Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1895-01-30

ization; in such periods of general pros
I perity investors become credulous and
bold, and the most conservative managers
OF capital make investments which give
them shocking opinion Of their own
Judgment as they look back at their record
from the stand point OF the financial crisis
which is sure to follow an unwarrantable
imitation of values
+ In times of financial and commercial
depression securities which are fairly
good, and reasonably well protected, share
the fate of the poorer class, and ut such
times they are marked down below their
intrinsic value by the quotations made at
the various stock exchanges of the coun-
try.
Il While the securities owned by the
Union Mutual Life Insurance Company
at the close of December. 1898, would
compare fayorably with the holdings of
most other financial institutions Mt that
time, its list included several lots of rail
road bonds which did not seem SO a1trac-
tive when in default Of interest, with the
property securing them in receivers
hands, as they did the year they were
acquired, when at that time these same
railroads We're earning operating expenses,
fixed charges, and dividends upon their
stock, and were theoretically extending
their mileage to meet the anticipated dc
mands which expected development of
new territory would soon render neces-
sary, believing that this additional mile
age would in the near future greatly in
crease the earnings, thus placing the
property upon permanent and substan-
tial basis to enable the corporation TO meet
all outstanding obligations and liabilities.
The plans and expectations of the mana
gers Of these railroads did not at the time
seem unreasonable, and bonds We're readi-
ly taken in exchange for the necessary
capital to complete construction
Neither the managers of such railroads
nor the managers of the financial institu-
tionS which purchased their securities,
could foresee the approaching financial cri
sis All realize now that its visit has been
made and many are still busily engaged
in strengthening the weak points in their
/ financial structure which the panic dc
veloped.
If the effect OF the business depression
has been to reduce the cost of railroad
construction it follows that roads which
were built previous to 1898 may have
lcgitimately been capitalized as
measured by the basis of cost today, and
it is no reflection upon the sagacity or
Judgment of the management of financial
institutions that they now find in their
assets railroad bonds issued in excess of
the amount necessary to construct the
road upon the basis of cost of construction
at the present time
While the shrinkagc in market value
of the 81, $50, 900, railroad bonds owned
by this company was 500, $3.50, as
shown by the appraisal of December &c.
1893, the policy holders of the Union
Mutual Life Insurance Company have
the satisfaction of knowing that it would
be a difficult task to find holder of a SINH
lar amount of railroad securities whose
shrinkagc in market value was less, and
it may be qualification to them to receive
the assurance that through the many
changes which have been made by the
finance committee OF their board in the
assets of the company ut the close of 1894
it did not own single bond of any kind
which at that date was in default of in
tcrcst and the loss in value below cost of
800, 3S7. 40 made in 1898 had disap-
peared, and at the close of 1894 the value
of the quick assets was $50, llS.05 above
their cost.
Explaining some Of the changes re
ferrcd to which have during the year been
| made in the assets of the company, there
has been sold $3.50, 000, par value, of rail
road bonds Including $500, 600 par value,
which are now in default of interest pay
ments. and sale has also been made Of
800, 900 par value of miscellaneous cor
poraton bonds.
While there are exceptional instances
it is substantially true that the financial
institutions which have invested their
money in the choicest securities during
the past ten years or twenty years, have
during that period experienced the great
est degree of prosperity earned the larg
est profits, maintained the highest credit,
and have always been the best prepared to
meet the emergency of financial crisis.
Firmly believing in the wisdom OF this
policy, the finance committee of your board
have underworld to dispose of all Sc
curities which seemed to possess in some
degree the speculative element, and substi
tute in their stead sound investment secur
| tiles less subject to wide fluctuations in.
market value. Recognizing that while it
is desirable to hold a reasonable proper
/ ton of your assets in bonds which may be
readily converted into cash ut any time,
the clement Of tOnvcrtbility is not So cs-
! Scntlai III INC assets OF u IIllc INSURANCE
/ Company as it is in the assets Of a saving
/ bank whose deposits are liable to be with
drawn ut the pleasure of the dcpositors.
/ In making investments your finance
CON mittee have first considered the qucs
ton of safety and next the question Of
/ income; and the following comparative
4 statement will show the different classes
/ of securities in the assets of the company
which have been affected by the changes
made during the year 1884,
Disc. 80, DEC. 81,
Railroad bonds, 1851, all 40 Sl,o2i, So 0S
United States bonds, None. % 375 20
State, County and
City bonds, 9i7,599 30 l,osi, Az 81
Miscellaneous Corp'n
bonds, 6i2.352 O6 1921 So
Mortgages real estate, 1910 256 So 1,382,2Is IS
Collateral Loans, 3d. 59 80 J69,129 VI
During the year portion of the first
floor of the Union Mutual Building in
Portland has been rcmodeled at an OK
pensc of about sl3. GOO. aud it win be OBJ
served that this expenditure mas been
made without increasing the valuation
placed upon this property in December,
/ 1895