New-York tribune., 1921-08-21

- 81 conAagratlon losses ever be-
F,e US. no one will gainsay that
ase who have their money at stake
j entitled to good returns on their
fsiness operations outside the
Arn;ngs that may be made from in
lrest on invested assets.
1t SO happens. however, that for
long period Of years the total bus
mess OF all companies in the aggre-
gate shows an operating loss. The
narrow margin of profit, in years
when there is profit, and the general
average of loss on the total opera
tons over long periods, has had a
deterring effect upon the organiza-
ton of new companies and has
caused many old and respected in
stitutioas to retire from business.
Only few years ago there were
more than four hundred stock COM
panies competing for business in
the United States. Today there are
few over three hundred. During
the past ten years the dividends paid
to stockholders on the capital and
surplus they originally invested in
one hundred and thirty-fve So
called millionaire" companies,
companies having million or more
in assets), amounted to trihe less
than 7 per cent.
What is of immediate Importance
in this connection is that interest on
investments not only furnished all
the dividends to stockholders, but
also furnished something over for
accretions to the surplus which is
held for the greater security Of
policyholders and to establish conf
dence.
It was for these reasons that the
National Convention Of Insurance
Commissioners in reaching the
agreement with stock fire insurance
companies as to what constituted a
reasonable underwriting profit,
(outlined in the previous sketch)
agreed also that interest on assets,
Including the reserves known as
'unearned premium liability" which
previously have been explained,
should be credited to their invest
ment account and not to their un-
derwriting-
Were interest earnings on the in
vestments Of stock fire insurance
companies to be diverted, it would
either cause an immediate increase
in rates to make up for the loss of
income, or the withdrawal from
business of many companies be-
cause, to repeat previous state
ments. and with emphasis, the re-
turns from both sources today Gun
derwriting and investment) are
barely sufficient for a reasonable
profit to those in the business and
are not sufficient to attract new
capital
Insurance is not commerce, ac-
cording TO a celebrated and long
standing decision of the Supreme
Court Of the United States, and SO
each state prescribes the conditions
under which the companies of other
states may be licensed to transact
business within its borders. The re-
suit IS a medley of insurance laws
governing our operations and defn-
ing the character Of investments, in
all but nine states present statutes
providing also for retaliation"
The effect of retaliatory laws is i'm
mediate and severe. For instance, il
New York requires Of the companies of
other states compulsory Investment in
Y York mortgages, or any other
sisss Of securities, under retaliatory
s-arltes those states at once require
investment By New York State COM
panles in their mortgages or other pre-
scrlbed securities Such investments
made compulsory on stock FIRE insur-
arce coupanies in any given percent
age, must have the effect Of curtailing
their operations. SO reducing competi-
ton and carrying capacity, and tend
ing also 70 divert the companies from
the functions for which they were
chartered
Every stock fire insurance company
worthy the name, wants 10 diversity
's Investments 20 as 70 - establish
confidence in It's stability and (2)
nase hem marketable. in case Of con-
Migration losses, raos. quickly and with
'ns least sacrifice.
n our business, the contact with the
sae'ic ia largely through agents who
srs locate3 In every hamlet, town and
city IA the country. Agents are the
eoTnra real reporters on fire insurance
lor the public. and are absolutely
heceszary 20 assist property owners in
sasegnardsny their property, in effect
ng Improvements under the Self-Elec
s.ys system Of rating, and in protecting
taeir property interests with proper
soTer q fire inaurarce--as important
'ndeed az local bank.
Local agents are the retailers os our
paz'ness and their cost 70 the public
y afecn'e1y returned in service rem
hssed- This ce1t is less, We believe,
aan AIRY similar factor in other lines
- bEasaess. Comoarisons arc difficult
. sHegre AZ most business operations
ere prsYa<asg conducted while all that
Rsrfzsns 70 stock fire insurance is pub
.'e property IN the Office Of every state
insurance department. In the country
In fset am firmly convinced that
ne whole expense and profit os stock
9rs Insurance.. manufacturing, whole
salsng ard retailing), based on the
fafn@r sacompiets information from
.Fade bodies with which ws have been
g erssesponfenee, IL iesa than that Of