The Hawaiian star. [volume] (Honolulu [Oahu]) 1893-1912, 1905-07-14


iect from the standpoint of general
principles. Measuring the wisdom of
this class of investment by specific
results am illustration may be taken
of the results to the society, for the
year 1904, of it's relations with Equit-
able Trust Company.
The book value of the society's hold
ings i'm Equitable Trust, plus its aver
age deposits during 1904, i'm that in
stitut'on. amount to $17,37O, 900. The
societys income from that investment
consisting of per cent interest on
deposits and 121a per cent dividends
on the par value Of its stock holdings,
amounted to 1899, 1S2.OO, or 2.3 per cent
on the total Investment.
The claim would undoubtedly be made
that i'm addition to the direct income,
the society has greatly benefited
through the appreciation Of the stock
over its book value. Profit through
the increase in market value of a
stock can be made only through the
actual sale of the stock. A stock is
worth no more than it can be liquidat-
ed for; and a pertinent question in this
connection would be, could the society
withdraw it's protecting support from
these auxiliary concerns and dispose of
its stock holdings at present market
rates? If it could not, it's profits
through the appreciation in stock va
lues is at least partly fictitious.
In our opinion, the society, should
place its funds in such a manner that
it occupies the position of an investor
solely. 1t should purchase no bonds
or stocks which require manipulation
or nursing. 1t should make no pur-
chases of securities where their sub
sequent sale could ever be unadvisable
for any other reasons than general
market conditions. In other words,
it should be a life insurance company.
UNSYSTEMATIC METHODS.
During its process of examination, it
has been disclosed to your committee
that there does not exist in the office
of the society a comprehensive system
for the conduct of its business.
Starting with the fundamental error
in the manner in which the authority
of the board is delegated to its sub
ordinate committees, there is found a
general lack Of that system by which
responsibility can be fixed at it's pro-
per place.
The duties of one officer cross those
of another in such a way that neither
one can be held to perfect account
ability.
The records of some departments are
not kept i'm as complete a manner as
the Importance Of the transactions de-
mand.
The records of expenses do not center
in one final location, for ready refer
ence, but are divided between various
departments.
The different accounting officers are
all sincere in giving the society their
best individual efforts, but there is not
that unison of direction among them
required for satisfactory final results.
We deem it essential that there be a
general readjustment through which
the authority and duty of each gen
eral officer be definitely fixed, and
through which the society's records
shall become consistent and readily
available for reference.
A GENERAL SUMMING UP.
When a careful examination of an
institution discloses defects of widely
different character i'm many different
departments a still further examination
is quite apt to disclose the additional
fact that dissimilar as those defects
may be, they can all be traced back to
one underlying cause.
The various conditions in the Equit-
able Society, which have been criti-
clzed in this report, have all had their
origin i'm one fundamental error. and
that is the departure from the true
principles and ethics Of life insurance.
This statement could be made with
equal truth in regard to many other
companies, and for that reason YOUR
committee feels warranted in going
perhaps beyond the contemplated scope
Of its duties, in the hope that this re-
port may thereby have some inhunce
in raising the conduct of life insurance
generally to a higher plane.
In its purity, the ideal life insurance
company has but two objects, /. e.:
Cd TO furnish absolutely perfect
protection.
CD To furnish that protection at the
lowest possible cost.
The mere size of a life insurance
company has no effect on it's ability
to furnish sound and economical pro-
lection to its individual policy holders.
1t is necessary that a sufficient number
of lives be assured to come within the
laws of average mortality and that the
volume Of business be great enough to
cover what might be termed the fixed
charges or expenses, and to command
the financial position desirable for the
advantageous investment of funds.
When these objects have been at
tanned, additional volume of business is
not only unnecessary, but if obtained at
greater proportionate cost, is directly
detrimental to the interest of the policy
holder.
Whether resulting from a misconcep-
ton Of the importance of growth in size
from the competition of other COM
panies or from the human instinct to
excel, there has existed a disposition
to lose sight of the true purpose Of life
insurance and devote all energies to