The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-02-22
THE CASE or THE EoUIrABLE.
The Policy h oiders In the Company the
True Parties In Interest


ance Society
Mr.. Smiths trouble Is that he Is ignorant
Of certain all important facts that boar on
the situation talked with an estimable
and well meaning gentleman n day or so
ago who Is a minor stoclhoder in the Equi-
table and who was equally or more Ignorant
OF these IA cts He said: THAT $50, 100000 OF
surplus belongs to the stockholders and
they will have to give u to us.' was amazed
TO find that. though he was man Of means
and position and stocsholder In the
society. he did not know the difference be-
tween the legal reserve and the surplus but
asserted that fall the surplus the policy
holders are entitled to is included in the
reserve" and that "a mutual company had
no surplus whatever
A few plain statements Of fact which mag
be easily verified may help TO clear under
standing OF the matter The charter OF
the Equita bic states that il shall be mutual
in its operation; il has been mutual In lts
operation and has always been so repre-
scented by the mana cement and the agents
in soliciting business its policies are par
ticipating" policies. the stock is specifically
limited to dividends OF per cent. and can
not draw anything beyond such dividends;
the so-called surplus belongs to the policy
holders.
The society has assets of 1888 o2o
What is the nature Of this enormous fund?
That Ia best answered by inquiring into the
nature of its liabilities Its assurance
fund or legal reserve. amounts TO 1921
73s 35s. This is the net present value OF
it's liability to policyholders under 81 1885,
542 s92 OF outstanding assurance. The State
requires that this legal re- We be at all times
held intact. and ii is the duty Of the lnsur-
ance Department to see that il is so held
and properly invested as n trust fund. Other
liabilities amount to s. 100 3ea This sum
includes amounts not yet due on matured
installnent policies; death losses due and
unpaid adjusted and not due. in process Of
adjustment. reported but not proved and
Gf anyl resisted: also certain liability under
hah,red endowments and debenture bonds.
The further item necessary to balance LA
blities with assets is one Of $50 79i 200 which
Is designated as surplus.
The greater portion of this surplus Is
savings out OF premiums and interest earn
ings under accumulation or deferred divi-
dend policies tontinc" or -semi-ton.ine"
contracts Under these the dividends. in
.
for specified number Of years. As such
policies have been issued in enormous and
increasing volume, the surplus acc,mula-
lions under them have rolled up much
faster than they have been paid out. A
portion of the eighty millions ia general
surplus, or, more properly, additional re-
serve over and above tho reserve required
10y law, held for the protection Of all policies
as a safeguard against such contingencies
ms fluctuations in the value Of securities,
excessive mortality from epidemic or
war. nc
The courts have hed that the holder OF
a tontine policy or a semi-tontine policy
in the Equitabl cannot demand an account
ing OF the surplus to the credit of his policy
before tho term Of his contract has expired;
the surplus contingenily belonging to his
policy being liable to share during the whole
term in the general experience Of the com
pany. and his dividend at the close Of the
term being apportioned finally according
to such experience But the surplus none
the less belongs TO the policYholders. II
the stockholders should attempt 10 take
possession OF it the State Insurance Depart
ment and the courts would step in and pre-
vent such action. 1t is not az il the com
pany had written stock policies at stock
rates with the understanding that the
or "a wings that could be accumulated The
Equitable has written mutual policies at
mutual rates.
In the Equitable the tail has waRged
the dog for n long time. IL will be seen
from the foregoing facts that the funds of
the Equitable belong to the policyholders
and that il has been TO all intents and pur-
poses mutual in its operation. But its
Affairs have been controlled by $4,000. or
strictly by s5l 600 Of stock. The late
u. 4 lMt.tlN ~
Equitable. and the HYDE family has been
amply rewarded out OF the premiums paid
by policyholders for that service But
why should this insignificant holding Of
stock longer control the destinies OF this
great society? II financial methods which
are obiectiona bic to the old officers OF the
company and to the policyholders are
intrcduced-in the handling OF the policy
holders funds. rPmember-why should
the owner OF SOL 600 OF stock be permitted
TO work his will in the society? With its
limitation as 70 dividends and with the
IN utual feature running through al the
sooety's insura noe transactions, the stock
is little more or less than n trust. IT the
policyholders. who own the four hundred
millions OF the societys funds want a voice
In It's mana cement. doe- any one think they
are likely to be denied II II they appeal TO
the Legislature and 10 the courtS2
Fabulous offers for this stock-this tail
to the dog-have been reported. con-
ironing Interest IN the hlOcks 70 long as
the policyholders do not see fit to take
the mana cement away from the stock.
might be properly regarded IA worth
good deal. because. If held by a competent
person II would properly enough carry
with il high sala ried position in the society.
But how could any one who paid IS 900 600
or more for il get his money back-in
the light Of day? certain class OF finan-
ciers who deal in property on large scale
seem to fail to appreciate the peculiar
nature Of life insurance funds and 10 be
ignorant of the real cha ra cter OF the Equi-
table. But the Insurance Department Of
thu State and the courts are to I've reckoned
with. The policyholdeTs' money will not
be Ia nded over 70 the stockholders. Nor
would the polovholders be denied The
right IL vcte for directors II their case were
ca rried before the Legislature in proper
form is the opinion OF the writer
II is unlikely that such appeal will he
made because the directors have voted 10
mutualize the company. Mr. Hyde is said
10 control the committee appointed to draft
a plan OF mutua lization, How can the
society be mutuaized except by giving the
polioyh holders the right TO vote for directors?
And will they not themselves be in a posi-
ton TO say'who shall administer the society
when they get that right? The directors
have also voted TO retire the stock. with
compensation. What is that compensa-