The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1900-02-24


this real estate has cost on our books The
difficulty of getting a reliable appraisal in
dull market may be illustrated by the
fact that one parcel was appraised at 3d.
600: half of II has since been sold for 49,
600 cash for uses which increase the value
OF the remainder. We have several pieces.
some very valuable, which now cost us
nothing They are what remain after sell
ing enough to more than return the cost
OF the parcels OF which they were part
None of these were appraised Many pieces
on which We may reasonably expect some
gain were not appraised; some on which
we may lose were not appraised The
question therefore presented itself: What
account, If any, should be taken OF the
shrinkage so estimated by the commits
sioner?
A leaf from our own experience In these
matters may be instructive In 1879 the
commissioner made an examination and APP
praisal of every piece of property foreclosed
or likely TO be foreclosed. These properties
cost us S12,597,99S. The commissioner valued
them at only $40. 63S. S70-a shrinkage of
S1,959, lbs. Out of this we have since sold
for 50, 21S ga what cost us S1SS. 1865. but
which the commissioner valued at only &c.
679, 1912; that is, We got 81, 42s,457.0o more
than the property cost and ST. 1872 more
than the commissioner valuation. That
the remainder of those properties Will sell
at equal advantage We do not expect.
While some will make a gain. some are
certain to make more or less of loss from
causes of depreciation that occurred long
ago. On the other hand, the properties
foreclosed since 1893 ought not to suffer any
very heavy shrinkage. We do not know
why, as a whole, they are not worth their
cost.
We carry our foreclosed real estate on
our books at its original cost We cannot
tell what it is worth until we sell il. Hav-
ing always had proven reasons for believ-
ing it worth its cost as a whole. we have
never by appraisals anticipated either gain
or loss. We have taken each as Ii came.
We could not in justice to ourselves mark
some pieces down to an appraisal without
marking others up to an appraisal This
would cause annual changes in book values
based on mere changing opinion instead or
the actual investments, with constant
temptation at least to mark up rather than
down. Our present method We do not deem
1t wise to change
But in order to give fair recognition to
the fact of probable loss on some of the
foreclosed properties and the uncertain
amount of gain on others, and in view of
our ample surplus. the Office of which in
part is to protect us against such con-
tingency, We have decided to add SO per
cent. to the shrinkage estimated by the
commissioner, making a in round
numbers of $4,000. and for the present
carry that as memorandum liability UNI
der the title of Contingent Real Estate
Depreciation Account. 1t does not affect
the actual value of our property. Provid-
ing against possible loss which cannot be
measured till IL comes does not cause a
loss This leaves our accounts undis-
turbed, while ii relieves our surplus of
what might otherwise, in view of the COM
missioner's estimate. be regarded as posi-
bic padding with uncertain values. So long
as il is deemed eXpedient to carry this
item of provisional liability the balance of
it, deducting any losses made on sales, will
be shown each year.
The Amount Of Surplus.
The surplus, Dec. 81 1899. was $7,20S 34l SO
by our own standard Of solvency, which is
much higher than the legal standard, the
latter being based on the assumption of
earning per cent. annual interest On all
business written since April 1, 1882, we CAL
culate our liability on the assumption of
earning only per cent. interest. This
makes our reserve liability higher and
our surplus lower by 81. 4.703. than they
would be were that business based on the
legal per cent. standard, in which case
the surplus would stand at s.. 3l3. 0A59 For
greater future safety, the company volun-
than that required on business based on
the legal standard.
Real Estnte Sales.
closed properties that had cost s551 949. 40.
So, 1895; on the rest there was a gain of
$1Cl $685. leaving a net gain of SIS $50 49,
1t was throughout dull year for real
estate.
To December 81, 1899, the net gains on
real-estate sales from year 30 year aggre-
gated sl,S0S, 1854.
Property Purchased.
The present home Office of the company
was built thirty years ago. with little an
ticipation in plan and accommodation for
the great increase in the work of coming
years, in which we have long been put to
great inconvenience and disadvantage. An
opportunity offered to buy an adjoining
piece of land well suited to connect with
the present building. We shall probably
improve it during the year by a plain but
| substantial and thoroughly modern Office
| building. giving us needed space and con-
venience, and to tenants attractive business
quarters.
The Signs of the Times.
1t is with no little satisfaction that we
| note in some of our competitors the dawn
| Of long-deferred recognition Of the vital
Importance of some of those things which
the Connecticut Mutual has all along in
| sisted were essential to safety, essential TO
| the just Interpretation and administration
| OF the mutual principle, and essential to
| the best and permanent welfare of those
beneficiaries for whom alone life insurance
| is designed. and for whom 1t should have
a single eye.
Others Adopting the Connecticut Mu-
tuaPs Interest Assumption.
The judgment which led us eighteen years
| ago to anticipate the great fall i'm interest
rates. and to provide against its effect by
then assuming a per cent rate was de-
| cried as counsel Of timidity and weak
| ness. That assumption has given us in
| comparable strength, with great advantage
| to the business based on the per cent
| rate. and without cost to the older per
| cent. business; and the relations between
| the two have been self-adjusting The day
| foreseen having come, most of the com
| panies are forced to change their assump-
| ton, and some of the largest find them
| selves with a vast amount of business on
| the per cent. basis, about which there
| is an appearance of anxiety, for the 4 Der
| cent. reserves on it are being reinforced
by heavy appropriations thereto from sur
| pluses accumulated from, and supposed 10
be held for future division among the va
| Growing Alarm mt the Expense Ac-
One of the strangest Developments I'm life
| insurance in the last twenty-five years has
| been the increase in it's expense account
While that Of every other enterprise and
| industry has been studiously watched and
| pruned at every possible point, and its re-
| duction has been prime and permanent
| aim or management not only as means
| of greater profit to the business. but as a
| necessity in meeting com linn nv tvroo az