Evening star., 1932-06-23
INSURANCE FIRMS
| FACING PROBLEMS.
Stock Holding Valuations and
Compensation Payments
to Be Discussed.
BY ROLLIN NJ. CLARK.

When the insurance commissioners OF
the various States convene in Chicago
today for meeting of the Executive
Committee of their national organ
ization they will find themselves con-
fronted with two perpleXing problems
that call for immediate solution. One
is determination of the method of
valuation for securities owned by insur-
ance companies to be used in the
preparation of their financial statements
as Of June 80, 1882. The other is the
necessity of some action to dig work
mems compensation insurance out OF
the red
State Requirements.
The security valuation question is
paramount, because a number of States
require insurance companies to file
semi-annual reports of their financial
condition. If market values as of June
80 are demanded in these reports some
companies are likely to show a technical
impairment OF capital and reserves due
to the heavy depreciation they will have
to charge eff on their investments.
The situation today is even more acute
than it was at the end of last year,
when the insurance commissioners de-
cided that the mutual interests of
policyholders and insurance companies
would be best served by using average
values for securities as represented by
quotations as of June 80. 1881. These
values were applied chiefly t. holdings
of fire and casualty companies, because
life insurance companies own an in
significant amount of stocks and are
permitted TO amortize their bonds.
In some quarters fears were eX-
pressed at the time that the commits
cir troo
ground in adopting any artificial basis
of security valuation. If conditions
should become worse instead of improv-
ing. it was argued. policyholders who
had been lulled into false sense of
security would have a rude awakening.
But these predictions have not been
borne out. Most insurance companies
are demonstrating their ability to live
within their current leone regardless
of market fluctuations.
Hence it is likely that another
formula ignoring actual market values
will be worked out during the Chi
cago meeting No doubt the allowable
values will be lower than those pre-
scribed six months ago, but it is not
expected that they will prove embar-
RAISING to the rank and file of COM
panies. A number of them, neVerthe-
less, have prepared themselves for any
contingency by changing their capital
structure SO as to show an ample
surplus even on market value basis.
Premium Increase Planned.
plan calling for a fiat increase of
25 per cent in workmen's compensation
premiums will be placed before the
commissioners, along with a proposal
to return to the insured a portion of
the premium at the end of the year
If experience justifies it. Despite rate
increases put into effect throughout the
country last Autumn, the insurance
companies ended the year with an un-
precedented underwriting loss and
further relief is deemed imperative at
Orce.
Tie news will not be encouraging to
employers who are required by law to
carry this form of insurance for the
protection of their workers. Vehement
protests will be lodged, but the answer
of the insurance companies is that they
must stop this drain upon their re-
sources if they are to continue writing
the business
Copyright. 1922