Arizona republican., 1905-09-14
Essential Part They Play
in Insurance Business
I'm THESE LATTER DAYS
A Mutual Life Official in the Course
of the New York State Insurance
Investigation Explains the Necess-
ity Of These Combinations.

IcllSc OI Sy lluICdlCS anu bAiCAA ORNASN
in connection with the insurance busi-
ness and a frank statement of personal
profits gained through their operations
made by Frederick Cromwell, treasurer
of the Mutual Life Insurance company
was the feature of today's session or
the special legislative committee ap-
pointed to probe the methods of the
life insurance companies in this state.
The defense of the syndicate was made
by Mr.. Cromwell soon after he was
called to the stand in the morning
Before he was asked question ne |
begged leave to say a few words and. |
upon being directed to proceed, said:
''The law of combination which affects |
finance as everything else has made |
syndicates necessary. When l became |
treasurer of the Mutual Life Insurance !
company the total assets of our COM /
pany were 800, 100000 The transac-
tions in my department now are over
800 000, 900 per annum. When our re-
ceipts We're less-twenty years ago-it
was quite possible for US to buy from
bond dealers and pay the successive
profits, but now it is absolutely impos-
sible to buy advantageOusly large
blocks of securities, except as they are
/ floated by these combinations of capi-
tai, popularity called syndicates, and to
| have to go into them to get our invest
ments and get them in sufficient size
and at ground floor" prices. We
! could not make our investments with
/ out syndicates and we are partners in
every syndicate into which we go. L
want to say further that unless we
went into these syndicates we would
! not be able to invest our funds except
! by buying in small quantities and pay
ing the successive profits of middle
men.
Il ask you. Mr.. Hughes, and tne COM
mittee, to consider that we have now
over $3.50, 1000. 900 of assets and while
we have over $1OO.OOO.O00 invested in
bonds and mortgages we are constant
ly under the necessity of finding addi-
tional investments for our large accu-
mutations of funds. This is the condi-
ton 1t is no theory. 1t is a condition
which we meet and the exhibits are
here to show now we have to apply II.
Our investments are such that when
Mr.. Tappan, l suppose about the most
widely known and honored bank pres
ident in his day in New York died, he
left it as a condition that his trustees
| should have one privilege and that was
to invest the same in securities such
as these of the Mutual Life Insurance
| company. That is the way we invest
: ed our money, but we could not make
the transactions of s100.000,000 year
in the securities bought by this COM
pany without using syndicates."
The acknowledgment of personal pro-
fits was made in a tabulated statement
which was presented to the committee
after recess. 1t showed that Mr. Crom-
well had made a personal profit of $685.
81 from syndicate operations during
=, the past five years, in which he indi-
: vidually and the Mutual Life had par
ticipated.
: Mr.. Hughes. chief of the counsel O
n the committee, Immediately took VI
each item of the syndicate transactions
= in an effort to ascertain the manner
: in which these profits We're obtained
= An interesting point was brought on
= w1en probing a transaction in Pennsyl
, vania railway IL convertibles, II
which Mr.. Cromwell made no persona
- profit, the witness Stated.
= "Of course we are greatly interests
e in the Pennsylvania railroad. 1 Nigh
say We are the heaviest stockholders.
e Answering Mr.. Hughes, Mr.. CTomwe
- said the holdings of the Mutual Lif
in the Pennsylvania railroad was 50,
" 100000 par.
Among these transactions, the con
nection of trust companies with tn
Mutual Life was brought out when
was stated that the one million pound
~ sterling subscription to a Japanese loa
was shared by the u. S. Mortgage an
Trust company and the Guaranty Tru'
- company. In explaining this relatio
s. Mr.. Cromwell said: I'VE gave thes
m opportunities to the trust cOmpani'
r. in which we neld large interests fC
a very good reasons. AS L explained tn
r morning We as an insurance cOmpan
ne need very large banking facilities f
very large interests. 1T goes withol
saying that it is better for US to III
our own companies rather than to gi7
to institutions which we have no col
et nection the handling of our large il
vestments.
For this reason we put men into Il
s. directorate of these subsidiary con
ly. panies to look after the interests
IT. the Mutual They are not for the pr
IL tit of the interest on the paltry 1
ay shares they have to hold, but to prote
he the Mutual. 1t is natural we shoU
ne wish to put in as directors of the
lct companies the same men as are on t
ar board of the Mutual. 81 have 1
rp shares in these companies as a direct
as but have never made any secret of
If "The result of our connection wi
o. these companies is that in fourte
years we have made through them
profit of $16,00O,000 for the policy mol
e / ers If we had not these institutiO
we should have to turn the Mutual
o. to a banking institution as well as
&C life insurance company. This we cot
not do.
This being the state of the cases,
- is natural that we should help the
subsidiary institutions to make mon
and should throw opportunities in the
way The men we put in them are I
m there for their own profit. They neN
get a dollar out of the Mutual unfair
Oh and every cent they make through the
trust companies and banks for the NJ
i tual is for the policy holders and I
policy holders alone"