Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1890-06-09
VERY POOR POLICIES
We're Those Issued by the American
Lite Insurance Company.
so SAYS COMMISSIONER FORSTER.
The Managers Taken Severely to Task in
His Report Because Of
30 SAYS COMMISSIONER FORSTER.
THEIR RECKLESS BUSINESS METHODS.

ESPECIAL rKLEGRAM TO THE DIsPATcH.1
HARRISBURG, June SIN his annual re-
report Insurance Commissioner Forster
writes at length of the operation OF the
American Life Insurance Company. He
says the company was originally lncorpo-
rated BY special act on April 9, lSoO, by
which its capital and accumulated FUNDS
were required to be invested in irst-class Sc
curities, but under a supplement passed
April s, 1857, the officers had unlimited
powers in the investment of the funds of the
incorporation, and the discretion of these
officers was the only security the stockhold-
ers and policy holders had for the proper
management of their fnsncial interests.
This company" says Commissioner
Forster, ''has not for many years had first
class standing on account of the peculiar
methods employed in Its management, which
created alarm and distrust, and designedly
SO, for the purpose of enabling the purchase
of policies at less than their real value.
More than ten years ago a contract was
made with New York company, the agents
of which visited the policy holders of the
American, and in order to induce them to
surrender their policies for less than they
were worth, represented that the company
was
IN FAILING CONDITION.
''At this time it was amply able to pay
all of Its policy obligations at their matur-
ity. After this the American ceased to be
an insurance company, except IN name.
The suspicion and distrust engendered by
this proceeding prevented it from securing
any large amount of new business, and, in
deed, it did not seem to encourage acces-
sions to the number of its policy holders.
1.-The apparent aim of the management
was to reduce and finally extinguish the
policy obligations upon terms most favorable
to the corporation, that is, the stockholders,
with the ultimate view of enhancing the
market value of the stock, or dividing the
surplus, or, perhaps, of engaging ex-
clusiVely in the trust business permitted
by the charter. The insurance in force has
diminished from S33, 100000 in 1873. the
first report made to this department, to less
than s., 600, 900 at the close of 1889, when
the last report was made. The reserve, cal
culated according to the legal standard, was
in 1873 only IL per cent of the amount of
the insurance, while in 1889 it was 81 per
cent of the insurance, showing that the re-
naming policy holders are mostly of ad-
vanced ages, and that large proportion Of
the policies are paid up"
RECKLESS FINANcIERING.
After referring to the fact that the mortal
ity OF the company had for number of years
been largely in excess of the tabular rate,
or that provided by the premiums, the In
sursnce Commissioner says:
"But it was not excessive mortality that
wrought the financial ruin of the company,
When the late managers obtained a con-
trolling interest of the stock, for which not
less than par was paid, it was hoped that
they would, BY strict business methods, re-
store the company to public confidence. In
stead of doing SO they used the funds en-
trusted to their control for speculative ven
lures. The financial control of the cor
poration was committed to a coterie
of the most reckless and vision
ary spectators, who loaned the |
money OF the company to themselves |
upon the stocks and bonds of corporations |
with which they were affiliated. This they |
did with the expectation, no doubt, that
these ventures would prove profitable to
themselves and not harmful to the COM
pany; and it requires the utmost charity TO
attribute to them no greater fault than an
error of judgment in thus imperiling their
own stock as well as the interests of the
policy holders, of which they were the law
iul trustees.
There is no evidence that they have
profited personally by their system OF finan-
eiering, although they undoubtedly meant
to do so; and In view of the ruin they have
accomplished one is at loss to determine
whether their conduct was dominated bv in
sane recklessness or by deliberate intention
to defraud.''