The Washington herald., 1913-01-05
GRILLED
BYATT0RNEYS
Continued from Faye one.

| ture, Mr.. Best refused to alter his
original criticism that 1t was misleading.
Mr.. Carusi took him through a series OF
technical mathematical calculations to
show that the company was in far better
! financial condition than could be indi-
| Gated on the regular blank form on
which reports are required to be made
out. Mr.. Best, however, stuck to his
original contention that In view Of the
exceptionally large loss ratio for the
| first ten morths-upward Of 20 per cent
the companies were not justified In
phrasing their advertising literature as
they had. although technically the Etera-
ture might be held not Inaccurate
His testimony as to the literature was
applied more particularly to the resolu-
| tion passed by the directors of the
Commercial last November. which set
forth I'm one paragraph that the pre-
MUM income of the company had been
| materially increased. and. in the next
paragraph, that the capital and surplus
of the company has been materially in.
cresed and the company had earned
for its stockholders a large amount OF
money. The technically upon which
the probity of this statement hinged
involved the possible connection of the
| word "earned' in the second para
graph. with the mention of the pre-
MUM income In the first.
Much of the time yesterday was
spent In introducing figures relating
to other fire insurance companies by
comparison. particularly in connection
way of comparison. particularly in con-
nection with Best's criticism of the
large ratio which the amount carried
| as real estate earnings, through the
increase in book values of the Southern
Building. bore to the total surplus of
the company.
Figures for Other Companies.
According to a sort of joint computa-
| tion by Best and Carusi. to which the
latter acceded in part, the surplus OF
the company without the increased
value OF the Southern Building being
carried as an asset, would have been
In the neighborhood of $4,000. This,
however. IL the Southern Building
transaction should be taken into con-
sideration. would be reduced to se.700
plus the s226.715 carried under income
as the Commercials half OF the In
creased valve Of the building.
Carusi. through question. indicated
that the National Union Fire Insurance
Company, of this city. had. at the last
reporting assets totaling SIS, 700. of
which $1,000 was in the form of real
estate; the Arlington Fire Insurance
Company. of this city. total assets. SS70,-
oO0 of which S2l400 was in the form of
| real estate: the Firemen's Fire Insurance
Company. total assets. Sl5.0 real es-
tate. S15,0Q0.
Mr.. Carusi next attacked the calcula-
ton which charged off as an underwrit-
ing loss the unearned liability OF the
company, that is money which must be
held in reserve TO meet possible fire loss
from paid-up policies which run for more
than one year
rs II not true he asked. that the
unearned premium reserve is treated in
insurance solely as a liability"
Yes
rs it not true that an averageIy good
company has business on the books
which represents a big unearned pre-
mium reserve fund. has proit in 1t for
the company which is commonly esti-
mated at from 50 TO N per cent OF that
fund 20
The lower figure would be more near
ly CORRECT"
$50 that. although classified as liza
bility. as getting at the real condition
of the company and its assets * per
cent OF this premium reserve might he
treated as available assest belonging TO
profits
That is true II the business Of the
company for time preceding the COM
putation-say for two or three years
Immediately preCcdinG-showed a profit
Such a deduction would he dependant
for proof upon the proba hility that the
company could sell out or reinsurc at a
profit. II il hadn't been earning profits
1t could not sell at 4 profit"
Holds Others Responsible.
Referring to Bests statement that the
fire loss ratio which the Commercial sus-
tained in the first ten months Of 1912
was exceptionally heavy. Mr.. Carusi
asked him if he knew that much OF the
business put on the books Of the Com
mercial by the company. which owned
it before Tuttle. Wightman & Dudley.
Inc, took over the control. had not been
Cancelled Mr.. Best replied in the mega
tive. and Carusi asked him il il were
not possible that part OF the heavy loss
was from hazards underwritten by the
former management. Best replied that
this was possible.
You do not know then the loss ratio
OF the business placed by Tuttle, Wight
man & Dudley?'
NO. 1 have only the figures of this re-
port"
Mr. Carusi asked the witness IL the
expenses of n new company. outside
those incurred inactually getting the
business. are not heavier than in the
case OF older and established companies.
Yes" replied Best. "a new company
has TO pay higher commissions"
One question indicated a contention on
the part of counsel for the companies
that the premium reserve requirements
OF insurance laws work hardship on
small and new companies. inasmuch as
they must automatically stop writing in
surance at a low point unless the sur
plus and premium reserve is increased
from some other source. such as pre-
MUM on stock
Walter c. English. a local attorney,
was the last witness of the day. Mr..
English testified that last summer he
concluded that the Commercial was op-
Grating at a loss and called on Mr.. Ca
rusi for information. Mr.. Carusi prom
ised to consult the officers of the COM
pany about the matter and communicate
with English, the witness testified, but
20 further information was forthcoming
from the visit. He was not cross-ex-
amined.