The New York herald., 1921-08-21

ton losses ever before us, no ono VIII
gainsay that those who have their money
at stake are entitled to good retur MS on
their business operations outside the
earnings that may be made from in
terest on invested assets.
1t so happens, however, that for long
period Of years the total business OF al
companies in the aggregate shows an
operating loss. The narrow margin OF
profit, in years when there is profit, and
the general average of loss on the total }
operations over long periods, has had
deterring effect upon the organization OF
new companies and has caused many old
and respected institutions to retire from
business.
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
years the dividends paid to stockholders
on the capital and surplus they originally
invested in one hundred and thrty-hve
so-called "millionaire" companies, (com-
panies having a million or more in as
sets), amounted to a trife less than 7
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
nished something over for accretions to
the surplus which is held for the greater
security of policyholders and to estab-
lish confidence.
1t was for these reasons that the
missioners, in reaching the agreement
with stock fire insurance companies as
to what constituted reasonable under
writing 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 investment account
and not to their Underwriting.
Were interest earnings on the invest
ments 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 returns from
both sources today Underwriting and
investment) are barely sufficient for
reasonable profit to those in the business
and are not sufficient TO attract new
capital.
Insurance is not commerce, according
to a celebrated and long standing dc
cision Of the Supreme Court Of the United
States, and so each state prcscribes the
conditions under which the companies Of
other states may be licensed to transact
business within its borders. The result
is a medley Of insurance laws governing
our operations and defining the char
actcr of Investments in all but nine
states present statutes providing also
for retaliation"
The effect Of retaliatory laws is mmc-
diatc 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 retaliatory 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
Of curtailing their operations, so reducing
competition and carrying capacity, and
tending also to divert the companies
from the functions for which they we're
chartered.
Every stock fire insurance company
worthy the name, wants to diversity its
investments SO as TO (I) establish con-
hdence in its stability and (2) make them
marketable, in case of oonfagraton
losses, most quickly and with the least
sacrifice.
In our business, the contact with the
public is largely through agents who are
located in every hamlet, town and city
in the country. Agents are the CONNER
cial reporters on fire insurance for the
public, and are absolutely necessary to
assist property owners in safeguarding
their property, in effecting improve
ments under the Self Elective system Of
rating, and in protecting their property
interests with proper cover Of fire in
surance--as important indeed as a local
bank.
Local agents are the retailers OF az
business and their cost TO the public is
adequately returned in service rendered.
"'Ais cost is less, we believe, than any
similar factor in other lines Of business
Comparisons arc difficult 70 secure as
most business operations are privately
conducted while all that pertains TO
stock fire insurance is public property in
the 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, wholcsaline
and retailing), based on the rather in
complete information from trade bodies
with which VIC have been in correspond
cnee, is less than that of any other branch
Of business conducted on similar basis.