The Newark star and Newark advertiser. [volume] (Newark, N.J.) 1909-1909, 1909-08-12

On the contrary, the company has pur-
chased no property n erected no
BUILDINGS not needed for the business Of
the mpan and such purchases have
all been made at not o the market
price, and the buildings erected nave
been carefully planned and economic
ally constructed and are worth to the
company the cost thereof.
The Fidelity Deal.
AS to the allegations contained in
paragraph twenty-eight a (2Sa) OF sald
bill of complaint, defendants admit
that some of the stockholders of the
Prudential Company have for years
demanded larger dividends on the par
value of their shares, and that the
board of directors rave thought it un
wise TO accede to such demands. They
deny. however, that the sale OF the
stock of the Prudential Company to
the Fidelity Trust Company, in the
year 1902, was made in the eXpecta-
ton that the minority of the stock
holders would thereby be rendered
helpless to enforce any just demand
for increased dividends beyond the III
per cent. rate.
They also deny that the claims of the
complainant and other stockholders
who agree with him that larger divi-
dends ought to be declared, have been
ignored by the directors and their de-
msnds for proper and just consldera-
ton for the increase of dividends re-
fused attention, or that methods ana
policies have been devised and enforced
by the directors for the purpose OF
keeping down. as far as possible. addi-
lions to the profits of the company dis
tributable to the stockholders thereof.
They say that on the contrary the said
claims of the stockholders have been
carefully considered by the directors
and that the ours taken by the lat
ter in refusing to increase the divl-
dends to the stockholders has, in the
judgment of the board of directors,
been not only just and fair to the stock
holders but has been necessary to the
prosperity and safety of the company.
Defendants also admit that the
directors expect to make further dis
tributions from the earnings on the nom
participating policies that were issued
prior to 1897 to the holders of such
policies n say that this course is not
only just and fair to the policy-holders
concerned and the stockholders as well,
but is essential to the continued pros
perity of the company.
History Of IndustriaIs.
When the Prudential Company began
business industrial insurance was new
in this country and there were no ia
bles of mortality or other statistics
upon which premium rates could be
calculated with accuracy or certainty.
1t was of the first Importance that the
rates should be high enough to in
sure the stability of the company and
to enable 1t in any contingency to per-
form its contracts. Keeping this prin-
-ciple in mind, the company, with the
best assistance ~obtainable, prepared II
table of rates that then appeared to
be Just and fair. AS the business of
the company developed, however, the
profits derived from the rates go adopt
ed far exceeded the expectations of the
company at the time of their adoption.
The Industrial policies then issued by
the Prudential Company did not pro-
vide for participation in profits and
the officers and directors took the view
that all the profits made by the com
pany On s1ich policies belonged to the
stockholders. Accordingly, in the year
1879, they began dividing such profits
among the stockholders by way of
stock dividends. Only the sum of $751;
600 had been paid into the company By
the stockholders M only stock for
that amount had been issued. The first
dividend was upon this stock, and
amounted to $4,000 and brought the
stock up to 800, 900.
Thereafter stock and cash dividends
were declared from time to time, 80
that at the end of 1886 stock dividends
to the amount of 1909, 600, and cash
dividends to the amount of 81, 1874, $50
had been declared and paid to the
stockholders, and the company had ac-
cumulated undivided profits in addition
amounting to the sum of 81, 031, Z07. 93, all
derived from said industrial policies.
This experience demonstrated to the Of
ficers and directors of the company that
the premiums which il rae eXacted
from its industrial rolicy-holders were
too high and were much in excess of a
sun sufficient to defray the cost of
carrying their policies and paying a
reasonable dividend to the stockholders.
in addition to this, the lapse ratio
on the company's industrial policies
was alarmingly high, and much I'M
favorable comment was being made in
various influential quarters with re-
spect to the high cost of industrial in
suranee. In some States legislation was
threatened, aimed either at the total
suppression of such insurance or its
drastic regulation. 1t was at his juno
ture and on account of these various
circumstances that the Prudential Com
pany in the year 1897 decided to issue
a new form of industrial policy provld-
ing for increased benefits to the policy
holders and promising participation in
the earnings of the company. And it
was for the same reason that the COM
pany made such increased benefits to
apply to its old Industrial policies and
began paying dividends on such poll
cies out of the earnings derived there
from.
In pursuance of this new policy. the
Prudential Company paid cash and
mortuary dividends In 1897 to it's old In
dustrial policy holders amounting to the
sum of S77. 399, and such dividends were
continued and increased from time To
time, until at the end of the year 1905,