Omaha daily bee., 1906-04-01
SURETY BUSINESS NOT SURE
General Conditions Not Such as Allure Pros
pective Investors.
COMPANIES LACK CLASS ORGANIZATION
Methods Are Not such a. Tend TO
Bring Bcst Returns on Money
Invested In the
Business

haA surety hNuEIMllNtAo Etiti any Ahh
especially the most conservative and ex-
perienced. are not well satisfied with the
conditions now obtaining is Illustrated by
the movements recently inaugurated by
the two opposite. but cooperating forces
OF every company. the management and
agencies. The recent and sudden death
OF Robert s. Branen Of Denver, most
enterprising surety man. who had sue
ccssfuily organized the fire underwriters
into mutually beneficial association,
threatens to prevent the formation Of
national association OF surety and casualty
agents which many believe would have
been of great help in amelorating the con-
ditions existing. There has also been
considerable talk lately Of approaching
conferences between the executives OF all
the surety companies, the United Auditing
and Adjusting association OF New York
having failed in its mission because 1t was
in part improperly conceived and in
capably executed. Three Of the largest
and most active companies, Fidelity and
Deposit. the American Surety and Amerl-
can Bonding. declined TO Join. and the
association was soon abandoned, very
largely because of jealousy and
rivalry between the presidents Of two
OF the constituent companies. These are
merely mentioned as straws which show
how the wind blows. There were no fail
ures in 1905, but the companies only did
fairly well
That the present situation is de-
/ plorable one. due largely to ignorance and
inadequate rates, is painfully apparent to
every surety manager. Opinions as to the
proper remedies may differ, but the writer
humbly believes that educatipn-not merely
OF the applicant OF principal. but of the
/ agent and even of the management,
| through acquaintance with history-and
! adequate rates will serve as a panacea.
The pursuance by executive OF a policy OF
conservative underwriting, judicious coin
/ surance and Reinsurance. which latter is
of recent growth in surety circles, and re-
! quirements Of joint contrUf and collateral
| security would avail much.
! Mistaken idea Prevalent.
There seems to be a popular misimpres-
sion that surety companies pay few losses
/ and that their returns. especially to stock
holders, are large. Even to question this
might seem futile. but as facts and figures
are not 70 be disputed, a few which even
| the l4yman can understand will be pre-
sented> bearing out the writer's contention
that under the present conditions surety
companies generally do not make money
The business is conducted on a nearly cash
basis, but even this does not avert losses
Take the figure In the issue of March s.
1906. Of The Spectator. which has compiled
its data from the most favorable sources
reports OF the companies themselves. out
of the seventeen surety companies new
and old (although It is almost universally
conceded that surety companies do not be-
gin to catch" losses until about the fifth
| year of their existence) doing an active
business in the United states in 1905. only
six paid dividends Let us see what divi-
dends they paid. One OF the oldest and
largest paid s2s0,OOO, or 1f per cent on IA
| capital OF 100000 but NOT because of the
| great profit in its underwriting although II
was conservative, but because. although it's
! premium receipts were only 81, ,1S4 its
income from other sources was $50. 5l2
nearly enough to pay its losses, which were
| ssh. 35s. This case is taken as a fair ex-
ample because Of prudent management
the age of the company-sixteen years-its
policy, which is liberal in scope, and its
| widely extended territory. Two other COM
panies showed greater dry1dends-l6 and II
per cent-but they failed to add to their
! surplus such an amounc as experience
shows may be quickly exhausted IL any
unusual losses occur UT these one has
not even entered Nebraska and has total
assets Of only ASO,773, while the other was
only organized in 1901. The fourth highest
revenue producer, which paid a dividend
Of 10 per cent. was another new company.
having been formed in 1901, while COM
pany which follows a policy very similar 70
the hrst paid dividend of per cent. due.
as in the first case, to profitable invest
ment OF its assets
Laws Affect Businesa
/ The unfayOra BILE tendency ~ legisIat tim Is