Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-02-18

while every fluctuation in the prices al
into immediate cash is quoted on the
Securities Heavily Undervalued.
IT have decided to take our policy
holders into our confidence in the most
complete way, so that they may realize
how fully our directors have provided
against any contingency of this kind.
You will notice that we say that the
values quoted are those given by the
government department or lower.
There is much in those two words.
They mean that the values given In
the report are approximately $50, $780,
900 less than the actual current values
of those securities on the Exchanges.
Then we have the additional deduction
from market values of $4,000 900, re-
ferred to in the report, and also the
special contingency reserve OF $l2,-
500 900. These items total sos 900, 900,
and our unlisted assets and other mar
gins raise the amount to 100000. 900.
This means that the market values
of our securities could shrink by
500, 100000 without reducing our
surplus by one dollar. Such shrink
age is, of course, almost inconceivable.
I, indeed, doubt very much If even the
catastrophe of another world war
could produce so drastic depression.
Surprising it did. we would still have
intact our undivided surplus Of over
$54 100000. We are hardly likely, I
think, to be criticized for lack of con-
servatism. I do not know any other
financial corporation which has its
assets so protected. I imagine We are
more likely to be told that we have
been too conservative; If so. that is a
criticism we must endure. Our safety
margins may, perhaps, be unneces-
sarily large, but safety must be our
paramount consideration; and If, as we
confidently anticipate, the margins
prove not to be required, they will in
time be available for distribution
among our policyholders. And what
possibilities for our policyholders do
these margins represent!
Praises Canadian Law.
"But let us look further into our
earning power. There are many con-
tributing factors: energetic, yet eau
tious and economical agency manage
ment; careful selection of risks; con-
servatism in always retaining a con-
siderable proportion of our earnings to
build up protective reserves. and. above
ALL specialization in the safe and
profitable investment of the funds.
Our investment policy is. in fact. a
distinguishing characteristic of the
Company. Our development and pros
perity would have been impossible but
for our investment policy. and our in
veStment policy could not have been
pursued but for the wise investment
provisions of our Canadian Insurance
Law. That law stands before the
world as a monument to the wisdom
of our Dominion Parliament. Com
panieS of many other lands are either
permitted unwise freedom or are
hampered by restrictions, equally
Unwise, which prohibit investment in
many of the most desirable securities.
The Canadian Act, by contrast, per-
mits reasonable freedom to the COM
panies, while fully safeguarding policy
holders.
Investment Provisions.
at may be timely to summarize
briefly the provisions Of our law. They
permit investments in-f1rSt mortgages
Cup to SO per cent of the appraised
value), government and municipal
bonds, corporation bonds secured by
q
tions which have paid dividends for
the preceding five years, and common
stocks of corporations which have paid
dividends for the preceding seven
years, such dividends being not less
than per cent per annum, or
100000 per annum in amount. These
provisions avoid the extreme both of
unwiSe freedom and of harmful re-
striction. To my mind they are almost
ideal.
Our list of assets shows that we
own securities of large amounts in all
classes authorized by the Act.
With the great growth of the Com
pany, the problem of investing its con-
stantly increasing fund becomes more
and more important. What avenues
are open to us? AS for mortgages, we
are most unwilling to establish
agencies in distant centers, of whose
real estate values, conditions and dam
gers we know nothing. That would
be to entruSt the safety of our invest
ments, even to large extent the
safety of our Company. to the judg-
ment of strangers. Government and
municipal bonds yield but low rates of
interest. AS for bonds of corporations, |
We must face the fact that. apart from
occasional railway and public utility |
issues. the strongest corporations are
rapidly redeeming their obligations, |
and no longer need to borrow. Desir-
able bonds, therefore. represent con-
stantly decreasing field.
For a very considerable part of our |
We must, consequently, |
look to those classes of common stocks |
which are authorized by our Canadian |
Act. Fortunately when the same |
degree of care as is necessary for
safety in selecting mortgages and |
bonds is applied to the selection of
common stocks, especially within the
conservative limits laid down by the
Act, these selected securities are, in
the judgment and experience of the
thoughtful and well-informed. among
the choicest and safest of all invest
ments and by far the most profitable
and desirable.
No Magic in Bond"
Consider mortgages What COM
pany has not suffered losses, and