Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1882-04-11
A New Departure Indeed.

An announcement is made by one of the
oldest and largest American life insurance
companies-the Connecticut Mutual of Hart
ford-which will not fail to challenge atten-
ton. Coming as it does from company of
unquestionable solvency, abundant resources,
honorable record and peculiarly careful
management, this programme of a radical
new departure in the conduct of life insurance
is entitled both to respect. because of its
source, and to candid examination because of
its important and far-reaching results. 1t is
nothing less than decision on the part of
this second largest life company in the coun-
try to base its reserves (as regards future
contracts) upon the assumption of three per
cent interest, instead of four or four and one
half per cent as the other American COM
panies now assume under the legal provisions
of the several States. The existing contracts
of the Connecticut Mutual are based upon a
four per cent rate of interest. Some of these
have been running over 80 years. and thous-
ands of them must so run for many years to
come. But now there has come a change
which opens before the minds of conservative
financiers a possible prospect of permanently
low rates of interest; and the managers of
this always conservative Company. after due
consideration of the gravamen ofthe situation
step boldly out of line and take the bull by
the horns. They intend to be on the safe
side whatever may happen.
This is no mere managerial trick or trap of
the new plan" order; but it is the most
serious and far reaching step ever taken by
an American life company. 1t means, more
over the making life insurance so absolutely
safe that no question can be raised and this,
too, without making it so costly as to be out
of anybody's reach. 1t is conservatism Of a
radical type, if we NAV so say-a purely
progressive managerial move which, even
though it be not a necessity. must carry
conviction of its soundness and its
honesty of purpose. Opinions may differ as
to what the rate of interest is to be in the fu-
ture-say 40 or so years hence-but there
can be but one opinion touching the perfect
safety of assuming three per cent as certain
TO be earned on the kind of securities in which
life insurance funds should be invested. The
four per cent assumption has heretofore sat
isfied everybody and even the four and one
half per cent basis still has the full faith of
MANY managers and makers. But Presi-
dent Greene does not intend to be caught
mapping and so. to hedge against even a re-
mote contingency, he has proposed this step
TO his Board of Directors, and with their
sanction it is now promulgated.
All this is boldly. bravely done. While
interest in this country is in a permanent de-
cline. we must express our admiration of the
courage which is exhibited by this pioneer of
a new departure in life insurance. The de-
tails of its working, as also certain collateral
new features of contract and practice, we
must let the company set forth in its own way
only saying just here that the change pro-
posed. we are assured, will not tend to in
crease the present rates of premium on the
average, but will merely make necessary
some slight readjustment of them to
meet the actual conditions demonstrate
ed bv full experience and upon
a more conservative assumption as
TO interest Let ii be remembered, more
over. that it is a company with Sc years sue
cessful experience, and with s50,O00.oOO OF
assets. whose excessive conservatism is thus
compelling public attention. As We have
| said. it is no new PLAN" much less is it an
experiment 1t is a volume from the library
of experience itself and a. such is to be re.
ceivsd as a report of progress, even if any
shall feel like questioning the wisdom or the
necessity of so startling = stride. And, any
way, it is entirely within the scope of the
Companys powers and rights to thus increase
the security of its members. if its manager.
80 incline-N L. Daily Commercial Bat
iefin. April 3.