing fairly well. By this time, also, two others participated in the percentage combine. Thus James W. Alexander, who had become secretary in 1867, now received one-half of one per cent of each year's surplus. George W. Philips, the actuary, got the same. The venerable president, W. C. Alexander, still remained outside the breastworks.
The early seventies was the period of distress among the New York life-insurance companies. If we carefully study the causes that brought so many to destruction—the Globe, the Guardian, the Continental, and the rest—we shall place the chief responsibility upon the methods pursued by the Equitable. Dishonesty in management somewhat explains the failures; but, above all, competition, reckless commissions to agents, enormous advertising expenses—on these rocks the larger number went down. At one time the New York Life, under the management of Pliny Freeman, was found insolvent; and unquestionably, in the latter sixties, Hyde's reckless purchase of new business had endangered the Equitable'a position. Old insurance men will tell you that, in 1868, the Equitable was far from sound. We can gather no intelligible idea concerning its financial condition from its reports. According to the Massachusetts standard it had, in 1868, a surplus of only $258,000,; but, in order to make even this small showing, it included more than $300,000. of deferred and uncollected premiums. It is hardly worth while now to analyze the figures in detail. All companies at the time fixed up their statements practically as they pleased; and frequently made a pretense of solvency only by including assets that would now be generally excluded. Real estate valuations are an extremely flexible asset, then as now; only the other day Superintendent Hendricks reduced the Equitable's sworn statement by $15,000,000. These facts are clear: Hyde had been most lavish in his expenditures for new business; had appropriated outrageous gratuities for himself and inside friends; had strained his resources by paying out dividends which he had never earned; and thus found himself in a position that demanded immediate and drastic action. Had he been a conservative manager, he would have cut commission rates, and curbed extravagance in other lines. But that would have stopped the growth of his company; above all, interfered with his great ambition—the humiliation of the Mutual Life. He would thus have made a better showing for his insured; but that was never first consideration. However, he could not go on indefinitely as he had started. The occasion called for a plan that would permit these enormous management expenses without alienating the public and without swamping his company.
    5↑ Testimony of Theodore M. Banta, formerly actuary and now cashier of the New York Life-Insurance Company, before the Trustees In 1887 (Beers's investigation, page 349, manuscript copy). Banta, valuing on a four per cent basis, found a deficit in the reserves, and made the company solvent only by valuing at five per cent. It must not be assumed from this that the solvency of any of these companies is endangered now. In the sixties they did not have the enormous flexible surpluses which so amply protect them at present. Hyde's genius, as will appear, consisted in his discovery of a method that permitted all kinds of extravagance without endangering his company's solvency.
How Hyde, in order to meet this situation and increase his own annual income, degraded the whole life-insurance system, reversed the very life-insurance idea, made the Equitable one of the world's greatest gambling institutions, and largely induced the present demoralisation, will be described in the next chapter.