The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1905-12-28
Why the Participation of the Com
lpanies in Great Financial Oper-
ations Has Been of Benefit to
Policyholders.
HAS SAVED MILLIONS
IN MAKING INVESTMENTS
No Other Means by Which the
Vast Sums that Are Placed Each
Year Can Be So Judiciously and
Readily Invested. ....
Nv HERBERT VANDERHOOF.

By HERBERT vANDERHooF.
The absorbing interest which the peo-
pie of the United States take in life in
the wide publicity which has been given
by the press Of the country to the inveS-
legation which has been conducted in
New York. Unfortunately this investiga-
facts that are creditable to the business
conducted by the great companies, but
solely to expose whatever has been dis,
creditable in their management, and
while errors of Judgment on the part Of
certain officials have been widely ex-
plotted. the, great and good work which
they have been accomplishing for years
has been utterly ignored.
The business which is yearly transacted
by the ninety old line life insurance COM
panies Of the United States exceeds in
ness in the country one-haif the PEG
pie of the country, it has been estimated,
have an interest In life insurance. either
IS ?olicyholders or future beneficiaries
= 1t is well, therefore, to remember that
every dollar Of the hundreds Of millions
ttllt have been paid into these companies
today Is just as safely invested and is as
certain to be returned with added inter-
ct it is certain that the government
will redeem its obllga lions when they ma
tire.
# insurance in force In these ninety
companies was $12,92S, 493,754, total Of
- such tremendous proportion as to be be-
yond the power Of the human mind to
7ealize. This great sum is more than the
,ctual value Of all the steam railroads in
he United States, which on June 80,
004, was only 1244, $50 900 The new
money in the form of premiums received
Segregated S4ss ,sOs,27s. The assets held
segregated s257s, 1855 $50 or more thar
.hree times the aggregate capital of ali
t. he 1881 national banks in the country
he year, from premiums and interest on
heir investment, was over $500 900, O00
or about $40, 900 900 more than the total
income Of the United States government
.or the year.
The Syndicate in Business
great deal Of senseless criticism has
been INDUCED in relative to the actions
IF "syndicates" in connection with the
business Of life insurance, the object be-
isyndcate is necessarily a "grafter-"
men one considers the stupendous fig
,es I have given above, however. the
ycessity Of syndicates becomes self
sident
ance, is about to issue a series of
onds Before putting them on the mar
whole issue will be taken promptly. y
viii not do to have them hawked about
with any uncertainty as to the, outcome
Accordingly, a contract Is made with a
banking house to guarantee absolutely
the sale Of the entire issue at 8. given
rate, say 9sH per cent.
The bank associates with itself a mum.
vidual capitalists, to each of whom 8
f. specific allotment of bonds IS made, eacl
being bound to take, at the rate named
the bonds allotted or pro rata share
unless all are disposed Of to the genera
public When the whole Issue has beer
thus or na u ns. tn
per cent, If all are disposed Of on tn
open market each member of the syndi
cate has, profit of ~ per cent on hi
without having, In fact, put up an
money The whole business is nothing
more Or less than an underwriting enter
sue,
Buying on the inside.
All large issues Of bonds In these day
are sold exclusively In the manner de
scrlbed If life insurance company de
sires to buy good securities at first cos
g. it can do so only by. going into the syndi
cate. It can get them at inside figure
lined, for example, g, company as men!
Der Of the syndicate secures its bond
at 961a per cent instead Of at SO. It ma
take it's allotment for Its own use to hol
tho syndicate rate of 9S. but will be cred
tied with it's profit Of IL per cent, max
ing the net cost 1914.
During the e., examination n nat of one Of til tn
certain of it's officers and officials ha
flrrned syndicate among themselves.
which the company had no part. The
purchased their bonds at first hand, an
sold the same to the company. as we'll 6
70 outside L., parties, at Rrone to oor them n
dc ft,1o he "a .
but 1t had no participation IN the prom
made by the syndicate.
SO This was the one case of an abuse
he syndicate, and since then most Of tt
participants have been well punishe
But it must also be borne in mind ths
The syndicate operations of other con
oanies that were revealed by the inve
:igation were honestly and ably manage
or the interests Of the policyholders.
he case of one company it was show
.fa& it had made, profit for it's polio!
holders, or, in other words, had effects
> i saving in the cost Of securities pu
* chased to the extent Of not less thu
s16.ooo,ooo in the last fourteen year
Thus the syndicate in life insurance h
aot been prejudicial to the interests
he insured, and the entire life insuran
i management should not be blamed for t
ndscretions of the management Of O.
stock company.
Is an Absolute Necessity.
! -, With concerns whose investmer
mount to scores Of millions each yes
! Us many of the life insurance compani
4 n 10, it will therefore be readily seen tn
Fl 4 he "syndicate'' is an absolute necess
4 md that there IS no other agency
4 which 1t can invest these vast sun
large sums are, Of course, loaned out
mortgage, large that is, in the aggl
4 gate. but really small compared with
n .otal resources Of the companies It
II also a necessity that large part of
y - >ssets Of the insurance companies shol
\ De invested in quick assets that can
Immediately disposed of when the oce
sion arises. Mortgages on real ests
cannot be so disposed of, and while til
"A nay In many cases pay a larger inter-
-eturn than the quick asset the percel
age of funds thus invested must alWa
De limited to a certain proportion of t
whole.
How carefully and wisely the manage
If the life insurance companies ha
Il conserved the interests Of the policyho
ers is shown by the yearly stateme1
hey furnish to the policyholders, sho
ne the nature of their investmer
There is nothing of the wildcat type
81 9,urities they hold, but all are of the G.
,dge variety, and all have shown a stee
FL appreciation in value since the compan
nave held them And the tendency
Zach year to more carefully scrutin
- .hese investments, as has been shown
8 he action of one, company, which
q disposed of all it's stocks and placed
Investments in approved bonds and mo
ie hot