, 1875-06-11
INSURANCE..
Examining the Affairs OF the
Mercantile.
Intentions Of tho Stockhollers..-The
Illinois Law.
Condition Of tho Chicago.



EXAMINATION nY TIE BrATE OFFICERS.
Whcn tho animal reports Of insurance conpa-
MES In this Siato reEo made 10 tho Auditor, At
tho frat OF tbs year, the insufiug Rpd insurance
public noted that The Mercantile Fire Insurance
Company, Of this city, showed an impairment Of
It's capital stock to tho amount of iittlo over
~ per cent, This was not sufficient for the Au-
d.!or to refuEe them certificate on, aud tho
Company has accordingly continued to transact
bua!noEs up TO tlis timo. It has lately appeared
to tho officers Of tic Company. AZ wei! 1B par-
hapA 10 she bta:o officials, that TIC impairment
might reach % pos cent. In which case II would
Icromo tho duty Ut the Auditor TO Withdraw tho
Cvmpanys certificate. In any caae. 1t was clear.
II good policy for tho Company to take homo nc-
ton at once TO adjust tile nattor 10 AZ 10 present
Aolia showing 10 the public who wished to buy
Iusnra.lce.
"Wednesday Of this week, Mr.. L. F. Leonard.
Of Springfield, who has charge Of insurance.
matters IN tho Authors chico, arrived in thin
city, aud ta1o Ut, unofficial call OIL tho officers Of
tho Company. III tho coufso u tho couyerna-
tlou, tho o1lcors offered to liavo /.
THOROUGH AND EEAhcNtSa E1A,t1xAT1oS
Of tho bonka nado 10 sco exactly how they stood.
This waR not directel by the Auditor to bo done.
but was the suggestion Ut tbs company's
ouicorH.
Yesterday morning tito Directors Of the Com
paNS lItb WILL 4hIs 1LtJuAl14 III III
thoir office. and the situation WAS pretty thor
uughiy canyassed. Meanwhile the examination
OF books is going on. aud will probably be cou-
clulcd Monday morning.
Whatever this examination mas show concern
Ing tho impairment Of the Conpany's capital,
ONLY Two CoUHsEs
arc opcu to tho stockholders, in order to put the
organization On its legs: Quo IL to retire nor
tiOn Of tho stock 40 Us to bring II within tlls
limit and tho other IS to put tn enough addtt
tho figures at which Il now stands. The capital
OF the Company ID now about s9i5, 200. and the
proposition is usaio by tho principal stockhold-
ERR to combine the Two methods above neil.
ioued,-that ia. to rotirc como Of the stock, and
a.s9 to put in fresh capital.
The Directors Of tho Company, some Of whom
aro among tho most solid ctL1zcnH OF the city,
cxrrsss d purpose not to tinker np tho matter
at all They will either ronE,lre all the rl-Ea in
other companies aud 90 out Of business, or they
will put tho Company on a Btsous mud solid
baAis. In tho mean!lme the Company il not
doing much business, simply because it does not
wish to extend itB risks Until tho futl,Fd Is nA-
eurel. Tho Directors will arriya At their concl,.-
obCe to tue inEurancc authorities.
1t IL proper to BAY, IN connection with this
Company, that tho officers Lavo manifested
lautlablo intention to 10 perfectly far In tho
matter. and tU do whatever tho Auditor choso
10 recommend III tho promises.
In connection With this case. 1t mny bo OF III
terest to tle public to learn notao facts conccrn-
ing
THE METHODS or Dolsa INSURANCE BUSINESS
undor tho lRws Of thiB State, anil how the ieeu-
latiops bear hardly on now companies. These
facts and figures arc, Of course. well enough
known to every INSURANCE nan, but probably not
10 tho general public.
The Inn provides, In 'gonornl terms, that oil
tho ltnenInel premiums Oh new buslncHH shall
be conatltuted reinsuraico it!ud. This f1le III
applied by tho authorities to mean reserve OF
90 per cent on tho gross receipts; 10 that for
tho first year OF ilew company, each 81 re-
ceived produces only 60 ccnts for expenses OUT
aide tho ro,usuranco fund. Tie losses Of q
company arc figured to be generally about IS
per eent Of tho proGiuu receipts, though they
often run up 10 50 OF even GO pcs cent. stnt'ng
tho case as fayosably ny possible for new cotf-
pany, they must pay 3j cents for losses ont Of
tue 80 cents left isotn tho reinsurance fund.
This leaves them only Is cents OH tho dollar
with Which to pay commissions aud Oh
ro,,sos; but the smallest calculation fo-
these IL 80 lcr cett, no that, under average cir
cumstnucca, oaclI now company must expcct to
loee II cents for each dollar received for pre-
nliuma tho iii Ut year, and 4 consequent impair
ment Of capital Is inevitable. II, however, the
company can hold Oh for tho second year,
THE Gaze Is CHANGED,
because the 10 rcr ccut for reinsurance fund In
lsos dcductible from roneWa! premiums, and
consequently the cou1panyB condition Ii better
tl.c second year by sum OF money about eqnal
to SO per cent on tho renoTnla. or course small
impairment Of capital docs not lessen the chances
for reimbursement. largc tire excepted yet
people hso apt to prefer company with .
surplus 10 one with m in'pa!sment,
The law Of Illinois provides that II company
belonging out uf tho State nhnll Bhow Ill impair
lncnt Of 20 per cent in i.s capital stock. tho
Auditor shall rcfuAp or withdraw his certificate
of permission to do business; but In case OF o
company within Tho State. III impairment Of Is
per cent shall DO shown bcfoEo tho certificate
rhnll bc withdrawn.
IN nErEnEScE TO TIE ENTIRE FIRE INSURANCE
COMPANY,
nbout which 20 much hullo Las becn mado In
.on'o ot tho Insurance. Journals, i Is to b. ssid
o.as oo quo 10 s'shesy kpan qt 3t. F'ntemaR aooa IL
worry conservative busiuesa, and It's mn!u
danger IL from doing no littlo business that It's
expenses a!ono Will cat Into, Its capit.l. Con-
ceruing tho legality Of ts charter, it is perhaps
sullcieut to say that it has bcon pronounced al
right by tho Attorney Genera! Of tho State.
Il is expected that Mr. Leonard will make, or
cauBe to be maize, thorough examination of iss
affairs before he returns. Au examination WAS
1nAde In Febraary 'aat by Mr. J. II. kellogg,
time ho certified that the books aud papers OF
tho Company tailed with its statement, which
wns ~ fsr AZ be waa called upon to 60 into tAo
merits Of the Company.
CONCERNING TRANSACTIONS IL LAND,
word may bo prontably SAID concerning the
formation Of new insurance companlea III Chi-
cago. Tho law requires that tho iuouoy shall DO
nctnh!ly paid tn fur the capita! stock, anA then
loaned on landed security; but. III point Of fact
this IL seldom or noyes dono. III common prao-
tire. ths Intending esockholder giycs mortgage
on rual estate for tho amount of stock subscribed
for. by this MEANS he appears Oh tho books ~
having paid In q Sum Of money for stock, which
uloioy is instantly loaned back 10 him on 1And:
when, III fact no money has ever passed.. l'y
this method OF stock subscriptions much wortll-
lass land is palnel on on tue companies, and
there is every likelihood that tho bits Of ground
t'and rsrt with in the assets Of somo cou,pa-
1.cs Lre VI :!H natuEo.
THE CHICAGO,