St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1892-02-03

eloiio VI tiiS CilJ III WiliCI IL 10 lOCoiOd.
Their influence upon tha company's
business IS extremely important. In
1856, the year before the buildings were
begun, the aggregate new Insurance
written by the company in the territory
In question was IS, 047,200 This aggre-
| gate has steadily increased until for the
| year 1891 it amounted to S2S. 500, $50,
which is the largest business that was
secured in that field during that year
by any life insurance company, and not
! only was the quantity of the business
remarkable, but its quality was such as
TO make 1t most desirable in every
way. Without the buildings it is safe
to say such results could not have been
obtained. l may add, by way of general
comment on real estate matters, that
while the superintendent notices that
the company owns l47 parcels of real
estate and has 800 other parcels under
mortgage, and the further fact that
these properties are scattered not only
through many states of this country,
but over two continents, the nature of
snch duties made it necessary, perhaps
to omit comment on the real estate trans.
actions IN which profits have been re-
allied and to confine himself practically
to the four parcels which he discusses:
but your interests reach further, and
you Will naturally be pleased to learn
in this way not only the relation of the
items criticised to the cOmpany's total
holdings, but also the circumstances
surrounding each case. If these re-
lated facts tell you anything, it is the
probable existence today Of a surplus
largely Ill excess of S15,000.000. We
all accept the superintendent figures.
Yet. as vou and | are peculiarly inter
eSted i'll the whole case, we are permit
fed hot nlrSal1ync tn viz tht,
SlDle effect of these facts. Suppose, for
example, that the superintendent had
accepted the well known opinion of one
or the heaviest holders Of New York
real estate as the value of the Plaza
hotel. 81, 150, 600, and that he had accept
ed the value of our home office building
on rental basis of per cent net, and
that he had accepted the inside figures
of the inspectors of the Credit Foncier
as to the value of the Paris property,
his net deductions on real estate, includ-
Ing his heavy deductions on Holbrook
Hall, would have been 1926. 309.25. This
aloue would increase our surplus $780,
600.
Agency Management.
Under the head of agency manage
| ment the superintendent of insurance
says that funds of the company to the
N-NtSLio Vi vi tllOuSdiluS vi QOI-
lars have been advanced to these agents
without interest and upon insufficient
security to persons unfamiliar with the
life insurance business. And this state
ment would seem to indicate the worst
possible management OF our agency de-
partment. The facts ought, therefore,
to be fully explained. The general sys-
TEN upon which advances have been
made to agents by this company and by
other life companies may be illustrated
as follows, the figures used being merely
illustrative and not the terms Of any
actual existing contract:
The company, we will say, enters into
contract with Brown, who is general
agent for state, that he shall receive a
commission of % per cent of the first
years premium on all policies paid by
him, and a renewal commission of per
cent OH each renewal premium paid OIL
such policies. Brown, of course, finds
1t necessary to employ Jones and others
as sub-agents, and lie ordinarily pays
them the % per cent commission al
lowed him by the company on first
years premiums. Brown relies upon
his renewal commission for his own
compensation, but while he continues
in active service he is frequently al
lowed to draw on fixed amount against
commissions for his living expenses,
such amount being regulated by the cir
cumStanceS of the case as competition
Increases. Brown finds that, in order to
retain Sub-agent Jones, he will be
Obliged to pay more than 25 per
cent commission. To do this,
Brown is obliged to make new ar
rangement with the company. Instead
of increasing Browns first years COM
mission. the company agrees to advance
to him sum equal to renewals Tor 10
per cent? on business secured by Jones,
and to hold all of Browns future re-
newal commissions under the contract
as security for the advance. Brown is
now aole to pay Jones 35 per cent COM
mission, and so retain his services, bit
at the end of the year Brown is appar-
entity i'll debt to the company in an
amount equal to 10 per cent Of all first
year premiums secured by Jones, and
the larger the business the larger the
apparent debt. This will continue until
such time as the old business kept on
the books greatly exceeds the amount
OF new business annually done. In a
rapidly increasing business this result
Will not be reached for several wears.
but If the total amount paid to Brown
has not exceeded what the business
was actually worth, the time will come
Wnen the commissions accruing under
his contract will exceed the total cost OF
the years business. Browns business
from this time forth will require less
expenditure OH the part of the company,
and IN proportion to its volume, than
heretofore, and his so-called indebted
ness as it appears under his contract will
disappear more rapidly than it accumu-
lated, at which time Brown will realize
the profit for which lie has worked. The
company, having already paid for this
business in large part, will have lower
expense ratio to this extent in the fut-
ure, and its surplus will be correspond
ingly increased. You will notice that
this debt does not represent money
which Brown has squandered or re-
tanned for his own uses. He has simply
USED the money to carry on company
business. Ii it should ever happen that
Browns renewal commissions fail to
cancel the debt, the business has simply
cost the company what it cost Brown.
and the company has taken good care
that the total amount of commissions
and advance received by Brown should
never be sum greater than the new
business secured by him was worth.
One l.. c. Vanuxem g. Co.
The superintendent criticises the
agency of Messrs. l.. G. Vanuxem &,
Co., at Philadelphia, Pa, and alleges a
debt to the company on account of what
he terms 'eXtravagant allowances of
several hundred thousand dollars. Re-
ferring to the illustration above of the
method OH which general agents bust
ness is conducted, and the manner in
which an apparent debt might be con-
tracted-when ] state that from 1887 to
1892, inclusive, this firm wrote business
aggregatlng S132,000,000, clear expla-
nation is offered you of how under the
above practice a large debt might ap-
pear to exist. In this particular agency
the advance contemplated in our illus
tratiou took on various forms under
various contracts, which, however, were
always subject to our approval. Against
the commissions earned and to be
earned the members of this
firm drew. advances for living expenses
as before referred to, and advances on
account were made to some snbagents.
but at no time has the amount of money
advanced to l.. c. Vanuxem & Co. eX-