The New York herald. [volume] (New York, N.Y.) 1920-1924, 1921-08-24

ton losses ever before us, no one will
gainsay that those who have their money
at stake are entitled to good returns on
their business operations outside the
earnings that may be made from in
teycst on invested assets.
II so happens, however, that for long
period Of years the total business ORAL
companies in the aggregate shows an
operating loss. The narrow margin OF
profit, in years when there Is profit. and
the general average CT loss on the total
operations over long periods, has had
lettering effect upon the organization OF
new companies and has caused many old
and respected institutions 10 retire from
business. t
Only few years ago there were more
than four hundred stock companies
competing for business in the United
States. Today there are few over
three hundred. During the past ten
yeas the dividends paid tc stockholders
on the capital and surplvs they originally
invested in one hunted and thirty-hve
so-ealled millionaire" companies, (com-
panics having million or mopc ia as.
sets), amounted TO a tribe less than 2
per cent.
What is Of immediate importance in
this connection is that interest on invest
ments not only furnished all the divi-
dends to stockholders, but also fur.
nishcd something over for accretions to
the surplus which is held for the greater
security of policyholders and to estab-
lish confidence.
II was for these reasons that the
National Convention of Insurance Com
niissioncrs, in reaching the agreement
with stock fire insurance companies as
70 what constituted reasonable under
writing profit, Outlined in the previous
stetch), agreed also that interest on
assets, including the reserves known as
''unearncd premium liability" which
previously have been explained, should
be credited TO their investment account
and not TO their underwriting.
Were-intcrest earnings on the invest
mcnts Of stock fire insurance companies
to be diverted, it would either cause an
,,af.
for the loss Of income, or the withdrawal
from business OF many companies, be-
cause, TO repeat previous state me nts,
and with emphasis, the returns from
both sources today Underwriting and
investmcnt) are barely sufficient for a
reasonable profit to those in the business
and are not sufficient to attract new
capital.
Insurance is not commerce, according
70 celebrated and long standing de-
cision of tho Supreme Court OF the United
States. and so each state prcscfibes The
conditions under which the companies Of
other states may be licensed to transact
business within its borders. The result
Is medley Of insurance laws governing
our operations and defining the char
acter Of investments, in all but nine
states present statutes providing also
fc- retaliation"
The effect OF retaliatory laws is inme-
date and severe. For instance, if New
York requires OF the companies Of other
states compulsory investment in New
York mortgages, or any other class OF
securities, under rctaliatory statutes
those states at once require Investment
By New York State companies in their
mortgages or other prescribed securities.
Such investments made compulsory on
stock fire insurance companies in any
given percentage, must have the effect
oE curtailng their operations, 50 reducing
competition and carrying capacity, and
tending also to divert the companies
from the functions Tor which they were
chartered.
Every stock fire insurance company
worthy the name, wants TO diversity its
investments so as to ~ establish con-
fdcnce in its stability and (2) make them
marketable, in case OF conhagration
losses. most quickly and with the least
sacrifice.
IN cur business, LhC contact Win inc
public i largely through agents who arc
located IN every hamlet, town and city
in the country. Agents arc the CONNER
cial reporters on fire insurance for the
public, and are absolutely necessary to
assist property owners in safeguarding
their property, in cffccting improve
ments under the Sclf-Electivc system OF
rating, and in protecting their property
interests with a proper cover of fire in
.sursncc-as important indeed as local
bank.
Local agents arc the retailers Of our
ausincss aud their cost to the public is
adequately returned in service rendered.
This cost Is less, we believe, then any
similar factor in other lines Of business.
Comparisons arc difficult to secure as
most busincss operations arc privately
conducted while all that pertains to
stock fire Insurance is public property in
ihc Office OF every state insurance de-
partment in the country.
In fact am firmly convinced that the
whole expense and profit Of stock fire
insurance, manufacturing, wholcsaling
and retailiny), based on the rather in
complete Information from trade bodies
Snb which we have been In correspond
encc, Is less than that OF any other branch
"a business conducted On a similar basi 5
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