The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1886-03-05

were so reasonably certain to earn 4 per cent. on
all our assets for the Lext forty to seventy years
that we could rightfully ask men to commit the
future welfare Of their families into our hands
| upon that issue, and we believed further that 3
per cent interest was the prudent rate to as
sumo to earn during all that time. We therefore
based all new business from that date on that as
sumption.
This company alone Of American companies
has taken this step toward greater safety. 1t
gives us a position relative to the probable future
of safe investments which we are glad to occupy.
1t VIII enable us to select securities more closely
and remove anxiety as to the future course of
the interest rate; for, if it rises, We shall simply
earn so much more surplus to divide; and if it
falls we shall have guarded ourselves.
Meantime it is interesting to note how the
course of events has confirmed our view. Gov
eminent bonds yield only about q per cent;
Connecticut, during the last year, issued a large
amount of 3 per cent. bonds at a premium; New
York city issued 81 per cent bonds at an average
premium Of about Z per cent Pittsburg issuesa
4 per cent bond at nearly 6 per cent. premium;
St Louis issues a like bond at a premlum; New
Haven at 81 per cent, Northampton at 4 per
cent, and a score of others at corresponding
rates. according to their ability. can borrow adj
| vantageously; the securities of Boston and its
suburbs earn but about 81 per cent; the rate OF
interest on the best railway bonds is correspond
ingly low, ranging from below 4 per cent. to a
per cent; the rate on firstrate mortgages has
fallen equally. And whas existing cause is to
change all this permanently Many things may
| change it temporarily; but the prudent course
seems clear; for wealth is increasing faster than
capital is demanded for new and safe uses.
Upon the business issued since April l, 1852,
we hold, therefore. a reserve 1922, l65 larger than
that required by law.
INCREASE OF SURPLUS.
On the 31st Of December, 1870, the company
held a surplus of So, 403, 237. II on gross assets Of
$50. 915, 957.O 2. The then directors of the COM
pany considered it no longer necessary to hold 30
large a surplus, and inexpedient to continue
longer the modes of business by which it had
been accumulated. A plan for the gradual dis
| tribution of the greater part of this surplus was
suggested and matured by the then management,
and adopted. During the last decade the pres
ent management was engaged in carrying it out.
At the same time the financial straits of that period
made it seem advisable to our directors to use
the surplus resources as far as possible, within
the limits of prudence. to enable members to con-
tinue their policies.
On the 31st December. 1880, the company had
a surplus of So, 35l. l55. 45 on gross assets of $49,-
1872, 629. 38. 1t held a large amount of foreclosed
real estate which the insurance department. had
recently valued at some 81, 500, 900 less than cost,
though it expressed the clear opinion that the
shrinkage was only temporary, and due to the
unexampled depression Of 1880; and that,
considering its intrinsic value, we would not be
justified in selling then, even at full cost. BY
the 31st of December, 1885, we had sold over a
quarter Of our real estate for 1888, 1874. O2 more
| than it cost. and for 81, 292, 1915 more than the
4 aCDoko opPLA i wi 6Aa w As4
our surplus by the legal standard from $3,35l,-
155. 45 to 81, $50, 142. 81. a gain of 81, 328, 98I. 46.
We hold a surplus adequate to every possible
contingency. so far as we can ~foresee. and every
outgoing member will have what the directors
adjudge his proper share of that which is held
for the certain protection of the interests of all.
We believe these statements will be as salts
factory to every friend of the company as the
facts are to its management.
CONSTITUTION OF THE SURPLUS.
Some items of the surplus now held may vary
in the future. All companies are required to re-
port the present market value of stocks and
bonds over cost; this, at present prices, gives an
increase in our assets. Our securities of this
class are of the highest and most stable charac-
ter, but a fall in the market, while not affecting
the income, would take so much out of our as
sets and surplus. Some of these bonds cost a
premium which, should they be held to maturi-
ty. will be lost when they are paid; others again
cost less than their face, and q corresponding
gain will be made when they are paid.
Another and important part of the present
surplus is the profit so far made from sales of
real estate, amounting, as has been stated, to
1888, 1902. We have so far treated. and for
the present shall continue to treat, the real
estate taken by foreclosure in 1880, as a
whole. We snail doubtless make further large
| profits; we may find it best. In some instances. to
| submit to some losses; and until we can more
closely determine the outcome of the whole, asa
whole, we deem it the prudent course to hold
present gains, 30 that no possible future losses
1 uudy iIupdlE OuE QttlOouQ -pdy luS dOlityt duu,
moreover, 80 that the income from these invested
| gains may assist the income from rents on the
| unsold real estate and the better enable us to
hold it for proper prices.
THE INSURANCE BUSINESS.
We began the year with 1852. $50. 685 at risk;
we lost by lapse and surrender 81, SAG, 005, or less
than 3 per cent. of the amount at risk-a favor
able experience we believe to be equaled by
none and nearly approached by scarcely any
other company. Death losses, 49, 79, TAT; ma
tured endowments, 1888, 735; and expiring term
policies. $19, 500; not taken, $655, 900; aggregated.
81, 542, 9S2; a total loss of assurances of 50, 09l. 98Z.
New assurances issued and ~revivals, So, 162. 800.
leave the amount at risk at the end of the year
$151, 30l, 588.
THE EXPENSE OF NEW BLOOD
1t would have been easy to have secured a
large increase in the amount at risk. by raising
the commissions therefor. or by paying salaries
to solicitors regardless of any proper commission
basis. But we refused to gain new business in
that way. For, with a company the size of this,
we believe it our first duty to secure as low a
cost of insurance to present members as posi-
BILE. consistent with the perpetuity Of the COM
pany; and to take on new members only so fast
as can be done without enhancing that cost more
than the new lives are worth to the old for legit-
innate purposes.
It certainly ought to be the case that as the
companies gain experience and acquire a BUSH
ness large enough to give them stability-and
every solvent company has enough for that
now-they should be able to find ways to reduce
the cost of insurance so far as expenses are con-
cerned. In every other great business the re-
duction of expenses is a constant study and a
necessity. Only by such reductions have profits
been possible in many most important branches
of industry in recent years.
The great fall In the rate of interest in the last
few years has greatly and permanently increased
the cost of insurance in all companies by re-
ducing the dividends that can be earned. It
ought not to be further increased through the
expense account.
And yet, never were commissions so high, nor
other expenditures for new business so great as
now. They can be paid only by the Tontine
companies, and out Of their great profits from
forfeitures, which are not to be divided for many
years. and for the final amount of which there
is no responsibility.
A company is, therefore, shut up to one of two
courses: To adopt some one of the many modes