The sun. [volume] (New York [N.Y.]) 1833-1916, 1877-01-08
LIFE INSURANCE PROFITS.
THE SURPRISING INCOMES OF THE
L1RGE EST COMPANIEs


The state Commissioner'- Exa ,natiou 10 be
Bcann To-day with the Muiuai-A Wide
Difference between Theory and Practice.
William Smythc, State Life Insurance
Commissioner, begins to-day an examination of
the affaiis OF the Life Insurance Companies In
this city. Savings banks and life insurance
comranes are, when properly managed. two Of
the chief evidences Of the progress OF civlliz /
ton Both act as institutions OF savings, the
difference being that money deposited with
lie Insurance companies cannot be drawn out
while temptation OF various kinds induces men
TO risk the money which can without trouble be
taken from the bank In which II Is deposited.
or late the public mind has had good cause Of
alarm about both these Institutions. Savings
banks have collapsed with but meagre assets
Tor division, and insurance companies have
been closed by process OF law. without a dollar
OF compensation to the deluded victims who
placed not only confidence In the statements,
but cash In the hands OF the directors.
What ia life insurance anyhow? Simply this
In mutual company certain men agree to in
sure each others lives for sneciaed amounts,
ana hiie agents to conduct the business based
on NOR atty tables. at such n minimum OF profit
as VIII defray the expenses. Life insur nee cal
culittons are made. first, on the suupositiun
that the amount ins red Is 81. Having obtained
the not premium that will insure 81, the net
premium that Will effect similar Insurance for
slVl Sl.uOO. or fnv other named sum, Is found
ny multiplying the net premium th Il will insure
~ by the sum actu ly insured. IL is assumed
IN { the yment OF the premium Is made at he
time the insir nce Is IN cted THIS Is called the
beginning Of the policy wear. and tine mount IN
sureo Is to be III II the end OF that policy year,
IN which the insured may die. 10 this u aided
the amount OF money thit will. when increased
by interest at a gwen rate per annum, COM
pounded annually, produce II in any designated
number OF years.
Some wears ago the American e lerience table
OF mortality was prep red based on statistics OF
nf n ~ Ia a.
ton OF the chance that person may die duripg
any given time suppose that out OF one hundred
persons condemned to tie shot on a given day
all are repreved tor the day except one, and the
one TO be shot Ia to be the one who draws the
nine white balls and black one. Inc
Gu nee belors the drawing of any particular
mans getting the black ball. and there
fore bis chance OF being shot that day,is one only
out Of one hundred. II two men had to die
that day, each individuals chance, before the
driving, OF getting black ball. would be twice
as great as It was before, for now there are two
the box. The chance, In this case. would be
two out of one hundred: for three persons.
three out Of one hundred, ana so on to the limit
OF one hundred out OF one hund ed-wnich
would make II certain that each man would be
shot. Inc same principle apples to life insur-
instead OF 100 there are 10000.
Having ascertainei the amount 1t would cost
to Insure the life Of any one, or any one thou
sand-that Is, having ascertained what 1t Is
worth to insure one dollar to be paid to the
heir OF a person at the end OF one year, he dy-
ing In that year. the company add a reasonable
sum for expenses. ana tnen issue the policy tue
premium repres niiug the combined amounts
ascettained.
SO much for theory.
In Practice tue compani's md four distinct
sources OF pront. In TIE lsst pl4cs the mortHl-
" table IA wrong. IL l. based on the mort4lltv
of an entire population. while insurlnc's are
orfc ed only on choice lives, ca efully selected.
rms ,ney i their vitality profit. wni ,h, in the
case Of tue Oldest aud largest company. l. not
far from % Der cent on the taule basis. second
~. u known that tue calc Ilatinns are based
on the su"rosition that ~ per cent. interest Il
received oN the companies, whereas thew really
get from tto Der cent. on loans. In the third
place, the actual premium l. 40 per cent. u
the met premium"-tnat i, the companies add
~ pcr cent. to the tthulAted cost. for expenses
but this Is "A source II ere profit, Tor tne ex-
penses are clothing near thlt sum. inen, IN tue
sources Of pron.. come surrendered policies,
forfeited policies. sales Of gold ani other Incl.
IA .vinx settled besono q iestion these interest
Ing facts We gathered from tue officers of the
Mutual Life Insurance Company tne Oldest and
largest OF the mutual Companies, that Its profits
IN 1876 We're:
From sufpu vitality. sl7Sooo
rom sa,ln. on expense. ........'... isp,t6j
fso Liseelaues gs sour,es. pi.sD
Grand
This sum rcrreseuts the forthcoming dividend
Tor year 1876, and viii pe dlNIled among the
policy holders.
In conscq ience Of the exposures made bv THE
SuN The STATE Superintendent noulcd the IN
snran'e people tna' he purposei making thor
Oush invesug ton Of tue companie-. AMI n. rs
ueen INDUCED, In the n pc OF rec Nabushiug
puhlc confidence. 70 begin With The stronger ia
siituuons. 10 Wa obviously proper that Tue
Mutuh Life snoulI . GIVE his attentions first,
as tue olles, and the 4g o.. After th4t viii
couethe Eqrtlb,e, \ rw Iur. Lie ~ ,slnueton
aud the 81. \ currury * lluln Niop of the
MUTUAL Lie SHOWS tl4t IL -. or. NJ, d In ls43
It's hgst dividend WAS in l.i, Sj!uJl and the
AMOUNT ~ ilane Tor the coming dividend viii
be sig9)VW some aii renee. TIE iohowln.
table Vi dNidtnds VIA be found Interesting
so''.'.......'......'...'. ,a-po