I 
 
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 New York 
 
 State College of Agriculture 
 
 At Cornell University 
 
 Ithaca, N. Y. 
 
 Library 
 
Cornell University Library 
 HG 8835.HS 
 
 Studies in practical life insurance; an e 
 
 3 1924 013 780 543 
 
 LIBRARV 
 
 JUL 11 1945 
 
 
 DATE DUE 
 
 
 "Aft^naJflBit- 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 QAYLOfiO 
 
 
 
 PRINTED IN U.S.A. 
 
 Av 
 
Cornell University 
 Library 
 
 The original of this book is in 
 the Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924013780543 
 
STUDIES 
 
 IN 
 
 Practical Life Insurance 
 
 An Examination op the Principles of Life Insurance 
 
 as Applied in the Policies, Reports, Agency 
 
 and Office Methods of the 
 
 New- York Life Insurance Company 
 
 BY 
 
 JAMES M. HUDNUT 
 
 ASSISTANT SECRETARY OF THE COMPANY 
 
 With a Chapter on the " Personal and Public Aspects of Life Insurance ' 
 
 and an Appendix containing the most important Sections '§uba?^c 
 of the Insurance Law of New York ~> 
 
 by Darwin P. Kingsley, President of the Company tMfi 
 ' ■ -■-- - -",tant Sections ' gi/sx^ 
 
 ' Mf,} I'M fit 1 c v o 
 
 :^ 
 
 NEW YORK 
 
 PUBLISHED BY THE COMPANY r/(f"' 
 
 1911 
 
 *,;■" 
 
Copyright, 1911, by the 
 NEW- YORK LIFE INSURANCE ,.CO. 
 
 
 
 / o : c r7> S" I 
 
References have occasionally been made to other publica- 
 tions by the Company— thus : "S. C. H."— Semi-Centennial 
 History of the Company; "H. "-History, 1895-1905; "T.H." 
 — Temple of Humanity — a volume describing the Home Office 
 and Home Office methods. 
 
CONTENTS 
 
 CHAPTER I. 
 
 Three Representative Policies— Their Conditions and Benefits. 
 
 Page 
 
 The scope of these studies 1 
 
 Copy of Ordinary Life Policy 2 
 
 The tools we must use 9 
 
 The death-rate determines the cost : 10 
 
 The level premium is best ". 10 
 
 Finding the net single premium 11 
 
 Finding the net annual premium 12 
 
 Proving our figures 12 
 
 Some important deductions 13 
 
 The loading for expenses, taxes and contingencies 14 
 
 The Contract — its integrity — its good faith 15 
 
 Contract changes — of Beneficiary — to other forms 16 
 
 Keeping the contract in force • 17 
 
 The contract as a bank credit 19 
 
 Loan and surrender values — surrender charge 19 
 
 Computing paid-up insurance values ■ 21 
 
 The surrender charge examined 22 
 
 Paying death-losses — equivalent values 22 
 
 Twenty Instalments certain and Annuity 23 
 
 Value of the instalment option ". 24 
 
 How dividends may be used 25 
 
 Limited-Payment Life Policy 25 
 
 Copy of Twenty-Payment Life Policy 26 
 
 The premium and the loading 33 
 
 Verifying the reserves 34 
 
 Effect of the larger reserves 35 
 
 Twenty- Year Endowment Policy 36 
 
 Computing the premium for insurance 36 
 
 Computing the premium for endowment 37 
 
 Copy of Twenty- Year Endowment Policy 38 
 
 Table of loan and surrender values 45 
 
 Summary of the discussion 47 
 
 CHAPTER II. 
 Apportionment op Surplus. 
 
 Legal requirements 49 
 
 Limitation of expenses 50 
 
 Assumed mortality gains 50 
 
 Select and'ultimate method of valuation 51 
 
 Ascertaining the expense rate 54 
 
 Ascertaining the interest rate ' 55 
 
 No dividend earned in first year 56 
 
 This result foreseen '. 57 
 
 Ascertaining the dividend earned in second year 59 
 
 vii 
 
viii Contents 
 
 CHAPTER III. 
 
 Reports and Examinations. 
 
 Page 
 
 Outline of annual report 61 
 
 Income and disbursements 62 
 
 Items treated in an exceptional way 63 
 
 Expenses imposed by law 64 
 
 Assets — valuation of bonds, etc 65 
 
 Liabilities — valuatio'n of policies, etc 67 
 
 Reports to other States 68 
 
 Reports to foreign governments 70 
 
 CHAPTER IV. 
 
 Agency Organization and Methods. 
 
 The Branch Office system 73 
 
 Advantages of the Branch Office system 74 
 
 The Nylic Association 75 
 
 The elimination of waste 75 
 
 Insurance Clubs 76 
 
 The Weekly "Bulletin" 77 
 
 CHAPTER V. 
 
 Home Office Organization and Methods. 
 
 Control by Policy-holders through Trustees 78 
 
 Control by Trustees through Committees 78 
 
 Departments and Divisions in Home Office 79 
 
 Itinerary of an application for insurance 79 
 
 How the money comes in 81 
 
 Itinerary of a death-claim 82 
 
 Payment of Endowments and Annuities 83 
 
 Other disbursements 85 
 
 CHAPTER VI. 
 
 Personal and Public Aspects of Life Insurance by the President 
 
 of the Company. 
 
 A few of the things Life Insurance does 86 
 
 The ultimate meaning of Life Insurance 86 
 
 A new declaration of independence 89 
 
 Life Insurance and the man 90 
 
 Life Insurance — the discoverer and the lawgiver 93 
 
 Life Insurance — Its service and leadership 95 
 
 Taxation of Life Insurance 97 
 
 The kingdom and the riches of Life Insurance 99 
 
 The relation of the State to Life Insurance 102 
 
 A plea for Federal Supervision of Interstate Life Insurance 103 
 
 APPENDIX. 
 
 Compound interest tables 106 
 
 Compound discount tables ". 107 
 
 Table showing the necessity and the sufficiency of the net premium 108 
 
Contents ix 
 
 Pagk. 
 
 Net effective rates of interest, 1908 • 109 
 
 Assessment of expenses, 1908 Ill 
 
 Taxes paid by the New- York Life Insurance Company in 1910 112 
 
 From the "Insurance Law" of New York — 
 
 § 6. Fees , 115 
 
 § 7. Expenses of examinations 115 
 
 § 16. Investment of capital and surplus 115 
 
 § 18. Stocks, bonds and other evidences of debt 116 
 
 § 20. Restrictions as to real property 116 
 
 § 36. Officers and directors not to be pecuniarily interested in transactions 117 
 
 § 39. Examiners and examinations 117 
 
 § 44. Reports of corporations 117 
 
 § 45. Forms of report to be furnished by Superintendent 118 
 
 § 50. Agents' certificate of authority 118 
 
 § 53. General penalties 118 
 
 § 58. Policy to contain the entire contract; statements of insured to be representa- 
 tions and not warranties 118 
 
 § 59. Certain provisions in policies prohibited 118 
 
 § 60. Estimates and misrepresentations prohibited 119 
 
 § 83. Distribution of surplus to policy-holders 119 1 
 
 § 84. Valuation of policies 120 
 
 § 8Y. Contingency reserve 120 
 
 § 88. Surrender value of lapsed or forfeited policies 121 
 
 § 89. Discriminations prohibited 122 
 
 § 91. Business to be accepted from licensed agents only; agents' certificate of au- 
 thority 123 
 
 § 92. No forfeiture of policy without notice 123 
 
 § 94. Election of directors 124 
 
 § 96. Limitation of new business 127 
 
 § 97. Limitation of expenses 128 
 
 § 98. Salaries of officers and agents; when fixed by board of directors 129 
 
 § 99. Vouchers 129 
 
 § 100. Investments 129 
 
 § 101. Standard Provisions of life policies 130 
 
 § 103. Annual reports of life insurance corporations 131 
 
 From the Legislative Law — 
 
 § 66. Legislative appearances 132 
 
 Fr,om the Penal Law — 
 
 § 665. Misconduct of directors, officers, agents and employees of corporations 133 
 
 § 1200. Rebates 133 
 
 § 1627. Contradictory statements under oath 133 
 
 From the Tax Law — 
 
 § 187. Franchise tax on insurance corporations 133 
 
 From the Insurance Law of Massachusetts — 
 
 § 75. Standard provisions of life policies 134 
 
 Postscript 135 
 
 Items from New- York Life's Annual Report for 1908 136 
 
 Items from New- York Life's Annual Report for 1910 142 
 
STUDIES IN 
 
 PRACTICAL LIFE INSURANCE 
 
 CHAPTER I. 
 
 THREE REPRESENTATIVE POLICIES-THEIR 
 CONDITIONS AND BENEFITS 
 
 The Scope op These Studies. 
 
 THERE are plenty of text-books on life insurance and we do not intend to 
 add to their number. On its theoretical side the subject is highly tech- 
 nical, and involves a considerable knowledge of the higher mathematics. 
 Studied in the abstract it is apt to be very dry, and no one but a student, bent 
 upon mastering his task, is likely to get through even a very simple text-book. 
 Of course this should not deter students who have the time and inclination from 
 undertaking the task, nor should it prevent the addition to college curricula of 
 a course of study in life insurance. 
 
 But we have set for ourselves and our readers a very different task. While 
 a few people need to understand the theory and practice of life insurance in its 
 entirety, a very large number need to have such a knowledge of it as will enable 
 them to insure wisely, to use intelligently as occasion may require the various 
 options which the Policy contains, and to understand the relations which life 
 insurance sustains to the state. "When one understands a specific case, generali- 
 zations become comparatively easy, and the scientific study of the subject be- 
 comes more attractive; and we venture to hope that many who read these 
 ' ' Studies ' ' will be led to pursue the study of life insurance on broader lines. 
 
 General Garfield tells us how, when he was elected a member of the Ohio 
 Legislature, he attained a working knowledge of the government of the State. 
 He reasoned after this manner : ' ' Nothing can be done by a government without 
 money; and so if I examine all the legal steps by which taxes are assessed, col- 
 lected and expended, I shall know a good deal about the practical workings of 
 the government of the State of Ohio. ' ' We propose to follow some such plan in 
 ihe present work. The business of a life insurance company consists very largely 
 in issuing policies of insurance and in carrying out the contracts thus made. If, 
 then, we take up a few representative policies, consider all their clauses and follow 
 them through all possible phases of their history— showing what the Company 
 receives on account of them and what it does with the money— we shall know 
 something practical about life insurance. Here, then, is a copy of the Ordinary 
 Life Policy of the New- York Life Insurance Company, as issued in 1911 : 
 
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 REGISTER OF CHANGE OF BENEFICIARY. 
 
 NOTE. -No change, designation, or declaration shall take eltecl until endorsed on this Policy by the Company at the Home Office. 
 
 DATE ENDORSED 
 
 BENEFICIARY 
 
 ENDORSED BY 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 * 
 
 
Studies in Practical Life Insurance 9 
 
 Rather a formidable document isn't it? Well, such policies used to be much 
 briefer, and as we go on to examine this one we shall find that the reason why 
 a life policy now contains so many words is because it promises so much— it 
 provides for so many contingencies. So let that encourage us to go on and 
 examine it clause by clause. In a palace there are many rooms, and all have 
 their uses — it is only the hovel that is so simple that it can be taken in at a 
 glance.* 
 
 The first thing to be noted is that by this Policy the Company promises to 
 pay ten thousand dollars on the receipt of proof of the death of the Insured, 
 during the continuance of the contract; that it takes effect as of July 1, 1911, 
 after the delivery of the Policy; and that the consideration is $281.10 cash in 
 hand, and the same amount to be paid on the first day of July in every year 
 thereafter during the continuance of the Policy. 
 
 Now we are getting down to business— how does the Company know that 
 the amount named as consideration will enable it to perform its part of the 
 contract? This is the nub of the whole matter, and if our readers will follow 
 us carefully here they will begin to understand both the theory and the practice 
 of life insurance. 
 
 The Tools We Must Use. 
 
 Perhaps a word should be said just here about technical terms. They 
 are the tools we must work with, and it is necessary for the reader to under- 
 stand them and fix them in mind — just as he does the technical terms in 
 Arithmetic, Grammar, Algebra or Geometry. It will be noted, for example, 
 that the contract under consideration is called in general a Policy, specifically 
 an Ordinary Life Policy; that the money paid for it is called a Premium; 
 that the person whose life is insured is called the Insured; and the person to 
 whom the Policy is payable at the death of the Insured is called the Bene- 
 ficiary. These terms are in universal use — in the contract, in the law, in the 
 official reports — and all have exact and definite meanings. We shall see later 
 that there are various kinds of Policies and Premiums; it is sufficient now to 
 know that the Ordinary Life Policy is a Policy that insures during the entire 
 life and upon which premiums are payable annually, semi-annually or quarterly 
 during life. The premium here named is the gross, or office premium — that 
 is the premium that must be paid to the Company. We shall find farther 
 on that the gross, or office premium consists of two parts — the "net premium" 
 for the payment of death-losses and the "loading" for expenses, taxes and con- 
 tingencies. We shall find that there is a net annual premium and a net single 
 premium. We must also fix in mind the principles of interest and discount. We 
 shall frequently find it necessary to compute the present value of money to be 
 paid at some future time or times. Every time a new term is used, its meaning 
 should be fixed in mind before going farther. 
 
 *While the contract is long, there are only twenty-seven written words and twelve 
 written figures in it. In the heading to the "Table of Loan and Surrender Values", it will 
 he noted how a table for a policy of $1,000 is adjusted to a policy of $10,000 by the addition of 
 two written words, and five written figures. The form of the policy is the result of much study, 
 so that the writing of it may be done quickly and with the least possible chance of error. The 
 work is done on special typewriters at an average cost of less than five cents per policy. 
 
10 Studies in Practical Life Insurance 
 
 The Death-Rate Determines the Cost. 
 
 The age of the Insured under this Policy is 35 years. Now, we know, as 
 a matter of observation, that of men aged 35 some die soon and some live long, 
 and it is by knowing how rapidly a large number of men aged 35 will die off 
 that the Company knows how it can afford to make such a contract as this. 
 This knowledge is embodied in Tables of Mortality. These tables show the 
 approximate death rate at each age among a large number of persons. A 
 mortality table usually begins with 100,000 lives at age 10, and shows the 
 number of deaths in each year until all are dead.* It is evident that if we 
 know what the death rate will be in any year of life we can tell what it will 
 cost to insure against the contingency of death in that year. For example, 
 if among 81,822 persons living at age 35, 732 will die during the next year, then 
 the average risk will be 732 divided by 81,822, and the net cost of insuring each 
 man for $1,000 will be this fraction multiplied by 1,000. In the same way the 
 net cost of insurance in each year of life may be obtained. In practice the "age" 
 is taken at the nearest birthday. 
 
 The Level Premium Is Best. • 
 
 But there are various reasons why year-by-year insurance is not suitable 
 for human life. In the first place, the risk is liable to deteriorate very rapidly, 
 and if a company had the right to cancel a risk — as in fire insurance — the man 
 who was about to die might find himself suddenly without insurance. If, on 
 the other hand, the company did not have this right, the impaired risks would 
 all renew while more or less of the best risks would not, and the company 
 would experience an abnormal death-rate. Second, year-by-year insurance 
 would involve a yearly increasing cost until, in old age, the cost would become 
 prohibitory. The safest, most satisfactory and most successful form of life 
 insurance is that which insures for the whole life, or for a term of years, and 
 so adjusts the cost that the Insured is required to pay the same amount every 
 year.f 
 
 This complicates the problem of ascertaining what is a proper charge for 
 such a contract as the foregoing. We see at once that if the Insured is to pay 
 
 *The story of the formation of tables of mortality is a long one and can not be gone into 
 here, but it will be of interest to note that the discovery of the law of mortality 
 is usually attributed to Edmund Halley, Astronomer Royal of England, who in 1692 constructed 
 from the death registers of the City of Breslau, in Silesia, the first complete table of mor- 
 tality. In 1815 Joshua Milne constructed the Carlisle Table from the records of the City of 
 Carlisle, England. This table was the first used in this country. In 1843 the Actuaries', or 
 Combined Experience, Table was constructed from the mortality experience of 17 English life 
 companies; and in 1867 the American Table was constructed chiefly from the experience of the 
 Mutual Life Insurance Company, by Sheppard Homans, then Actuary of that company. (At 
 the American Life Underwriters' Convention of 1860, Mr. Homans reported that vitality statis- 
 tics had been promised by 22 companies and received from 13.) The two latter are those 
 now used in this country. Most of the State Insurance Departments use the Actuaries' Table 
 in the valuation of policy liabilities, but the tendency of late has been toward the American 
 Table. 
 
 f Of course, we do not overlook the various attempts which have been made, and are con- 
 stantly being made, to furnish life insurance at current cost by co-operative, and fraternal, 
 societies. A history of these attempts and the present condition of these societies is the best 
 comment upon the statements made above. Most of the co-operative societies have died out. 
 The social bond has made the fraternal orders more enduring, but they are experiencing the 
 inevitable increase in cost which threatens their extermination or the freezing out of the 
 older members. 
 
Studies in Practical Life Insurance 11 
 
 the same each year, he will pay more than the current cost during the early 
 years of his Policy and less than the current cost during its later years— if he 
 lives to old age. Consequently there will be an accumulation of these early over- 
 payments which may be kept at interest, and the amount necessary will be 
 affected by the rate of interest that may be earned. This complicates the matter 
 still farther. Now, we might say— there must be some amount which, if paid 
 every year by men insuring at age 35, and the early overpayments increased by 
 compound interest, would be exactly sufficient to pay each man's policy as it 
 matured. We might then say that this amount according to the American Table 
 of Mortality with interest at 3% is $21.08 per $1,000 insured, and that this is 
 the net premium used in the foregoing Policy, and that the balance, $7.03 per 
 $1,000, is the "loading" for expenses, taxes and contingencies. 
 
 While all this would be true, it would not be quite satisfactory — if we are 
 going to make any pretence of Studying Life Insurance; and while we do not 
 propose to go through the operation of calculating the net premium, we think 
 the method of doing it may be so outlined that, the ordinary reader will grasp 
 the principles upon which the computation proceeds. This can be done without 
 the use of any algebraic formulae; we need not perform the long arithmetical 
 calculations; all that is necessary is to follow the reasoning and accept our as- 
 surances as to the figures which would result if the calculations were performed. 
 
 Finding the Net Single Premium. 
 
 Let us assume, then, that we wish to insure for $1,000 each as many men as 
 the American Table of Mortality shows to be living at age 35. This number is 
 81,822, and of this number 732 will die during the next year. Premising that in 
 life insurance calculations the premiums are supposed to be paid at the begin- 
 ning of the year and that death-losses are supposed to be paid at the end of the 
 year in which they occur, our first operation is to find what sum in hand at the 
 beginning of the year, improved by 3% interest, will pay $732,000 at the end of 
 the year. This is a simple operation and may be performed by dividing $732,000 
 by $1.03, or by multiplying it by the decimal .970874.* This will give $710,- 
 679.77, and this is the present value of $732,000 to be paid one year hence. This 
 amount in hand at the beginning of the year would therefore provide for the 
 death-losses of the first year. 
 
 At the beginning of the second year there are 81,090 living and the number 
 of deaths in the second year will be 737. There will therefore be $737,000 to be 
 paid in death-losses at the end of the second year. What amount must we have 
 in hand to provide for that 1 Obviously such an amount as will produce $737,000 
 if kept at interest for two years— in other words the present value of $737,000 
 due two years hence. Now we might compute the amount of one dollar at the 
 end of two years with interest at 3% and use that as a divisor; but we will take 
 a shorter cut. Tables of compound interest and discount are in common use, 
 and one will be found on page 107. They have been made to lighten our labors. 
 
 •This decimal is the present value of $1 due one year hence, interest being computed at 
 3 per cent. It is obtained by dividing $1 by $1.03 the amount of $1 at the end of one year with 
 interest at 3 per cent. By adding interest at 3 per cent, to $1.03 we get the value of $1 at the 
 end of two years, and by using this as a divisor we get the present value of $1 due two years 
 hence. When we understand the principle we may use the table on page 107. 
 
12 Studies in Practical Life Insurance 
 
 We understand them and could make one ourselves if we chose ; so we will do as 
 Mr. Emerson said he did when he went from Boston to Concord— he used the 
 bridge over the Charles River, instead of swimming the river. By these tables 
 the present value of one dollar to be paid two years hence is, interest being 
 assumed at 3%, $0.942596; the present value of $737,000 due two years hence 
 will therefore be the product of this sum multiplied by this fraction, or $694,- 
 693.25. We have now found the present value of the death-claims to be paid at 
 the end of the first and second years; we might perform similar operations for 
 all the following years until the last survivor dies at age 96. Having done that 
 and added together all the results we would have the present values of all the 
 death-claims to be paid upon 81,822 persons insuring for $1,000 each at age 35. 
 If we should do this we would get as a result $34,355,666.83, an average of 
 $419.88 and a fraction for each person insured. This latter amount is called 
 the net single premium, and if each of our 81,822 persons were to pay that 
 amount at age 35, and the Company received interest on accumulations at 3% 
 per annum, and there were no expenses, it would be able to pay all losses at the 
 end of the year in which they occurred. 
 
 Finding the Net Annual Pbemium. 
 
 But no one — or hardly any one — wishes to pay for a whole life insurance 
 by one sum. He wants to pay for it by yearly instalments ; so our next problem 
 will be to find a yearly instalment from each of the living that will be the 
 equivalent of $419.88 cash in hand. Of course we know it will require more 
 than one dollar a year — but let us see how far one dollar a year will go 
 towards it. If each of our 81,822 persons pay one dollar we shall have $81,822 
 to start with. At the beginning of the second year there will be 81,090 living, 
 and from these we will get $81,090, the present value of which is $78,728.17. 
 At the beginning of the third year there will be 80,353 living, from whom 
 we will receive $80,353, the present value of which is $75,740.42. In like 
 manner we may find the present values of one dollar paid at the beginning of 
 each year by the living until all are dead. When we have found these amounts 
 and have added them together we shall have a total of $1,629,648.77, which 
 is the present value of one dollar per year from each person as long as he lives.* 
 We have already seen that, in order to insure each one for $1,000, we must 
 secure present values to the amount of $34,355,666.83 ; therefore each must pay 
 annually as many times one dollar per year as 1,629,648.77 is contained times in 
 34,355,666.83. Performing the division we get $21.08; therefore each must 
 pay annually $21.08 ; and this is the net annual premium. 
 
 Proving Oue Figures. 
 In order that we may have a demonstration of the correctness of these 
 figures, and for other purposes, we have prepared a table, which will be found 
 
 *If we divide this sum by 81,822 — the number of persons contributing it — the quotient will 
 be $19,917. This is the present value of an Annuity Immediate of ?1 for age 35. It is distin- 
 guished from an Annuity proper by the fact that it begins with $1 cash, while an Annuity 
 proper begins at the expiration of one year. The present value of an Annuity proper of $1 is 
 always $1 less than the present value of an Annuity Immediate. Tables have been worked out 
 showing these values for all ages, and knowing how they are obtained, we may hereafter use 
 the figures of the tables. 
 
Studies in Practical Life Insurance 13 
 
 on page 108, in which the operation of receiving the net annual premium from 
 each person living at th,e beginning of the year, adding interest for the year, 
 and paying the claims of those who die is carried on until all are dead. This 
 table will serve several purposes : (1) It shows the sufficiency and the necessity 
 of the net annual premium; (2) it shows the magnitude of the interest factor 
 in life insurance; (3) it shows the necessity of large accumulations; (4) it 
 shows what amount the company must have on hand at the end of each year 
 for each $1,000 of insurance taken at age 35 under an Ordinary Life policy. 
 This latter amount is known as the Terminal net value, or the reserve. 
 
 These are the questions that are constantly arising in discussions of life 
 insurance problems. If a company is really going to insure lives it must charge 
 an adequate premium, and what is an adequate premium depends upon the 
 death-rate and the rate of interest. No mortality table can foretell the exact 
 death-rate even among a large number of persons; but it is necessary to have 
 a standard and to conform to it. The American Table is founded upon the 
 experience of American life companies, and has been found to be a safe guide 
 in the insurance of life. It represents a mortality somewhat higher than any 
 well-managed company ought to experience, thus leaning towards the safe 
 side in providing amply for death-losses. Savings from mortality are easily 
 returned in the form of dividends, while a deficiency might be fatal to the 
 company. In life insurance it is always necessary to remember that ' ' a surplus 
 is more easily handled than a deficit". 
 
 The rate of interest assumed in calculating the net premium of the Policy 
 under consideration is three per cent., and it will be seen that the lower the 
 interest rate the higher the premium. The assumption of a low rate of interest — 
 that is, a rate that is sure to be earned and one that is at present exceeded — is 
 therefore a safe method. A life contract may run for fifty years and many 
 changes may take place ; the safe way is to put it on a safe basis and adjust it to 
 actual conditions as they arise.* The excess of interest over three per cent, can 
 be returned in dividends just as is the saving from mortality.! 
 
 Some Important Deductions. 
 
 The Table shows the necessity of large accumulations in regular, or reserve, 
 life insurance, and a study of it should convince any one of the unreasonableness 
 of the prejudice that exists respecting such accumulations. A life insurance 
 
 *It will be seen later on that if a man insured at age 25, lived to age 75, and left the 
 proceeds of his policy to a daughter aged 25, who in turn lived to age 75, the same presumption 
 as to interest rate would need to hold good for 100 years. 
 
 fEarly premiums of the New-York Life were based upon the Carlisle Table with interest 
 at 4 per cent. Later the American Table was used with interest at the same rate. In 1892 
 the American Table with interest at 3% per cent, was adopted. The American 3 per cent, was 
 adopted for certain policies in 1896, and at a later time for all new policies. The Table and rate 
 of interest established by law for the valuation of policy liabilities has had to be kept in mind. 
 Massachusetts first enacted such a law in 1859 and adopted the Actuaries' Table with 4 per 
 cent. Interest. New York adopted the American TaTjle with interest at 4% per cent, in 1860, and 
 changed to the Actuaries' Table with 4 per cent, in 1880. The latter is now used to value 
 policies issued prior to January 1, 1901; policies issued subsequent to that date are valued 
 by the American Table with interest at 3% per cent., except that a company may issue policies 
 on a 3 per cent, basis and have them so valued. See Sec. 84, Insurance Law of New York, 
 given on page 120. 
 
14 Studies in Practical Life Insurance 
 
 company issues its contracts agreeing to do certain specific things and is held to 
 a rigid accountability in the fulfilment of its contracts. The carrying out of 
 these contracts involves certain definite accumulations and the Company makes 
 them. The careless critic sees that they are large and at once assumes that they 
 are larger than is necessary, and that larger dividends should be paid. The poli- . 
 tician sees in them a source of revenue for the State and advocates heavier taxes. 
 The student of these figures will see that these large accumlations are necessary 
 to carry out the contracts made, and the State law requires the Company to keep 
 on hand these amounts.* 
 
 We have now found that any number of persons may be insured at age 35 
 at a net annual premium of $21.08, and that this net premium together with 
 interest on accumulations at 3% per annum will pay all death-losses as they 
 occur. In the same manner we may find the net annual premium for each age. 
 But note this — each age takes care of itself, because it is there that the law of 
 mortality operates— not upon the average age. For example: if a company 
 were organized for each age and insured the number living by the mortality 
 table at that age, it is plain that the net premiums and interest received by each 
 such company would exactly pay the death-losses of each. The company com- 
 posed of young policy-holders could not help the company composed of old 
 policy-holders. Each would provide for its own death-losses. But having 
 charged each man the cost of insuring at his own age, there would be no injustice 
 in putting all ages together and putting all the money into one fund and paying 
 the losses of all ages from it. Bach man pays for his own risk and each policy 
 is paid at maturity. This is what is done in a life insurance company, t 
 
 The Loading foe Expenses, Taxes and Contingencies. 
 
 Having satisfied ourselves that $21.08 per year from persons insuring at 
 age 35 will pay the death-losses of all such persons as they occur, we now 
 take up the subject of "loading". The gross premium charged in this Policy 
 is $28.11, showing that the loading is $7.03, or 33 1/3.% of the net premium. 
 This charge is to cover expenses, taxes and contingencies. Here again, it is 
 desirable to provide enough, and any surplus arising from this source — as well 
 as from excess of interest and from mortality savings — is available for distri- 
 bution in dividends. It is also necessary, in order to cover contingencies, to 
 have a surplus. No one would wish to insure in a company that had only just 
 enough funds to cover its actual liabilities. 
 
 *See Sec. 84, Insurance Law In Appendix. The abatement of the full amount during the 
 first four years will be discussed later. 
 
 •f-Sub -standard risks are insured under various plans — by charging an extra, by rating 
 them at a higher age than the actual age, or by putting them in a special class and apportion- 
 ing surplus on the basis of the actual mortality experienced. 
 
 The bearing of this table upon co-operative, or assessment, insurance should not escape 
 the attention of even the casual reader. The point is — cost of insurance is determined by age, 
 and any system that fails to take account of this fact and to provide adequately and scien- 
 tifically for it, is only laying up trouble for itself and disappointment for its adherents. 
 Average age is no guide to the cost of insurance. For example, the death-rate per 1,000 at age 
 35 is 8.95 and at age 70 it is 61.99. The death-rate among 2,000 persons, 1,000 of each age, 
 would therefore be 8 9 ° + 61 " = 35.47. Their average age, however, would be 52%, and at 
 age 53 the death-rate per 1,000 is only 16.33. As the death-rate increases more rapidly than the 
 age the death-rate among a, large number of persons of .different ages will always be higher 
 than the death-rate at the age corresponding to the average age. 
 
Studies in Practical Life Insurance 15 
 
 While the distribution of surplus is the next thing provided for in the 
 Policy, that subject will be more easily understood after other policy features 
 have been discussed. 
 
 We will retain the numbering of clauses used on pages 2 and 3 in the Policy, 
 but will group the various benefits and provisions according to subject matter. 
 
 The Contract— Its Integrity— Its Good Faith. 
 Sections 1, 2, 3, 4. 
 
 1. The Contract.— It seems superfluous to say that the Policy is free of 
 conditions as to residence, travel, or occupation, and that it constitutes the 
 entire contract, when no such conditions appear, and no other paper is referred 
 to as a part of the contract. But such conditions and such references have been 
 so much used in life policies until recently that it seems necessary to empha- 
 size their omission. Under former conditions the insured needed copies of the 
 application and medical examination in order to have the entire contract. The 
 following States still require a life company to furnish the Insured with copies, 
 not only of the application and medical examination, but also of every paper 
 signed by the Insured in connection with the issue of the Policy: Colorado, 
 Illinois, Indiana, Massachusetts, North Dakota, Ohio, Oklahoma, Washington. 
 The restrictions and the warranties formerly contained in the application and 
 medical examination, while apparently necessary in the earlier stages of the 
 business, opened the door to endless litigation. Restrictions were gradually 
 relaxed until they were finally abandoned by the leading companies, and when 
 the State of New York adopted a standard Policy in 1907, restrictions were 
 allowed for only one year. By the amended law in effect January 1, 1909, cer- 
 tain standard provisions were substituted for the section prescribing standard 
 policy forms.* 
 
 2. Incontestability. — The early policies were contestable for many causes. 
 When the incontestable clause was first introduced it usually specified what the 
 Policy would not be contested for. The present form states the causes for which 
 the Policy may be contested and excludes all others. The causes allowed under 
 the New York Law are non-payment of premium, and violation of conditions of 
 the Policy (if it contains any) relating to military or naval service in time of 
 war. The maximum limit in the law is two years. According to the ruling of 
 at least one court, a Policy incontestable from date of issue may always be con- 
 tested for fraud, but if it is incontestable after a specified time the presumption 
 is that, the company having had opportunity to discover fraud— if there was 
 any — and bring action to annul the contract, is estopped from pleading fraud 
 after the time limit expires, t 
 
 Under a New- York Life Policy incontestability means that if the person 
 
 •The New-York Life began the issue of unrestricted policies in 1892, S. C. H. 303. The 
 standard provision of the New York law on this point is as follows: Sec. 101, "3. A provision 
 that the -policy shall constitute the entire contract between the parties, but if the company 
 desires to make the application a part of the contract it may do so provided a copy of such 
 application shall be endorsed upon or attached to the policy when issued, and in such cases the 
 policy shall contain a provision that the policy and the application therefor shall constitute 
 the entire contract between the parties." 
 
 ■fReagan vs. Union Mutual Life Ins. Co. 189 Mass. 555. 
 
16 Studies in Practical Life Insurance 
 
 insured is the person examined (that is, if there was no substitution), if he is 
 really dead, and if the Policy was in force according to its terms when death 
 occurred, it will not be contested.* 
 
 3. <S 'elf '-Destruction.— All the early policies contained a clause making them 
 null and void with forfeiture of all payments to the Company in case of suicide, 
 and under this clause much litigation arose, t It was sometimes impossible to 
 determine whether the Insured came to his death by his own hand, by accident 
 or by the hands of others. The sanity of the deceased was sometimes in doubt, 
 and the injustice of contesting the payment of a Policy long in force was ap- 
 parent. The subject was treated by different companies in different ways; some 
 States made laws on the subject. The strenuous competition of 1892-1905 did 
 much to liberalize the practice of companies on this and other points. The New 
 York Standard Life Policy of 1907 allowed a restriction of liability by reason of 
 suicide during one year; the "standard provisions" enacted in 1909 made the 
 maximum term two years. As the New-York Life's incontestable clause takes 
 effect one year from date, the period of its limited liability in case of self- 
 destruction is made to correspond. That there may be no forfeiture of money 
 the Company returns the premium paid in such cases.} 
 
 4. Age.— Of all methods of adjustment in case of misstatement of age this 
 seems fairest. There is no penalty — simply an adjustment of the real risk to 
 the actual amount paid. Three other methods have been used: if the age was 
 understated (1) consider it fraud, or (2) require payment of difference in 
 premium with interest; (3) if age was overstated return excess payments with 
 interest. The first was harsh and unjust; the second was to the Insured in the 
 nature of paying for a dead horse ; under the third the Insured did not receive 
 for a part of his money what he intended to purchase — namely, insurance. The 
 method here used is simple, direct, and its fairness is apparent. 
 
 Contract Changes — op Beneficiary — to Other Forms. 
 Sections 7, 8 and 13. 
 
 7. Change of Beneficiary.— Next in importance to the question of being 
 insured at death is the question, to whom shall the insurance be paid? It will 
 be noticed that this Policy is made payable "to the wife of the Insured with right 
 of revocation ' '. It might have been made without such right — the Insured has 
 his choice. It might be in favor of a child or other dependent whose dependence 
 would be only temporary. Experience has shown that policies with the right of 
 revocation provide for more contingencies than those without it. Unless the 
 Insured gives up the right, the Policy is always under his control. 
 
 8. Privilege of Change to Other Forms of Policies.— There are sometimes 
 "misfits" in life insurance. The "best Policy to take" depends upon circum- 
 
 *The first incontestable clause used by the New-York Life was adopted in June, 1889, and 
 became operative after two years. In 1892 a one year clause was adopted, and In 1899, an 
 incontestable-from-date-of-issue clause was adopted. (S. C. H. pp. 250, 303, H. p. 30). The 
 present one year clause was adopted in 1907, in order to comply with the Massachusetts statute. 
 
 fThe New-York Life eliminated the suicide clause from its policies in 1850, but it was 
 retained by many companies until 1892 and after. 
 
 JFor other historical data see S. C. H. 35 L 161, note. 
 
Studies in Practical Life Insurance 17 
 
 stances and circumstances change. The young man who needs all the insurance 
 he can carry at Ordinary Life rates insures under an Ordinary Life Policy. By 
 and by he is making big money and he would like to pay up his insurance 
 within a definite period, or perhaps change to an Endowment Policy. This clause 
 gives him the privilege provided he is under 60 years of age. 
 
 10. Assignment.— The Insured may wish to pledge his Policy for some 
 temporary purpose ; in that case an assignment may be used instead of changing 
 the beneficiary. The Company assumes no responsibility for the validity of 
 any assignment — but pays it to whoever may be adjudged to be the owner 
 at maturity. 
 
 13. Paid-up and Endowment Options. — By reference to the table on page 
 108 it will be seen that the reserve on the Policy constantly approximates 
 the face of the Policy and reaches it at age 96. Sometimes a policy-holder lives 
 that long. The New-York Life had one such case in 1908, one in 1909, and 
 one in 1911, and although there was no such stipulation as this in the contracts 
 the Company paid the policies to the living. They were insured until the plan 
 on which they were insured was complete and the face of their policies was in 
 the Company's hands. 
 
 In our examination of the net premium we found that a certain amount in 
 hand, called the net single premium, would pay all future death-loss charges 
 on the Policy. Now it sometimes happens, when the Insured uses his dividends 
 to purchase paid-up insurance, that the reserve on the face of the Policy, 
 together with the reserve on the dividend additions, equals the net single 
 premium long before age 96. In that case the policy-holder would have the 
 right to have his Policy endorsed as paid-up and no more premiums need 
 thereafter be paid. This is an additional inducement to use dividends in this 
 way — the first being that they continually add to the insurance carried under 
 the Policy. 
 
 Keeping the Contract in Force. 
 Sections 5, 6, 12, 9 and 14. 
 
 5. Payment of Premiums. — We come now to the specific duty of the policy- 
 holder — the one thing he has to do under this Policy in order to make it effective 
 — he must pay the premiums as stipulated — if he wishes the Policy to go on as 
 contemplated. We saw in our examination of the premium rate that this is 
 payable yearly in advance, hence the treatment of unpaid quarterly and semi- 
 annual premiums at death will be readily understood. The meaning of the 
 last sentence in this clause is that when the time expires to which a premium 
 is paid some other provision of the Policy must come into operation if it is to 
 be kept in force. We shall see later what these other provisions are. Premium 
 payments are facilitated in this way: Policy-holders living in the vicinity 
 of the Home Office pay their premiums there. The Company has Branch 
 Offices in the principal cities of the country, and the territory is parceled out 
 among them. At least fifteen and not more than forty-five days before a 
 premium falls due a notice is sent to the Insured, in accordance with the 
 Law of New York State, notifying him that a premium on his Policy will fall 
 
18 ' Studies in Practical Life Insurance 
 
 due on such a day, where it may be paid and the renewal receipt obtained.* 
 In some cases policy-holders are notified that they may pay premiums at certain 
 banks. The purpose is to make the payment of premiums as convenient as 
 possible. 
 
 Men insure their lives because life is uncertain, but as soon as a contract is 
 made to insure life it is seen that many other things are uncertain, and that the 
 contract must provide for these things if it is to do what men really wish to 
 have done when they insure. If the Insured pays his premium as agreed the 
 contract goes on, but the thoughtful man asks — What if I fail to pay it on the 
 day it is due ? The first answer is — 
 
 6. Grace.— The provision is practically a loan— automatically made by the 
 Company at five per cent, interest. It may run a month, if desired, and if the 
 premium falls due in February the month is considered as including thirty days. 
 The interest charge and the deduction of the year's premium in ease of death 
 during the month simply carry out the plan upon which the premium rate is 
 calculated.! The practice of the New- York Life is, as soon as the month of 
 grace begins to notify the policy-holder of that fact ; to call his attention to the 
 interest charge; and to state the date upon which the month of grace will ex- 
 pire. After the expiration of the month of grace, if the premium remains 
 unpaid, a letter is sent by the Premium Cashier at the Home Office, or by 
 the Cashier of the Branch Office where the premium is payable — as the case may 
 be — urging its payment and saying : "If you find it inconvenient to do this, 
 kindly let me know what amount of cash you can remit, and how long a time 
 you will need to meet the entire amount, and I may be able to suggest some plan 
 by which you can keep your Policy in force. ' ' What plan would be suggested 
 would depend upon conditions, but every indulgence is granted consistent with 
 the rights of both parties to the contract. 
 
 12. Premium Loans.— One of the methods used is set forth in this section. 
 It provides for a loan to the amount of the premium due without the deposit of 
 the Policy and without the formalities incident to obtaining a regular policy 
 loan. The Company simply requires that the loan and interest shall not exceed 
 the total cash surrender value of the Policy. J 
 
 9. Reinstatement.— The three foregoing sections provide methods of keep- 
 ing the Policy in force when it is impossible to pay the premium at the time it 
 falls due. This section supposes the Policy to have lapsed for non-payment by 
 any of these methods. Even if it had no surrender value it would be better to 
 have it reinstated than to take a new Policy, because it is so much nearer the 
 non-forfeiture stage and the larger cash values. If therefore the insured fur- 
 nishes evidence of insurability satisfactory to the Company and pays the back 
 premiums with interest, his Policy is placed in the same position as if it had not 
 lapsed. Systematic and persistent efforts are made to induce men to reinstate 
 lapsed Policies. 
 
 •Insurance Law, Sec. 92 — Appendix. 
 
 fOver two hundred thousand premiums were paid directly to the Home Office in 1909 and 
 the amount of interest received on premiums thus paid during the month of grace was over 
 $8,000. T. H. 97. 
 
 JThe total amount of Premium Loans of all companies in the United States on December 
 31, 1909, was $27,242,938. 
 
Studies in Practical Life Insurance 19 
 
 14. Benefits on Surrender or Lapse.— We have now considered every 
 available method of keeping the Policy in force on the original basis. Suppose 
 all these fail — what then? Suppose the time comes when the Insured either 
 wishes the value of his Policy in cash or in insurance, without the payment of 
 any more money. This section, together with the "Table of Loan and Surren- 
 der Values ' ' on page three of the Policy shows what he would receive, provided 
 he had paid two or more years ' premiums. These benefits are based upon the fact 
 that the Policy has a certain cash value and that this value may be taken either in 
 cash or in insurance ; and if in insurance it may be either for the face amount of 
 the Policy during a limited period, or for a smaller sum of insurance which will 
 continue until death. The option of continued insurance for the face amount 
 of the Policy is made automatic if no choice is made. It is assumed that if 
 the Insured has any choice he will exercise it ; but that if he has no choice, or is 
 unable to make it by reason of illness, absence or forgetfulness, then continued 
 insurance for the larger amount will best protect his interests. 
 
 The Cash Surrender Value and the surrender charge will be treated of in 
 connection with our examination of the "Table of Loan and Surrender Values". 
 
 The Contract as a Bank Credit. 
 Section 11. 
 11. Cash Loans. — Section eleven . provides for cash loans. This assumes 
 that the premiums continue to be duly paid, and that the cash surrender value 
 of the Policy is drawn against somewhat as a bank account might be, or as 
 one might borrow at the bank by pledging bonds or stocks as collateral 
 security. This was first allowed by law in New York in 1892. Prior to that 
 time Premium Notes might be received by the Company for a part of the 
 premiums falling due, but the Company was not permitted to loan money on 
 its own contract obligations, although they might be very valuable. Compara- 
 tively few Policies were issued with provisions for cash surrender value, except 
 after a period of ten years or more ; hence the Insured might have much money 
 locked up in his Policy and yet be unable to avail himself of any portion of it in 
 a time of need.* 
 
 Loan and Surrender Values— Surrender Charge. 
 
 "We will now consider how the loan and surrender values, the amounts of 
 paid-up insurance and the time limits on term extension are arrived at. Turning 
 to page 108 it will be seen from the last column of the Table that the Company 
 has on hand at the end of each year for each $1,000 insurance of this kind a 
 certain amount of money called the reserve fund, or the reserve. The various 
 values guaranteed in the Policy and shown in the ' ' Table of Loan and Surrender 
 Values" are based upon the amount of the reserve held by the Company for each 
 $1,000 insurance at the end of various years. 
 
 •The amount of Policy Loans by all companies in the United States on December 31, 
 1909, was $419,033,530. The amount thus loaned by the New-York Life Insurance Company 
 was nearly $70,000,000. The Policy Loan Division of the Home Office consists of a Superin- 
 tendent and a clerical force of thirty-seven persons. Over 80,000 cases are handled in a year. 
 The Policies deposited as collateral security, are cared for by the Division of Policy Loan 
 Securities, consisting of a Superintendent and a clerical force of twenty-nine. The Division 
 has the exclusive use of a fire-proof vault 29 x 30 x 12 feet, furnished with steel cabinets. 
 
20 Studies in Practical Life Insurance 
 
 In making up this Table the Company has been governed by three con- 
 siderations—the equities of the ease, the non-forfeiture laws of the various States 
 and the practice of other companies. It might be said, the equities of the case 
 should be a sufficient rule ; but equity is a relative term here and has been estab- 
 lished by changing custom. Under life Policies as originally issued, no cash 
 value or paid-up insurance was promised; if the premium was not paid as 
 agreed the Policy lapsed and all payments thereon were forfeited. But usage 
 soon bettered the contract— the companies began to give paid-up insurance and 
 to pay surrender values ; then they promised them in the policies ; and then the 
 States began to enact laws governing surrenders.* 
 
 It has been assumed from the beginning that the insuring company is en- 
 titled to a "surrender charge" if the Insured asks for the value of his Policy 
 in either cash or insurance— unless he has been insured during a considerable 
 period of time. No law has ever required a surrender value of any kind unless 
 at least two years' premiums have been paid. No State now requires non-for- 
 feiture provisions until three years' premiums have been paid, but all allow 
 companies to pay surrender values earlier at their option. Canada, on the other 
 hand, requires policies to be non-forfeiting after three years and does not allow 
 the issue of policies guaranteeing surrender values until three years' premiums 
 have been paid. The laws of every State base the surrender value upon the 
 reserve, either by a specified standard or by the standard upon which the Policy 
 is issued, and all allow a surrender charge,— that is to say, a deduction is allowed 
 to be made from the reserve and the balance is the cash value which may b& 
 either received in cash or used to purchase paid-up or temporary insurance. The 
 surrender charge allowed under most State laws is 2y 2 % of the amount insured. 
 In one State it is 3% of the insurance. Sometimes it is 20% of the reserve or a 
 percentage of the insurance, whichever is greater ; in one State it is 20% of the 
 reserve; and in Massachusetts it is "5% of the present value of the 
 future net premiums which by its terms the Policy is exposed to pay 
 in case of its continuance". "While these laws are not always appli- 
 cable to the companies of other States, it is desirable to keep within the- 
 limits they prescribe. The reason for allowing a surrender charge is that the 
 Insured has entered into a contract which has cost the Company considerable- 
 money to secure ; that the contract gives the Insured the right to stay in the Com- 
 pany for life — the Company cannot withdraw from it ; that those who choose to> 
 withdraw are likely to be the best risks, while those who are conscious of any im- 
 pairment of health are likely to remain to claim the benefit of their contracts. 
 Life insurance can only be carried on by the co-operation of many persons; all 
 enter into the plan of co-operation upon equal terms, all known inequalities being 
 adjusted in the contract. But the contingencies against which they insured 
 begin to happen immediately — some die, the health of others becomes impaired,. 
 Those who withdraw must make good to those who remain the loss thus caused.. 
 The surrender charge is supposed to represent this loss, or the cost of securing* a. 
 new member in place of the one who withdraws. 
 
 •For early history on this subject see S. C. H. pp. 58-63. 
 
Studies in Practical Life Insurance 21 
 
 Computing Paid-up Insurance Values. 
 
 Having stated the law and the facts we now come back to the Table in the 
 Policy under consideration to see how they are harmonized. Under the laws the 
 Company is not required to allow a surrender value during the second year, and 
 is not allowed to do so in Canada. In the States, however, practically one-half of 
 the reserve is allowed as a surrender value after two years' premiums have been 
 paid. The reserve in this case is $26.13, the cash or loan value is $13 ' per 
 $1,000. The amount of paid-up life insurance shown in "Column 2" for this 
 year is the amount which, according to the law, as applied to other years, the cash 
 value will purchase used as a net single premium at the attained age of the 
 Insured. The attained age here is 37 years, when the net single premium per 
 $1,000 is $435. We have then the proportion— $435 : $1,000 : : $13 : $29. 
 
 The same general rule is applied in determining the time for which the 
 insurance will be continued under option (b), but not quite so easily. The 
 cash value is used as a net single premium but the time cannot be determined 
 by a single proportion. The present values of the cost of insurance must be 
 calculated year by year until the money is used up. The Insured is now aged 
 37. At age 37 the risk of death is the number dying in that year divided by 
 the number living at the beginning of the year according to the Mortality Table, 
 or 80353 . This gives the decimal .009234; therefore for an insurance of $1,000 
 one must pay 1,000 times this decimal or $9.23. Discounting this for one year 
 at 3% we have $8.96, which carries the insurance for one year. Only $4.03 
 now remains. By a similar process we shall find the cost of $1,000 insurance at 
 age 38 to be $9.41, the present value of which, discounted at 3% for two years is 
 $8.87. For less than one year the proportional method may be used, and we have 
 8.87 : 12 : : 4.03 : 5.4. As the Company is giving more than the law requires the 
 nearest full month is used. 
 
 At the end of the third year we have a cash value of $32 and the insurance 
 is extended three years and seven months. We may verify this in the same 
 manner. We begin now with age 38. The process may be outlined as follows : 
 Divide the number dying by the number living to get"the probability of dying; 
 multiply this decimal by 1,000 to get the cost of insuring $1,000 during that 
 year; multiply the result by the present value of $1 due in the required 
 number of years. The result will be the present value of the cost of insurance 
 for that year. Continue this process until the sum of these present values 
 exceeds the sum you have to expend. Take the sum of all except the last and 
 subtract it from the sum you have to expend and use the remainder as a factor 
 of the proportion with the present value of the cost of insurance for that year. 
 It works out as follows : 
 
 1st year -^^j X 1000 = 9.41 present value $9.14 
 2d vear ^1^2 x 100 ° = 9 - 586 Present value 9.04 
 3d year -^~ X 1000 = 9.79 present value 8.96 
 4th year -^^ X 1000 = 10.01 present value 8.89 
 
22 Studies in Practical Life Insurance 
 
 The sum of the first three of these terms is $27.14, and this deducted from $32 
 leaves $4.86. "We then have the proportion : 8.89 : 12 : : 4.86 ■: Answer 6.6. 
 
 Therefore $32 cash in hand at age 38 will extend an insurance of $1,000 
 for a period of three years and seven months.* 
 
 The Surrender Charge Examined. 
 
 Beginning with the third year the maximum surrender charge — and hence 
 the minimum cash value — is fixed by law, but a company may make the charge 
 less and the value more if it choose, and this is done here. The following table 
 shows the reserve at the end of the different years up to the tenth, fractional 
 parts of the dollar being omitted, the cash value, the surrender charge and the 
 percentage of the surrender charge to the reserve : 
 
 fear 
 
 Reserve 
 
 Cash Value ! 
 
 3ur. Charge 
 
 % 
 
 3 .... 
 
 $39 . . . . 
 
 $32 
 
 .... $7 
 
 .... 17.9 
 
 4 
 
 53 ... . 
 
 44 
 
 .... 9 
 
 17.0 
 
 5 
 
 68 ... . 
 
 58 
 
 .... 10 
 
 14.7 
 
 6 
 
 82 ... . 
 
 72 
 
 10 
 
 12.2 
 
 7 . . . . 
 
 98 ... . 
 
 113 . . . . 
 
 90 
 
 '108 
 
 8 
 
 8.2 
 
 8 
 
 .... 5 
 
 4.4 
 
 9 ... . 
 
 129 
 
 127 
 
 2 
 
 . . . . 1.6 
 
 10 .... 
 
 146 
 
 146 
 
 
 
 It will be seen that the surrender charge begins in the third year at 17.9% 
 of the reserve or less than 1.5% of the amount insured — the maximum surrender 
 charge stated in the Policy— and gradually diminishes until at the end of the 
 tenth year it disappears entirely. The amounts in "column 2" and the time 
 in ' ' column 3 ' ' are found for other years in the same manner as before. 
 
 It only remains to be shown that the surrender charge is within the terms 
 of the Massachusetts law. When three years' premiums have been paid on an 
 Ordinary Life Policy beginning at age 35, the Policy is exposed by its terms to 
 pay net annual premiums in the same proportion that a man aged 38 is exposed 
 to receive an annuity. The present value of such premiums is therefore obtained 
 by multiplying the amount of the net premium $21.08 by the value of an 
 "annuity immediate" of $1 at age 38. This value is $19,125 and the product 
 is $403.16. The surrender charge allowed in this case is therefore 5% of $403.16, 
 or $20.16, which is greater than the surrender charge made in the Policy. 
 
 We may in the same manner find the surrender charge for other years. For 
 example, at the end of the 6th year we would have the present value of $1 
 annuity immediate at age 41 ! (18.265) multiplied by $21.08=$385.03, 5% of 
 which is $19.25. In the same manner we should find the surrender charge allow- 
 able at the end of the 10th year to be $17.93. As the legal surrender charge 
 begins with a larger amount than the surrender charge actually made and de- 
 creases more slowly, it will always be larger. 
 
 Paying Death-Losses— Equivalent Values. 
 
 We have turned aside into many by-paths— suppositions of what the Insured 
 may do, and guarantees of what the Company will do in such and such cases— 
 
 •In actual office work tables are used which show the present value of extending insur- 
 ances at any age for one year, two years, etc. The above shows the principles upon which 
 such tables are based. 
 
Studies in Practical Life Insurance 23 
 
 but we have always come back to the main road, and now we are almost home. 
 We are almost to the end— an end which comes to every man whether he is 
 insured or not— for now we are to consider— 
 
 15. Modes of Settlement upon the Death of the Insured.— The Policy is 
 payable on its face to a Beneficiary named and in cash, but this Beneficiary may 
 have been changed, or an assignment may have been made. If there is an exist- 
 ing assignment of the Policy it is paid to the assignee in cash as his interest may 
 appear. If there has been a change of Beneficiary that fact will appear in its 
 proper place on page 4. If the Insured has selected any other mode of payment 
 than cash, that will also appear on page 4. The modes other than cash which the 
 Insured may select while living, or, in default of such selection, which may be 
 selected by the Beneficiary after the Policy becomes a claim, will now be con- 
 sidered. 
 
 (1) This mode provides that the Beneficiary receive interest on the net 
 sum payable, during her lifetime, and that the principal be paid to her legal 
 representatives or assigns. This is similar to the provision in a will that a wife 
 receive interest on a certain sum during her lifetime, which becomes a part of 
 the residuary estate at her death. 
 
 (2) This mode distributes by instalments the entire value of the Policy, 
 including interest on the unpaid portion during the years in which the distribu- 
 tion is made. This will therefore require a little examination. The question is — 
 For $1,000 in hand how much should the Company pay each year for two years, 
 three years, four years, etc., money being worth 3% 1 In short how did the 
 Company arrive at the figures in "column 2" under this option? In order to 
 pay $1 now and one dollar one year hence we must have in hand $1 plus the 
 present value of $1 due one year hence, or $1.970874; and if this amount will 
 enable the Company to pay two instalments of $1 each, $1,000 in hand will 
 enable it to pay as many dollars as 1.970874 is contained times in 1,000. Making 
 the division we get 507.39. To get the amount for any other number of years, 
 we have only to add to $1 the present values of $1 due in as many years as the 
 required number of payments less one and use the sum as a divisor as before. 
 For example, the sum of the first four amounts in the table of present values of 
 $1 on page 107 is $3.7171. Adding $1 for the first payment and dividing 
 1,000 by the sum gives $211.99, the amount to be paid annually for five years. 
 
 Twenty Instalments Certain and Annuity. 
 
 (3) This option provides for twenty payments certain, and for an annuity 
 of an equal amount as long as the Beneficiary may survive thereafter. First we 
 will consider the twenty annual payments certain. Let us see how much will be 
 required to pay $1 in cash and $1 at the end of one year, two years, etc., up to 
 nineteen. We may add to $1 the present values of $1 at the end of each year 
 up to nineteen, or we may take from the proper column on page 107 the 
 present value of $1 per annum for nineteen years and add this to $1. By either 
 method' we get $15,324. 
 
 Now we must find the sum in hand necessary to pay $1 per year during 
 the remaining years of the life of the Beneficiary — if she should live beyond 
 
24 Studies in Practical Life Insurance 
 
 the twenty years. The Insured under the present Policy is aged 35. If the 
 Beneficiary is two years younger and the Insured should die at age 50, the 
 Beneficiary if living would then be age 48. When twenty annual instalments 
 have been paid the Beneficiary — if living — will be 68 before another instal- 
 ment will be due. First we ascertain how many will outlive the twenty years. 
 The number living at age 48 (in the American Table) is 71,627, at age 68 it is 
 43,133. What amount must we have on hand for each of the 71,627 at age 48 
 in order to pay $1 per year for life to each one of the 43,133 who will be living 
 at age 68 ? We will first ascertain what amount we must have on hand twenty 
 years hence and then discount it for twenty years. When we considered the 
 subject of net annual premium we first found the present value of $1 per year 
 paid by the number living according to the mortality table from the age of 
 insurance until the end of life. It is obvious that the present value of $1 each 
 year to be received by the living will be the same as the amount of $1 per year 
 to be paid by the living. The present value of $1 per year to or from each of 
 the living from age 68 to the end of the table may be obtained as explained 
 in the former case, or we may take the value of an Annuity Immediate from 
 the table at age 68 ($8,381) and multiply it by the number of the living at that 
 age (43,133). By either method we shall get $361,497.67, which is the sum 
 necessary to pay $1 each to 43,133 persons aged 68 and $1 per year for each 
 year of life thereafter. Discounting this at 3% for twenty years gives 
 $200,152.58. Dividing this amount by 71.627 the number living at 48 gives 
 $2,794. 
 
 This, then, is the amount which must be on hand for each person at age 48 
 to pay $1 each annually for life to those living at age 68. We have already 
 found that the sum in hand necessary to pay $1 annually for twenty years is 
 $15,324. Adding these two amounts together we have $18.118 — which is the 
 sum we must have in hand in order to pay twenty annual instalments of $1 
 each and an annuity of $1 per year to the survivors of those living at age 
 48 when the payment of instalments begins. But we have on hand $1,000, 
 therefore we can make the instalment and the annuity as many dollars as 
 18.118 is contained times in 1,000, which is 55.19, the amount shown in the 
 table. 
 
 Value of the Instalment Option. 
 
 The wisdom of making a life Policy payable in instalments, or of the 
 Beneficiary choosing such a method of receiving the proceeds of a maturing 
 Policy is coming to be widely recognized. The Beneficiaries are not usually 
 persons who are accustomed to making investments, and the Policy often repre- 
 sents their all. They seldom need the full amount of the Policy at once— but 
 need just sufficient to cover current expenses. Under these options their money 
 is safely kept and interest is paid on the unused portion, and almost every con- 
 ceivable contingency is provided for— except that of a Policy too small to provide 
 for large needs! That can be remedied only by the Insured before he dies. 
 
 It will be noted that under certain circumstances payments will be made 
 semi-annually, quarterly, or monthly, if desired. When payments are made 
 
Studies in Practical Life Insurance 25 
 
 oftener than once a year no additional interest is allowed on this account. The 
 use of the money compensates the Company for drawing two, four or twelve 
 checks instead of one. The beneficiary has the benefit of safety and regularity 
 of income. Provision is made for a rate of interest in excess of 3% in case the 
 Company shall declare a higher rate upon funds so held. Policies upon which 
 there is an existing assignment, those under which the Beneficiary is a firm or 
 corporation, and policies under which the net sum payable is less than $1,000 
 are paid in cash.* 
 
 How Dividends May Be Used. ' | 
 
 It will be noted that the guarantees of the Policy under consideration relating 
 to dividends are the following: that it shall participate in the surplus of the 
 Company; that the portion of divisible surplus accruing on this Policy shall be 
 ascertained and distributed annually; and that this dividend shall be available 
 at the option of the Insured in either of four ways, which are fully set forth in the 
 Policy itself. A few comments may be helpful. Options one and two are practi- 
 cally the same, except in the case of policies upon which the premiums have all 
 been paid. Under option three the dividend would be used to purchase paid-up 
 insurance at the net single premium rate plus a loading which is the equivalent 
 of $2 annually per $1,000 of the insurance so purchased. To the net single pre- 
 mium is added the present value of an annuity immediate of $2 beginning at the 
 attained age. This- gives the premium rate at which the paid-up insurance is pur- 
 chased. Under option four dividends become in effect deposits with the Company 
 at interest, withdrawable on any anniversary of the Policy. The Insured does 
 not lose the dividend by failing to exercise his choice, as in that case option three 
 takes effect automatically. In other words if no choice is made the Company 
 adds the value of the dividend to the Policy in the form of paid-up insurance. 
 This is on the assumption that the Insured wishes the whole value of his Policy 
 to be in the form of insurance— which course is most advantageous to his estate 
 in case of death. 
 
 We have now explained in detail every provision of the Ordinary Life Policy 
 except the one last referred to — relating to dividends. As the method of appor- 
 tioning surplus to Ordinary Life Policies involves the business transacted under 
 other policy forms, we will defer a discussion of this method until other policy 
 forms are explained. We will now take up the 
 
 Limited-Payment Life Policy. 
 
 The following is a copy of the Twenty-Payment Life Policy, as issued by 
 the Company in 1911: 
 
 *ln order to facilitate the payment of death-losses, blanks to be used in furnishing proof 
 of death are furnished the family of the Insured by Branch Offices upon request. At the same 
 time the Home Office is notified. Here the matter is taken up by the Death-Loss Division, 
 which immediately collects from the difflerent bureaus all available information respecting the 
 Policy of the Insured necessary to determine three things (1) whether or not the Policy was in 
 force; (2) what amount is due under it; (3) who are the legal beneficiaries. This informatien 
 is arranged in order in a, file awaiting the arrival of proof of death, when the matter is at once 
 taken up for completion. About 8,000 death-losses are paid annually, involving in 1910 the 
 disbursement of over $23,700,000. 
 
26 
 
 Studies in Practical Life Insurance 
 
Studies in Practical Life Insurance 
 
 27 
 
28 
 
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Studies in Practical Life Insurance 
 
 31 
 
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32 
 
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 1 REGISTER OF CHANGE OF BENEFICIARY. 
 
 NOTE.— No change, designation, or d eel unit ion shall take ellect until endorsed an I his Policy by the Company at the Home Office. 
 
 DATE ENDORSED 
 
 BENEFICIARY 
 
 ENDORSED BY 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 - 
 
Studies in Practical Life Insurance 33 
 
 The provisions of this Policy will be found to be exactly the same as those 
 of the Ordinary Life except (l)"that the annual premium is $383.40, instead of 
 $281.10, and that instead of being paid annually during life it is to be paid every 
 year during the continuance of the Policy until premiums shall have been paid 
 for twenty full years, or until the prior death of the Insured; (2) that the 
 amounts of cash surrender and loan value and of paid-up insurance in the Table 
 on page 3 are larger in this Policy, and that the time for which the insurance 
 will be continued, — in case the payment of premiums is discontinued after two 
 years' premiums have been paid — , is longer. We will now examine into the 
 reason of this. 
 
 The Premium and the Loading. 
 
 It will be noted that this Policy insures during the whole period of life- 
 just as the Ordinary Life Policy does — the present value of the net premiums 
 to be received must therefore be the same as in the former case and these values 
 are obtained in the same way. The only point that need be discussed here is how 
 the Company may realize these values in twenty years. The present value 
 of the insurance costs of $1,000 insurance taken at age 35 or the net single pre- 
 mium, in that case was found to be $419,883. In order to get the equivalent of 
 this in equal annual payments from the living from age 35 to age 55 we first 
 find the present value of $1 paid by each person living according to the 
 Mortality Table during the twenty years beginning at age 35. We begin with 
 $1 each from the 81,822 persons living at age 35, or $81,822. At the end of the 
 first year $1 would be received from each of the 81,090 persons then living, and 
 this $81,090 would be discounted at 3% for one year. In the same way the 
 amounts to be received at the beginning of the years following would be dis- 
 counted until twenty payments of $1 each had been made. If we performed 
 these operations and added together the amounts thus obtained we should have 
 a total of $1,150,932,798, which is the present value of $1 each received in cash 
 from 81,822 persons living at age 35 and of $1 each annually thereafter from 
 the living until twenty payments have been made.* But we must have present 
 values equal to 81,822 x 419.883 or $34,355,666.826 ; therefore we must have from 
 each person annually for twenty years as many dollars as 1,150,932.798 is con- 
 tained times in 34,355,666.826. Performing the division gives 29.85; therefore 
 the net annual premium to be paid for twenty years is $29.85 per $1,000. As 
 the gross premium charged in this Policy is $38.34 per $1,000, the loading is 
 $8.49. The Ordinary Life loading is $7.03 or 331/3% of the net. This net 
 premium is the Ordinary Life net premium plus $8.77, which — with its loading 
 — is called the "higher premium element". If we deduct the Ordinary Life 
 loading from $8.49 we have $1.46, which is 16 2/3% of $8.77. In other words the 
 loading on the higher premium element is at one-half the Ordinary Life rate. 
 
 •If we divide $1,150,932,798 by 81,822 the quotient will be $14.06624, and this is the present 
 value of $1 in cash and $1 per annum during nineteen years or until prior death, from persons 
 beginning at age 35. This is called the present value of a. "Temporary Annuity Immediate" 
 during the period of twenty years. Tables have been constructed showing the present value 
 of a "Temporary Annuity Immediate", beginning at any age and continuing during any desired 
 period. Knowing what it means and how it is obtained, we may hereafter take these values 
 from such a table. 
 
34 Studies in Practical Life Insurance 
 
 Verifying the Reserves. 
 
 If we were to construct a table after the manner of the table on page 108 
 we should have in the last column the amount of reserve on hand for each $1,000 
 insured at the end of all the years following age 35. These amounts for the 
 first ten years would be as follows, omitting fractional parts of a dollar: 
 
 First year $22 Sixth year $143 
 
 Second " 44 Seventh " 170 
 
 Third " 68 Eighth " 197 
 
 Fourth " 92 Ninth " 226 
 
 Fifth " 117 Tenth " 255 
 
 While we have taken these figures from a Table of Terminal Net Values, they 
 may easily b<? verified. For example, 
 
 lit year's premiums $29.85 x 81,822 $2,442,386.70 
 
 Add one year's interest @ 3% 73,271.60 
 
 $2,515,658.30 
 Deduct 732 death-losses 732,000.00 
 
 $1,783,658.30 
 
 Divide by number of living 81,090 22.00 
 
 Second year — 
 
 Amount on hand $1,783,658.30 
 
 2d year's premiums 81,090 x 29.85 2,420,536.50 
 
 $4,204,194.80 
 Add one year's interest @ 3% 126,125.84 
 
 $4,330,320.64 
 Deduct 737 death-losses 737,000.00 
 
 $3,593,320.64 
 Divide by number of living 80,353 44.72 
 
 At the end of the twentieth year the Insured will all be age 55 and their 
 policies will all be paid in full, there must then be on hand for each the net single 
 premium for age 55 ; and the reserve at the end of each year thereafter will be 
 the net single premium for the attained age. The reason is obvious; the net 
 single premium is the amount of cash in hand at any age which will pay all 
 death-losses under policies issued at that age ; those who insure under a twenty- 
 payment life policy at age 35 and pay premiums for twenty years will pay no 
 more, but are now insured for life and will remain so. Hence at the beginning 
 of each year thereafter they will be in the same position as that of men newly 
 insured by the payment of the net single premium. 
 
 We have seen how the cost of an insurance for the whole life may be paid 
 for by twenty annual payments — simply by making the present values of those 
 payments equal the present value of the insurance. In a similar manner 
 we may arrange to collect these values in any specified number of years. 
 Limited-Payment Life Policies are accordingly issued which are paid up by 
 either five, ten, fifteen, twenty, twenty-five or thirty annual premiums. 
 
Studies in Practical Life Insurance 35 
 
 Effect of the Largeb Eeseeves. 
 
 We will now examine the Table of Loan and Surrender Values on page 3 
 of the Policy. If we compare the figures in Column 1 with the reserves already 
 given we shall have the following, omitting fractional parts of the dollar : 
 
 End of Year 
 
 Reserve 
 
 Cash Value 
 
 Surrender charge 
 
 2 
 
 $44 
 
 $29 
 
 $15 
 
 3 
 
 68 
 
 55 
 
 13 
 
 4 
 
 92 
 
 79 
 
 13 
 
 5 
 
 117 
 
 107 
 
 10 
 
 6 
 
 143 
 
 133 
 
 10 
 
 7 
 
 170 
 
 162 
 
 8 
 
 8 
 
 197 
 
 192 
 
 5 
 
 9 
 
 226 
 
 223 
 
 3 
 
 10 
 
 255 
 
 255 
 
 
 
 The cash value at the tenth year and thereafter is. the full reserve, omitting 
 fractional parts of the dollar. 
 
 As we have observed in considering the Ordinary Life Policy, the law 
 does not require a surrender value of any kind until three years' premiums 
 have been paid; the company allows approximately one-half of the reserve 
 as such value after two -years' premiums have been paid under the Ordinary 
 Life Policy and 66% under this Policy. The surrender charge under each 
 Policy at the third year is approximately 20% of the reserve and diminishes 
 until it reaches nothing at the tenth year. The decline is however more rapid 
 under the higher premium Policy, for the reason that the reserve is larger in 
 proportion to the insurance. The surrender charges have the following ratios to 
 the reserves : 
 
 Year Ordinary Life Pol. 20 Pay't Life Pol. 
 
 3 17.9% 19.1% 
 
 4 17.0% 14.1% 
 
 5 14.7% 8.5% 
 
 6 12.2% 7.0% 
 
 7 8.2% 4.7% 
 
 8 4.4% 2.5% 
 
 9 1.6% 1.3% 
 
 If we compare these surrender charges both with respect to the amount 
 per $1,000 insured and the percentage of the reserve, with the surrender 
 charges allowed by law — as we did those of the Ordinary Life Policy — we shall 
 find they are always smaller than the legal allowances. 
 
 The only point requiring special explanation is the manner of ascertaining 
 the surrender charge under the Massachusetts law, which is "5% of the present 
 value of all the net premiums which by its terms the Policy is exposed to pay." 
 At the end of three years "The Policy is exposed by its terms to pay" net 
 premiums of $29.85 for 17 years, hence we must use for the multiplier not the 
 present value of $1 paid annually during life — as in the case of the Ordinary 
 Life Policy — that is to say the "Annuity Immediate" — nor the present value 
 of $1 paid during twenty years or until death, if prior, that is the ' ' Temporary 
 
36 Studies in Practical Life Insurance 
 
 Annuity Immediate" — 20 years, age 35, — but the "Temporary Annuity Imme- 
 diate" — 17 years, age 38, which we may obtain from the table which we have 
 already learned how to construct. This value is $12,554. Multiplying this by 
 the net annual premium gives $374.74, 5% of which is $18.74, the maximum 
 surrender charge allowed by the Massachusetts law under this Policy at the 
 end of the third year. In the same manner we may find that it will always be 
 greater than the surrender charge made in the Policy. 
 
 The amount of paid-up insurances shown in column 2, and the time during 
 which the full amount of the insurance will be continued, in case the payment 
 of premiums is discontinued, may be verified in the same manner as under the 
 Ordinary Life Policy — no new principles are involved. 
 
 The Instalment Table is the same as in the Ordinary Life Policy. 
 
 Prior to the introduction of non-forfeiture conditions practically the only 
 forms of Policy issued were the Ordinary Life and the Term Policy, the latter 
 being a Policy which only undertook to insure during a limited period. The 
 reason is obvious: Limited-Payment Life premiums are necessarily higher and 
 no one would be willing to risk the forfeiture of the larger values in case of 
 a forced discontinuance of premium payments. But with non-forfeiture con- 
 ditions in the Policy and correspondingly larger values allowed upon lapsed 
 Policies, the advantage of paying up a Policy within a limited time appealed 
 to would be insurers. The first non-forfeiting Policies were all of the Limited- 
 Payment variety — either life or endowment.* 
 
 "We will now consider the 
 
 Twenty- Year Endowment Policy. 
 
 The following is a copy of this form of Policy as issued by the New-York 
 Life Insurance Company in 1911 (see page 38) : 
 
 The text of this Policy will be found the same as that of the life policies 
 already discussed except (1) that it is made payable in cash to the Insured at 
 the end of twenty years, if he be then living, and to the Beneficiary on proof of 
 death prior to the end of the twenty years; (2) that the premium is $519.10 
 annually for twenty years; (3) that the "Privilege of Change to Other Forms 
 of Policies" is omitted, as it is not necessary; and (4) that the Table of Loan 
 and Surrender Values on page three is different. 
 
 Computing the Premium for Insurance. 
 
 We will first consider the premium rate. It is obvious that we now have a prob- 
 lem somewhat different from those which preceded. It isn't a question now of 
 providing for insurance during life, but only for a term of years ; and there is 
 the added problem of providing for payment of the face of the Policy at the 
 end of twenty years. If we turn to the Mortality Table we shall find that of 
 the 81,822 persons living at age 35, 17,259 will die during the next twenty 
 years and 64,563 will be living at age 55 ; our problem therefore is to provide an 
 insurance of $1,000 each for the 17,259 to be paid as they die, and $1,000 each 
 
 •See S. C. H., pages 58-62. 
 
Studies in Practical Life Insurance 37 
 
 twenty years hence for the 64,563 who will survive, and then to apportion the cost 
 in equal annual payments to the living. 
 
 First we will ascertain the present value of an insurance of $1,000 for 
 twenty years upon the lives of each of 81,822 persons. We begin as in the case 
 of the Ordinary Life Policy. The number dying during the first year is 732, 
 and $732,000 must be paid at the end of the first year, the present value of which 
 is $710,679,768. Deaths in the second year will be 737 and the present value 
 of $737,000 due two years hence is $694,693,252. In the same manner we may 
 obtain the present values of the insurances to be paid at the end of each of the 
 twenty years. If we were to perform all these operations and take the sum of 
 the results we • would have $12,553,331.24 as the present value of these 
 insurances.* How much must the living pay annually to make equivalent 
 values 1 We first find the present value of $1 per year from each, the first dollar 
 to be paid at once. This gives the series of the number living multiplied by $1 
 and the amounts discounted thus: 
 
 }81,822 paid in cash $81,822.00 
 
 $81,090 discounted for one year 78,728.173 
 
 $80,353 discounted for two years 75,740.416 
 
 etc., etc. 
 
 If we complete the series we shall have $1,150,932.80 as the present value 
 of $1 per year from each of the living for twenty years. We get the same 
 result by multiplying 81,822 by $14.06624, the value of a Temporary Annuity 
 Immediate for 20 years at age 35. But the present value of the insurances for 
 twenty years is $12,553,131.24, therefore each must pay as many dollars annually 
 as 1,150,932.80 is contained times in 12,553,131.24. Performing the division we 
 get 10.907, hence the net annual premium for a Term Insurance of $1,000 for 
 twenty years beginning at age 35 is $10.91. 
 
 Computing the Premium for Endowment. 
 
 The present value of 64,563 endowments of $1,000 each due in 20 years is 
 $64,563,000 discounted for twenty years (64,563,000 x .553676) or $35,746,- 
 983.59. t We have already found that $1 annually from each of the living for 
 twenty years will produce present values equal to $1,150,932.80 ; hence to pro- 
 duce the required amount each must pay annually as many dollars as 1,150,- 
 932.80 is contained times in 35,746,983.59. Performing the division we get 
 31.059, hence the net annual cost of the endowments will be $31.06. But since 
 each man wishes the insurance if he dies and the endowment if he survives, they 
 may be combined in the same contract by paying the cost of both. Adding 
 
 ♦If we divide this sum by the number of the living at age 35 we shall get $153.42 the 
 amount of cash in hand from each necessary to provide an insurance of $1,000 for twenty 
 years beginning at age 35. This is the Net Single Premium for a Term Insurance of twenty 
 years at age 35. 
 
 flf we divide this number by the total number living at age 35, we will get $436.89, and' 
 this is the amount which each would need to pay in cash for an endowment of $1,000 each to 
 the living twenty years hence. This is therefore the net single premium for a 20-year Pure- 
 Endowment taken at age 35. 
 
38 
 
 Studies in Practical Life Insurance 
 
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 NOTE. -No change. dealgnAton, or declaration shall lake eflect until endorsed en this Policy by the Company at the Home Office. 
 
 DATE ENDORSED 
 
 BENEFICIARY 
 
 ENDORSED BY 
 
 
 
 
 
 
 
 
 
 
 
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Studies in Practical Life Insurance 45 
 
 together the net annual costs we have ($10.91 + $31.06) $41.97 as the net annual 
 premium for a twenty-year endowment insurance of $1,000 taken at age 35.* 
 
 The gross- annual premium on this Policy is $51.91 per $1,000, the 
 loading is therefore $9.94. If we deduct the Ordinary Life Loading for same 
 age— as in case of the Limited-Payment Life Policy— we have $9.94 less 
 $7.03 = $2.91. The excess of this net premium over that of the Ordinary Life 
 rate at same age is ($41.97 — $21.08) $20.89. The excess loading is therefore 
 practically 14% of the excess premium. The question arises — why is not the 
 same rule followed as before? The answer is — such was formerly the custom, 
 but under the Wisconsin law of 1907 no life company may do business in that 
 State if its loadings on Endowment Policy premiums exceed one-third of the 
 net premiums on Limited-Payment Life Policies paid-up by a corresponding 
 number of premiums. We have already seen that the net annual premium for 
 a 20-Payment Life Policy at age 35 is $29.85, therefore the loading of a 20- Year 
 Endowment Policy at that age may not exceed $9.95. 
 
 Table of Loan and Sueeender Values. 
 
 If we were to make up a table from the net premium on this Policy — show- 
 ing premiums received, interest received and death-losses paid until the end of 
 twenty years— as in the case of the Ordinary Life Policy — we should have in 
 the last column amounts representing the reserve fund on hand per $1,000 
 insured at the end of each year. These amounts are used in case of discontinu- 
 ance of the payment of premiums — as in each of the preceding policies — in one 
 of three ways, at the option of the Insured, and if no choice is made they are 
 applied automatically to do as nearly as may be what the Insured originally 
 set out to do. First let us see if the Company is complying with the law as to 
 the surrender charge. We give below a table showing (1) the reserve at the 
 end of each year, (2) the cash surrender, or loan value, (3) the surrender charge. 
 
 Vear 
 
 Reserve 
 
 Cash Value 
 
 Surrender charge 
 
 2 
 
 $70 
 
 $55 
 
 $15 
 
 3 
 
 101 
 
 92 
 
 15 
 
 4 
 
 145 
 
 133 
 
 12 
 
 5 
 
 185 
 
 175 
 
 10 
 
 6 
 
 2i26 
 
 216 
 
 10 
 
 7 
 
 269 
 
 26-2 
 
 7 
 
 8 
 
 313 
 
 308 
 
 5 
 
 9 
 
 359 
 
 357 
 
 2 
 
 10 
 
 407 
 
 407 
 
 
 
 Although the law does not require any value to be given until three years ' 
 premiums have been paid, the Company allows nearly 80% of the reserve at 
 the end of the second year. At the third year the surrender charge is $15 per 
 $1,000 (14% of the reserve), and after that it declines to 0. As all the 
 
 •In insurance text-books the Insurance part of this contract is called Term Insurance, and 
 the endowment part Pure Endowment. When combined they make an Endowment Insurance; 
 "but Pure Endowments are so seldom issued, except in connection with an insurance for the 
 same period that, such a policy is usually spoken of simply as an Endowment Policy. Having 
 learned how the net single premium and the net annual premiums are obtained both for Term 
 Insurances and for Pure Endowments, it is now to be noted that such premiums for many 
 ages and for many periods have been carefully calculated and are available in tables, which 
 -we may have occasion later to consult. 
 
46 Studies in Practical Life Insurance 
 
 States having laws on the subject— except Massachusetts— allow a surrender 
 charge of at least $25 per $1,000 insured or of 20% of the reserve, it only 
 remains to ascertain if ' ' five per cent, of the present value of all the net premiums 
 which the policy is by its terms exposed to pay", is ever less than $15. In the case 
 of the 20-Payment Life Policy we found that the highest surrender charge allowed 
 at the end of the third year, when the net premium was $29.85 was $18.74. With 
 a net premium in this case of $41.97, and the other factors the same, the sur- 
 render charge allowable would be found by the following proportion : 
 
 29.85 : 18.74 : : 41.97 : answer. 
 In short it would be greater than $18.73, hence the surrender charge here is 
 less than the law allows. 
 
 Paid-up Endowment Insurance.— Having settled upon the amounts in hand 
 at the end of various years, it now remains to be seen what these amounts will 
 purchase, first — in endowment insurance due at the end of eighteen, seventeen, 
 sixteen, etc., years. We have already seen how the net single premiums may 
 be calculated for any age and any period, and so we may take what we now 
 require from the tables which are accessible in print. By reference to such a 
 table we find the net single premium per $1,000 for an 18-year term insurance 
 at age 37 is $147.17, and that the net single premium at age 37 for a pure endow- 
 ment due eighteen years hence is $471.97. The sum of the two is $619.14, and 
 this will purchase at age 37, an endowment insurance of $1,000 due at age 55 
 or at prior death. Going to market with $55 in our purse, how much can we 
 buy at this rate ? We have the proportion : 
 
 619.14 : 1,000 : : 55 : the answer. 
 
 Performing the operations required we get $88.83, and the Policy says $89. 
 
 The other amounts of paid-up endowment insurance may be verified by 
 similar calculations. 
 
 But when we get to market we may conclude to expend our $55 in the pur- 
 chase of a temporary insurance of $1,000. How long will this amount carry 
 the insurance ? Here we follow the same method as explained under the Ordinary 
 Life Policy. We ascertain the cost of $1,000 insurance for each year, beginning 
 with age 37, adding them together as we go along, until the difference between 
 the sum and $55 is less than the cost of the next year's insurance. Then the 
 balance is used to buy insurance for as many months as it is twelfths of the 
 cost of insurance for that year. 
 
 If we used the tables we would note the cost of term insurance at age 37 
 for one year, two years, etc., until we came to an amount greater than $55. The 
 amount preceding this would be the cost of the full years' insurance, the balance 
 would be applied as before explained to obtain the number of months additional. 
 
 At the end of the fifth year we shall find that we have enough to pay for the 
 insurance for fifteen years and have a little money left ($39.17) and with that 
 we would purchase a pure endowment due fifteen years hence. To ascertain 
 how much it would be we would either calculate the net single premium for a 
 pure endowment for $1,000 taken at age 40 and due fifteen years hence, or take 
 the amount from the tables. We should find this to be $530.57. We would then 
 
Studies in Practical Life Insurance 47 
 
 have the proportion 530.57 : 1000 : : 39.17 : answer. Performing the opera- 
 tion we get 73.82. 
 
 The Instalment Tables are the same as in the Ordinary Life Policy. 
 
 We have now learned how to find the net single and the net annual premium 
 both for term insurance and for a pure endowment, at different ages and for 
 different periods. Endowment Insurance Policies are issued with 10, 15, 20, 25, 
 30, 35 or 40 year periods, and the net single and net annual premiums are found 
 by adding together the cost of their two component parts. 
 
 Summary of the Discussion. 
 
 Reviewing the ground we have gone over, we find that Life Insurance pro- 
 ceeds upon the following assumptions and demonstrations : 
 
 1. A standard mortality table expresses with a reasonable degree of accu- 
 racy the death-rate which may be expected among a large number of lives at each 
 age of adult life. Knowing the death-rate at each age we may compute the cost 
 of insuring against the contingency of death during any year of life. 
 
 2. This cost increases from year to year until it reaches 100% of the insur- 
 ance; but the cost of a whsle life insurance may be paid for by equal annual 
 payments, either during whole life or during a fixed period, by making the 
 present value of such payments equal to the present value of the insurance. 
 As the cost of insurance is an increasing cost, if it is paid for by equal annual 
 payments, such payments in the earlier years of the insurance will be greater 
 than the current cost of the insurance, and in the later years less than the cur- 
 rent cost; the overpayments of the early years must therefore be accumulated 
 at compound interest at the rate assumed in computing the present value of 
 the insurance and the present value of the payments to be made therefor. 
 
 3. These accumulations are fixed with mathematical accuracy by the mor- 
 tality table and the rate of interest assumed in computing the present value of the 
 insurance and the present value of the annual payments to be made therefor; 
 they are always equal to the difference between the present value of the insur- 
 ance and the present value of the payments yet to be made ; the accumulations 
 on each Policy continue to increase from year to year as long as the Policy 
 remains in force, or until the Insured reaches the age at which the mortality 
 table used in computing them ends, when they become equal to the insurance. 
 
 4. These accumulations constitute the Policy reserves of the insuring com- 
 pany ; they are an essential part of the provision made for the ultimate payment 
 of the policies at maturity, and are a part of such payment; they are the basis 
 of the Policy guarantees respecting cash surrender value and paid-up, and ex- 
 tended insurance, in case the annual payments by the Insured are discontinued ; 
 the holding of reserves is by the law of the State necessary to the solvency 
 of the insuring company. 
 
 5. The annual payments computed as above upon certain rates of mor- 
 tality and interest to provide for death-losses are called net annual premiums ; 
 the expenses of administration are provided for by an addition to the net 
 
48 Studies in Practical Life Insurance 
 
 annual premium called the loading; the loading is supposed to provide for all 
 other contingencies including unexpected losses and to be sufficient, in the 
 case of policies participating in the surplus of the Company, to provide for 
 certain returns in the form of dividends ; the sum of the net premium and the 
 loading is called the gross premium, or the office premium, and this is the 
 premium written in the Policy as the consideration for the insurance contract. 
 
 6. In the case of an Endowment Policy, provision is made in the net 
 premium for the present value of the insurance during a fixed period and for 
 the present value of an endowment of equal amount in case the insured survives 
 until the end of the period. These present values are separately computed and 
 the sum of the net premium for the insurance and the net premium for the 
 endowment is the net premium for an endowment insurance. To this net pre- 
 mium is added a charge called the loading for expenses, taxes and contingencies 
 and, in the case of the New-York Life, for dividends, and the sum is the gross, or 
 office premium, written in the Policy as the consideration for the contract of 
 endowment insurance. 
 
 7. The same conditions as to overpayment and accumulation obtain under 
 endowment policies as under whole life policies, until the end of the endowment 
 period. « 
 
 8. While the net premiums with interest are intended to be sufficient to 
 provide for all death-losses and endowments, and while the loadings are intended 
 to be sufficient to provide for all other expenditures, yet their computation only 
 marks the several steps taken to ascertain the gross premium, in consideration of 
 which the Company undertakes the contract. The gross premiums and all other 
 items of income go into a common fund from which all disbursements are made. 
 While the law takes account of the component parts of the gross premium in 
 determining a limit for expenses, it does not require that these component 
 parts shall be used for the specific purposes had in view in their computation. 
 On the contrary, it specifically provides that certain assumed mortality gains 
 and certain gains from lapses may be used in acquisition expenses, and that 
 a contingency reserve may be built up within certain limits by savings or sur- 
 plus from any source whatsoever. This surplus is available for any needs of 
 the Company. In short, a life company undertakes, with the money it receives 
 from all sources, to carry out its contracts in accordance with the provisions of 
 law under which it operates. 
 
 In the following chapter we shall show how the assumptions of mortality, 
 interest, loading, expenses of administration, etc.— which find place in the gross 
 premium— are adjusted to the facts as they find expression in the actual experi- 
 ence of the Company. 
 
CHAPTER II. 
 
 APPORTIONMENT OF SURPLUS. 
 
 Legal Requieements. 
 
 The three representative Policies which we have considered in the fore- 
 going-chapter provide that they shall participate in the surplus of the Com- 
 pany, and that the proportion of surplus accruing to each shall be ascer- 
 tained and distributed annually and not otherwise. The latter clause is the 
 language of the statute of the State, which provides further that the surplus 
 ■earned shall be ascertained as soon as may be practicable after December 31 of 
 ■each year ; that after setting aside from such surplus such sums as may be required 
 (1) for the payment of authorized dividends upon capital stock (in the case 
 of companies having capital stock) and (2) of such sums as may properly be 
 held for account of existing deferred dividend policies, and (3) for a contin- 
 gency reserve not in excess of the amount prescribed in the same article, — the 
 remainder shall be apportioned to all other policies entitled to share therein.* 
 
 It will be seen that the "determination of the surplus to be equitably appor- 
 tioned to a single annual dividend policy involves a consideration of the entire 
 business operations of the Company for the year. "We must not be surprised 
 therefore if our study takes us over a good deal of ground. But we should bear 
 in mind that our purpose is not so much to determine the amount of the annual 
 •dividend as it is to study the methods by which it is arrived at. So let us go 
 forward patiently step by step. 
 
 The normal sources of surplus in life insurance are four : 
 
 1. An expense rate lower than that provided in the loading ; 
 
 2. A death-rate lower than that provided for in the net premium ; 
 
 3. An interest rate higher than that assumed in calculating the premium 
 {this rate including net profits on investments) ; 
 
 4. Excess of Policy reserve on Policies discontinued, over the returns made 
 on such Policies. 
 
 Before a dividend can be paid on a life Policy the following items must be 
 provided for: (a) the Policy's share of the expenses of the Company; (b) the 
 Policy's share of the death-losses; (c) the Policy's legal reserve at the end of 
 the year; and (d) such contributions to the contingency reserve as may be judged 
 necessary and proper by the Trustees of the Company. As these various factors 
 are in a large degree prescribed by law, it will be necessary before entering 
 upon an examination of the sources of surplus from which these dividends were 
 •derived, to examine the provisions of law which direct: (1) how expenses are to 
 be limited and apportioned; (2) what rate of mortality may be assumed; (3) 
 what reserves may be held at the end of various years and what must be held; 
 and (4) how a contingency reserve, or unappropriated surplus, may be built up 
 and maintained within certain maximum limits. 
 
 ♦Insurance Law, Sec. 83. 
 
50 Studies in Practical Life Insurance 
 
 Limitation of Expenses. 
 
 We have seen that the provision made in the premium for expenses and 
 contingencies— the loading— is the same in all years during the premium- 
 paying period. But the expense of inducing people to apply for life insur- 
 ance policies is very much greater than the expense of caring for the policies, 
 and this greater expense is all incurred in the first year. Agents' first year's 
 commissions, the cost of medical examination and of inspection and other 
 expenses connected with the acquisition of new business, exceed the loading 
 in the first year 's premium. One of the most serious problems of life insurance 
 management has been the proper apportionment of first year 's expenses. 
 
 As the mortality is much less than the normal during the first five years, 
 it is advantageous to a life company to secure new business even at an outlay 
 greater than the loading. The law takes account of this and makes a distinc- 
 tion between the expense allowable in the first, and in subsequent, years of 
 insurance as follows : 
 
 First year's expenses must not exceed (a) the loadings upon first year's 
 premiums, plus (b) the present values of the assumed mortality gains for the 
 first five years of insurance on policies in force at the end of the calendar year, 
 as ascertained by the select and ultimate method of valuation as provided in 
 section 84, plus (c) the gross premiums on policies issued and terminated 
 during the year less the net cost of insurance while in force. 
 
 Renewal commissions and collection fees are limited — (a) on endowment 
 policies payable by less than twenty annual premiums — to five per cent, for 
 fourteen years ; (b) on other forms of policies — to seven and one-half per cent, 
 for nine years and five per cent, for the next five years; (c) on all policies after 
 the first fifteen years— to a collection fee not exceeding three per cent. 
 
 Total expenses are limited to (a) total loading on premiums received, plus 
 (b) assumed mortality gains, plus (c) an amount for investment expenses not 
 exceeding one-fourth of one per cent, on mean invested assets, plus (d) real 
 estate taxes and other outlays exclusively on real estate.* 
 
 Assumed Mortality Gains. 
 
 The "assumed mortality gains" spoken of in connection with the expenses 
 on new business will be understood from the following resume of section 84, on 
 Valuation of Policies: The Superintendent shall make annually valuations on 
 the net premium basis of the policy contracts of all companies doing business 
 in the State. The legal minimum standard for contracts issued prior to 
 January 1, 1901, shall be the Actuaries' Table of Mortality with interest at 
 4% per annum; and for contracts issued after that day the American Table 
 with interest at 3^2%, provided that the legal minimum valuation of all con- 
 tracts issued on or after January 1, 1907, shall be in accordance with the select 
 and ultimate method, and on the basis that the rate of mortality during the 
 first five years after the issuance of the said contracts respectively shall be 
 calculated according to the following percentages of the rates shown by the 
 
 *For the full text of Section 97 — Limitation of Expenses — see Appendix, page 128. 
 
Studies in Practical Life Insurance 51 
 
 American Table, to wit, first insurance year 50%, second year 65%, third year 
 75%, fourth year 85%, fifth year 95%. The. superintendent may vary the 
 standards of interest and mortality in the case of corporations from foreign 
 countries as to contracts issued in other countries than the United States; and 
 in particular cases of invalid lives and other extra hazards. 
 
 The legal minimum standard for the valuation of annuities issued after 
 January 1, 1907, shall be McClintock's "Tables of Mortality Among Annui- 
 tants", with interest at 3%%, but annuities deferred ten years or more and 
 written in connection with life or term insurance* shall be valued on the same 
 mortality table from which the consideration of premiums were computed with 
 interest not higher than 3y 2 %. 
 
 Any life insurance company may voluntarily value its Policies or any class 
 thereof, according to the Americdn Experience Table * * * * at a lower rate of 
 interest than that prescribed, but not lower than 3%, and with or without ref- 
 erence to the select and ultimate method of valuation, and in every such case 
 shall report any excess of its valuations over those computed by the legal mini- 
 mum standard and also the standards used by it in making the same, and if such 
 other standards are adopted they shall not be abandoned without the written 
 consent of the Superintendent of Insurance A 
 
 Particular attention is called to the matter in italics, because the New- York 
 Life varies its standard in the case of sub-standard lives, lives insured in tropical 
 and sub-tropical countries, and uses the American Table of Mortality with 3% 
 interest in calculating the reserves on the Policies now under consideration, but 
 does not avail itself of the abatement in the reserves allowed by the select and 
 ultimate method at the end of the first, second, third and fourth years. 
 
 A condensed statement of Section 87, relating to contingency reserve, or 
 unappropriated surplus, is as follows : A domestic life company may accumulate 
 and maintain, in addition to the net value of its policies computed according to the 
 standard adopted by it under Section 84, a contingency reserve not exceeding 
 the following percentages : The largest percentage is 20% or $10,000, whichever 
 is greater— when net values of its Policies are $100,000 or under. The per- 
 centage decreases as net values increase until the minimum of five per cent, 
 is reached when net values exceed seventy-five million dollars. Accumulations 
 held on account of deferred dividend policies are not considered as a part of the 
 contingency reserve. 
 
 The Select and Ultimate Method op Valuation. 
 
 The select and ultimate method of valuation is an attempt to fix the maxi- 
 mum amount that may safely be expended by a life company for new risks in 
 excess of the first year's loading— in view of the lower mortality of such risks 
 during the first five years of insurance. It allows a company to expend during 
 the first year the present value of these assumed mortality gains, and to hold 
 a smaller reserve per $1,000 at the end of the first, second, third and fourth 
 years of insurance. The method, according to its author, Mr. Miles Menander 
 
 *Such as we have already considered in the payment of life and endowment policies. 
 fFor the full text of Section 84, see Appendix, page 120. 
 
52 Studies in Practical Life Insurance 
 
 Dawson, "charges the company with its' actual liability, as nearly as possible, 
 allowing for selection. The effect of it, as compared with the full net premium 
 reserves by the usual formula, is to allow the gains from mortality during the 
 first five years as an offset to the initial expense incurred in securing those fresh 
 lives * * * After the fifth year the reserves * * * * are the full net premium 
 reserves by the usual formula. ' '* 
 
 As the net premium is calculated upon the assumption that the full table 
 rate of mortality will be experienced and the full reserves held at all times, we 
 must now consider: (1) how much less than the amount provided will be neces- 
 sary for death-losses; (2) how much more will be received in net premiums 
 from the larger number of living; and (3) how much more will be needed as a 
 reserve for the larger number of living at the end of five years. The following 
 table shows the number living and dying, and the present values of the death- 
 losses in each year at the table rate of mortality : 
 
 Age Living Dying Losses Present Values 
 
 35 81,822 732 $732,000 $710,679.77 
 
 36 81,090 737 737,000 694,693.25 
 
 37 80,353 742 742,000 679,035.36 
 
 38 79,611 749 749,000 666,476,. 76 
 
 39 78,862 756 756,000 652,132.40 
 
 40 78,106 
 
 Total present values $3,402,017.54 
 
 The following table shows the same items by the select and ultimate method : 
 
 Age Living Dying Losses Present Values 
 
 35 81,822 366 $366,000 $355,339.88 
 
 36 81,456 481 481,000 453,388.68 
 
 37 80,975 561 561,000 513,394.66 
 
 38 80,414 643 643,000 571,297,. 14 
 
 39 79,771 726 726,000 626,254.13 
 
 40 79,045 
 
 Total present values $2,519,674.49 
 
 The new figures of living and dying are obtained as follows: The first 
 year we have the number of living as in the table; the mortality being 50% 
 of the normal the number dying will be half the number of dying by the table. 
 The new number of living at age 36 is 81,822 less 366 = 81,456. The table rate 
 of mortality for age 36 is (the number of dying divided by the number of living) 
 the decimal .009089, and the select and ultimate rate is 65% of this, or .00591, 
 and at this rate the number of deaths among 81,456 will be 481. Deducting this 
 number from 81,456, we get the next number of the living and proceed as before. 
 The amounts are discounted for one, two, three, four and five years respectively 
 by using the decimals from the table of values of one dollar due in one, two, 
 three, etc., years. 
 
 The following table shows the excess number of living at each age over the 
 numbers of the Mortality Table— who will pay net annual premiums of $21.08 
 on the Ordinary Life Policy : 
 
 Age Excess No. Amount of Prems. Present Values 
 
 36 366 $7,715.28 $7,490.56 
 
 37 622 13,111.76 12,359.09 
 
 38 803 16,927.24 15,490.83 
 
 39 908 19,140.64 17,006.21 
 
 40 939 
 
 Total present values $52,346 . 69 
 
 ♦Mr. Dawson was Actuary to the Armstrong Committee. 
 
Studies in Practical Life Insurance 53 
 
 There are now 939 more living than the table shows and the reserve for 
 each $1,000 insurance at the end of the fifth year is $68.16 ; hence the additional 
 reserve required will be $64,002.24, the present value of which is $55,208.84. 
 To sum up — we have — 
 
 Present values provided in net premiums at 
 regular mortality rates $3,402,017 . 54 
 
 Additional present values provided in net pre-. 
 
 miums by larger number of living 52,346 . 69 
 
 Total $3,454,364.23 
 
 Of which there will be needed — 
 
 Present value of death-losses by select and 
 
 ultimate method $2,519,674.49 
 
 Reserves for additional number living five 
 years hence 55,208 . 84 
 
 Total $2,574,883.33 
 
 Excess of present values provided over those needed for death-losses and 
 reserves, $879,480.90. As there was $81,822,000 insurance taken at age 35 this 
 gives an "assumed mortality gain" of $10.75 for each $1,000. 
 
 The assumed mortality gains under a Twenty-Payment Life Policy taken 
 at age 35 are found in a similar manner to be $10.52, and those under a Twenty- 
 Year Endowment Policy, $10.21. 
 
 The reserve at the end of each of the first four years by the select and 
 ultimate method may be obtained in the same manner as shown in the table on 
 page 108. We begin, as- in the table— with 81,822 persons insured. But as 
 $10.75 is assumed mortality gains and is set aside for first year's expenses out 
 of the first net premium, the amount received for death-losses and reserves the 
 first year is $21.08 less $10.75 = $10.33. We then proceed as in the first table. 
 The amount received the first year for our present purpose will be 
 
 81,822 x $10.33 = $845,221.26 
 
 Add one year's interest 25,356 . 63 
 
 Total $870,577.89 
 
 Deduct death-losses 366,000 .00 
 
 Balance $504,577 . 89 
 
 Dividing this by the number living (81,822 — 366) 81,456 gives $6.19 the 
 reserve per $1,000 by the select and ultimate method at the end of the first 
 year. After the first year the full net premium is used with the number living 
 and dying as shown by the select and ultimate method above. The reserves 
 per $1,000 insured for the Policies under consideration by the American Table 
 and by the select and ultimate method are shown as follows : 
 
 End of Ordinary Life 20-Payt. Life 20-Year Endt. 
 
 Tear A. T. S. & U. A. T. S. & U. A. T. S. & TJ. 
 
 1 $12.88 .. $6.19 .. $22.00 . 
 
 2 26.13 .. 22.32 .. 44.72 . 
 
 3 39.76 .. 38.04 . . 68.20 . 
 
 4 53.77 .. 53.33 .. 92.46 . 
 
 5 68.16 .. 68.16 .. 117.52 . 
 
 $15.50 .. $34.59 
 41.06 .. 70.40 
 66.56 .. 107.50 
 92.05 .. 145.91 
 
 117. ©2 .. 185.71 
 
 $28.35 
 
 66.92 
 
 105.93 
 
 145.50 
 186.71 
 
 At the end of the fifth year the full reserve is held on each policy, and 
 although the number of policies is now greater than in the table on page 108 
 
54 Studies in Practical Life Insurance 
 
 the reserve for each Policy is in hand and the net annual premiums will be here- 
 after paid by each, so it does not matter whether the number is great or small— 
 the reserve, together with the net premiums and interest, will pay all death- 
 losses as they occur. 
 
 What we have just gone over has its bearing on the question of dividends 
 in this way— it shows that if the full amount allowed by law is used in first year's 
 expenses there will be no surplus at the end of the first year from (a) loading, 
 nor from (b) mortality gains actually realized. All that remains of premium 
 and interest at the end of the first year is $6.19 per $1,000, the small reserve 
 allowed by the select and ultimate method. Moreover, there will be no surplus 
 from mortality gains during the next four years, because such gains have 
 already been appropriated to bring the reserve up to the regular table rate at 
 the end of the fifth year. Still further— we have not charged the new Policy in 
 its first year with its proportion of the general expense of the company. 
 
 As the law allows the whole present value of assumed mortality gains to 
 be used for first year's expenses, and makes no provision for general expenses 
 in the first policy year, it virtually authorizes a company to pay those expenses 
 out of surplus— in other words, to borrow this amount from the other policy- 
 holders, assuming that it will be made up in the years following. We shall 
 see the bearing of this assumption and how the loan may be adjusted as we 
 proceed with our study of the policies under consideration. 
 
 Ascertaining the Expense Rate. 
 
 In order that we may follow these policies through several years we will 
 assume that they were written in 1908, and will now ascertain the actual expense 
 rate of the Company during that year under three heads (a) acquisition expenses 
 to be borne by new business only; (b) renewal expenses to be borne by old 
 business only; (c) general expenses to be borne alike by new and old business. 
 
 We give here a resume of the method by which expenses are apportioned to 
 old and new business and print in the appendix the full text as made up by the 
 Actuaries' Department of the Company. From the total disbursements shown in 
 the annual report to the Insurance Department are deducted the sums paid 
 policy-holders under all forms of contract. To the balance thus obtained are 
 added commissions paid on reinsurance premiums, such commissions and reinsur- 
 ance premiums not being included in income and disbursements for reasons ex- 
 plained on page 62. Prom this total are deducted (a) certain bookkeeping items 
 which appear in both the income and disbursement accounts (and so balance each 
 other) ; (b) certain items which are deducted from the interest account in making 
 up the net effective rate of interest '(including investment expenses) ; and (c) 
 expenses on annuities and on single premiums. The balance shows the amount of 
 insurance expenses to be assessed upon annual premiums for insurance. The 
 remaining items are divided into three parts according as they represent (1) 
 direct acquisition expenses, (2) renewal expenses, and (3) general expenses. The 
 following results are shown : 
 
 I. Direct acquisition expenses $2,722,672 
 
 II. Renewal expenses 1,076,472 
 
 III. General expenses 5,180,742 
 
Studies in Practical Life Insurance 55 
 
 We have already seen in our examination of the loading on Limited-Payment 
 Life Policies and Endowment Policies that it consists approximately of the Ordi- 
 nary Life loading plus one-half this rate on the excess of the premium over the 
 Ordinary Life premium. This excess is called the higher premium element. In 
 order to bring all premiums to a common basis for the assessment of expenses 
 an adjustment is made of other than Ordinary Life premiums as follows: To 
 an amount equal to the Ordinary Life element is added one-half the balance or 
 higher premium element. The same result is reached by adding together the total 
 premiums and the Ordinary Life element in all and taking half the sum. To 
 illustrate : the premiums on the three Policies under consideration are- 
 Ordinary Life $28.11 
 
 Twenty-Payment Life 38.34 
 
 Twenty-Year Endowment 51.91 
 
 Total $118 . 36 
 
 Ordinary Life element 28.11 x 3 84.33 
 
 One-half higher premium element (118.36 — 84.33).. 17.01 
 
 Total adjusted premiums on the 3 policies $101. 34 
 
 The sum of the three adjusted premiums is 84.33 + 17.01. 
 
 T , . , 118.36 + 84.33 
 It is also ~ 
 
 To the Company's ordinary renewal premiums are added the reinsurance 
 
 premiums, and the above adjustment is made with the following result: 
 
 I. Adjusted new premiums $4,808,000 
 
 II. Adjusted renewal premiums 61,505,000 
 
 III. Total adjusted premiums 66,313,000 
 
 Dividing the corresponding amounts of expenses by the amounts here shown 
 
 gives the following ratios of expense : 
 
 I. Ratio of acquisition expenses 56 . 63% 
 
 II. Ratio of renewal expenses 1.75% 
 
 III. Ratio of general expenses 7 . 81% 
 
 Considering the expense rate from its legal side we have the following :* 
 
 Total first year's expense margins $3,189,480 
 
 Total acquisition expenses 2,794,223 
 
 Ratio of acquisition expenses to expense margins.. 87.61% 
 
 Total expense margins on all business $18,143,194 
 
 Total expenses 9,867,161 
 
 Ratio of total expenses to total expense margins 54.38% 
 
 Ascertaining the Interest Rate. 
 
 We will now consider the interest rate, following the same method as in the 
 case of expenses. It should be noted at the outset that we are not seeking to 
 obtain the real rate of interest earned upon the Company's investments, but the 
 Net Effective Bate received, for the purpose of the dividend, upon the Policies 
 under consideration. If we were doing the former we should take the ledger 
 assets of the Company as the basis of our divisor ; but for our present purpose 
 we take a divisor based upon these liabilities of the Company which from their 
 nature need to earn interest. With this thought in mind the division of the 
 liabilities of the Company into (a) liabilities not required to bear interest, and 
 (b) liabilities normally drawing interest, will be understood.! 
 
 •dee N. Y. Ins. Report, business of 1908, page 216. 
 fSee Appendix, page 109. 
 
56 Studies in Practical Life Insurance 
 
 The amount of net effective interest includes all credit items of profit and 
 loss, and excludes all debits of a similar character, real estate expenses and 
 taxes, income tax on interest receipts and the cost of caring for investments. 
 The law allows for the latter one-fourth of one per cent, upon the mean 
 invested assets. In the first year (1907) after the law went into effect the 
 Company made the full deduction in determining expense ratios and net effective 
 interest rate. In 1908 it took three-sixteenths instead, and in 1909 it reduced it to 
 one-eighth. After making the proper adjustments the Net Effective Rate of 
 interest is found to be 4.225%. 
 
 This was the net effective rate derived from the entire funds of the Com- 
 pany ; but there were certain adjustments to be made by reason of a requirement 
 of the French Government— that certain investments for the protection of French 
 policy-holders should be made in French bonds. As these bonds bear a rate of 
 interest lower than that obtained from the Company's other securities, three net 
 effective rates of interest were obtained: (1) the rate shown above— obtained 
 from all the Company's securities; (2) the rate obtained by omitting the French 
 bonds from the calculation ; (3) the rate obtained from all securities deposited 
 with the French Government — assuming all except the bonds in question to 
 earn the rate (2). The rate applicable to the Policies under consideration is 
 rate (2), 4.238%. 
 
 No Dividend Earned in First Year. 
 
 We are now ready to consider how our three Policies issued in 1908, stand 
 at the end of the first year with respect to a dividend under the most favorable 
 assumptions possible. We give below the showing of each Policy assuming 
 (1) an acquisition expense rate equal to 87.61% of the expense rate allowed by 
 the law; (2) a general expense rate of 7.81%— the actual rate of the Company; 
 (3) the select and ultimate rate of mortality, and (4) the select and ultimate 
 reserve at the end of the year. 
 
 ORDINARY LIFE POLICY. 
 
 Premium received $28 . 11 
 
 * Acquisition expenses $15 . 58 
 
 General expenses 7.81% of premium 2.20 
 
 Total expenses 17 . 78 
 
 Balance $10.33 
 
 Add interest at 4.238% .44 
 
 Total $10.77 
 
 tDeduct net cost of insurance 4.45 
 
 Balance $6.32 
 
 Select and ultimate reserve 6.19 
 
 Surplus $0 . 13 
 
 * The legal expense margins are: loading $7.03, assumed mortality gains $10.75; total 
 $17.78, of which 87.61 per cent, is $15.58. 
 
 t The net amount at risk is $1,000 less the reserve on hand at the end of the year. The 
 cost is found by multiplying the net insurance $994 by the risk of death .004473 — which is 50 per 
 cent, of the table rate. 
 
Studies in Practical Life Insurance 57 
 
 TWENTY-PAYMENT LIFE POLICY. 
 
 Premium received $38.34 
 
 * Acquisition expenses $16. 65 
 
 tGeneral expenses 7 . 81% 2.59 
 
 Total expenses 19 . 24 
 
 Balance $19 . 10 
 
 Add interest at 4 . 238% .81 
 
 Total $19.91 
 
 JDeduct net cost of insurance 4 . 40 
 
 Balance $15 . 51 
 
 Select and ultimate reserve 15 . 50 
 
 Surplus $0.01 
 
 *The , legal expense margins are: loading $8.49, assumed mortality gains $10.52, total 19.01, 
 of which 87.61% is $16.65. 
 
 ■{•Calculated on the adjusted premium 28.11 -\- 38.34 = 33.22. 
 
 i 
 
 {The net insurance — $1,000 — 15.50 = $984.50. 
 
 TWENTY-YEAR ENDOWMENT POLICY. 
 
 Premium received $51 . 91 
 
 * Acquisition expenses $17.65 
 
 tGeneral expenses 7.81% 3 . 12 
 
 Total expenses 20.77 
 
 Balance $31 . 14 
 
 Add interest at 4.238% 1.32 
 
 Total $32.46 
 
 Deduct net cost of insurance 4.35 
 
 Balance $28 . 11 
 
 Select and ultimate reserve 28.35 
 
 Deficit $0.24 
 
 * The legal expense margins are: loading $9.94, assumed mortality gains $10.21, total 
 $20.15, of which 87.61 per cent, is $17.65. 
 
 t Calculated on the adjusted premium 28.11 -I- 51.91 = 40.01 
 
 2 
 
 Under these favorable assumptions the three policies show as a whole a 
 slight deficit. Nevertheless the Company does not stand to lose anything — 
 because it still has on hand a small balance from each and if the second pre- 
 mium is not paid no reserve will be needed. It is obvious that no dividend can 
 properly be declared on them, because if declared it must be paid whether the 
 second premium is paid or not. 
 
 This Result Foreseen. 
 
 The Officers of the Company foresaw that this would be the case when it 
 resumed the issue of annual dividend policies, in 1906, in anticipation of the 
 
58 Studies in Practical Life Insurance 
 
 law taking effect in 1907, and it sent out with each Policy a notice to that 
 effect, in order to prevent disappointment on the part of policy-holders. The 
 Company also took early steps to devise a proper method of accounting with 
 annual dividend policies during the first five years of their existence. During 
 these years these Policies confessedly stand in a different relation to the Com- 
 pany — that is to say, the whole body of policy-holders — from that which they 
 afterward occupy — first in reference to acquisition expenses, second in refer- 
 ence to mortality, and third in reference to profits from discontinued policies. . 
 The law assumes that the first difference will be offset by the second; but it 
 takes no account of general expenses in the first year, nor of the profits from 
 lapses — which are chiefly in the first five years, both because of the larger pro- 
 portion of lapses during those years and because of the larger surrender charge 
 in proportion to the reserve. It virtually assumes that one of these will offset 
 the other. 
 
 The New- York Life did not wish to avail itself of the permission of the 
 law to hold a reserve smaller than the full table rate, nor did it wish to assume 
 a mortality in accordance with the select and ultimate method. It preferred 
 to set aside the full reserve — which the law allows it to do — and to be guided 
 by its own mortality and lapse experience. It has been in business over sixty- 
 five years and has constructed from its own experience a mortality table repre- 
 senting a large part of that experience in each year of insurance from the first 
 to the twentieth. This might be called the New- York Life 's Select and Ultimate 
 Table — it is called the "Compound Progressive Mortality Table". Assuming 
 these rates and its own experience as to lapses it worked out the problem in 
 advance and found: 
 
 1. That loadings on first year's premiums plus mortality savings and 
 profits from lapses during the first five years might safely be relied on to pay 
 both acquisition expenses and general expenses of the first year and to make 
 good the difference between the select and ultimate reserve and the full reserve ; . 
 
 2. That the Company might therefore safely set aside the full reserve at 
 the end of each year ; 
 
 3. That dividends might be apportioned after the first year from (a) sur- 
 plus from the loading, and (b) surplus from excess interest over three per cent, 
 on the reserve. 
 
 This method has several important advantages over a year by year esti- 
 mate of all the factors in the case: (1) It bridges over the hiatus left by the 
 law with respect to general expenses of the first year of insurance; (2) it leaves 
 the Company free to base the dividend upon factors which are fairly constant, 
 and which result normally in an increasing dividend each year; and (3) by 
 placing the full reserve to the credit of the Policy each year the cash surrender, 
 loan and insurance values may be made larger in the early years of the policies 
 than they could be if only the select and ultimate reserve were used.* 
 
 * The annual dividend policies issued by the Company in 1906 are now in their fifth year 
 and are showing the results assumed. 
 
Studies in Practical Life Insurance 59 
 
 Ascertaining the Dividend Earned in Second Year. 
 
 Let us now consider what dividends may be paid on the Policies in question 
 at the end of their second year. The Net Effective Rate of Interest for this 
 purpose in 1909 was 4.35%, and Expense Ratios were as follows: 
 
 I. Ratio of first year's expenses 56.13% 
 
 II. Ratio of Renewal expenses 1.79% 
 
 III. Ratio of general expenses 8 . 17% 
 
 The general expense ratio and the renewal expense ratio chargeable on these 
 Policies give a ratio of 9.96%. 
 
 Applying this ratio to the Policies under consideration we get the following 
 results : 
 
 ORDINARY LIFE POLICY. 
 
 1st item of surplus — from loading: 
 
 Loading from second premium $7.03 
 
 Expenses— 9.96% of $28.11 2.80 
 
 Balance $4.23 
 
 Add interest at 4.35% .18 
 
 Total $4.41 
 
 2d item of surplus- — from excess interest: 
 
 Reserve end of first year $12 . 88 
 
 Net premium received 21 . 08 
 
 Reserve end of second year: 26 . 13 
 
 $60.09* 
 
 Mean amount at interest $30 . 04 
 
 Interest, at 1.35% (4.35—3.00) 41 
 
 1. Surplus from loading $4 . 41 
 
 2. Surplus from excess interest .41 
 
 $4 82 
 Dividend 97% : . . $4.67 
 
 TWENTY-PAYMENT LIFE POLICY. 
 
 1st item — surplus from loading: 
 
 Loading from second premium $8.49 
 
 Expenses— 9.96% of 28.11 + 38.34 3.31 
 
 2 
 
 Balance $5.18 
 
 Add interest at 4.35% 22 
 
 Total $5,. 40 
 
 2d item — surplus from excess interest: 
 
 Reserve end of first year $22 . 00 
 
 Net premium received 29.85 
 
 Reserve end of second year 44.72 
 
 $96.57* 
 
 Mean amount at interest $48.28 
 
 Interest at 1.35% 0.65 
 
 1. Surplus from loading $5.40 
 
 2. Surplus from excess interest 65 
 
 Total surplus $6.0'5 
 
 Dividend 97% 5.86 
 
 *See note next page. 
 
60 Studies in Practical Life Insurance 
 
 TWENTY-YEAR ENDOWMENT POLICY. 
 
 1st item — surplus from loading: 
 
 Loading from second premium $9.94 
 
 Expenses 9.96% of 28.11 + 51.91 3.98 
 
 2 
 
 Balance $5.96 
 
 Add interest at 4.35% .25 
 
 $6.21 
 2d item — surplus from excess interest: 
 
 Reserve end of first year $34.59 
 
 Net premium received 41 . 97 
 
 Reserve end of second year 70.40 
 
 $146.96* 
 
 Mean amount at interest $73.48 
 
 Interest at 1.35% 0.99 
 
 1. Surplus from loading $6.21 
 
 2. Surplus from excess interest .99 
 
 Total surplus $7.20 
 
 Dividend 97% 6.98 
 
 Of course it was the duty of the Trustees to consider what part — if any — 
 of the surplus arising from these policies should be appropriated to contingency 
 reserve and what part to a dividend. Life insurance is a system based upon 
 averages — averages of lives, averages of years and averages of experience in 
 investing money, and the object is to produce from these averages certain 
 uniform results. The dividend declared by the Company upon these policies 
 was 97% of the total surplus arising in 1909 from the two sources named, and 
 100% of such surplus in 1910. The dividends as found above are those earned 
 in 1909 and paid in 1910. Those paid in 1911 on the three policies in question 
 were $4.82, $6.14 and $7.40 respectively. They may be verified by using the 
 expense ratio and net effective rate of interest for 1910, which are as follows : 
 
 Total expense ratio applicable to old business 1910 10.34% 
 
 Net effective interest rate for policies of this class. . . . 4.23% 
 
 We have now examined three representative policies clause by clause, to 
 ascertain just what they guarantee to the holder; we have gone over the mathe- 
 matical calculations upon which the different benefits are based; we have seen 
 how surplus earnings are apportioned; we have left the policies in force on the 
 books of the Company. It is now time to examine the business of the Company 
 as a whole, and this we propose to do in the following chapter. 
 
 *The sum of the reserve at the end of the first year and of the net premium received 
 at the beginning of the second year constitute the reserve at the beginning of the second year. 
 The mean amount at interest is therefore one-half the sum of these amounts and of the reserve 
 at the end of the second year. 
 
CHAPTER III. 
 
 REPORTS AND EXAMINATIONS. 
 
 The reader cannot do better at this point than to turn to the Appendix 
 and read sections 44, 45 and 103 of the Insurance Law. These sections (1) 
 impose the obligation to make annual reports, (2) give the Superintendent 
 authority to prescribe forms, and (3) declare that such reports shall contain 
 certain information specified. This does not prevent the Superintendent from 
 requiring much more— it makes it certain that certain information will not be 
 omitted. We will take up first the report required by the State of New York 
 and then indicate briefly the additional information required by the authorities 
 of other States and countries. 
 
 Outline of Annual Report. 
 
 The report of the New- York Life to the New York Insurance Department 
 for the year 1910 is a printed folio volume of 168 pages and consists of — 
 
 1. Income and Disbursements ; Assets and Liabilities in the form of a balance 
 sheet— beginning with the ledger assets of the previous year, and ending with 
 the gross assets as admitted by the Insurance Department; 
 
 2. An Exhibit of Policies, showing the number and amounts in force at the 
 beginning and end of the year and the changes during the year. This is made 
 for the State of New York on the basis of paid-f or business only ; for other States 
 — as their laws require— either on a paid-for basis or an issued basis ; 
 
 3. Business in the State of New York in brief— the copies going to other 
 States containing an exhibit of the business in those States ; 
 
 4. Gain and Loss Exhibit showing actual expenses, interest and mortality in 
 connection with legal allowances and office assumptions respectively ; the profits 
 from lapses and surrenders, gain and loss on investments, etc. ; 
 
 5. Premium Note account; 
 
 6. Schedule of cash and deposits of the Home Office with banks and trust 
 companies in the United States and Canada ; and cash with foreign banks, govern- 
 ments and Branch Offices ; 
 
 7. Special and General Deposit Schedules, showing in detail the securities 
 deposited with the authorities of different States and countries in pursuance of 
 legal requirements; 
 
 8. Real Estate Schedule, showing each parcel of property owned by the 
 Company, with particulars of cost, income, taxes and improvements; also de- 
 tails of all purchases and sales made during the year; 
 
 9. Mortgage Schedule, with description, location, etc., of each piece of 
 property mortgaged to the Company ; also an account of mortgage loans made, 
 increased, reduced, discharged or disposed of during the year; also showing the 
 amount loaned in each State and foreign country. 
 
62 Studies in Practical Life Insurance 
 
 10. Collateral Loan Exhibit, with similar information ; 
 
 11. Bond Schedule, showing in detail the bonds owned with book, par and 
 market values; date of purchase and from whom acquired, interest received, 
 etc. ; also separate schedules of all bonds acquired or disposed of during the 
 year, with the profit or loss on each lot sold ; 
 
 12. Schedule of Bank Balances, showing the largest balance carried in 
 each bank and trust company in each month of the year ; 
 
 13. Schedule of Contested Policies, showing name and residence of in- 
 sured, amount of Policy, reason for contesting; also all settlements of contested 
 cases made during the year; 
 
 14. Schedule of Salaries, Compensation and Emoluments of all persons or 
 corporations, to whom $5,000 or over was paid during the year; 
 
 15. Schedule showing all salaries paid for agency supervision; 
 
 16. Schedule showing all commissions paid on loans or on purchase or 
 sale of property during the year; 
 
 17. Schedule of Legal Expenses, showing amounts, to whom paid, and for 
 what service rendered; 
 
 18. Schedule of Expenditures, in connection with matters before legisla- 
 tive bodies, officers or departments of government; 
 
 19. Dividend Schedule, showing dividends paid under all forms of policies 
 in various years and for various ages; including explanations of the methods 
 by which dividends were calculated on all classes of policies ; 
 
 20. Schedule showing in detail all money expended in connection with the 
 election of directors. 
 
 21. In addition to this printed form Policy Valuation Schedules are fur- 
 nished, showing in groups by kind of Policy, amount of insurance, age of in- 
 sured, and years in force, the data necessary for making a complete valuation 
 of its Policy liabilities. 
 
 Income and Disbursements. 
 
 Having given this general outline of the Annual Report, let us dig into 
 the Income and Disbursement accounts a little. There are some items that will 
 need explanation, and here is a good place to show why some items are treated 
 as they are in the calculation of Net Effective Rate of Interest and the Expense 
 Ratios — already used in the calculation of dividends. For this reason we will 
 use the Report for 1908 and account for the treatment of certain items therein. 
 
 The first item in the income account that is dealt with in a peculiar way, 
 is reinsurance. When a company writes a policy for a larger amount than it 
 wishes to carry on a single life, it reinsures a part of the risk in another com- 
 pany. But in order that the same transaction may not be counted twice in 
 summations including the business of the various companies, the premiums 
 received on the amount reinsured, the commissions paid, and the death-losses 
 paid on same are included in the report of the reinsuring company only. The 
 original company reports its premiums received less reinsurance premiums, its 
 
Studies in Practical Life Insurance 63 
 
 commissions paid less reinsurance commissions, and its death-losses less the 
 amount received from other companies on risks reinsured. Dividends, how- 
 ever, are paid by the original company upon the whole amount, hence in cal- 
 culating the expense ratio the premiums received and the commissions paid are 
 included in the calculation. If the risk is reinsured at a participating rate, 
 dividends are paid by the reinsuring company to the original company. 
 
 The item "consideration for supplementary contracts involving life con- 
 tingencies" refers to death-losses the value of which the beneficiaries are to 
 receive in a fixed number of annual instalments and annuity or in annuity alone. 
 When such a Policy matures the Company credits itself with having paid it as 
 a death-loss and charges itself with the same amount as consideration for the 
 supplementary contract. If the amount is to be paid in instalments without 
 annuity, it is treated in the same way, except that it appears as income under the 
 item, "Consideration for supplementary contracts not involving life contingen- 
 cies. ' ' t 
 
 The other entries in premium income are easily understood and no further 
 reference would be made to them were it not that one of them is sometimes dif- 
 ferently treated. In the New- York Life's report dividends are reported according 
 to the cash dividend system — not according to the reversionary dividend system. 
 The Trustees declare a dividend because the Company has so much cash to divide 
 —not because it has so much paid-up insurance to divide. The entries are made 
 in the report according to the way the dividend is finally applied and in no other 
 way. The reversionary dividend system increases the figures of premiums re- 
 ceived, insurance (paid-up additions) written, insurance surrendered and cash 
 paid for insurance surrendered, without putting a penny more into the com- 
 pany's till, or into the policy-holder's pocket. It is a relic of the time when 
 dividends were made in paid-up additions to the Policy— and in no other way.* 
 
 Items Treated in an Exceptional "Way. 
 
 There are some items in income that are neither premiums nor interest ; and 
 there are some disbursements that are neither payments to policy-holders nor 
 expenses of management; these are the items which we propose to explain and 
 to show how they are treated. While they are strictly matters of bookkeeping, 
 they are none the less matters which pertain to practical life insurance. The 
 bookkeeping methods adopted are intended both to show a true balance— account- 
 ing for all moneys received and expended— and also so to segregate certain items 
 as to show their true character. Some appear on both sides of the account and 
 so balance each other. As most of these items are dealt with in the interest and 
 expense calculations, we will take up in this connection these papers as printed 
 in the appendix. See page 109 ; also what is said of the purpose of the calculation 
 on page 56. 
 
 The comments referred to above will explain the purpose and the method used 
 in ascertaining the'proper divisor in the paper on Net Effective Interest Rate. Let 
 us note why certain items are deducted from, and why others are included in-. 
 
 * See S. C. H., page 313; also New York Ins. Report for 1908, page 167, note, and Mass. 
 Ins. Report, page 125, note. 
 
64 Studies in Practical Life Insurance 
 
 interest. Account is first taken of the state of the interest account at the begin- 
 ning and close of the year and the increase in net interest and rents due and 
 accrued is included. The amount due and accrued a year ago belongs in the 
 previous year 's interest earned but was received this year ; while the amount now 
 due and accrued was earned this year; hence the increase is added to actual 
 receipts. The amount of accrued interest is large — the explanation is it includes 
 all the coupons due January first, while the report covers the year ending De- 
 cember thirty-first preceding. 
 
 In order to get the net income from real estate, taxes and repairs must be 
 deducted; as securities are disposed of by reason of maturity or otherwise items 
 cf profit and loss appear on both sides of the account. The interest account is 
 entitled to all gains and must bear all losses — they are necessary incidents in the 
 investment of money. The same is true of exchange and of bank charges — some- 
 times exchange is in the Company's favor and the interest account is credited 
 with the gain; sometimes it*is against the Company and the interest account is 
 charged with the loss. Sometimes — usually — the Company receives interest on 
 bank balances— but under certain .circumstances banking privileges cost some- 
 thing and the cost is charged to interest account. A doubtful debt is marked off 
 and charged to profit and loss; if later it is recovered it is credited to the same 
 account. 
 
 The assets at the end of the year include the interest received during the 
 year. As interest is not reckoned on interest in the year it is received— the 
 amount of the interest is deducted— one-half in taking the mean of the assets at 
 the beginning and end of the year, the other half by subtraction from the mean 
 amount. If a man has $100 at the beginning of the year and receives $10 per 
 month during the year and interest at 4%, his interest rate would prove up as 
 follows: Assets at beginning of year $100; interest on same for year $4.00; 
 interest on half of $120— $2.40; assets at end of year $226.40; mean amount 
 $163.20. The interest is $6.40 and the rate 4%, the divisor must therefore be 
 $160, that is the mean amount $163.20 less half the interest. 
 
 With the explanations already made the student will have no difficulty in 
 understanding the treatment of various items in the paper on Assessment of 
 Expenses. 
 
 Expenses Imposed by Law. 
 
 Kesuming our examination of the income and disbursement accounts we note 
 (in disbursements) the deduction from the amount of death-losses paid the 
 amount reinsured— for reasons already explained. The account is carefully item- 
 ized after the form furnished by the Superintendent of Insurance, and this form 
 determines under what head disbursements must be entered. Those that are in the 
 nature of profit and loss we have already met with and disposed of. Only three 
 others call for comment here— the amount paid the Insurance Department for 
 an examination of the Company ($18,925.03), the amount paid as taxes of vari- 
 ous kinds imposed by State, county and city laws ($943,460.22), and the amount 
 paid for Trustee Election expenses ($34,736.02). These expenses were all im- 
 posed by law. 
 
Studies in Practical Life Insurance 65 
 
 As will be seen by reference to Section 39 of the Insurance Law, printed in 
 the Appendix, the Superintendent must examine every company at least once 
 every three years. The New- York Life was examined in 1908, and an examina- 
 tion is going on at the present time (May, 1911). These examinations are con- 
 ducted by experts and cover every department of the Company's business, in- 
 cluding both its transactions and its methods. The Company is also subject to 
 examination by the insurance officials of other States and countries. The last 
 •examination of this kind was made in 1906, and was participated in by representa- 
 tives of the insurance departments of Tennessee, Kentucky, Wisconsin, Nebraska 
 and Minnesota. 
 
 We give in the Appendix, page 112, a detailed statement of the taxes paid in 
 each State in the Union. It will be noted that they are of several kinds,— and 
 that the tax rate on premiums in different States is very unequal, being more than 
 twice as great in some States as in others. The total amount paid in taxes by 
 the Company was equal to one and two-tenths per cent, on its total premium 
 receipts. It was over two-thirds as much as the total salaries and all other com- 
 pensation of officers, directors and Home Office employees— over one thousand in 
 number! These taxes are in addition to all taxes on real estate. Since 1908 the 
 corporation tax of the Federal Government has been added to the tax burdens 
 of life insurance companies. 
 
 The cost of election of Trustees is divided according to law to show the cost 
 for each election. There was no contest in either of the years for which these 
 expenses were incurred, but the expenses were incurred in preparing for a pos- 
 sible contest. The Company must always be ready to furnish the Superintendent 
 of Insurance with complete lists of all policy-holders with their postoffice ad- 
 dresses, and to furnish such other lists of policy-holders in separate jurisdictions 
 as the Superintendent may approve. (See Section 94, Insurance Law in Appen- 
 dix.) This necessitates maintaining a "Stencil Division" of over forty persons, 
 with special typewriters, stencil printing machines, etc. The new names added, 
 the changes and corrections require the writing of about 1,500 stencils each day, 
 and the Division is capable of supplying a complete list of policy-holders in 72 
 working hours. 
 
 Assets-— Valuation of Bonds, etc. 
 
 The "Ledger Assets" correspond in a way to the money received by the 
 Government and "covered into the Treasury"— it cannot be got out without an 
 appropriation. It must be accounted for. But the question arises respecting 
 every interest-bearing security — what is it worth? If a piece of real estate is 
 bought— it may increase in value or it may depreciate. Its value to the Company 
 usually lies in the income it produces, and it is usually valued upon an income- 
 producing basis showing at least 4% net. If the valuation needs to be reduced 
 in order to bring it to this basis the reduction is charged to profit and loss and 
 comes out of the net effective interest. In a similar way the interest account 
 gets the benefit of an increase in value. The latter is not usually done, however, 
 until the property is sold. 
 
 In the case of bonds a somewhat different course is pursued. A bond 
 is an agreement to pay a certain sum at the end of a certain period 
 
66 Studies in Practical Life Insurance 
 
 with interest semi-annually or quarterly at a certain per cent. But the 
 price of bonds, having say twenty years to run and bearing interest at 4%, pay- 
 able semi-annually, varies somewhat with the state of the money market. In and 
 following the panic of 1907 the best bonds showed a decline of from five to ten 
 per cent. If mortgages on real estate— or the title to real estate — passed from 
 hand to hand as bonds do they would have shown a similar depreciation. Money 
 was worth more, hence securities were worth less. But a life company's liabili- 
 ties are not largely cash liabilities —they are long-term liabilities, and its securi- 
 ties are bought because they produce income and the principal will be paid at 
 maturity. In view of these things and in order that the rate of interest shown 
 should be the effective rate received, the State has established the rule that a 
 bond that is ' ' amply secured and not in default as to principal or interest, shall be 
 valued as follows : If purchased at par, at the par value ; if purchased above or 
 below par, on the basis of the purchase price adjusted so as to bring the value 
 to par at maturity and so as to yield meantime the effective rate of interest at 
 which the purchase was made".* 
 
 For example, a 4% bond bought at par always yields 4% on its cost, no 
 matter when it matures ; therefore its book value is always par. But a 3y 2 % bond 
 having twenty years to run and bought at 93.16 per cent, also yields 4% ; its book 
 value must therefore be "adjusted" every year. To do this the Company credits 
 interest account with 4% on the book value and adds the difference between 
 4% and the interest actually received to the book value. These additions bring 
 the book value to par at maturity. On the other hand, a 4%% bond having 
 twenty years to run and bought at 106.84 per cent, also yields 4%. In this case 
 the Company each year credits interest account with 4% on the book value 
 and deducts the balance from the book value of the bond. These deductions 
 bring the book value to par at maturity. After the first year the rate is reckoned 
 on the new book value. 
 
 The Branch Office debits and credits represent incomplete transactions— the 
 Branch Offices (there are over one hundred of them) have received the money 
 and paid it out, but the vouchers have not been received or have not been ap- 
 proved—they are not yet entirely matters of record. Until they are the debit 
 balances are not "admitted assets". 
 
 The "premiums due and unreported" represent cases where the policy- 
 holder is availing himself of the days of grace in the payment of premium ; those 
 under the head of new business represent policies upon which a quarterly or 
 semi-annual premium has been paid, as a new policy is not in force until the first 
 premium has been paid. The deferred premiums represent quarterly and semi- 
 annual premiums falling due in 1909 but belonging to the policy year beginning 
 in 1908. Premiums are theoretically paid annually in advance, hence four quar- 
 terly or two semi-annual premiums belong to the year 1908, although some were 
 not due until 1909. From all these premiums 25% is deducted as loading because 
 under the law the Company might spend about this sum in expenses. The total 
 loading on gross premiums received during the year averaged 21.1 per cent, of 
 gross premiums, as per Gain and Loss Exhibit in report to the State. 
 
 * See Section 18 Insurance Law, Appendix. 
 
Studies in Practical Life Insurance 67 
 
 It will be noted that market values in excess of book values are added and 
 book values in excess of market values are deducted. This is done rather to 
 make the statement conform to that required in other States and countries than 
 as a test of real values, as the valuation of bonds by another method is— as we have 
 seen— specifically authorized by the New York Insurance Law. 
 
 Liabilities— Valuation of Policies, etc. 
 
 The New- York Life began business in April, 1845, and has been a growing 
 Company ever since. On December 31, 1908, it had on its books over one 
 million policies of insurance and nearly ten thousand annuity contracts. Natu- 
 rally many of these reach back to years when other laws were in force and when 
 policy forms were very different. In fact the different kinds of policies now on 
 the Company's books furnish a history in miniature of life insurance during the 
 last fifty years. The oldest Policy in force is number 620, issued in 1846, and 
 there are 61 policies in force that are over fifty years old. We are just now being 
 reminded that fifty years ago the Civil War began and that the country was then 
 in a turmoil of excitement. Nevertheless the great moral and economic forces 
 kept at work, building up even while destructive forces were tearing down. 
 There is no more stirring chapter in the history of the Company than that cover- 
 ing the period 1861-65, during which time its business increased more than four- 
 fold. 
 
 For purposes of valuation all policies issued prior to 1901, except those 
 bearing 3% guarantees (issued since July, 1896), were grouped together and 
 valued by the Actuaries' Table of Mortality with interest at 4%— a standard 
 which by a law of the State superseded all others in 1880, and which is still in 
 force for such policies. Other issues either follow subsequent laws or are valued 
 by a higher standard than the law requires. The additional reserve set aside 
 in excess of the State's requirements was $3,129,402, and will be found in 
 item 35. After an exhaustive examination of all sources of information on the 
 subject, including the mortality among its own declined risks during a period of 
 twenty years, the Company began in 1896 the insurance of impaired and partially 
 impaired risks. Upon the first of these and upon tropical insurances the Com- 
 pany held a reserve based upon a mortality double that of the American Table 
 with 3% interest, and upon the second and upon semi-tropical insurances it 
 held a reserve based upon a mortality once and a half that of the American Table 
 with 3% interest. Annuities were valued by three standards, according to year 
 of issue— the later standards representing the larger experience. This immense 
 amount of reserve— over 459 million dollars (it is now over 522 millions) is made 
 up of the reserve required on individual contracts similar in general tenor to those 
 which we have analyzed to ascertain their present values. 
 
 The liabilities under items 9 to 35 require little comment. The total amount 
 of Policy Claims looks large, but over half of it is upon losses that have been 
 reported but no proof of death received. Under item 12, strike out the words 
 "or adjusted and not due". When a New- York Life policy claim is "adjusted" 
 it is then paid. These words are in the official form to cover policies issued years 
 ago under which a death-loss was not due until 30 or 60 days after proof was 
 received. The New- York Life still has such policies in force, but does not avail 
 
6S Studies in Practical Life Insurance 
 
 itself of the privilege of delay. The amount of death-claims resisted also looks 
 large although it is less than one per cent, of the total of paid and resisted. It 
 includes many cases carried over from the previous year. The Company must 
 protect its policy-holders from fraudulent claims. Such claims are reported to 
 the Insurance Department in detail each year, and upon the merits of its defense 
 the Company invites the closest scrutiny. Taking the first ten on the list at the 
 end of 1910, the Company's reasons for resisting payment were as follows: In 
 three cases— insurance contract never consummated; in one case— insured not 
 dead; in three cases— insurance benefits had expired before death — Company 
 liable in one case for a surrender value which it is ready to pay; in two cases 
 policies lapsed charged with loan— were endorsed for paid-up value less the debt, 
 which the Company is ready to pay — one of these had been decided in favor of 
 the Company and an appeal taken ; in one case— fraud in procuring Policy. 
 
 The due and unpaid endowments and annuities are mostly those upon which 
 checks had been sent out but they had not come back. The Company formerly 
 waited for a claim to be made under endowment and annuity contracts, but 
 some fifteen or more years ago it devised a form of check the endorsement and 
 payment of which furnish the needed proof that the Beneficiary is alive. Such 
 checks are now sent out so as to reach the Beneficiaries on or about the due date. 
 
 Item 27 shows a large amount due in taxes. Taxes are levied on the business 
 of the year, but are mostly due and payable in the following year when the totals 
 have been made up. 
 
 To the special surplus funds included in item 35 there has since been added 
 an "annual dividend equalization fund". Since the Company began to pay 
 annual dividends on its new contribution annual dividend policies it has declared 
 and paid the following percentages of the surplus normally accruing on such 
 policies: For 1907, 100%; for 1908, 96%; for 1909, 97%; for 1910, 100%. 
 The purpose is to lay by a little from the more prosperous years in order to 
 maintain a normally increasing dividend as the policies grow older, as explained in 
 the preceding chapter. This fund now (1911) amounts to $387,532. The reserve for 
 Nylic contracts is the present value of certain agents' contracts and will be more 
 fully explained in the chapter describing Agency Methods. 
 
 Reports to Other States. 
 
 While the Convention of Insurance Commissioners adopted some years ago 
 a standard form of report, the differing laws of various States make additional 
 information necessary in some of them. Illinois, Massachusetts, New Jersey, Ohio 
 and the District of Columbia require the report of new business and of insurance 
 in force to be on the basis of ' ' policies issued ' ' instead of on the basis of ' ' policies 
 paid for". Massachusetts requires a record of individual policies and makes a 
 seriatim valuation. Wisconsin requires (1) a schedule of each audit of the Com- 
 pany's affairs showing cost, (2) a schedule showing the bonds given by officers 
 and employees, (3) a special gain and loss exhibit of non-participating policies, 
 (4) a salary schedule showing all salaries of $3,000 or over, (5) a schedule show- 
 ing in detail amounts paid as legislative expenses, (6) a schedule of lapsed poli- 
 cies on which loans have been made, (7) a loan schedule classified according to 
 
Studies in Practical Life Insurance 69 
 
 interest rates, (8) a Wisconsin policy loan schedule, (9) a Wisconsin dividend 
 schedule. The Company is also required to send to holders of deferred dividend- 
 policies in Wisconsin a statement showing their contingent interest in the deferred 
 dividend fund. Idaho requires the table showing cash and loan values, paid-up 
 and extended insurance of Ordinary Life policies to be extended to age 96. The 
 following requirements are made by one' or more States, and many of them are 
 made by all: 
 
 A life insurance company must file a certified copy of its charter and, annu- 
 ally, a statement of its business and condition on the 31st day of December next 
 preceding, in such form as the insurance official of the State may prescribe. 
 
 It must satisfy the insurance official of the State that it is lawfully organized 
 and has complied with the laws of its Home State, and that it has on deposit with 
 the financial officer of its Home State securities worth at least $100,000 ; in some 
 cases additional deposits are required in the State where the company seeks to 
 do business. 
 
 It must procure from the insurance official his certificate of compliance with 
 the laws, and publish reports or abstracts thereof with the certificate, in the 
 manner prescribed, and file evidence of such publication. Its annual statement 
 must include data sufficient to enable State insurance officials to make a valua- 
 tion of its policy liabilities, or it must furnish a certificate of such valuation from 
 the insurance official of its own State. 
 
 It must appoint a resident of the State its attorney upon whom legal process 
 may be served; in some States such attorney must be appointed in each county 
 where the company does business ; in some States each agent must be an attorney 
 for service. 
 
 It must furnish lists of its agents within the State, who must, in many 
 States, be residents thereof; such agents must file copies of their appointments 
 and procure licenses, and their books must be open to the inspection of tax 
 officers. 
 
 It must give bonds that it and its agents will comply with the laws and pay 
 taxes as imposed, and reports must be made to tax officers of premiums received 
 and schedules of policies in force. 
 
 It must allow an examination of its affairs to be made whenever deemed 
 expedient by the insurance officials of the States where it does business, and pay 
 the expense of such examinations. 
 
 It must make its investments, as prescribed by law, in certain securities, and 
 of the value of these securities and of the real estate owned by the company, the 
 insurance official is made the final judge. 
 
 It must file with the State official copies of all its policy forms ; its policies 
 must have attached thereto copies of all documents referred to therein and made 
 a part thereof ; they must be so fully described in large type on their face that 
 the holder shall not be likely to mistake their nature or scope; they must be 
 subject to the courts of the State wherein the Policy was issued; rebates of 
 premium or other discrimination between insurants of the same class or expecta- 
 tion of life must not be made; and some States restrict their own companies, in 
 the matter of reinsurance, to one-half the amount of the risk, except by consent 
 of the insurance official. 
 
70 Studies in Practical Life Insurance 
 
 It must require medical examinations, and the certificate of its medical 
 examiner that an applicant was insurable according to the company's rules may 
 bar the company from pleading that the insured was not in the state of health 
 required by the company. 
 
 It must pay all claims and judgments within a specified time ; it must allow 
 a specified time for the beginning of an action; if it pleads misrepresentation, 
 it must deposit the premiums received in court prior to the trial of the case; 
 statements made in an application must be deemed true after the lapse of a 
 specified time; statements of the applicant are to be considered as representa- 
 tions and not as warranties ; misrepresentations are not to void a Policy unless 
 the matter misrepresented shall actually contribute to the contingency or 
 event on which the Policy is to become due and payable; suicide is not allowed 
 to void a Policy unless it was contemplated when the insurance was taken and 
 sometimes not at all ; intemperate habits are not allowed to void a Policy if such 
 habits were generally known where premiums were paid and the company con- 
 tinued to receive premiums on the Policy. 
 
 It must, unless its policies expressly contract otherwise, allow paid-up or 
 term insurance in case of lapse after a specified number of annual premiums 
 have been paid, and policies may not be lapsed for non-payment of premium 
 unless notice of the due date thereof shall have been given within a time pre- 
 scribed. 
 
 Reports to Foreign Governments. 
 
 All the reports to foreign governments differ somewhat in detail from 
 those furnished the States of the Union and some are required to be made with 
 great fullness of detail according to the scope and plan of the particular coun- 
 tries. All are made in the money of the country, and some in American money 
 also. Those which involve most labor are the Austrian, the British, the Canadian, 
 the German, the Japanese, the Mexican and the Swiss. We give below a resume 
 of the German, which will serve as an example of the "permutations and com- 
 binations" to which the various details may be subjected: 
 
 The amount of income and disbursement is in a form known abroad as Profit 
 and Loss Account, because everything is brought to a completed condition— a 
 condition which shows the profit or the loss on the year's business. The amount 
 brought forward from the previous year's report, after all adjustments had been 
 made, is entered in the new report in some detail — as premium reserves, reserves 
 for pending insurance claims, profit reserve of the insured and increase of same 
 from surplus of previous year, other reserves set aside for various purposes and 
 increase of same from surplus of previous year. The premium income includes 
 all premiums belonging to the year, whether received during the year or not, 
 premiums deferred from the previous year and premiums paid in advance being 
 excluded. Income from securities is treated in the same manner, interest earned 
 during the year being taken, no matter when received, and rents from real estate 
 being net, after payment of taxes and expenses. 
 
 In disbursements, payments on claims of the preceding year are carefully 
 distinguished from payments on claims incurred during the year, and the amount 
 remaining unpaid in each class is carried into the total. The same method is 
 
Studies in Practical Life Insurance 71 
 
 pursued with respect to dividends and endowments. Amounts paid for re-insur- 
 ances are treated as disbursements. Re-insurance is treated as any other business 
 operation, the company being credited with all it receives and charged with all it 
 expends in the process. 
 
 In "Expense? of Administration", first year's commissions include all 
 moneys paid and indebtedness incurred to individuals for procuring new busi- 
 ness. Renewal commissions include amounts paid for renewals and in commuta- 
 tion of renewals, and any increase in the indebtedness of agents. "Other Ex- 
 penses of Administration" are analyzed in a supplement under a dozen different 
 headings. Profit and Loss items, on both sides of the account, pertaining to 
 investments in securities, are derived from a schedule called "Movement of 
 Securities". The schedule covers some thirty columns, many of which are com- 
 pletely filled in every ease. 
 
 Having thus included in Disbursements everything which made for loss 
 during the year, the exhibit continues with a statement of premium reserves and 
 of specific reserves not to be increased from the profits of the year Then a state- 
 ment is given of profit reserves and of other reserves, for special purposes, which 
 are subject to adjustment when apportionment is made of the profits of the year. 
 When this is done and a balance struck, we have the net profits of the year, the 
 disposal of which is noted under appropriate heads. 
 
 The balance sheet is very much like our own. 
 
 The items which have appeared in this summarized form are now taken up 
 and traced back to their source, and compared with other items to which they are 
 most closely related. In a schedule called "Distribution of Premium Income 
 and Payment of Losses", required for participating and non-participating poli- 
 cies, respectively, premiums received, amount of losses and of surrender values 
 paid, and the amount reserved for claims unpaid are all reported under various 
 categories of insurance and kinds of policies. Considerations received' for annui- 
 ties are treated in the same manner, so far as the method is applicable. 
 
 The death-losses are taken up in mortality schedules showing the total actual 
 mortality as compared with the expected: (1) on the entire business, (2) in the 
 general class, (3) in the class of partially impaired lives, (4) in the class of 
 impaired lives, (5) in the tropical class, (6) in the semi-tropical class, (7) annui- 
 ties on male lives, and (8) annuities on female lives. These eight schedules show 
 the mortality of insured and annuitants by number of persons and by amounts, 
 grouped according to year of birth of the insured or the annuitant, the actual 
 mortality being compared with the expected, at each age. This makes in the case 
 of insured persons, seventy-eight groups in each of six schedules, and in the case 
 of annuitants ninety-four groups in each of two schedules, with all the details 
 necessary to deduce the actual and the expected mortality for each group. 
 
 The same death-losses are also taken up in six schedules entitled "Financial 
 Result of the mortality in the business year". These schedules show, for each 
 of the eight classes just enumerated, what provision for the death-losses was 
 made from (1) reserves, (2) costs of insurance, and (3) amounts received from 
 re-insuring companies; and consequently, what the profit or the less from mor- 
 tality amounted to in the several classes. 
 
72 Studies in Practical Life Insurance 
 
 The amount paid in Dividends, and the amount set apart as Profit Reserves 
 for the payment of dividends at the end of specified periods, are made the sub- 
 jects of searching analysis. A schedule called "Distribution of Profits and Move- 
 ment of Profit Reserves" shows the amounts insured under each of seven classes 
 of participating policies, divided according to dividend periods. The amount 
 paid in each class is shown ; and in classes with dividend periods longer than one 
 year, the amounts of profit reserve from the previous year, with additions from 
 surplus, are also shown. 
 
 In order to arrive at the figures shown in this schedule for policies with 
 dividend period of more than one year, such policies are shown in 85 
 groups according to class and year of issue, with the amounts insured and the 
 movement of the profit reserve during the year. These exhibits of policy-groups 
 will in time (they were begun in 1899 and include 20-year deferred dividend 
 policies) show the history of each class of deferred dividend policies from the 
 year of issue until the year of maturity. The particulars required in the case of 
 maturing groups are — 
 
 1. Amount insured at time of distribution, with reserve on same. 
 
 2. Total income from premiums to time of distribution. 
 
 3. Total income from interest to time of distribution. 
 
 4. Total disbursements of losses. 
 
 5. Total disbursements for commissions and expenses of administration. 
 
 6. Total disbursements for surrender values. 
 
 7. Profit fund on hand for distribution. 
 
 8. Total amount of premiums on which this fund is to be apportioned. 
 
 The Policy schedules are four in number, two for participating and two for 
 non-participating insurance. The two which describe the "Movement of Out- 
 standing Insurance" are similar to our own; while two others show the amounts 
 insured, the net annual premiums, and the premium reserves for the year, under 
 each of eleven different forms of Policy. 
 
 This exhibit of the business as a whole is supplemented by an exhibit of the 
 German business sufficiently elaborate to show its magnitude, cost, amounts paid 
 and general condition. 
 
 The labor incident to the preparation of annual reports falls chiefly upon the 
 Actuaries' Department, the Treasury Department and the Division of Policy 
 Claims. These departments contain about 250 employees and the extra time work 
 required is about 18,000 hours, an average of 72 hours extra work for the entire 
 force. 
 
CHAPTER IV. 
 
 AGENCY ORGANIZATION AND METHODS. 
 
 The Branch Office System. 
 
 While a strictly logical method would perhaps have placed this chapter first, 
 it was thought that the reader would be more interested in how the business was 
 obtained after a little study of the business itself. Life insurance, as we have 
 seen, consists in the co-operation of a large number of persons under well defined 
 contracts, for the purpose of distributing the pecuniary losses caused by pre- 
 mature death. Incidentally it becomes a plan for the accumulation of money 
 for those who live long: the main fact is the co-operation of the insured. How 
 best to secure this co-operation is one of the chief problems of the life insurance 
 manager. Many insurance organizations are able to handle safely and wisely the 
 business they obtain, but they obtain comparatively little, hence their value to 
 society is small. The useful company is the company that insures many lives 
 and makes the benefits of life insurance effective to many persons. 
 
 The early method followed by all companies was the General Agency 
 method. A General Agent was given control of certain territory, and allowed 
 to appoint sub-agents who procured most of the business. The company paid 
 the General Agent for all business turned in, and he in turn compensated the 
 sub-agents. Under this system only a few men do business directly with the 
 Home Office— the business is practically farmed out to the General Agents. If 
 they are lazy, incompetent, or disgruntled, the company gets comparatively little 
 business from their territory. If they die, or resign, or stop business for any 
 other reason, a new General Agent must be appointed and the business re- 
 organized. The sub-agents— the men who. do the hard work— are not properly 
 encouraged, taught or compensated. 
 
 After an experience of nearly fifty years with the General Agency system 
 the New- York Life began to take back the territory farmed out to General Agents 
 and to establish the Branch Office system. This change was completed in 1903, 
 and the Company is now represented in all the chief business centers of the 
 world by its own Branch Offices. Each office is in charge of an Agency Director 
 and a Cashier, who are appointed by the Company. They are paid a salary 
 according to the work they do and according to the economy with which they 
 conduct the affairs of their office. The Agency Director is in charge of the 
 territory attached to the office, finds new agents, makes contracts with them, 
 instructs them in their duties, and, when occasion requires it, recommends the 
 termination of their contracts. All agents' contracts are made direct with the 
 Company and subject to its approval. Every agent is attached to the Branch 
 Office of the territory in which he works and reports to it. 
 
74 Studies in Practical Life Insurance 
 
 The Cashier has charge of the inside affairs of the Branch Office— of the 
 books, the correspondence and the clerical force. He makes a daily report of all 
 financial transactions, accounting for all money received and disbursed, this 
 report being mailed at the close of each day's business. He also makes, on 
 behalf of the Agency Director, a monthly statement, showing in detail the work 
 of each agent attached to the Branch. All business is carefully examined for 
 errors or incompleteness before it is sent to the Home Office, and is sent in special 
 envelopes according to the character of the business, in order to facilitate distri- 
 bution when it arrives. The records of each office are complete with respect to 
 the business passing through it, and they are in respect to completed business 
 duplicated at the Home Office, so that in case of fire, accident or theft no em- 
 barrassment will result. The fixed charges of a Branch Office may be terminated 
 on thirty days' notice, and if an office is discontinued there are no commissions 
 to be paid to a General Agent. 
 
 Advantages of the Branch Office System. 
 
 The Branch Office system accomplishes three desirable ends: (1) It places 
 the field work and agency expenses absolutely under control of the Home Office ; 
 (2) it brings the men who obtain the business into close touch with the Home 
 Office; (3) it places the facilities and conveniences of the Home Office within 
 reach both of agents and of the insured. It secures a constant supervision of 
 the agents ' work by trained men who are on the spot with opportunity to advise. 
 Every agent's contract is with the Company; a careful record of each man's 
 business is kept at the Home Office — not only of how much business he secures, 
 but of how steadily he works and how well his business stays on the books. All 
 necessary correspondence is conducted for him, leaving him free to devote all 
 his time to securing business. To the policy-holders in its territory the Branch 
 Office is practically the Company. Here they pay premiums and secure loans, 
 and here are paid to them the various benefits which arise under their policies. 
 
 In order the better to secure oversight of the field work the Company groups 
 the territory of its various Branch Offices into Departments, each of which is 
 under the general supervision of an Inspector of Agencies, or a Supervisor. The 
 Supervisors and Inspectors are usually men who have been markedly successful 
 as Agency Directors — men of strong personal character who have the faculty of 
 inspiring others; men who thoroughly understand the business and are usually 
 large personal writers — men qualified to lead and to help others. The Agency 
 force of the Company has thus come to be a compact organization— something like 
 an army— which is always in close touch with the Home Office. 
 
 The Official Examiner of the Insurance Department said in his report of an 
 examination of the Company made in 1908 : ' ' The business of this Company is 
 conducted under the Branch Office system, in contrast with the General Agency 
 system. The Company deals with Branch Office Cashiers, who are paid salaries, 
 and the policy-holder after the second year, deals almost wholly with the Branch 
 Office Cashier, and is, therefore, to that extent, divorced from the agency depart- 
 ment and the producing part of the business. This fact is one of the elements 
 which has brought the Company to its present low expense rate, referred to later. 
 
Studies in Practical Life Insurance 75 
 
 Practically little of the Company's business is therefore mortgaged for renewal 
 commissions. ' ' 
 
 The Nylic Association. 
 
 In order further to cultivate an esprit de corps the Company organized 
 in 1895 the "Nylic Association". The word "Nylic", formed from the initial 
 letters of the name of the Company, had long been in use as the Company's cable 
 word at New York ; it was now to designate a composite class of New- York Life 
 agents, each with a definite standing based upon length of service and amount 
 of business done. Good standing in the association was also to carry certain 
 emoluments, which would make it worth while for an agent to continue with the 
 Company for life and to maintain a high standard of production. The question 
 has long been mooted: "Is the life agent's work a profession?" Other pro- 
 fessions are made up of men who have passed certain prescribed examinations; 
 but every profession at the outset is composed of men who have achieved certain 
 results. The Nylic Association established a class of life insurance agents, based 
 upon steady production, upon loyalty to their own Company, and upon prin- 
 ciples and methods which bring cumulative benefits to all who follow them. 
 
 The Association is composed of five classes called respectively— Freshmen 
 Nylics, Nylics of the first, second and third degrees, and Senior Nylics. The 
 period of membership in each of the first four classes is five years. The con- 
 ditions of membership were first made easy — a man must write and pay for at 
 least $25,000 in new business during each year. In 1899 the requirement was 
 made $50,000 of paid-for business. After two years' service the "Freshman 
 Nylic" begins to receive extra compensation upon the business written two 
 years before — that is still on the books of the Company! Nylics of the first, 
 second and third degrees receive extra compensation each year based upon 
 the business written five years previously and still remaining on the books 
 of the Company, the extra compensation being at a higher rate for each 
 degree attained. After a service of twenty years the Senior Nylic is guar- 
 anteed compensation for life, provided he does not enter the service of any other 
 company, this compensation being based upon an average of his several income 
 bases during the first fifteen years, and the business remaining on the books 
 from the year in which his production was smallest while a Nylic of the third 
 degree. Certain provision is also made for drawing Nylics who become totally 
 incapacitated. 
 
 The Elimination op Waste. 
 
 The general effect of the Nylic system has been to eliminate waste from the 
 business— waste of time and energy in securing and instructing agents, and waste 
 of money in writing business that did not prove permanent. To keep his member- 
 ship in Nylic an agent must secure an average of about $1,000 per week during 
 each year ; he must remain with the Company at least three years in order to re- 
 ceive extra compensation; such extra compensation always depends upon the 
 amount of his business that remains on the books. He is working for a permanency ; 
 he works more steadily ; the longer he represents the Company the more efficient 
 he becomes. The standard is not so high as to discourage any man who is going 
 
76 Studies in Practical Life Insurance 
 
 to make a business of life insurance ; but is high enough to weed out the incom- 
 petent and the unworthy. 
 
 Under Section 97 of the Insurance Law as originally enacted, in 1906, the 
 Company was not allowed to add any new members to its Nylic Association, but 
 old contracts were not invalidated. When the Company was examined by the 
 Insurance Department in 1908, the official examiner commended the system as 
 "highly beneficial both to the agent and to the Company. The benefit to the 
 Company", he said, "was three-fold. It provided a more economical plan than 
 the renewal commission basis. It made the interest of the Company the interest 
 of the agent, and it won for itself a reputation for reliability and responsibility 
 in each community where the persistent agent was located. No other factor, in 
 my opinion, has contributed more to the economical management of this Com- 
 pany than its 'Nylics', and it is a matter to be regretted that it cannot be carried 
 on with new agents." Being thus advised, the Insurance Superintendent in 
 1910 recommended a modification of Section 97 which was amended by inserting 
 the following words: "If any such corporation shall compensate its agents or 
 any of them, after the first insurance year, in whole or in part, upon any other 
 plan than commissions and collection fees, the aggregate sum so paid shall in no 
 year exceed the limitations herein imposed, and the schedule and plan of such 
 compensation shall be submitted to and approved by the superintendent of 
 insurance. ' ' 
 
 Under this amendment the Company has since established "Nylic No. 2." 
 There are now 522 members of the original Nylic, and 651 members of Nylic 
 No. 2. 
 
 Insueance Clubs. 
 
 In further pursuance of its purpose to organize and maintain an agency force 
 which would make the business of Life Insurance a profession, with certain stand- 
 ards of achievement, and with certain ethical standards governing the conduct of 
 the business, — the Company has established two classes of Insurance Clubs. 
 The $100,000 Club and the $200,000 Club. Any agent working in North America 
 who writes and pays the premiums on $100,000 or more (but less than $200,000) 
 of new business under club rules and within the club year thereby becomes 
 a member of the $100,000 Club; any agent who secures and pays the first 
 year's premiums on $200,000 or more, under club rules and within the club 
 year, becomes a member of the $200,000 Club. 
 
 The $100,000 Club had for the club year ending in 1910 a membership of 
 242, and their total business for the club year was $30,609,738. The $200,000 
 Club had for the same period a membership of 138 and their total business for 
 the club year was $37,653,715. No additional emoluments attach to membership 
 in these clubs, but the honors of the organizations go to the largest writers. A 
 secretary of the clubs keeps a careful record of each member's work, and the 
 honors are announced in the "Bulletin", which goes to all agents of the Com- 
 pany. The club rules are framed in the spirit of justice to intending insurers 
 and of loyalty to the Company, and are enforced by the club spirit. An execu- 
 tive committee is given power to expel any member who shall be deemed unfit 
 for membership, and the Company on its part pledges itself that any member 
 
Studies in Practical Life Insurance 77 
 
 expelled for cause shall thenceforth find no place in the agency ranks of the 
 New-York Life. - 
 
 The Nylic Association and the insurance clubs, supplemented by the weekly 
 "Bulletin" from the Home Office have imparted a strong mental impulse and 
 a high moral tone to the Company's agency force. The bases of a profession 
 have been established, both in standards of achievement and in the ethics that 
 should control men in the conduct of a noble business. Educated sentiment has 
 been found to be a subtle and far-reaching power. It secures more work and 
 better work than the mere love of gain- while at the same time it enhances the 
 earning power of those who devote their lives in a generous spirit to the pro- 
 fession of Life Insurance. 
 
 Three of the most successful fieldmen have recently been appointed "Agents' 
 Counselors", or special advisers to members of the $100,000 and $200,000 Clubs. 
 These men have been in the service of the Company for more than twenty-five 
 years and each has a phenomenal record, both with respect to amount of business 
 done and methods of doing it. 
 
 The Weekly Bulletin. 
 
 There is issued every week from the Home Office a "Bulletin", containing 
 words of encouragement, suggestion and instruction respecting the business of 
 the Company. History and experience and every-day life are searched for the 
 sentiment and the argument that will move men; and the "Bulletin" is filled 
 with helps of the most valuable kind, and with incentives of the highest order. 
 The best thought of every one connected with the Company, from the President 
 down, is not considered too good to be laid before the field force every Monday 
 morning; while members of that force, in their turn, furnish valuable thoughts 
 for their co-workers at the Home Office. 
 
CHAPTER V. 
 
 HOME OFFICE ORGANIZATION AND METHODS. 
 
 The business of the New- York Life now includes over one million 
 separate contracts, an income of over one hundred million dollars per year, 
 disbursements to the amount of sixty millions, the investment of forty millions, 
 and the care of six hundred millions of accumulated funds. In this chapter 
 we shall endeavor to show how such a vast and complicated business is carried 
 on with order, accuracy and dispatch. 
 
 Control by Trustees Through Committees. 
 
 The Company is a purely mutual organization — no one has a vote except 
 the insured members — and these elect, under careful provisions of law, a 
 Board of Trustees, who have supreme control of the Company's affairs.* 
 They elect the Executive Officers, adopt By-Laws defining the duties of officers 
 and of standing committees of the Board, and meet monthly to hear and act upon 
 the reports of officers and committees. The standing committees are as 
 follows : 
 
 1. A Finance Committee, consisting of seven Trustees and the Treasurer 
 of the Company having supervision of the funds and investments. No loan 
 or purchase is made without the approval of every member present. 
 
 2. An Executive Committee, consisting of seven Trustees and a Vice- 
 President, which supervises all expenditures other than those specifically 
 assigned to some other committee by the By-Laws. In January it reports to 
 the Board, for its approval, the rules and methods under which such expendi- 
 tures are to be made during the ensuing year. 
 
 3. An Agency Committee of seven Trustees and a Vice-President, which 
 controls the appointment and compensation of all Inspectors of Agencies, 
 Supervisors, Managers, Agency Directors and fieldmen. 
 
 4. A Loss Committee of four Trustees, the Secretary of the Company, 
 one of the General Counsel, and the Superintendent of Policy Claims, — which 
 supervises the payment of death-losses. 
 
 5. An Auditing Committee of three Trustees, the Secretary, a Comptroller, 
 a General Counsel and an Auditor, — which audits all disbursements for ex- 
 penses. This Committee employs a chartered accountant who is under the 
 control and direction of the Committee and reports to it and not to any Officer 
 of the Company. 
 
 6. An Office Committee of three Trustees, all the Vice-Presidents, the 
 Secretary and the Treasurer, — which regulates all matters of administration 
 not otherwise provided for in the By-Laws. 
 
 At the beginning of each year each of these Committees, except the 
 Finance Committee, prepares Rules and Regulations for the transaction of the 
 particular business coming under its control. These Rules and Regulations go 
 
 •See section 94, Insurance Law in Appendix. 
 
Studies in Practical Life Insurance 79 
 
 into details much more fully than it is possible to do in the By-Laws. They 
 decide many questions in advance as to the general policy of the Company; 
 assign specific duties to the various officers, and fix the limits of their authority. 
 They are particularly full and specific with respect to who may incur expense 
 and to what extent, and how disbursements shall be authorized and audited. 
 These Rules and Regulations must all be approved by the Board of Trustees 
 before becoming operative. 
 
 These committees hold regular meetings— some as often as twice a week — keep 
 careful minutes, and report to the Board at its monthly meetings. Nothing is 
 done without the authority of some committee, or of the Board, and such authori- 
 zation must be a matter of record. A card index is kept of committee rulings and 
 decisions. The President is ex-officio a member of the Board and of all committees. 
 
 The Home Office force is divided into Departments and Divisions as follows : 
 
 Departments.— Actuaries', Advertising, Auditors', Comptrollers', Inspection,. 
 Law, Medical, Printing, Eeal Estate, Supply, Treasury. 
 
 Divisions — Files and Records, Indexes, Inquiry, Letter '(incoming), Mailing 
 (outgoing), Policy Briefs, Policy Changes, Policy Claims, Policy Issues, Policy 
 Loans, Policy Loan Securities, Premium Collection, Stencil. 
 
 Itinerary of an Application for Insurance. 
 
 As we began these "studies" by examining actual policies, we will illustrate 
 some of the Company's Home Office methods by following an application for 
 insurance through the various departments and divisions through which it must, 
 pass for the issue of a policy. On the morning of April 12 three applications were 
 taken from the mail and a memorandum attached to each with the request that- 
 each person who did. anything to it should note on the memorandum what he did 
 and when ; then they were sent on the regular way through the office. Two were- 
 declined; the third made the complete journey according to the following itiner- 
 ary, beginning- with the day the application was signed: 
 
 1. Application secured in Tennessee April 8, and applicant examined by a 
 regular examining physician. 
 
 2. Nashville Branch Office received application and medical examination 
 April 10. 
 
 3. "Home Office Memorandum", showing name of Insured, date of birth,., 
 amount of insurance applied for and name of Beneficiary, typewritten and at- 
 tached. 
 
 4. An inspection memorandum sent out same day by Nashville Office to be 
 reported on later. 
 
 5. Application mailed same day by Nashville Office with other applications 
 and invoice in an envelope with a big "A" in one corner. 
 
 6. Envelope arrived in New York Post Office April 12, was dropped in the- 
 Company's special "A" box, and brought to the Home Office by the Company's, 
 carrier. 
 
 7. Envelope received by Letter Division and sent unopened to Index 
 Division. 
 
 8. Envelope opened, papers stamped "received 10.18 A. M. " Application, 
 
80 Studies in Practical Life Insurance 
 
 compared with invoice and with Home Office Memorandum attached. Search 
 made through Index containing over three million cards with name, etc., of all 
 applications ever made to the Company, for record of previous insurance. Name 
 found. 
 
 9. At 10.38 case sent to Division of Policy Briefs, where among 1,750,000 
 cards the record of a former insurance was found and note made of same. 
 
 10. Application sent to Medical Department at 10.50, where medical ex- 
 aminer's report was found complete and his signature genuine. 
 
 11. The case then went to the Rating Bureau where the Company's ratings 
 as to family history, personal record, build, residence and occupation were 
 applied by two persons independently of each other. 
 
 12. At 1.45 P. M. it came before the Medical Board. The ratings were 
 approved, the risk recommended, and the case sent by pneumatic tube to the 
 Division of Policy Issues. 
 
 13. At 2.10 P. M. it was given to the clerk who handles applications from 
 Tennessee. The widely varying laws of different States make it necessary that 
 each case be handled by persons familiar with the special requirements of the 
 State from which the application comes. 
 
 14. At 2.29 P. M. a clerk attached a slip containing the premium rate and 
 other data, and the checker inspected and verified the figures. 
 
 15. At 2.40 P. M. the case reached the Logger's desk where it was logged 
 and numbered. 
 
 16. It was now sent to the Photo Bureau. The laws of Tennessee require 
 that a copy of the application and medical examination paper shall accompany 
 each life policy sold in that State. The camera is quicker and more accurate 
 than any copyist : it makes an exact copy in about forty seconds. 
 
 17. At 3.25 P. M. the papers were given to the Policy "Writer who finished 
 his work in just fourteen minutes, and the checker took six minutes more to 
 examine it and add his O. K. 
 
 18. The Policy went by tube to the Mailing Division, was put in a Nashville 
 Branch Office envelope, stamped and committed to the care of Uncle Sam. 
 
 19. While it was being sent out several persons got busy completing the 
 records of the Home Office. Cards were written for the Index Division, the 
 Division of Policy Briefs, the Comptrollers' Department, the Actuaries' Depart- 
 ment and the Agency Department, and the "President's Welcome Letter" was 
 filled out and sent to the new member of the New-York Life family. An entry 
 of the Policy was made on the Massachusetts Insurance Department sheets, which 
 contain a record of each Policy issued by the Company. 
 
 20. At 4 o'clock the application and accompanying papers went to the 
 Inspection Bureau, where they were placed in the uncompleted file to await the 
 inspection report, asked for by the Nashville Branch Office on April 10. 
 
 21. On April 14 the inspection report was received at Nashville, found 
 satisfactory and mailed to the Home Office, where it arrived on the 19th. It 
 was then attached to the other papers which were sent to the Pile Room to 
 be filed as No. 4,133,587. 
 
 22. The daily report of the Nashville Branch Office for April 30 to the 
 Comptrollers ' Department reported the first premium paid on that day. 
 
Studies in Practical Life Insurance 81 
 
 23. The different departments of the Home Office now have the data of 
 this Policy, which will enter into the accounts of new insurance, premiums 
 received, commissions paid, policy reserve, taxes on premiums, insurance in 
 force and expected mortality. The Comptrollers' Office will see that the 
 premium reported paid is accounted for in the bank account of the Nashville 
 Branch, that the proper commission is paid the agent, the proper fee paid the 
 Medical Examiner, the tax on the premium paid the State of Tennessee, 
 and that the proper renewal receipt is sent to Nashville before the next pre- 
 mium falls due. Everything that happens to the Policy hereafter will be 
 noted upon one or more of the cards in the Home Office, so that they will 
 supply a complete history of the insurance as long as it remains in force. The 
 Policy is now subject to all the contingencies noted in our examination of the 
 sample policies, and this may be the Policy that — with its supplemental annuity 
 contract — is to remain in force one hundred years. 
 
 We saw in the first chapter of these studies the principles upon which the 
 Company's contracts are based; here we see how they are put in force. It is 
 from contracts for insurances and annuities that the Company derives primarily 
 its entire income. The accumulations made necessary by the Policies soon become 
 a secondary source of income. In order that we may follow out General Gar- 
 field's plan of finding out 
 
 How the Money Comes In, 
 
 Let us begin at these sources of income, follow up the golden stream and see what 
 becomes of it. 
 
 First let us see how the Company makes sure that it gets all that belongs to 
 it. We have seen that when a Policy is written, various cards are written to keep 
 a record of it in the Home Office. The most important of these cards are (1) the 
 Comptrollers' Premium Card, (2) the Policy Brief Card, and (3) the Actuaries' 
 Valuation Card. When a Policy is issued and sent to the proper Branch Office 
 the Comptrollers' Premium Card contains a charge of indebtedness due the 
 Company; it is the duty of the Comptrollers to see that such indebtedness is 
 accounted for — either by payment of the premium or by the return of the Policy. 
 The cards are filed according to Branch Offices and in numerical order. As 
 successive renewal premiums become due the renewal receipts, together with the 
 notices to be sent to the insured, are made up in the Comptrollers' Office and 
 shipped to the Branch Offices for collection, a mark being made on the cards 
 indicating that receipts have been sent. These renewal receipts now become 
 charges of indebtedness which must be accounted for — either by payment of pre- 
 miums or the return of the receipts. 
 
 Whatever is necessary to show the standing of the Policy as an obligation of 
 the Company is noted on the Actuaries ' card. When the Policy is put in force by 
 payment of the first premium the Actuaries' Card representing the Policy is put 
 in the "paid-for" drawer, and it stays there until some change takes place in its 
 status. The total of these cards therefore shows the total amount of insurance in 
 force. They are assorted according to date of issue, plan and age, which makes 
 what is called the "valuation order". This enables the Department to make a 
 
82 Studies in Practical Life Insurance 
 
 valuation of Policy liabilities by the group method. Thus the Comptrollers see 
 to it that the Company gets its due, the Actuaries make a corresponding note of 
 the obligation thereby created, while the Brief Card contains other items of 
 information respecting the Policy. 
 
 About one-fifth of the income of the Company consists of interest and rents 
 When the Finance Committee authorizes the purchase of a bond or the loaning 
 of money on mortgage, the Comptrollers' Department makes a transcript of the 
 minutes containing the authorization. Every month the Department compares 
 this record with the Treasurer's check-book and with the canceled checks and 
 compares the price paid with the authorized price. Then a card is written de- 
 scribing the security and noting what interest will be due and when. These cards 
 contain charges of indebtedness for the amounts of interest due and are used in 
 checking the accounts of the Treasurer. Similar cards for real estate loans are 
 used in the Real Estate Department, and cards of bonds are used in the Treasury 
 Department. For ready reference lists of securities are made on sheets and 
 cheeked with the cards. Receipts from interest are entered upon these cards 
 and lists and checked by the Comptrollers' Department. The account is made 
 up monthly showing the amount received and the amount due and unpaid. The 
 amounts paid are checked up on the books of the Treasury Department. In- 
 terest on Policy and Premium Loans of every kind, including that paid when 
 days of grace in the payment of premium are availed of, and interest on agents ' 
 debts, are all verified by the Comptrollers' Department, — to insure the collec- 
 tion of all interest due the Company. 
 
 Having thus seen how the money comes in and how it goes out for invest- 
 ment, we will now ascertain how it goes out in payments to policy-holders and 
 for expenses. We will first follow a claim for death-loss through the office under 
 the care of the Division of Policy Claims. 
 
 Itinerary of a Death-Claim. 
 
 1. Insured died June 3, 1911, at Shreveport, La. 
 
 2. Shreveport Branch Office notified of the death on June 6, and delivered 
 the necessary blanks for making proof of death and claim and sent a report of 
 the death to the Home Office. 
 
 3. Report of death received at the Home Office June 9, and sent to Policy 
 Claims Division. Policy Index Division was then asked for a list of all policy 
 numbers issued on the life of the deceased, and when furnished a messenger was 
 sent to the Policy Briefs Division for a blue print photograph of the Company 's 
 records. When this blue print was furnished it was carried by the same messen- 
 ger to the Comptrollers' Department to have the date to which premiums were 
 paid endorsed on same and the amount of notes, if any, recorded, — then to the 
 Policy Loan Division for any record of loans which might be charged against 
 the Policy. The blue print was then taken to the Actuaries' Department who 
 compared the records of the Brief Division with their records and completed a 
 card for the Auditors ' Department, showing the exact amount payable under the 
 Policy. At the same time a request was sent to the File Division for the applica- 
 tion and all previous correspondence. 
 
Studies in Practical Life Insurance 83 
 
 4. When this application and correspondence, together with the blue print 
 of the records and list of Policies were received, the correspondence was put in 
 chronological order and placed in a death-loss envelope. 
 
 5. The ease was assigned a loss number, and recorded in the Death-Loss 
 Book, showing the amount of the Company's liability under the Policy. A record 
 card was completed with all data so far as obtained, and Index Cards were 
 made that will enable the Division to locate the case should future correspondence 
 be received without the number of the Policy being given. The case itself was 
 placed in a file, pending receipt of proofs of death. 
 
 6. Proofs of death received on June 12 and checked up by two competent 
 clerks; evidence of death being satisfactory and the claim being in order, they 
 signed the same and referred it to a member of the Sub-Loss Committee for final 
 action. 
 
 7. Case approved for payment by member of the Sub-Loss Committee on 
 June 12 and warrant for check signed and forwarded to the Auditors' Depart- 
 ment. Auditors' Department reviewed the warrant, comparing the figures with 
 those furnished by the Actuaries' Department and sent it to the Division of 
 Policy Payments for check. 
 
 8. Check being furnished, it was forwarded to the Shreveport Branch Office 
 on June 12 with instructions to deliver the same to the Beneficiary upon obtain- 
 ing the Policy and the signature of Beneficiary to death-claim receipt. 
 
 9. Check delivered to widow of Insured June 17.* 
 
 Payment of Endowments and Annuities. 
 
 Endowments and Annuities fall due upon fixed dates and can therefore be 
 arranged for in advance. The methods pursued in these cases are as follows : 
 
 Endowments.— Early in the summer of each year the Actuaries' Department 
 furnishes the Policy Claims Division a list of all the Endowment Policies matur- 
 ing in the following year. This Division obtains from the Division of Policy 
 Briefs photographic records of each of these Policies, verifies the date of settle- 
 ment, prepares a card with a description of the Policy and a statement of the 
 amount payable at maturity. The item is then entered in the Endowment 
 Register under the date of maturity. The tabs on the record cards are trimmed 
 to indicate the date of maturity — the tab remaining indicating the month— and 
 the cards are placed on file in chronological order in the cabinet and an entry 
 made in a Diary under the date upon which the check should be sent to the 
 Branch Office. 
 
 Upon the date indicated in the Diary for issuing the check the Division com- 
 
 * This case was selected to show the method of paying a death-loss, but incidentally it 
 shows something else that will be of interest. The Policy was issued April 24, 1894, for $3,000, 
 and contained a clause promising that in case death occurred prior to April 24, 1914, the Com- 
 pany would pay, in addition to the face of the Policy, an amount equal to one-half the amount 
 of premiums paid, taken at the tabular annual rate. The Policy was charged with a loan of 
 $603, and with balance of year's premium (semi-annual) $36.48, a total of $639.48. It was 
 credited with premium' additions of $680.40 and interest paid on loan in advance $26.02, a total 
 of $706.42. So the premium was paid, the loan canceled, and $3,066.94 net went to the widow's 
 bank account, for which a very grateful letter was sent to the Company. Incidentally it was 
 said that while his investments in other lines had been considerable, his life insurance formed 
 the major part of his estate at death. This was one of the forms of Policy which was abolished 
 by the Armstrong Laws of 1906. 
 
84 Studies in Practical Life Insurance 
 
 pares the photographic brief with the Register Card in the Division of Policy- 
 Briefs, notes thereon any change that may have occurred since the photograph of 
 the record was made, and certifies to present conditions. The briefs are then sub- 
 mitted to the Comptrollers' Department for a statement of the date to which 
 premiums have been paid, and to the Loan and Note Divisions for certification 
 as to any indebtedness that may be charged against the Policies. The application 
 is withdrawn from the Fifing Division, the record of the title of the Policy is 
 examined and the payee of the Endowment Benefit is entered on the Policy 
 Claims settlement card. The card and file are then reviewed by the Chief Clerk 
 of the Sub-Division. The warrant clerk of the Statistical and Accounting 
 Division prepares the warrant. In writing this warrant triplicate copies are 
 made automatically — the duplicate becomes a letter of transmittal to the Branch 
 Office and the triplicate is attached to the file. After the papers have been 
 examined and the warrant signed by the Superintendent of the Division, it goes 
 to the Auditors' Department for his verification and approval, upon which the 
 Division of Policy Payments draws a check in payment, which is duly for- 
 warded to the Branch Office with proper instructions as to its delivery. 
 
 Annuities. — Whenever an Annuity Policy is issued to a person residing 
 outside the territory under the jurisdiction of the Paris Office a record card and 
 file are furnished the Policy Claims Division. The Annuity is then indexed, and 
 the tabs of the card trimmed to indicate the dates on which the payments will 
 fall due; the card is then placed in the Division cabinets, where all such cards 
 are arranged in the order in which payments fall due. 
 
 All annuity payments in the United States, Canada and Mexico are made 
 by checks issued from the Home Office upon the warrant of the Superintendent 
 of the Policy Claims Division duly approved by the Auditors' Department. 
 These checks are dated to correspond to the date upon which the annuity falls 
 due, and are mailed from the Home Office direct to the annuitant sufficiently in 
 advance of the due date to insure delivery on that date or immediately there- 
 after. They are so restricted as to endorsement that they can be collected only 
 by the annuitant, and are so worded that they become a receipt for the annuity 
 instalment ; the bank being responsible for the endorsements, the checks serve the 
 double purpose of a certificate of survival and a receipt, and no other voucher is 
 required. Each month an examination is made to ascertain if any of these 
 voucher-checks have not been returned, and if so for what cause. Annuitants 
 are required to keep the Company advised of any change of address, and when 
 they remove temporarily or permanently beyond the territory served by the 
 Home Office check system, the Policy Claims Division gives necessary instruc- 
 tions to the Company's foreign offices to secure the prompt payment of the- 
 instalments as they fall due. Payments made at other offices are reported in 
 account with proper vouchers, and these vouchers are approved by the Policy 
 Claims Division before the charges in the account are allowed. 
 
 All other payments to Beneficiaries are made through the Policy Claims- 
 Division, the warrants being prepared and audited in a similar manner. This- 
 Division also prepares and furnishes all statistical information in regard to 
 the Company's Policy Claim Disbursements and Liabilities that may be required 
 by Governments or any other purpose. 
 
Studies in Practical Life Insurance 85 
 
 Other Disbursements. 
 
 We will now examine the method of regulating other disbursements of the 
 Company. 
 
 Under the Company's By-Laws and the direction of the Auditing Committee, 
 the Comptrollers of the Company are charged with the duty of examining, verify- 
 ing and checking all receipts and disbursements. All disbursements made directly 
 from the Home Office, except those on account of investments, Policy con- 
 tracts and Home Office salaries, are made upon warrants drawn upon the Treas- 
 urer by a Comptroller, pursuant to an authorization therefor, which authoriza- 
 tion must be filed in writing in the Comptrollers' Department. All disburse- 
 ments, no matter by whom warranted, which appear in the Cash Book, are 
 checked daily by this Department and the warrants examined. Disbursements 
 on account of Policy contracts are made— as we have, seen— upon warrants signed 
 by the Superintendent of Policy Claims (claims for death-losses being approved 
 by another member of the Loss Committee) and verified by the Auditors' Depart- 
 ment. The record of these disbursements comes to the Comptrollers' Department 
 for final verification. Disbursements for Home Office salaries are made upon the 
 joint warrant of the Comptrollers' Department and the Secretary, who is in charge 
 of the clerical force. All salaries must be authorized by the Office Committee 
 and the authorization filed with the Comptrollers' Department. In short, all dis- 
 bursements must first be authorized in a general way by some Committee, and 
 some one deputed to sign the warrant for each payment or class of payments. 
 Records of the disbursements with vouchers form the basis of frequent reports, 
 all of which are verified by the Comptrollers' Department. The Auditing Com- 
 mittee also employs an expert accountant who makes an independent audit and 
 reports directly to the Auditing Committee. 
 
 Each Branch Office in the United States, Canada and Mexico makes a daily 
 report of its receipts and disbursements to the Comptrollers' Department. The 
 reports from foreign departments outside the European Department, are received 
 as the foreign mails arrive. Premiums and commissions in the reports are 
 checked to see that proper authority exists, and at the end of every month the 
 reports are summarized for the bookkeeper and distributed by him td the proper 
 accounts in the general books of the Company. 
 
 These statements and illustrations of Home Office organization and methods 
 indicate (1) the complete oversight maintained by the Trustees of the Company; 
 (2) the thorough organization of the Home Office force, each Department and 
 Division having its own proper "work and each supplementing and acting as a 
 check upon the work of others. The methods embody the ideas of the most 
 skilled organizers and the most complete appliances in use in the business world. 
 The system by which the business is done is made as perfect as possible, and then, 
 in order to provide for exceptional cases and add human judgment to the 
 machine, a "Division of Inquiry" takes up such cases and looks after delays of 
 every sort. 
 
CHAPTER VI. 
 
 PERSONAL AND PUBLIC ASPECTS OF LIFE 
 INSURANCE. 
 
 Extracts from Addresses by DAEWIN P. KINGSLEY, President 
 New-York Life Insurance Company. 
 
 A Pew of the Things That Life Insurance Does. 
 
 From an Address before the Finance Forum, West Side Y. M. C. A., New York, April 19, 1911. 
 
 1st. — It answers the question whether or not a man will live long enough 
 to provide for his family. To the extent that money can represent a man's 
 productive power it doesn't matter when the properly insured man dies. 
 
 2d. — It cultivates aggressively the principles of self-respect and individual 
 responsibility, which are the very essence of our civilization. 
 
 3d. — It prevents the social defaults which premature death otherwise, 
 brings — defaults which are quite as disastrous to society and frequently as 
 dishonorable as those which occur in banking and general business. 
 
 4th. — It meets, as nothing else does or can, the demands for capital of a 
 society rapidly developing and offering the faith and earning power of unborn 
 generations as security for money which must be spent now. 
 
 5th. — It is a banker for millions of people — a banker who cannot be 
 ruined through panic, but who allows every depositor to draw on him at any 
 time to the extent of his cash credit. 
 
 6th. — It joins business to a constructive sociology ; it puts the man of small 
 means into touch with a statesmanlike plan ; it enters the realms of imagination 
 and takes us at least to the threshold of a new social order. 
 
 The Ultimate Meaning of Life Insurance. 
 
 From an "Address on Life Insurance in its Relations to Sociology", delivered before a, class at 
 
 Yale University, February 5, 1908. 
 
 It is time now to take cognizance of the ultimate meaning of Life Insur- 
 ance. "We do not reach science", says Dr. Small,* "until we advance from 
 knowledge of what has occurred to knowledge of the meaning of what has 
 occurred". Let us examine Life Insurance a little more closely while it is 
 performing its function in society in order to ascertain the meaning of what 
 occurs. 
 
 •A. W. Small, D. D., head of the Sociological Department, Chicago University. 
 
Studies in Practical Life Insurance 87 
 
 (1) Take a group of men aged twenty-one. When they insure their lives 
 what does it mean to them? It means that they have initiated a new social 
 process by which they will be able to pay their debts, by which the probability 
 that they or any member of their families will ever be added to the dependent 
 group in society is greatly decreased. 
 
 Sociology shows that for everything which distinguishes the present state 
 of society from barbarism we are indebted to the past. Every man is a debtor 
 according as he has received, and the young man who has been nurtured and 
 educated by the social processes of the present generation owes a great debt. 
 It will take time to pay it, and time is the one thing he is not sure of. He may 
 die to-morrow. Life Insurance shows him that a certain proportion of the men 
 of his age will die during the coming year, and that other numbers will die 
 during each ensuing year until all are dead. It sh.ows that, while some will 
 not live a year longer, others will live over seventy years longer, and that the 
 average number of years which all will live after age twenty-one is over forty. 
 The man who dies young, cannot possibly pay his debt by ordinary methods, 
 but Life Insurance is a process in which the man aged twenty-one is dealt 
 with on the assumption that he will live forty years longer. By a small sum 
 which he has already earned, and other equal sums which he may earn in each 
 year as long as he lives, he provides for the payment of his debt, whether he 
 dies soon or lives long. 
 
 This means to him an increasing sense of self-respect and of freedom. He 
 has made provision from his own resources for paying his debt; and he now 
 plans and works, not in the shadow of a doom that may interrupt his plans 
 and cut short his w6rk, but with the assurance that his plans may be carried 
 out and his work completed, in a measure, no matter when death may intervene. 
 This danger to his life plans, which was before vague and uncertain but abso- 
 lutely fatal when it came, has now been definitely located, measured and pro- 
 vided for. He may now plan and work on the assumption that he has forty years 
 of life before him. He has capitalized his youth, his health, his education and 
 his skill in a form that enables him to pay his debt, but not in a form that 
 enables him to spend it or lose it. On the other hand he is now at liberty to use 
 more freely in other ways the capital he accumulates by other methods, because 
 he has provided for the future of his family. 
 
 If it be said that Life Insurance does not directly create material values, 
 but is only a method of distribution; the sociological answer is that distribu- 
 tion is necessary in order that other social processes may go on. The grain 
 raised on a Western prairie would have little value if it could not be so dis- 
 tributed as to be available for those who need it. It is worth more in Chicago 
 than where it grew, more in New York than in Chicago, more in Liverpool 
 than in New York. Our Whole transportation plant, which earns more than 
 almost any other single industrial plant in the country, is based upon the 
 principle that distribution adds to value. A human life strictly by itself may 
 have little value. As a part of the social unit which we call the family it has more 
 value. As a part of the civil organization which we call the State, it has a 
 still higher value — higher chiefly because it is now in combination with others. 
 As a member of an organization which may comprehend millions of similar 
 
88 Studies in Practical Life Insurance 
 
 units, based on an immediate capitalization of the value of every unit, in other 
 words, as a factor in the co-operation and distribution which Life Insurance 
 inaugurates, the individual life finds its highest sociological usefulness. 
 
 Life Insurance not only increases wealth by distributing it — it transforms 
 material wealth into social wealth. Money is of value only for what it will 
 buy, and the wise man is continually exchanging it for something better. Life 
 Insurance transforms money into comfort, self-respect, education, character. 
 From a sociological standpoint processes are valuable according as they create 
 conditions and sentiments favorable to still better processes. The co-operation 
 of patriotism creates conditions, but it adds no new element to human associa- 
 tion and it ultimately depends upon force and violence. In the co-operation 
 of industrialism the utilization of new materials and new processes is a most 
 important sociological feature, but new processes and new machinery render 
 the old useless and create new conflicts, so that the net gain to society is 
 thereby diminished. Life Insurance introduces a new element into co-operation— 
 the continuity of the race — and upon this basis it erects a social structure 
 that destroys no pre-existing values, creates no new conflicts, and depends in 
 its operation upon moral and social forces. It seeks what the sociologist seeks 
 —the betterment of society, that is, the society of the future. It makes its 
 appeal to the profoundest instincts of manhood, and those who answer the 
 appeal are so quickened in their moral nature that they are better prepared 
 for their other work as social units. Patriotism, — admirable as it is, — tends 
 to separate men of different nationalities, to make them contingent enemies; 
 industrialism, — necessary as it is, — introduces a competition that is akin to war, 
 and its progress is attended with conflict and waste. Life Insurance draws 
 men together as moral and social forces whose highest interests lie in the 
 future and in their children. 
 
 (2) What does Life Insurance mean with respect to those for whose benefit 
 men insure? So long as the head of the family lives, all the members share 
 with him to some extent in the improved status which Life Insurance gives to 
 the family as a whole. If he dies prematurely, Life Insurance prevents the 
 pathological condition into which his family would otherwise fall. They are 
 not placed in abnormal relations to the social organism, but are enabled to 
 continue the status quo. Their development will proceed in an orderly manner, 
 without any violent change of relations in their environment. In this environ- 
 ment a sudden change, either from affluence to poverty or from poverty to 
 affluence, is not in accord with the most helpful social process and is in either 
 case usually a misfortune. Life Insurance rates a man at what he is worth, not 
 by any arbitrary standard, but by what he is, physically and economically, and 
 at his death it passes this value on to his family. 
 
 Again, Life Insurance fulfils for the family the law of the family, the 
 first law of Sociology, that members are to be treated according to their needs, 
 and not according to their capacities. It makes provision for that education 
 and culture of children which the father would make if he lived. Society 
 at large, seeing the necessity of education, creates and maintains at great 
 expense an educational structure, in order that all children may receive some 
 
Studies in Practical Life Insurance 89 
 
 degree of the training necessary for their efficiency as units in the social 
 organism. 
 
 "The primary symptom of failing health in a body politic" is declared 
 by the sociologist to be "lack of opportunity — opportunity primarily industrial, 
 then opportunity of every sort in which the interests of the individual are 
 capable of being effective". Obviously, the opportunity of an education is 
 lacking to the child who is kept from school to add to the income of the family 
 by its labor. 
 
 (3) What does Life Insurance mean to society at large? As society is 
 made up of units, it follows that the well-being of the organism will be promoted 
 by anything that benefits the individual units. If Life Insurance enables men 
 to pay their debts and to work according to larger plans; if it creates a new 
 social process that avoids conflict and waste; if it adds to material wealth by 
 scientific distribution and to social wealth by its wise response to social needs ; 
 if it enables the family to develop along normal lines, without any of those 
 violent wrenches which tend to throw the social organism out of gear ; then it 
 supplies the conditions and forces for a normal and healthy development of 
 society itself. Society always has on its hands certain classes of dependents 
 for whom it must provide, — one of its most difficult problems. It grapples with 
 such problems with clumsy hands. They belong to the family and can properly 
 be solved nowhere else. Life Insurance tends to prevent any further increase 
 of this class, and by increasing the number and maintaining the efficiency of 
 the better class, it strengthens the hands of society for the work it must do. 
 It increases also the number of those who, having provided for the sustentation 
 of life, are able to give time and strength to the augmentation of life — to its 
 enrichment by culture and the arts, and to the development of better structures 
 in the social organism. It is thus in harmony with the final purpose of the 
 social process which is declared to be "the incessant evolution of persons 
 through the evolution of institutions, which evolve completer persons, who 
 evolve completer institutions, and so on beyond any limit we can fix". 
 
 A New Declaration of Independence. 
 
 From an Address before the Eastern $100,000 Club, Old Point, Va., Oct. 8, 1902. 
 
 Our profession contemplates duty rather than rights. It teaches, in effect, 
 that natural rights cease with years of discretion; they pass away with the 
 advent of manhood. In some form or other, for every man, life becomes a con- 
 flict as soon as the period of responsibility is reached. If a man lives, he must 
 fight. If he enjoys any measure of freedom, he must fight. If he achieves any 
 happiness, worthy the name, he must fight. To the adult, therefore, the Declara- 
 tion of Independence should be superseded by a declaration of duties. We hold 
 that a man is born to responsibilities; endowed with certain inalienable duties, 
 amongst which are labor, that he may earn the right to live, and co-operation 
 that ^e may give as much as he gets and be happy because he has, of himself and 
 unaided, made provision to meet every liability. * * * * * * 
 
 Life insurance is the doctrine of duty. It is the highest civic code yet prac- 
 ticed by man. It is not philanthropy, which does about as much harm as good ; 
 
90 Studies in Practical Life Insurance 
 
 it is not the hysteria which too often characterizes benevolent and religious work ; 
 it is not the selfishness of the Declaration of Independence : it is the new doctrine 
 of duty, the true democracy. It asks no favors, avoids no obligations, seeks no 
 forgiveness for debts. It exacts its just dues, demands its full rights, enforces 
 its equitable claims. It bullies no one, and cringes to no one. It is rapidly dissi- 
 pating what little body ever existed in the fiction of kingly prerogative, and it 
 promises to eliminate purgatory from the territory of the hereafter, since it 
 compels its followers to pay their debts either before or at death. 
 
 It is a declaration of duty which shall result in the commonwealth of man; 
 where the will of the worker will be supreme ; where the toiler shall abundantly 
 receive his daily bread; where all men will pay their debts, and ask forgiveness 
 for no just dues ; where temptation to injure others or degrade ourselves will be 
 overcome. 
 
 This commonwealth will come because, amongst other things, we are slowly 
 evolving and establishing this better declaration and higher doctrine of human 
 rights. 
 
 "We have established the fact that human life is valuable; valuable, not in 
 the instinctive fashion which governs the law of self-preservation; valuable, not 
 from a sentimental standpoint, but valuable from the material standpoint; valu- 
 able as an asset in the great conflict into which every man must enter as soon as 
 he reaches the age of responsibility. 
 
 We are advancing even beyond that, and establishing a further fact,— that 
 life is not an individual fight alone, although it is that; not something subject 
 to the hazards of our daily contests, although it is that, too; not a matter of 
 accident or chance, but that it is, or may be, like a great, almost tideless sea, 
 reaching so far behind us and so far before, that no man can see its boundaries. 
 
 How to transmute life into a material asset is our business ; how to shift life 
 from a character otherwise fleeting, temporary, unstable, into a condition almost 
 immutable and having the strength of the hills and the reach of the sea — is our 
 mission. 
 
 Life Insurance and the Man. 
 
 Prom an Address before a Conference of the Principal Fieldmen of the New-York Life In- 
 surance Company, at the Mount Washington Hotel, Bretton Woods, N. H., Thursday, 
 September 29, 1910. 
 
 In what respect is the work of life insurance unique? What is the finest 
 thing it does? Not what is its greatest achievement, measured as we measure 
 the achievements of other forces in society, but what particularly unique and 
 fine thing distinguishes it ? In what important field is it first, indeed almost alone ? 
 
 We dwell on the wonderful service it is rendering — especially in the great 
 companies— through the necessary and large accumulation of securities. This 
 service was little thought of a few years ago. Now all the world wonders at it, 
 and all the politicians try to make it pay tribute. But in this service life insur- 
 ance is not unique. Other great sections of organized society do the same work. 
 The savings banks do it, the trust companies do it, although neither holds securi- 
 ties for such a high service or so completely divorced from all the influences 
 which at times dislocate organized effort and bring ruin through violent fluctua- 
 
Studies in Practical Life Insurance 91 
 
 tions. We cannot, therefore, call this the unique, the finest product of life 
 insurance. 
 
 We also dwell, and naturally so, on the beneficence which is primarily the 
 reason for the existence of all life insurance. And they present a wonderful 
 picture,— those millions sent daily almost with the speed of light just where they 
 will do the most good. A policy maturing in Alaska is worth just as much as it 
 would be if it had matured in New York, and the beneficiaries receive its pro- 
 ceeds almost as quickly. * * * Here, again, life insurance is far in advance 
 of any other system of beneficence known to society. But while it is more efficient 
 than other projects, more immediate in its action, more substantial in its sources 
 of responsibility and power, it is not in this respect unique. Everywhere there 
 are great foundations doing similar work. There are hospitals, orphanages and 
 homes for the aged and indigent with millions behind them dedicated solely to 
 a beneficence which is fine but which not infrequently runs into charity. No, 
 even this beneficence, which is naturally considered by many people to be the 
 beginning and the end of life insurance, is not its unique, not its finest work. 
 
 * * * If neither the direct benefactions of life insurance nor its service 
 to the industrial and commercial world as a buyer of securities constitute its 
 unique, its finest service, in what does this service consist ? Mind, I do not say its 
 greatest service. I purposely use the words "unique" and "finest". * * * 
 
 One of the noticeable contrasts between Europe and America is the larger 
 number of insured and the larger amount of life insurance per capita in private 
 corporations in America ? Why is this ? There must be a reason for it. * * * 
 
 There is a natural, a necessary, a mutually creative relation between the 
 development of life insurance in the United States and the peculiar character 
 of the citizenship of the United States; each explains the other. American citi- 
 zenship was the virgin soil ; the life insurance idea was the vivifying, fructifying 
 sun. The product, American Life Insurance, towers above other beneficent 
 and business structures as the sequoias of California tower above the great pines 
 which surround them. In its result it surpasses other plans because it has 
 reached in the individual what other plans have not reached, because it alone 
 has cultivated and satisfied that sense of personal obligation to general society 
 which rests upon every member of every American community. Whatever else 
 they, may do, whatever else they may be, our great life companies are conclusive 
 proof that a keen sense of civic duty pervades the entire people. 
 
 Consider some of the facts which distinguish our citizenship from the citizen- 
 ship of any other land : Here no man may be troubled because of his religious 
 convictions. Do you realize that this is true in no other important country on 
 earth 1 It has not been true here very long, but it is true now. The certain knowl- 
 edge that we may not be harassed or oppressed over what we believe or do not 
 believe about any of the great so-called fundamentals of religious faith makes 
 us all stand a little straighter. It cost much to accomplish that. But church 
 and state are forever separated here, really separated. That is not true of any 
 other considerable nation. Such a condition seems perfectly natural to us, but 
 it was not so natural to our forefathers. Only yesterday, or at most a few 
 generations ago, they were hanging Quakers and jailing Baptists. 
 
 American life insurance could never have attained its gigantic proportions 
 
92 Studies in Practical Life Insurance 
 
 except for the complete separation of church and state, except for the regenera- 
 tion of society which that condition has brought about. It could never have 
 become what it is while some overlord was responsible for men's convictions,— so 
 long as men did not directly and individually grapple with all the problems of 
 life and of death, too. It could never have become what it is unless the souls of 
 men had been awake, or unless it had been able to awaken them. With civil 
 and religious liberty came the demand for a new man, or, perhaps it would be 
 better to say, came the opportunity for a new man. The calamity unspeakable 
 would have been the failure of the new man to appear under the in- 
 spiration of such conditions. If selfishness and not responsibility, if license 
 and not liberty had taken control, our last condition would have been 
 worse than our first. All that might have happened. Many prophesied 
 that it would happen. Some critics claim that it has happened; but we know 
 better. We know that more and more our people love justice and fair play, more 
 and more they hate graft and special privilege, more and more they value the 
 right of franchise. Steadily they are rising to the high demands which govern- 
 ment by the people makes upon its citizenship. ###*## 
 
 About two and a half generations ago, when as a Nation we had passed 
 beyond our period of organization, had purchased Louisiana, fought the War of 
 1812, acquired the Oregon country, Texas, and the territory which includes Cali- 
 fornia, we were ready for our real advance. Just then life insurance began its 
 active propagandism. As a clean-cut fact, what was its plea 1 It went to a man 
 personally and said to him, first of all, "You are a man; you are valuable be- 
 cause you have responsibilities, high responsibilities to your family, to yourself 
 and to the State. You cannot avoid those responsibilities and be a good citizen. 
 No one else can discharge your duties for you. You can discharge them and you 
 must". It appealed to manhood. Its voice cut through the fogs of prejudice, 
 the clouds of superstition, and the mysteries always assiduously cultivated by 
 every type of ruler. It was many-voiced and many-tongued. It sent out thou- 
 sands of missionaries preaching the new gospel. These preachers could not talk 
 to their text, they could not succeed, if they wandered from the doctrine of man 's 
 individual responsibility. They preached no hatred of other men; they held up 
 no terror of authority; they offered no menace; they appealed to no impulse of 
 greed. They didn 't talk systems of government or religion. They struck straight 
 for the greatest thing in the world— a man's self-respect. They reached it, and 
 when we understand that fact, wonder ceases over their mighty success. When 
 they reached self-respect they quickened the man. When there was in the man 
 only a spark, they fanned the spark into a flame. When that flame burst forth 
 the man was transformed. Away went inherited fears, away went the hesitancy 
 and lack of decision and weakness born of dead generations and dying systems. 
 Forth stepped not merely an insurant, but a man of a new type — armed as no 
 other citizen of any other country was ever armed. 
 
 "What other business or profession has for three-quarters of a century driven 
 home, singly, an idea so vital to the sound development of the nation? Other 
 forces have worked, it is true, but none so uniquely, and none has stuck so close 
 to the real point. Religion worked mightily, but coupled with its exhortations 
 were necessarily the demands of that authority which is inseparable from every 
 
Studies in Practical Life Insurance 93 
 
 form of dogmatic theology. Politics worked, but generally for an appropriation 
 • first. Life insurance alone called directly to the man, to that divine something 
 in him which has been struggling upward for thousands of years. Every policy 
 placed made a better citizen ; every premium paid was a guarantee of the perpe- 
 tuity of the Constitution. 
 
 Now all the world begins to see the power and the prophecy which inhere in 
 the citizenship of the United States. There was never a citizenship like it. That 
 is a matter of history, a matter of fact. We believe that it is fairly conscious of 
 its might, that it is fearless and yet fair. We know that it responds ultimately to 
 every worthy appeal. We know that it is grim in its hatred of oppression. We 
 are certain that, in the end it will— as it always has— cast out false leaders. 
 
 If you analyze this citizenship seeking to know its dynamics, seeking to 
 understand why it hates oppression and wants the square deal, why, largely 
 from a moral impulse, it once sent a million men into battle, why it lately won 
 freedom for a fair island and then renounced dominion over it, if you pull it to 
 pieces to learn in what consists that moral and spiritual power which still makes 
 the United States the land of hope for the plain people of all lands, — if you do 
 this, you come in the last analysis to individual self-respect, the nerve centre of 
 civil and religious liberty. At the same time you find yourself at the very 
 sources of life insurance; you have reached its origin and you understand its 
 
 American life insurance has fostered and encouraged the religion of self- 
 respect. It has been militant in its methods. It has been as fierce as the Cru- 
 saders in its attacks. In its ministrations to the needs of the weak and the 
 defenseless it has been as gentle and as blessed as the dews of heaven. Its creed, 
 your creed, was phrased by Emerson, who was a prophet, in these words : 
 
 "We will work with our own hands, 
 we will walk on our own feet, 
 we will speak our own minds." 
 
 When the upright man, standing upright, was needed, we called to him, called 
 on his soul, and all that was within him, and he responded, "Here am I." In 
 this respect the work of life insurance is unique. This is the finest thing it does. 
 
 Life Insurance— the Discoverer and the Lawgiver. 
 
 From an Address to the Inspectors, Agency Directors and Leading Fieldraen of the New-York 
 Life Insurance Company, Augusta, Ga., January 19, 1911. 
 
 The greatest discovery made since man began to hunt for truth is man's 
 discovery of himself. The greatest organized institution, helping to expand 
 and extend that discovery and to establish it as a practical fact, is life insur- 
 ance. A famous novelist once wrote a book around the idea of how not to do it. 
 One of the puzzles in history — when it is reviewed in a large way — is how 
 it happened that man was so long in beginning to discover himself. He looked 
 for relief everywhere but in the right place. He could understand no help that 
 was not external and mysterious. If he was ill, he wanted a miracle performed ; 
 
94 Studies in Practical Life Insurance 
 
 if he was hungry, he tried to steal his food from somebody else; if he was 
 numerically weak, he bowed the knee and bent his neck under the dominance t 
 of some body or some thing which he thought could bring him protection and 
 safety. He was especially afraid of death, because life had no meaning. So all 
 kinds of institutions grew up, mostly based on the doctrine that man himself 
 here and now was a worm of the dust, full of iniquity and of no account ; possess- 
 ing the possibilities of great things, good and ill, in an indefinite new world, if only 
 he would act on the theory that he was of no consequence here and accept the 
 doctrine that somebody else possessed all the secrets of this life and of the life 
 to come. He was everlastingly looking for external authority. * * * * 
 
 All these things have arisen from the fact that man has not been looking in 
 the right place for relief. It is possibly, even probably, true that until relatively 
 recent times he had not developed to the point where he could take any other 
 view. It is equally and undeniably true that ambition and the love of power 
 created leaders who deliberately developed the wrong point of view and kept 
 men from looking in the right direction, kept them from making the great dis- 
 covery, — that the greatest thing in the world is man himself; that the most 
 valuable thing in the world is man himself ; that the most powerful thing in the 
 world is man himself; that the divine thing which gives the world and the uni- 
 verse a meaning is again man himself. ******* 
 
 The discovery of the law of life insurance was not the only thing that made 
 man discover himself, but it is one of the greatest things, and the practical 
 application of the law is the greatest force in bringing man to understand him- 
 self and his own supreme importance. ******** 
 
 When men discovered that there was a law of death they inevitably dis- 
 covered the law of life. This was a real revelation. Every sound law is, when 
 discovered, a revelation — if there is a general intelligence to comprehend it and 
 a conscience to use it. The law of life insurance helped man to discover himself 
 because it taught him that, through it, he could not only banish the terrors of 
 life's uncertainty, but by its principle of co-operation he could of himself and by 
 himself create a power that could do without waste what governments taxed him 
 unmercifully to do and then failed to do. It suggested a new patriotism, because 
 it taught him that there was no reason why he should slaughter his fellows in 
 order to make his home safe. *#*#***#* 
 
 Perhaps the most striking peculiarity of the law of mortality is the fact that 
 it reveals nothing concerning the individual when alone. It cannot be selfishly 
 applied. Men had always been seeking some hint or prophecy of how long they 
 would live— how long the individual would live. They studied the stars 
 above; they called spirits from the vasty deep. The answers that came 
 from without invariably brought degradation and reaction. The correct 
 answer finally came from within — from man himself. The form in which 
 it came indicated the use that could be made of it — it must be 
 used co-operatively, unselfishly. It established a new bond of kinship. Here 
 was a physical law of which every man was seen to be a part, a law that called 
 for neither King nor Bishop. It gave a new meaning to the declaration that 
 "no man liveth to himself and no man dieth to himself". If there is to be 
 co-operation there must be peace, fairness, confidence, kindness, justice, responsi- 
 
Studies in Practical Life Insurance 95 
 
 bility, faith, efficiency, and the law which underlies each of these great rules of 
 conduct life insurance teaches constantly. 
 
 As soon as the law of mortality was applied by life insurance it became a 
 discoverer in the moral realm also— a discoverer "of the thoughts and intents 
 of the heart"— the very work which the Apostle attributes to the word of God. 
 Life insurance discovers the man who needs it and makes its appeal, not to any 
 outward authority, but to the moral law written in the heart. It thus becomes, 
 the moral law giver. It says "you ought". There is no voice of authority 
 higher than that. "Am I my brother's keeper 1 ?" Not in the sense that I must 
 impose my belief and practice upon him and persecute him if he does not agree 
 with me. Am I the keeper of those whose support I have undertaken? Most 
 assuredly— to the utmost extent of my ability. That is the answer of every 
 manly man— of every honest heart. But before the discovery of the law of 
 mortality and its application by life insurance, a man's power to support his 
 family was limited by the length of his life. If life was prematurely cut off, 
 we placed the blame for failure to support the family upon Providence or fate. 
 Life insurance has brought the responsibility back to the man's own door. He 
 can, therefore he ought. Since life insurance has become the moral lawgiver, 
 Providence has become less inscrutable; fate has become more kindly. * * * 
 
 Civil laws are as various as nationalities. Life insurance laws are the same 
 everywhere. Civil laws halt at the frontier. Beyond that there is the fiction 
 called international law. International law in its last analysis is still based on 
 the doctrine that might is always right. To bring its children into harmony 
 from world's end to world's end life insurance needs no courts of arbitration, 
 no Hague Tribunals. And why? Because it has discovered that men are essen- 
 tially the same everywhere; because it has discovered that international hatreds 
 are the product of false theories ; because, naturally and not by grace, men trust 
 each other. Having made these discoveries, it became the lawgiver, civil and 
 moral. 
 
 Its first law is co-operation, its second law is justice, its third law is self- 
 respect, and then comes in the law of "you ought" following hard on the heels 
 of "you can". This lifts man's eyes to the contemplation of his own majesty, 
 his own responsibility, his own power. 
 
 By its discoveries and by its laws life insurance changes man from the 
 creature to the master, from a means to an end, from a mob to a solid phalanx. 
 It banishes the otherwise constant and demoralizing fear of death and sets men 
 
 to living 
 
 "As if this flesh which walls our life about were 
 brass impregnable." 
 
 Life Insurance— Its Service and Leadership. 
 
 Prom the New York Independent, Nov. 22, 1900. 
 
 Life insurance, as it first took form, was a prophecy of the day when man's 
 outlook would be as wide as the world ; it was the expression of an idea that was 
 peaceable, unselfish and wise, yet having withal a militant side. Under certain 
 
96 Studies in Practical Life Insurance 
 
 great leaders this beneficent idea not only prophesied, but fought. It preached 
 the doctrine of human fraternity, and at the same time vigorously attacked the 
 prejudices, the vices and the provincialisms that scatter and embitter men and 
 retard progress. With the beginning of the twentieth century the period of 
 prophecy draws to a close, and the militant period, the time of command and 
 leadership, begins. **#######** 
 
 Life insurance is about to pass out of that portion of its history in which 
 it has struggled and pleaded. It has been pleading for an unwelcome doctrine ; 
 the doctrine that, in spite of race and religious hatreds, in spite of color, climate 
 or the ambition of so-called statesmen, man has no natural reason to hate his 
 fellow-man ; on the contrary, he has a community of interest with all other men. 
 This doctrine has not been welcome to the vicious, to the intemperate, to the 
 improvident. It has not been too welcome to those who try, by appeals to 
 national pride, to fan the flame of hate against other men called "foreigners". 
 
 Life insurance in its period of pleading has had enemies within, too, as well 
 as foes without. The force of its doctrine has not infrequently been weakened 
 by the action of those of its own household— men who professed its faith, but 
 understood not its doctrine; men who failed utterly to comprehend its scope; 
 men who desired a "little" world and small things; men who have carped at 
 and criticised those* who believed in a broader theory. So-called servants of our 
 faith have foretold disaster to those who undertook to preach the Gospel of 
 universal prudence ; they have even appealed to the prejudices that tend to make 
 all men reactionaries. But against foes within and enemies without, life insur- 
 ance has been spreading over the earth like the coming of the light of a new 
 day. It has gathered its armies from beyond every sea, but chiefly from wher- 
 ever the Anglo-Saxon dwells. Life insurance to-day is the very spirit of the 
 Anglo-Saxon race: its methods are masterful; it seeks to meet and mingle with 
 all men ; it learns and it teaches ; but chiefly, it has an ideal, for which it strenu- 
 ously labors. 
 
 Like the Anglo-Saxon race, life insurance has not waited for the times to 
 come right : it has forced the hand of Time ; it has called into use the best organ- 
 izing ability, the broadest courage, the best business methods ; it has grown more 
 and more insistent, more and more militant, more and more dominant, more and 
 more successful and useful. It has taught men how to link together not only 
 the strength of individuals, but the immeasurable strength of generations, and 
 in preaching that gospel it has come in itself to illustrate the power which it 
 taught men to use. The very law which made men better when they insured their 
 lives has made life insurance mighty with the lapse of years. We have heretofore 
 thought almost exclusively of its moral and beneficent side; hereafter we shall 
 think more of what we may call its physical side, of the enormous force which 
 it will be compelled (whether it would or not) hereafter to exercise in the affairs 
 of men. 
 
 It has come to be an axiom in war that the nation wins which has the longest 
 purse. No group of men on earth to-day, organized for an industrial purpose, 
 or organized for a civic purpose, has behind it, dedicated to a single use, such 
 vast accumulations of wealth as have they who make up the army of the insured. 
 
Studies in Practical Life Insurance 97 
 
 The most impressive thing in the world at the dawn of the twentieth century 
 of Christian civilization, is the vast strength of the forces that are ready to make 
 its history. In no previous century of this era, or of any era, has there been 
 such organized power, such command over the forces of nature, such centraliza- 
 tion of men. Among all the forces that will enter into the contests of this new 
 and great arena, there is no moral force to compare with life insurance; and 
 from a physical standpoint, which of all the giants of the new century will dare 
 to measure strength with this Hercules? 
 
 The power of life insurance, both morally and physically, is unlike the 
 power of any other institution ever erected by mortal hands. No progressive 
 •condition can menace it ; no advance in humanity can bring about its destruction. 
 In the coming century there will be fighting on many fields ; there will be a vast 
 sacrifice of human life, an untold waste of human effort. Civic organizations 
 i;hat in other days led the world to a higher level will in turn be crushed and 
 destroyed, because new forces and new and better men demand^ a better State 
 ;and better governments. Eeligions will clash, and the old war between science and 
 revealed truth will go merrily on. 
 
 Without destroying any good thing now existing, without halting or imped- 
 ing the advancement of any new truth, without waste, life insurance will go on. 
 'Only degeneration in the moral fiber of the world can shrink its beneficence and 
 [paralyze its aggressive strength. ********* 
 
 Life insurance is a strong city and a sword of fire. It holds in a vast citadel 
 ■of conservatism the ambitions and the hopes that run through the notes of every 
 wedding-march, that cluster about every cradle. It has, too, in its treasure-house 
 securely locked the commercial faith of men, of cities, of States, and of nations. 
 
 Its doctrine compelled it to preach and prophesy in the nineteenth century; 
 its power and place will compel it to lead in the twentieth century. 
 
 Taxation of Life Insurance. 
 
 [From an Address delivered before the 18th Session of the Trans-Mississippi Congress, at Mus- 
 kogee, Oklahoma, November 20, 1907. 
 
 In substantially every organized form of society that has ever existed there 
 !has been a recognition of the fact that it was good public policy to encourage 
 ithe growth of certain ideas and interests, whether all individual citizens were 
 "directly benefited by such growth or not. For example, when Colorado became 
 a State, provision was inserted in the Constitution exempting mining property 
 from all taxation for a period of ten years. This, of course, put all the burden 
 •of taxation on other forms of property, but it was the judgment of the men who 
 'framed the Constitution and of the people who adopted it that the added burden 
 was warranted because of the encouragement which would thereby be given to 
 mining enterprises and the ultimate benefit which would accrue to all forms of 
 property in the State. The same idea on a much larger scale is represented in 
 the exemption of church and school property from taxation. It is stated on good 
 •.authority that the value of property owned to-day in the United States by the 
 
98 Studies in Practical Life Insurance 
 
 various churches is five thousand million dollars, and none of it is taxed. It is 
 not taxed because the controlling opinion has been that the Church was a benefit 
 to the State, that its influence upon the whole was of value to every citizen, that 
 its work ought to be encouraged, and that the burden of taxation ought to be 
 placed on other forms of property. The same argument has been used with 
 regard to school property. 
 
 Of course, in exempting church property from taxation, every tax-payer, 
 believer and unbeliever, is taxed to make up for the exemption. If property 
 owned by the Church pays no tax, then other property pays more tax. So the 
 State in effect has said that the unbeliever should be indirectly taxed for the 
 support of the Church because the Church is a pubic benefit. 
 
 Every one of these arguments applies with almost equal force to the pre- 
 miums of life" insurance. We have now reached a period where it is difficult to- 
 find a man who will claim that life insurance is hot a public benefit. Substan- 
 tially every citizen recognizes the conservative value of life insurance ; not alone 
 in the burdens of which it relieves the State ; not alone in its fight against want 
 and poverty; not alone in the protection which it affords the defenceless— the 
 opportunities which it gives boys and girls where otherwise there would be no 
 opportunity — but in the part it plays in the industrial development of the coun- 
 try,— in the demand which it creates for good securities; in the conservative 
 position which it takes with regard to securities ; in the great centres of financial 
 conservatism and strength which it necessarily creates. And yet, while life 
 insurance plays all these important functions in society, it has been taxed and 
 is still taxed as though it were in some fashion a public menace, or, if not that, 
 at least a strictly private enterprise in which the State had no direct interest, 
 and indeed an enterprise of which the State in its necessity may take advantage. 
 
 Under the system of taxation adopted by the various States in this country, 
 in one form or another every dollar of premiums paid by the policy-holder is 
 taxed. These taxes range from a fraction of one per cent, in one or two States 
 up to more than three and one-half per cent, in one State. 
 
 The premiums which the insured pay are in themselves a tax, self-imposed. 
 The great body of them represent serious economies, and even sacrifices, on the 
 part of the policy-holders. They represent savings which more directly benefit 
 the State than any other form of investment, and yet while the State exempts 
 school property and church property, it taxes the premiums of life insurance. 
 A parallel argument may be made with respect to the exemption from taxation 
 of savings bank deposits. The man who puts his money at interest in a savings 
 bank is not taxed; the man who puts his money into life insurance is taxed. 
 There is a monstrous inconsistency in this situation somewhere. 
 
 There has, beyond any question, been a decided advance of late in the cam- 
 paign against special privilege and special advantage, as against the general 
 public. Railroad passes have been abolished, and everybody applauds the action. 
 There are other special privileges and advantages which ought to be abolished, 
 and they will be. But my argument goes to this conclusion : that if as a matter 
 of public policy it is just and wise to exempt school property and church prop- 
 erty and some other forms of property from taxation, then the premiums of life 
 insurance ought to enjoy the same exemption. ****** 
 
Studies in Practical Life Insurance 
 
 LIBRARY 
 •n : ^945 
 
 DEi-T. OF 
 
 The Kingdom and the Riches op Life Insurance. agric. econ. 
 
 "From a Paper read before the Annual Convention of the Southern and South-eastern $100,000 
 Clubs of the New-York Life Insurance Company, Tampa Bay, Florida, March 13, 1901. 
 
 There is current everywhere — and especially in this country — an uneasy 
 feeling with regard to what we call wealth; a feeling that, at times, approaches 
 actual hostility. This feeling is directed generally against a few men who have 
 so much of the world's goods, that we call them rich; or against those great 
 modern engines of co-operation called corporations. But men, as such, and 
 corporations, as such, are relatively of little consequence; and, while this feel- 
 ing of unrest and hostility find a tangible object of attack in such men, and 
 in corporations, its true significance must be sought in a wider field, and its 
 menaces, if any exist, are not simply against men, or corporations, but against 
 society at large. ####****##* 
 
 It has become the fashion now-a-days to dwell on the riches of the world. 
 "We have lately been greatly impressed because the entire civilized world has 
 been insisting that the United States — both actually and potentially — is a fabu- 
 lously wealthy Nation. 
 
 As a matter of fact, the world has always been poor; and is poor to-day. 
 The gaunt figure of Hunger stalks only a little way in the rear of every man, 
 and all nations. The History of Civilization is the story of an interminable 
 war with Hunger. Every instant of time that separates the cradle from the 
 grave is made up of conflict with a tireless, insistent enemy; and that enemy 
 
 The great contest of all life has been for mere existence; for something 
 to eat. It is just as truly the condition of the world to-day, as it was a hundred 
 thousand years ago. England, for example, is supposed to have a food supply 
 for two weeks, if all external sources of supply were suddenly to fail. If the 
 world were really rich, the spectre. of Hunger might be removed to some dis- 
 tance ; it can never be banished. The world's problem, therefore, broadly stated, 
 has always been, How to become really rich! How to accumulate something 
 from which to satisfy for more than a day that dire necessity which stands 
 always at hand demanding an unending dole ! 
 
 The first step in the solution of the problem was, and is, the Physical Con- 
 quest of the Earth. The second step is Co-operation between Men. 
 
 The Physical Conquest of the Earth began as soon as animal life appeared 
 upon its surface. * * * Man began the contest with his brain, his 
 hands and his senses only. With these he fought his fellows, and beasts only 
 a little wilder than himself. He tore at the surface of the earth with such rude 
 implements as necessity most quickly suggested. He hid in holes and caves, 
 when an ungenerous earth pinched him with cold or blistered him with heat. 
 Necessity, and something internal — something that has lighted the torch of 
 Hope, and has always whispered of what we call Immortality— drove him on; 
 ■ever on. He not only fought Nature, but he watched Nature, and» learned 
 some of her secrets. He grew cunning, and turned these secrets to account. 
 He used the winds, the tides, the rain, the seasons. As he watched and listened 
 and fought, he gradually came to learn some of the deeper secrets of Nature. 
 He developed chemistry and mechanics; and, little by little advanced— always 
 
100 Studies in Practical Life Insurance 
 
 with great suffering and loss — until to-day he has, in some senses, not only the 
 earth, but the solar system in his grasp, or, if not in his grasp, at least spread 
 out before him in such a way that further discoveries are certain, and other 
 secrets must be learned. ####**##** 
 
 The conquest of Nature has been long and painful, not only because the 
 problems were intricate mil the contest unequal, but because man has never 
 been able fully to understand himself and his fellows. When men met other 
 men, there seemed always to I e the same hostility that Nature has fixed between 
 men and beasts. Even as they fell ^p^n the beasts of the forest, so men fell 
 upon each other. All men had common enemies, all men had common interests, but 
 this they, apparently, could not comprehend. They turned aside from the fight 
 against Nature in order to exterminate each other, in order to destroy each other's 
 works. In their conflicts they even lost some of the knowledge, some of the 
 secrets that they had won from Nature. They fought each other, and, as a 
 result, fell back before Nature, and then again they advanced their fight against 
 Nature, and with some success. They grew rich, and thereupon they threw 
 their riches away. They accumulated power, and then used it to destroy each 
 other. They discovered truth, and then used it for the extermination of their 
 fellows. And when they got here and there a glimmer of a great truth, they 
 erected this into a revelation from God, and on it they built great systems of 
 religion; and then these systems came into conflict, and thereupon arose such 
 fighting, such woe, such loss, as let us hope we shall never see again. * * 
 
 But there are reasons to believe that the time is near at hand when all this- 
 may in some senses be changed. * * * There is a new idea at work 
 in the world. An idea that knows no hate, no prejudice, no national boundaries, 
 no intolerance, no superstitions. The new idea — new in the sense that it is now 
 really making itself felt — is 
 
 Co-operation as Opposed to Competition. 
 
 It is perhaps the most prominent fact in the world to-day, and it has assumed that 
 attitude within the last quarter of a century. It now comprehends in some degree 
 all the leading forces- of modern life. It has brought into alliance — either wholly or 
 in part— transportation, the creative industries and the savings of the world. This 
 certainly changes the whole problem. This, if carried to a proper conclusion, will 
 not array man against man, but in solid ranks against Nature solely. What will be 
 added to the wealth of the world by such alliance is altogether beyond calculation. 
 How much the gaunt figure of Hunger will be pushed back, and how much the 
 burden of fear that rests upon the hearts of the world will be lightened by this 
 process, is also beyond calculation. But even so, if there were no process that 
 reached farther, the world would still be poor. The world would be poor be- 
 cause such co-operation is, after all, only the co-operation of force, it is the 
 co-operation that saves waste, it is co-operation based on intelligence and good 
 business methods and sane processes; but there is no courtesy or mercy in it, 
 no real charity, no positive helpfulness. 
 
 The form of co-operation that means most — our phase of it, life insurance — 
 really began to assert itself soonest. It taught the first lesson, which has 
 resulted in the erection of the great modern co-operative industrial institutions. 
 
Studies in Practical Life Insurance 101 
 
 Our style of co-operation is not based upon a day or an hour ; it does not stand 
 upon simple negations nor the weakness of men, it is more than a question of 
 salvage or the elimination of hostility; it takes a much broader view. It looks 
 at our picture of the world of to-day, and while it sees the significance of an 
 alliance between the existing Powers of the world, it also sees a much wider 
 alliance, a much vaster accumulation of power. It takes all these into account, 
 and adds the living and the unborn generations of men. It builds an empire on 
 a co-operation, which includes a study of the past, the duty of the present and 
 the certainty and the uncertainty of the future. It recognizes the laws which 
 govern humanity as a whole, and knows that birth, progress and death, genera- 
 tion after generation, form a basis of strength much sounder than the laws 
 that govern any nationality at any given period of time; and that a kingdom 
 founded on consideration of that sort will be wider and deeper and more lasting 
 than any kingdom the world has ever seen. And not only that, such co-operation 
 has in it an element of courtesy and mercy ; it has in it all the business wisdom of a 
 great trust, all the sane processes that have taught men to stop fighting each 
 other, and, in addition, a touch of something that is closely akin to religion. 
 Our profession is this high type of co-operation. *##**# 
 
 We have no quarrel with patriotism. The best patriot after all, is the man 
 who so loves his family that he makes intelligent sacrifice for its benefit. But 
 patriotism need not be bloody. "We hold that the patriotism of one hundred 
 years ago is as much out of place in the twentieth century as the stage-coach, 
 as much outgrown as the methods of the witch-doctor or the Indian medicine 
 man. It was not easy to teach the world nationality ; it will not be easy to teach 
 it internationality, but the lesson will be learned. "We are busy teaching it. 
 We are teaching the rule of the new king — the old king is dying. We are 
 teaching the people to know their own power — the old fear is dying. We are 
 teaching the new patriotism — the old race hatreds are dying, and they die hard. 
 We are teaching the secrets of the new wealth — the old wealth was weakness. 
 We are putting bands stronger than steel over the border-line that otherwise 
 separates the Past, the Present and the Future. We are awaking a life that 
 does not end with the generations ; a memory that never sleeps and never forgets, 
 and never loses what has once been gained. 
 
 We seek to make some portion of all effort immortal, by putting a benefi- 
 cent purpose into all civic life — just as science has lately shown us is the law 
 and the fact all through the universe. 
 
 We are marshalling a great host who are poor by the old standards, and 
 rich by the new. We do not yet say that poverty can be abolished by our 
 method; we know it cannot by the old. We do not say that the grim figure 
 that pursues us can be exorcised by our programme; we know that it grows 
 more insistent with each year under the old programme. We may never com- 
 pletely banish poverty, but we can see how, to the confusion of an old adage, 
 it can be made a fault always and generally akin to a crime. 
 
 Our method is co-operation through life insurance. A co-operation as wide 
 as the world, as deep as time and as tender as love. A co-operation of the people, 
 by the people, for the people. A co-operation of this generation with the previous 
 generation and with all generations to come. 
 
102 Studies in Practical Life Insurance 
 
 The Relation of the State to Life Insurance. 
 
 From an Address before a Conference of the leading Field Organizers and Agents of the New- 
 York Life Insurance Company at Frontenac, N. Y., September 15-17, 1908. 
 
 I assume at the outset that the State has the right to supervise the corpo- 
 rations which it has created; and it will probably be conceded that such super- 
 vision should be appropriate to the nature of the business and in accordance 
 with well established economic laws. 
 
 I wish to call attention first to the radical difference between a life insurance 
 corporation, and other corporations whose proper supervision is now a matter 
 of public debate. Take, for example, a railroad corporation. Its charter does not 
 simply authorize it to engage in the business of transportation, but it gives the 
 right of eminent domain. If it needs your property in order to complete its line, 
 it has the right to take it by condemnation proceedings. In other words, the 
 railroad receives a special favor from the State because of the service it proposes 
 to render. When it is ready for business it may not, therefore, rightfully charge 
 what it pleases and say, if people don't like its terms they can buy transportation 
 elsewhere. The amount of transportation to be done in the country through 
 which a railroad passes is limited, and any railroad built there is limited to the 
 business which the country furnishes. It takes a long time and a large amount of 
 money to build and equip a railroad, hence in many cases competition cannot be 
 had. In the case of a street railroad, its tracks occupy the streets and leave no 
 room for competing roads. In the case of telephone, electric light, and gas 
 companies, the streets must be torn up and the citizens subjected to a certain 
 amount of inconvenience and loss before the company can perform any service, 
 and the number of companies which can operate within a given district is 
 limited by these and other considerations. 
 
 But a life insurance corporation secures by its charter no control over private 
 property and no privileges which are not free to all life companies. It claims no 
 right of eminent domain ; it occupies no public thoroughfare ; it strings no death- 
 dealing wires overhead or underground; it digs up no streets; it builds no gas 
 tanks ; it makes no dangerous crossings ; it pollutes no atmosphere ; its operations 
 are noiseless; new companies are readily created and no monopoly is possible. 
 However desirable it may be, it is not like transportation, or light— something 
 that people can't live without. It is not something that the whole community 
 comes to depend upon. It is rather something that no one is vitally interested 
 in, or dependent upon, except those who voluntarily engage in it, either as 
 insurers or insured. Except in its general bearing on the welfare of the State, 
 it is more like a partnership or a private business— and it takes corporate form 
 in order to secure strength, effective management and perpetuity. 
 
 The activities of men, both privately and by means of corporations, may be 
 divided into two great classes— those to which they are driven by necessity— 
 by hunger, by lack of the comforts of life, and by the desire of accumulation— 
 and those which have their motive in the higher impulses— in affection and in 
 the sentiments of duty, justice and charity. And so we have, on the one hand, 
 manufacturing plants and public service corporations, and on the other, schools, 
 libraries, churches, asylums, homes for the aged— and life insurance companies. 
 
Studies in Practical Life Insurance 103 
 
 A Plea foe Federal Supervision of Interstate Insurance. 
 
 Condensed from an Address on this subject before the students of the University of Missouri 
 on February 16, 1909, in which it is shown: 
 
 1. That insurance— which was little used at the time of the formation of the 
 Constitution— has now come to be a notable factor in the traffic, credits, com- 
 merce and family life of the country. That, until quite recently, it was a local 
 affair, but it has now become a national affair, and even an international affair, 
 and its attempted regulation by 46 separate States produces confusion, injustice 
 and unnecessary expense. 
 
 2. That the chief obstacle to supervision by the Federal Government lies in 
 the fact that the Constitution gives Congress no authority over insurance as such, 
 and that the Supreme Court has decided that insurance is not commerce, which 
 Congress is authorized to regulate between the States as well as with foreign 
 countries. 
 
 3. That the Supreme Court has sometimes reversed former decisions; that 
 as exigencies have arisen the Federal Government has found it necessary to 
 "interfere" in matters theretofore controlled by the States, for the purpose of 
 executing some of the general powers of the Government ; and that in the case of 
 Champion versus Ames, which is known as the "Lottery Case", the Court has 
 virtually reversed its decision that insurance is not commerce. 
 
 Mr. Kingsley finds in the circumstances under which the Constitution was 
 adopted and in the manner in which it has been interpreted by all three depart- 
 ments of the Government — especially by the Supreme Court — certain historical 
 tendencies working for and securing certain national ideals. Among the subjects 
 discussed are— 
 
 1. The Currency. — When the Government under the Constitution was organ- 
 ized it had neither revenues nor credit, and the States were but little better off. 
 There was no national coinage, very few banks, and trade was almost paralyzed 
 for want of a uniform and safe medium of exchange. Alexander Hamilton, the 
 first Secretary of the Treasury, proposed and carried through the first Congress 
 measures for funding the national debt, for assuming the debts of the States 
 incurred in gaining independence, and for providing a revenue for the national 
 government. As an agency in carrying out these measures there was chartered, 
 against strong opposition, a United States Bank. Mr. Kingsley thus traces the 
 steps which finally led to the present national currency. 
 
 The Constitution gives Congress power "to borrow money on the credit of 
 the United States and to coin money and regulate the value thereof, and of foreign 
 coin". The Constitution as a whole makes the United States a sovereign nation. 
 Now, notice the links in the chain of reasoning. Congress has power to borrow 
 money, therefore it may charter a bank as an aid in borrowing money, and a 
 bank so chartered may be taxed by the States only in such a manner as Congress 
 permits. Congress may borrow money, and the United States is a sovereign nation ; 
 therefore it may emit bills of credit and make them a legal tender. Congress has 
 power to borrow money ; therefore it may enact a national banking law authoriz- 
 ing banks thereunder to issue circulating notes based on the security of United 
 States bonds deposited with the Government. Congress may borrow money; 
 having under this power undertaken to supply the country with a stable cur- 
 
104 Studies in Practical Life Insurance 
 
 reney, it may prevent the circulation as money of any notes not issued under its 
 authority, by taxing all other issues out of existence. This was going a long way ; 
 but it was clearly one of the occasions when Congress found it necessary to "inter- 
 fere", for the purpose of executing its general powers. 
 
 2. Expansion.— President Jefferson came into office as the head of the party 
 of strict construction of the Constitution. The lower Mississippi and its mouth 
 then belonged to Spain. It was the natural outlet for the commerce of States 
 and Territories lying along its banks and the banks of tributary streams. 
 The United States secured the ' ' right of deposit ' ' at New Orleans under a treaty, 
 but when Spain sold the Louisiana country to France these States and Terri- 
 tories demanded a free outlet to the Gulf. Jefferson proposed and Congress 
 authorized the purchase of the Island of Orleans and West Florida; but when 
 Livingston and Monroe were treating for these Napoleon offered to sell the whole 
 province of Louisiana, and the American envoys closed the bargain at once. 
 Jefferson himself thought he had done "an act outside the Constitution" in sign- 
 ing the treaty and privately proposed to his Cabinet an amendment to the Con- 
 stitution to legalize the transaction. But his friends urged him to keep his 
 doubts to himself, saying the power of the Federal Government to make treaties 
 covered the case. This view was afterward confirmed by the Supreme Court. 
 Under this power the Federal Government has. since acquired Florida, Oregon, 
 Washington, Idaho, Texas, California, Nevada, part of Colorado, Utah, Arizona, 
 New Mexico, Alaska, Hawaii, the Philippines, Guam, and Porto Rico. 
 
 3. The "Monroe Doctrine" —This has no other constitutional standing than 
 this: the Constitution made the United States a sovereign nation with certain 
 ideals to be pursued, and with which further foreign aggressions on this continent 
 would interfere. That we might be strong to repel such aggression we long 
 sought a naval base in Caribbean waters, which we finally secured in the acqui- 
 sition of Porto Rico, and in order more easily to defend both our eastern and our 
 western coasts we acquired control over a part of the Isthmus of Panama, and 
 are now constructing at great expense a canal to connect the waters of the 
 Atlantic and the Pacific. 
 
 4. Control of the Public Lands. — Under the Confederation several of the 
 States ceded to the General Government their claims to unorganized western 
 lands, and the possession of these became a strong bond of union on the one hand 
 and of controversy on the other. From these lands new States were created ; the 
 sale of public lands brought in large revenues; and over one hundred million 
 acres have been given away for educational purposes. The word education does 
 not occur in the Constitution, but homes and education are among the cherished 
 ideals of the Republic. Congress was given power to make all needful rules and 
 regulations respecting the territory and other property of the United States, and 
 from these few words have been deduced authority to govern territory belonging 
 to the United States and absolute control of the public lands. 
 
 It was the exercise of this power in the territories with respect to slavery— or 
 the election of a President by a party pledged to a certain course with respect 
 to slavery in the territories— that brought on the Civil War. Disunion had been 
 threatened a hundred times before, but never seriously attempted, and the great 
 
Studies in Practical Life Insurance 105 
 
 question was whether our dual form of government— local self-government by 
 the States and a Federal Government supreme in matters delegated to it by the 
 Constitution— could endure. 
 
 5. Commerce.— There was nothing the States gave up control over with 
 greater reluctance than over interstate and foreign commerce. But this was seen 
 to be necessary if anarchy was to be avoided. The question soon arose, "What 
 is Commerce 1 ' ' One of the most far-reaching and often-quoted decisions on this 
 subject was made by Chief Justice Marshall in the ease Gibbons versus Ogden. 
 Other decisions have followed until commerce, from a legal standpoint, includes 
 all the means, subjects and instrumentalities of commercial intercourse. "When 
 steam came into use, when the electric telegraph came into use, when the tele- 
 phone came into use — between States— when rivers between States were bridged 
 or navigated, the commerce clause of the Constitution was made to cover them all. 
 The Federal Government has sometimes failed to act until it was found that the 
 States could not separately afford proper control. This was notably true of 
 interstate commerce by means of railroads, the Interstate Commerce Act, under 
 which the Interstate Commerce Commission now exercises so great control, hav- 
 ing been passed in 1887— almost a century after the adoption of the Constitution. 
 
 President Kingsley's view is that in all these cases the Federal authority has 
 been gradually extended, not by usurpation but by legitimate interpretation of the 
 powers granted under the Constitution for the general good ; and that as circum- 
 stances have changed, new applications of principles have been made by the Su- 
 preme Court which have, in some eases literally, and in others, practically, reversed 
 previous decisions. The case in which Mr. Kingsley claims that former decisions 
 with respect to insurance have been reversed is that of Champion versus Ames, 
 or as it is better known— the "Lottery Case". In the early history of the 
 country lotteries were popular means of raising money # for charity, for govern- 
 ment, and even for churches, but they gradually came into disrepute. States 
 passed laws against them as local affairs, the United States forbade their use of 
 the mails. Then foreign lottery tickets were brought in and sent by express or 
 carried on the person. In 1895 Congress passed "An Act for the Suppression of 
 Lottery Traffic through National and Interstate Commerce and the Postal Ser- 
 vice, subject to the Jurisdiction and Laws of the United States ' '. 
 
 The case of Champion versus Ames arose under this law and was decided in 
 1903. Counsel for the lottery people based their argument largely upon the fact 
 that the Court had previously held a State law punishing traffic in lottery tickets 
 from outside the State to be valid— hence such traffic was not commerce. The 
 decisions to the effect that insurance was not commerce were also cited, with the 
 argument that lottery tickets were like insurance policies in this, that their value 
 depended upon chance. The Court did not refute the contention that lottery 
 was like insurance, but it decided that the carriage of lottery tickets between 
 States was interstate commerce, and that the power to regulate was so complete 
 as to include the power to destroy. 
 
 If interstate insurance is interstate commerce, then it may be regulated by 
 the Federal Government and not by State Governments. The only way to get a 
 decision on the question raised is for Congress to pass a law regulating interstate 
 insurance and let it be brought before the Supreme Court for adjudication. 
 
APPENDIX. 
 
 316 
 
 COMPOUND INTEREST TABLE 
 
 318 
 
 COMPOUND INTEREST TABLE 
 
 
 ONE DOLLAR PRINCIPAL 
 
 
 ONE DOLLAR PER ANNUM IN ADVANCE 
 
 The sum to which One Dollar Principal will Increase, 
 
 The sum to which One Dollar per Annum, paid at the 
 beginning of each year, will increase at Com pound Interest. 
 
 at Compound Interest, in any number of years, not exceed- 
 
 in any number 
 
 of years not exceeding Forty, at 3, 3^, 4, 4 L ., 
 
 ing Forty, at 3, 3^, 4, 4% 
 
 and 5 per cent, per annum. 
 
 and 
 
 S per cent. 
 
 jer annum. 
 
 
 2 
 a 
 
 V 
 
 > 
 
 3 Per 
 Cent. 
 
 3% Per 
 Cent. 
 
 4 Per 
 
 Cent. 
 
 Cent. 
 
 5 Per 
 Cent. 
 
 « 
 
 9 
 
 > 
 
 3 Per 
 Cent. 
 
 3^ Per 
 Cent. 
 
 4 Per 
 Cent. 
 
 4!^Per 
 Cent. 
 
 5 Per 
 Cent. 
 
 1 
 2 
 3 
 4 
 
 1.030 
 1.061 
 1.093 
 1 126 
 
 1.035 
 1.071 
 1.109 
 1 148 
 
 1.040 
 1.082 
 1.125 
 1 170 
 
 1.045 
 1.092 
 1.141 
 1 193 
 
 1.050 
 1 103 
 1.158 
 1 216 
 
 1 
 
 2 
 3 
 1 
 
 1.030 
 2.091 
 
 3.184 
 4.309 
 
 1.035 
 2.106 
 3.215 
 4.362 
 
 1.040 
 2.122 
 3.246 
 4.416 
 
 1.045 
 2.137 
 3.278 
 4.471 
 
 1.050 
 2.153 
 3.310 
 4.526 
 
 G 
 
 1.159 
 
 1.188 
 
 1.217 
 
 1.246 
 
 1.276 
 
 5 
 
 5.468 
 
 5 550 
 
 5.633 
 
 5.717 
 
 5.802 
 
 Q 
 
 1 194 
 
 1 229 
 
 1 265 
 
 1 302 
 
 1 340 
 
 6 
 
 6.662 
 
 6.779 
 
 6.898 
 
 7.019 
 
 7.142 
 
 7 
 
 8 
 
 1^230 
 1 267 
 
 V272 
 1 317 
 
 1.316 
 1 369 
 
 1.361 
 1 422 
 
 1.407 
 1 477 
 
 7 
 8 
 
 7.892 
 9.159 
 
 8.052 
 9.369 
 
 8 214 
 9.583 
 
 8.380 
 9.802 
 
 8.549 
 10.027 
 
 9 
 10 
 
 1 305 
 
 1 363 
 
 1 423 
 
 1 486 
 
 1 551 
 
 9 
 
 10.464 
 
 10.731 
 
 11.006 
 
 11.288 
 
 11.578 
 
 1^44 
 
 i:411 
 
 i:480 
 
 1.553 
 
 1.629 
 
 10 
 
 11.808 
 
 12.142 
 
 12.486 
 
 12.841 
 
 13.207 
 
 11 
 
 1 384 
 
 1 460 
 
 1 539 
 
 1 623 
 
 1 710 
 
 11 
 
 13 192 
 
 13.602 
 
 14.026 
 
 14.464 
 
 14.917 
 
 12 
 
 1 426 
 
 1 511 
 
 1 601 
 
 1 696 
 
 1 796 
 
 12 
 
 14.618 
 
 15.113 
 
 15.627 
 
 16.160 
 
 16.713 
 
 13 
 
 1 469 
 
 1 564 
 
 1 665 
 
 1 772 
 
 1 886 
 
 13 
 
 16.086 
 
 16 677 
 
 17.292 
 
 17.932 
 
 18.599 
 
 14 
 
 1 513 
 
 1 619 
 
 1 732 
 
 1 852 
 
 1 980 
 
 11 
 
 17.599 
 
 18.296 
 
 19.024 
 
 19.784 
 
 20 579 
 
 IS 
 
 1.558 
 
 1.675 
 
 1.801 
 
 1.935 
 
 2.079 
 
 15 
 
 19.157 
 
 19.971 
 
 20.825 
 
 21.719 
 
 22.657 
 
 16 
 
 1 605 
 
 1 734 
 
 1 873 
 
 2 022 
 
 2 183 
 
 16 
 
 20.762 
 
 21.705 
 
 22.698 
 
 23.742 
 
 24.840 
 
 17 
 
 1 653 
 
 1 795 
 
 1 948 
 
 2 113 
 
 2 292 
 
 17 
 
 22.414 
 
 23.500 
 
 24.645 
 
 25.855 
 
 27.132 
 
 18 
 
 1 702 
 
 1857 
 
 2 026 
 
 2 208 
 
 2 407 
 
 18 
 
 24.117 
 
 25.357 
 
 26.671 
 
 28.064 
 
 29.539 
 
 19 
 
 1 754 
 
 1 923 
 
 2 107 
 
 2 308 
 
 2 527 
 
 19 
 
 25.870 
 
 27.280 
 
 28.778 
 
 30.371 
 
 32.066 
 
 20 
 
 1.806 
 
 1.990 
 
 2.191 
 
 2.412 
 
 2.053 
 
 20 
 
 27.676 
 
 29.269 
 
 30.969 
 
 32.783 
 
 34.719 
 
 21 
 
 1 860 
 
 2 059 
 
 2 279 
 
 2 520 
 
 2 786 
 
 21 
 
 29.537 
 
 31.329 
 
 33.248 
 
 35.303 
 
 37.505 
 
 22 
 
 1 916 
 
 2 132 
 
 2 370 
 
 2 634 
 
 2 925 
 
 22 
 
 31.453 
 
 33.460 
 
 35.618 
 
 37.937 
 
 40.430 
 
 23 
 
 1 974 
 
 2 206 
 
 2 465 
 
 2 752 
 
 3 072 
 
 23 
 
 33.426 
 
 35.667 
 
 38.083 
 
 40.689 
 
 43.502 
 
 21 
 
 2 033 
 
 2,283 
 
 2 563 
 
 2 876 
 
 3 225 
 
 21 
 
 35.459 
 
 37.950 
 
 40.646 
 
 43.565 
 
 46.727 
 
 25 
 
 2.094 
 
 2.363 
 
 2.666 
 
 3.005 
 
 3 386 
 
 25 
 
 37.553 
 
 40.313 
 
 43.312 
 
 46.571 
 
 50.113 
 
 26 
 
 2 157 
 
 2 446 
 
 2 772 
 
 »3 141 
 
 3 556 
 
 26 
 
 39.710 
 
 42.759 
 
 46.084 
 
 49.711 
 
 53.669 
 
 27 
 
 2' 221 
 
 2 532 
 
 2 883 
 
 3 282 
 
 3 733 
 
 27 
 
 41.931 
 
 45.291 
 
 48.968 
 
 52 993 
 
 57.403 
 
 28 
 
 2 288 
 
 2 620 
 
 2 999 
 
 3 430 
 
 3 920 
 
 28 
 
 44.219 
 
 47.911 
 
 51.966 
 
 56.423 
 
 61.323 
 
 29 
 
 2 357 
 
 2 712 
 
 3 119 
 
 3 584 
 
 4 116 
 
 29 
 
 46.575 
 
 50.623 
 
 55.085 
 
 60.007 
 
 65.439 
 
 30 
 
 2.427 
 
 2.807 
 
 3.243 
 
 3.745 
 
 4.322 
 
 30 
 
 49.003 
 
 53.429 
 
 58.328 
 
 63.752 
 
 69.761 
 
 31 
 
 2 500 
 
 2 905 
 
 3 373 
 
 3 914 
 
 4 538 
 
 31 
 
 51.503 
 
 56 335 
 
 61.701 
 
 67.666 
 
 74 299 
 
 32 
 
 2 575 
 
 3 007 
 
 3 508 
 
 4 090 
 
 4 765 
 
 32 
 
 54.078 
 
 59.341 
 
 65 210 
 
 71.756 
 
 79.064 
 
 33 
 
 2 652 
 
 3 112 
 
 3 648 
 
 4 274 
 
 5 003 
 
 33 
 
 56.730 
 
 62.453 
 
 68.858 
 
 76.030 
 
 84.067 
 
 31 
 
 2 732 
 
 3 221 
 
 3 794 
 
 4 466 
 
 5 253 
 
 31 
 
 59.462 
 
 65.674 
 
 72.652 
 
 80 497 
 
 89.320 
 
 35 
 
 2.814 
 
 3.334 
 
 3.946 
 
 4.667 
 
 5.516 
 
 85 
 
 62.276 
 
 69.008 
 
 76.598 
 
 85.164 
 
 94.836 
 
 36 
 
 2 898 
 
 3 450 
 
 4 104 
 
 4 877 
 
 5 792 
 
 36 
 
 65.174 
 
 72.458 
 
 80.702 
 
 90.041 
 
 100.628 
 
 37 
 
 2 985 
 
 3 571 
 
 4 268 
 
 5 097 
 
 6 081 
 
 37 
 
 68.159 
 
 76.029 
 
 84.970 
 
 95.138 
 
 106.710 
 
 38 
 
 3 075 
 
 3 696 
 
 4 439 
 
 5 326 
 
 6 385 
 
 38 
 
 71.234 
 
 79.725 
 
 89.409 
 
 100.464 
 
 113.095 
 
 39 
 
 3 167 
 
 3 825 
 
 4 616 
 
 5 566 
 
 6 705 
 
 39 
 
 74.401 
 
 83.550 
 
 94.026 
 
 106.030 
 
 119.800 
 
 10 
 
 3.262 
 
 3.959 
 
 4.801 
 
 5.816 
 
 7.040 
 
 10 
 
 77.663 
 
 87.510 
 
 98.827 
 
 111.847 
 
 126.840 
 
 r 
 
 \> find the sum to whi< 
 
 :h a given t 
 
 imount will increase, 
 
 r 
 will 
 
 [\> find the 
 increase, a 
 
 sum to which a given 
 t compound interest. 
 
 amount per annum 
 at any of the rates 
 
 at c 
 
 impound interest, at 1 
 
 my of the 
 
 rates per cent, and 
 
 per< 
 
 ent. and nu 
 
 mber of years expressec 
 
 . in the above Table : 
 
 nun: 
 
 ber of years expressed 
 
 in the abov 
 
 e Table : 
 
 1 
 
 Hultiply th 
 
 e given amount per ai 
 
 mum by the sum to 
 
 ] 
 
 Multiply the given air 
 
 ount by th 
 
 e sum to which one 
 
 whic 
 
 h one dolla 
 
 r per annum will increa 
 
 se at the rate and for 
 
 dolli 
 
 ir will increase at the r 
 
 ate and for 
 
 the number of years 
 
 thei 
 
 lumber of y 
 
 3ars required, marking 
 
 off as many decimals 
 
 requ 
 
 ired, marking oft as n 
 
 lany decim 
 
 lis from the product 
 
 from 
 
 the produc 
 
 t as there are decimals 
 
 n the multiplier and 
 
 as tl 
 
 lere are decimals in th 
 
 ? multiplier 
 
 and multiplicand. 
 
 mult 
 
 iplicand. 
 
 
 
Studies in Practical Life Insurance 
 
 107 
 
 320 
 
 COMPOUND DISCOUNT TABLE 
 
 322 COMPOUND DISCOUNT TABLE 
 
 
 
 ONE DOLLAR PRINCIPAL 
 
 
 ONE DOLLAR PER ANNUM 
 
 The present value of One Dollar to be received at the end 
 
 The present value of an Annuity of One Dollar (Annuity 
 payable at the end of each year), for any number of years 
 
 of any number of years, not exceeding Forty, discounting: at 
 
 not exceeding Forty, discounting at the rates pf 3 3!., 4, 
 
 the rates of 3, 3% 4, 4 S and 5 per cent 
 
 . Compound Interest. 
 
 4 J ; S , and 5 per cent. Compound Interest. 
 
 0> 
 
 a 
 
 V 
 
 3 Per 
 Cent 
 
 3V 2 Per 
 Cent. 
 
 4 Per 
 
 Cent. 
 
 4H Per 
 Cent. 
 
 5 Per 
 Cent. 
 
 CD 
 
 a 
 
 3 Per 
 
 3U Per 
 Cent. 
 
 4 Per 
 
 414 Per 
 
 5 Per 
 
 > 
 
 Cent. 
 
 Cent. 
 
 Cent. 
 
 Cent. 
 
 >■ 
 
 
 
 
 
 
 1 
 
 .971 
 
 .966 
 
 .962 
 
 957 
 
 952 
 
 
 
 
 
 
 
 1 
 
 .9709 
 
 .9662 
 
 .9615 
 
 .9569 
 
 .9524 
 
 2 
 
 1.913 
 
 1.900- 
 
 1.886 
 
 1.873 
 
 1 859 
 
 2 
 
 .9426 
 
 .9335 
 
 .9246 
 
 .9157 
 
 .9070 
 
 3 
 
 2.829 
 
 2.802 
 
 2.775 
 
 2.749 
 
 2 723 
 
 3 
 
 .9151 
 
 .9019 
 
 .8890 
 
 .8763 
 
 .8638 
 
 4 
 
 3.717 
 
 3.673 
 
 3.630 
 
 3.588 
 
 3.546 
 
 4 
 
 .8885 
 
 .8714 
 
 .8548 
 
 .8386 
 
 .8227 
 
 6 
 
 4.580 
 
 4.515 
 
 4.452 
 
 4.390 
 
 4.329 
 
 6 
 
 .8626 
 
 .8420 
 
 .8219 
 
 .8025 
 
 .7835 
 
 
 
 
 
 
 
 
 
 
 
 
 
 6 
 
 5.417 
 
 5.329 
 
 5.242 
 
 5.158 
 
 5 076 
 
 6 
 
 .8375 
 
 .8135 
 
 .7903 
 
 .7679 
 
 .7462 
 
 7 
 
 6.230 
 
 6.115 
 
 6.002 
 
 5.893 
 
 5.786 
 
 7 
 
 .8131 
 
 .7860 
 
 .7599 
 
 .7348 
 
 .7107 
 
 8 
 
 7.020 
 
 6.874 
 
 6.733 
 
 6.596 
 
 6.463 
 
 8 
 
 .7894 
 
 .7594 
 
 .7307 
 
 7032 
 
 .6768 
 
 9 
 
 7.786 
 
 7.608 
 
 7.435 
 
 7.269 
 
 7 108 
 
 9 
 
 .7664 
 
 .7337 
 
 .7026 
 
 .6729 
 
 .6446 
 
 10 
 
 8.530 
 
 8.317 
 
 8.111 
 
 7.913 
 
 7.722 
 
 10 
 
 .7441 
 
 .7089 
 
 .6756 
 
 .6439 
 
 .6139 
 
 
 
 
 
 
 
 
 
 
 
 
 
 11 
 
 9.253 
 
 9.002 
 
 8.760 
 
 8.529 
 
 8 306 
 
 11 
 
 .7224 
 
 .6850 
 
 .6496 
 
 .6162 
 
 5847 
 
 12 
 
 9.954 
 
 9.663 
 
 9.385 
 
 9.119 
 
 8 863 
 
 12 
 
 .7014 
 
 .6613 
 
 .6246 
 
 .5897 
 
 .5568 
 
 13 
 
 10.635 
 
 10.303 
 
 9.986 
 
 9.683 
 
 9 394 
 
 13 
 
 .6810 
 
 .6394 
 
 .6006 
 
 .5643 
 
 .5303 
 
 14 
 
 11.296 
 
 10.921 
 
 10.563 
 
 10.223 
 
 9 899 
 
 14 
 
 .6611 
 
 .6178 
 
 .5775 
 
 .5400 
 
 .5051 
 
 16 
 
 11.938 
 
 11.517 
 
 11.118 
 
 10.740 
 
 10.380 
 
 IS 
 
 .6419 
 
 .5969 
 
 .5553 
 
 .5167 
 
 .4810 
 
 
 
 
 
 
 
 
 
 
 
 
 
 16 
 
 12.561 
 
 12.094 
 
 11.652 
 
 11.234 
 
 10 838 
 
 16 
 
 .6232 
 
 .5767 
 
 .5339 
 
 .4945 
 
 .4581 
 
 17 
 
 13.166 
 
 12.651 
 
 12.166 
 
 11.707 
 
 11 274 
 
 17 
 
 .6050 
 
 .5572 
 
 .5134 
 
 .4732 
 
 .4363 
 
 18 
 
 13.754 
 
 13.190 
 
 12.659 
 
 12.160 
 
 11 690 
 
 18 
 
 .5874 
 
 .5384 
 
 .4936 
 
 .4528 
 
 .4155 
 
 19 
 
 14.324 
 
 13.710 
 
 13.134 
 
 12.593 
 
 12.085 
 
 19 
 
 .5703 
 
 .5202 
 
 .4746 
 
 .4333 
 
 .3957 
 
 20 
 
 14.877 
 
 14.212 
 
 13.590 
 
 13.008 
 
 12.462 
 
 20 
 
 .5537 
 
 .5026 
 
 .4564 
 
 .4146 
 
 .3769 
 
 
 
 
 
 
 
 
 
 
 
 
 
 21 
 
 15.415 
 
 14.698 
 
 14.029 
 
 13.405 
 
 12 821 
 
 21 
 
 .5375 
 
 .4856 
 
 .4388 
 
 .3968 
 
 .3589 
 
 22 
 
 15.937 
 
 15.167 
 
 14.451 
 
 13.784 
 
 13 163 
 
 22 
 
 .5219 
 
 .4692 
 
 .4220 
 
 .3797 
 
 .3418 
 
 23 
 
 16.444 
 
 15.620 
 
 14.857 
 
 14.148 
 
 13.489 
 
 23 
 
 .5067 
 
 .4533 
 
 .4057 
 
 .3633 
 
 3256 
 
 24 
 
 16.936 
 
 16.058 
 
 15.247 
 
 14.495 
 
 13.799 
 
 24 
 
 .4919 
 
 .4380 
 
 .3901 
 
 .3477 
 
 .3101 
 
 26 
 
 17.413 
 
 16,482 
 
 15.622 
 
 14.828 
 
 14.094 
 
 26 
 
 .4776 
 
 .4232 
 
 .3751 
 
 .3327 
 
 .2953 
 
 
 
 
 
 
 
 
 
 
 
 
 
 26 
 
 17.877 
 
 16.890 
 
 15.983 
 
 15.147 
 
 14 375 
 
 26 
 
 .4637 
 
 .4088 
 
 .3607 
 
 .3184 
 
 .2812 
 
 27 
 
 18.327 
 
 17.285 
 
 16.330 
 
 15.451 
 
 14.643 
 
 27 
 
 .4502 
 
 .3950 
 
 .3468 
 
 .3047 
 
 .2678 
 
 28 
 
 18.764 
 
 17.667 
 
 16.663 
 
 15.743 
 
 14.898 
 
 28 
 
 .4371 
 
 .3S17 
 
 .3335 
 
 .2916 
 
 .2551 
 
 29 
 
 19.188 
 
 18.036 
 
 16.984 
 
 16.022 
 
 15.141 
 
 29 
 
 .4243 
 
 .3688 
 
 .3207 
 
 .2790 
 
 .2429 
 
 30 
 
 19.600 
 
 18.392 
 
 17.292 
 
 16.289 
 
 15.372 
 
 30 
 
 .4120 
 
 .3563 
 
 .3083 
 
 .2670 
 
 .2314 
 
 
 
 
 
 
 
 
 
 
 
 
 
 31 
 
 20.000 
 
 18.736 
 
 17.588 
 
 16.544 
 
 15.593 
 
 31 
 
 .4000 
 
 .3442 
 
 .2965 
 
 .2555 
 
 .2204 
 
 32 
 
 20.389 
 
 19.069 
 
 17.874 
 
 16.789 
 
 15.803 
 
 32 
 
 .3883 
 
 .3326 
 
 .2851 
 
 2445 
 
 2099 
 
 33 
 
 20.766 
 
 19.390 
 
 18.148 
 
 17.023 
 
 16.003 
 
 33 
 
 .3770 
 
 .3213 
 
 .2741 
 
 .2340 
 
 1999 
 
 34 
 
 21.132 
 
 19.701 
 
 18.411 
 
 17.247 
 
 16 193 
 
 34 
 
 .3660 
 
 .3105 
 
 .2636 
 
 .2239 
 
 .1904 
 
 35 
 
 21.487 
 
 20.001 
 
 18.665 
 
 17.461 
 
 16.374 
 
 36 
 
 .3554 
 
 .3000 
 
 .2534 
 
 .2143 
 
 .1813 
 
 
 
 
 
 
 
 
 
 
 
 
 
 36 
 
 21.832 
 
 20.291 
 
 18.908 
 
 17.666 
 
 16.547 
 
 36 
 
 .3450 
 
 .2898 
 
 .2437 
 
 .2050 
 
 .1727 
 
 37 
 
 22.167 
 
 20.571 
 
 19.143 
 
 17.862 
 
 16.711 
 
 37 
 
 .3350 
 
 .2800 
 
 2343 
 
 .1962 
 
 .1644 
 
 38 
 
 22.492 
 
 20.841 
 
 19.368 
 
 18.050 
 
 16.868 
 
 38 
 
 .3252 
 
 .2706 
 
 .2253 
 
 .1877 
 
 .1566 
 
 39 
 
 22.808 
 
 21.103 
 
 19.584 
 
 18.230 
 
 17.017 
 
 39 
 
 .3158 
 
 .2614 
 
 .2166 ■ 
 
 .1797 
 
 .1491 
 
 40 
 
 23.115 
 
 21.355 
 
 19.793 
 
 18.402 
 
 17.159 
 
 40 
 
 .3066 
 
 .2526 
 
 .2083 
 
 .1719 
 
 .1420 
 
 
 
 
 
 
 
 To find the present value of a given amount to be re- 
 
 
 
 
 
 
 
 ' 
 
 ?o find the 
 
 present val 
 
 ue of a giv 
 
 en amount 
 
 to be re- 
 
 ceived at the end of each year, during any number of years 
 
 ceiv< 
 
 ;d at the e 
 
 ad of any 1 
 
 lumber of 
 
 years not < 
 
 ixceeding 
 
 from One to Forty, at any of the rates of compound discount 
 
 For 
 
 ty at any 
 
 of the rates 
 
 of compoun 
 
 d discount 
 
 expressed 
 
 expressed in the above Table: 
 
 intt 
 
 le above Ta 
 
 ble: 
 
 
 
 
 Multiply the given sum to be received at the end of each 
 
 ] 
 
 Multiply th 
 
 ; given amc 
 
 unt by the 
 
 present val 
 
 ue of one 
 
 year by the present value of one dollar per annum, at the 
 
 doll: 
 
 it at the ra 
 
 te and for 
 
 the numbe 
 
 r of years 
 
 required, 
 
 rate and for the number of years required, marking off as 
 
 mar 
 
 -.-ing off as 
 
 many decir 
 
 aals from t 
 
 le product 
 
 as there 
 
 many decimals from the product as there are decimals iu 
 
 are 
 
 decimals in 
 
 the multip] 
 
 ier and mu] 
 
 tiplicand. 
 
 
 the multiplier and multiplicand. 
 
 Note. — In these tables the decimal is only carried out to four places, the nearest 
 whole number being used for the last figure. We have usually used a longer one in the 
 text; but where a large number of calculations are combined the shorter ones would 
 prove approximately correct. The second table shows the present value of one dollar 
 per year without reference to the expiration of human life. 
 
108 " Studies in Practical Life Insurance 
 
 TABLE showing the Net Premiums Paid, the Interest Received, the Death-Claims 
 Paid and the Reserve Fund on hand at the end of each year, for 81,822 Persons Insuring 
 for $1,000 each at age 35 — according to the American Table of Mortality with interest at 
 three per cent, per annum. 
 
 Net Annual Premium used,— $21.08236 to age 86, $21,081 age 87 to 92, $21.08 age 93 
 to end. 
 
 VR6 
 
 Number 
 Surviving 
 
 Number oi 
 Deaths 
 
 Premiums 
 
 Interest 
 
 Total Income 
 
 Death 
 Claims 
 
 Reserve Fund 
 end of ] 
 each year 
 
 Reserve 
 ler $1,000 of 
 Insurance 
 
 35 
 
 81,822 
 
 732 
 
 $1,724,908.89 
 
 $51,747.27 
 
 $1,776,656.16 
 
 $732,000 
 
 $1,044,656.16 
 
 $12.88 
 
 36 
 
 81,090 
 
 737 
 
 1,709,477.43 
 
 82,624.01 
 
 1,792,101.44 
 
 737,000 
 
 2,099,757.60 
 
 26.13 
 
 37 
 
 80,353 
 
 742 
 
 1,693,940.56 
 
 113,810.94 
 
 1,807,751.50 
 
 742,000 
 
 3,165,509.10 
 
 39.76 
 
 38 
 
 79,611 
 
 749 
 
 1,678,298.28 
 
 145,314.22 
 
 1,823,612.50 
 
 749,000 
 
 4,240,121.60 
 
 53.77 
 
 39 
 
 78,862 
 
 756 
 
 1,662,508.43 
 
 177,078.90 
 
 1,839,587.33 
 
 756,000 
 
 5,323,708.93 
 
 68.16 
 
 40 
 
 78,100 
 
 765 
 
 1,646,571.02 
 
 209,108.40 
 
 1,855,679.42 
 
 765,000 
 
 6,414,388.35 
 
 82.94 
 
 41 
 
 77,341 
 
 774 
 
 1,630,443.87 
 
 241,344.97 
 
 1,871,788.84 
 
 774,000 
 
 7,512,177.19 
 
 98.11 
 
 42 
 
 76,567 
 
 785 
 
 1,614,127.00 
 
 273,789.13 
 
 1,887,916.13 
 
 785,000 
 
 8,615,093.32 
 
 113.68 
 
 43 
 
 75,782 
 
 797 
 
 1,597,578.23 
 
 306,380.15 
 
 1,903,958.38 
 
 797,000 
 
 9,722,051.70 
 
 129.65 
 
 44 
 
 74,985 
 
 812 
 
 1,580,776.48 
 
 339,084.85 
 
 1,919,861.33 
 
 812,000 
 
 10,829,913.03 
 
 146.01 
 
 45 
 
 74,173 
 
 828 
 
 m 1,563,658.52 
 
 371,807.15 
 
 1,935,465.67 
 
 828,000 
 
 11,937,378.70 
 
 162.76 
 
 46 
 
 73,345 
 
 848 
 
 * 1,546,203.25 
 
 404,507.46 
 
 1,950,710.71 
 
 848,000 
 
 13,040,089.41 
 
 179.87 
 
 47 
 
 72,497 
 
 870 
 
 1,528,326.37 
 
 437,052.47 
 
 1,965,378.84 
 
 870,000 
 
 14,135,468.25 
 
 197.35 
 
 48 
 
 71,627 
 
 896 
 
 1,509,985.69 
 
 469,363.62 
 
 1,979,349.31 
 
 896,000 
 
 15,218,817.56 
 
 215.16 
 
 49 
 
 70,731 
 
 927 
 
 1,491,096.90 
 
 501,297.43 
 
 1,992,394.33 
 
 927,000 
 
 16,284,211.89 
 
 233.28 
 
 50 
 
 69,804 
 
 962 
 
 1,471,554.60 
 
 532,672.99 
 
 2,004,227.59 
 
 962,000 
 
 17,326,439.48 
 
 251.68 
 
 51 
 
 68,842 
 
 1,001 
 
 1,451,274.45 
 
 563,331.42 
 
 2,014,605.87 
 
 1,001,000 
 
 18,340,045.35- 
 
 270.34 
 
 52 
 
 67,841 
 
 1,044 
 
 1,430,172.13 
 
 593,106.52 
 
 2,023,278.65 
 
 1,044,000 
 
 19,319,324.00 
 
 289.22 
 
 53 
 
 66,797 
 
 1,091 
 
 1,408,163.32 
 
 621,824.62 
 
 2,029,987.94 
 
 1,091,000 
 
 20,258,311.94 
 
 308.32 
 
 54 
 
 65,706 
 
 1,143 
 
 1,385,163.69 
 
 649,304.27 
 
 2,034,467.96 
 
 1,143,000 
 
 21,149,779.90 
 
 327.58 
 
 55 
 
 64,563 
 
 1,199 
 
 1,361,067.84 
 
 675,325.43 
 
 2,036,393.27 
 
 1,199,000 
 
 21,987,173.17 
 
 347.00 
 
 56 
 
 63,364 
 
 1,260 
 
 1,335,791.44 
 
 699,688.94 
 
 2,035,480.38 
 
 1,260,000 
 
 22,762,653.55 
 
 366.52 
 
 57 
 
 62,104 
 
 1,325 
 
 1,309,229.08 
 
 722,156.48 
 
 2,031,385.56 
 
 1,325,000 
 
 23,469,039.11 
 
 386.14 
 
 58 
 
 60,779 
 
 1,394 
 
 1,281,296.44 
 
 742,510.07 
 
 2,023,806.51 
 
 1,394,000 
 
 24,098,845.62 
 
 405.81 
 
 59 
 
 59,385 
 
 1,468 
 
 1,251,909.20 
 
 760,522.64 
 
 2,012,431.84 
 
 1,468,000 
 
 24,643,277.46 
 
 425.49 
 
 60 
 
 57,917 
 
 1,546 
 
 1,220,961.95 
 
 775,927.18 
 
 1,996,889.13 
 
 1,546,000 
 
 25,094,166.59 
 
 445.16 
 
 61 
 
 56,371 
 
 1,628 
 
 1,188,370.35 
 
 788,476.11 
 
 1,976,846.46 
 
 1,628,000 
 
 25,443,013.05 
 
 4B4.77 
 
 62 
 
 54,743 
 
 1,713 
 
 1,154,050.10 
 
 797,911.89 
 
 1,951,961.99 
 
 1,713,000 
 
 25,681,975.04 
 
 484.29 
 
 63 
 
 53,030 
 
 1,800 
 
 1,117,937.95 
 
 803,997.39 
 
 1,921,935.34 
 
 1,800,000 
 
 25,803,910.38 
 
 503.69 
 
 64 
 
 51,230 
 
 1,889 
 
 1,079,991.72 
 
 806,517.06 
 
 1,886,508.78 
 
 1,889,000 
 
 25,801,419.16 
 
 522.92 
 
 65 
 
 49,341 
 
 1,980 
 
 1,040,169.27 
 
 805,247.65 
 
 1,845,416.92 
 
 1,980,000 
 
 25,666,836.08 
 
 541.94 
 
 66 
 
 47,361 
 
 2,070 
 
 998,428.42 
 
 799,957.94 
 
 1,798,386.36 
 
 2,070,000 
 
 25,395,222.44 
 
 560.71 
 
 67 
 
 45,291 
 
 2,158 
 
 954,790.26 
 
 790,500.38 
 
 1,745,290.64 
 
 2,158,000 
 
 24,982,513.08 
 
 579.20 
 
 68 
 
 43,133 
 
 2,243 
 
 909,296.95 
 
 776,754.30 
 
 1,686,051.25 
 
 2,243,000 
 
 24,425,564.33 
 
 597.35 
 
 69 
 
 40,890 
 
 2,321 
 
 862,011.74 
 
 758,627.28 
 
 1,620,639.02 
 
 2,321,000 
 
 23,725,203.35 
 
 615.14 
 
 70 
 
 38,569 
 
 2,391 
 
 813,082.19 
 
 736,148.57 
 
 1,549,230.76 
 
 2,391,000 
 
 22,883,434.11 
 
 632.52 
 
 71 
 
 36,178 
 
 2,448 
 
 762,676.96 
 
 709,383.33 
 
 1,472,060.29 
 
 2,448,000 
 
 21,907,494.40 
 
 649.50 
 
 72 
 
 33,730 
 
 2,487 
 
 711,070.09 
 
 678,556.93 
 
 1,389,627.02 
 
 2,487,000 
 
 20,810,121.42 
 
 666.07 
 
 73 
 
 31,243 
 
 2,505 
 
 658,641.06 
 
 644,062.87 
 
 1,302,703.93 
 
 2,505,000 
 
 19,607,825.35 
 
 682.30 
 
 74 
 
 28,738 
 
 2,501 
 
 605,832.56 
 
 606,409.74 
 
 1,212,242.30 
 
 2,501,000 
 
 18,319,067.65 
 
 698.21 
 
 75 
 
 26,237 
 
 2,476 
 
 553,108.39 
 
 566,165.28 
 
 1,119,273.67 
 
 2,476,000 
 
 16,962,341.32 
 
 713.87 
 
 76 
 
 23,761 
 
 2,431 
 
 500,911.25 
 
 523,897.58 
 
 1,024,808.83 
 
 2,431,000 
 
 15,556,150.15 
 
 729.31 
 
 77 
 
 21,330 
 
 2,369 
 
 449,662.76 
 
 480,174.39 
 
 929.837.15 
 
 2,369,000 
 
 14,116,987.30 
 
 744.53 
 
 78 
 
 18,961. 
 
 2,291 
 
 399,721.32 
 
 435,501.26 
 
 835,222.58 
 
 2,291,000 
 
 12,661,209.88 
 
 759.52 
 
 79 
 
 16,670 
 
 2,196 
 
 351,424.20 
 
 390,379.02 
 
 741,803.22 
 
 2,196,000 
 
 11,207,013.10 
 
 774.29 
 
 80 
 
 14,474 
 
 2,091 
 
 305,129.81 
 
 345,364.29 
 
 650,494.10 
 
 2,091,000 
 
 9,766,507.20 
 
 788.70 
 
 81 
 
 12,383 
 
 1,964 
 
 261,048.95 
 
 300,826.68 
 
 561,875.63 
 
 1,964,000 
 
 8,364,382.83 
 
 802.80 
 
 82 
 
 10,419 
 
 1,816 
 
 219,645.40 
 
 257,520.85 
 
 477,166.25 
 
 1,816,000 
 
 7,025,549.08 
 
 816.64 
 
 83 
 
 8,603 
 
 1,648 
 
 181,361.87 
 
 216,207.33 
 
 397,569.20 
 
 1,648,000 
 
 5,775,118.28 
 
 830.35 
 
 84 
 
 6,955 
 
 1,470 
 
 146,620.01 
 
 177,652.15 
 
 324,272.16 
 
 1,470,000 
 
 4,629,390.44 
 
 844.01 
 
 85 
 
 5,485 
 
 1,292 
 
 115,630.58 
 
 142,350.63 
 
 257,981.21 
 
 1,292,000 
 
 3,595,371.65 
 
 857.47 
 
 86 
 
 4,193 
 
 1,114 
 
 88,392.48 
 
 110,512.92 
 
 198,905.40 
 
 1,114,000 
 
 2,680,277.05 
 
 870.60 
 
 87 
 
 3,079 
 
 933 
 
 64,908.40 
 
 82,355.56 
 
 147,263.96 
 
 933,000 
 
 1,894,541.01 
 
 882.82 
 
 88 
 
 2,146 
 
 744 
 
 45,239.83 
 
 58,193.43 
 
 103,433.26 
 
 744,000 
 
 1,253,974.27 
 
 894.42 
 
 89 
 
 1,402 
 
 555 
 
 29,555.56 
 
 38,505.90 
 
 68,061.46 
 
 555,000 
 
 767,035.73 
 
 905.59 
 
 90 
 
 847 
 
 385 
 
 17,855.61 
 
 23,546.74 
 
 41,402.35 
 
 385,000 
 
 423,438.08 
 
 916.53 
 
 91 
 
 462 
 
 246 
 
 9,739.42 
 
 12,995.33 
 
 22,734.75 
 
 246,000 
 
 200,172.83 
 
 926.73 
 
 92 
 
 216 
 
 137 
 
 4,553.50 
 
 6,141.79 
 
 10,695.29 
 
 137,000 
 
 73,868.12 
 
 935.04 
 
 93 
 
 79 
 
 58 
 
 1,665.32 
 
 2,266.00 
 
 3,931.32 
 
 58,000 
 
 19,799.44 
 
 942.83 
 
 94 
 
 21 
 
 18 
 
 442.68 
 
 607.26 
 
 1,049.94 
 
 18,000 
 
 2,849.38 
 
 949.78 
 
 95 
 
 3 
 
 3 
 
 63.24 
 
 87.38 
 
 150.62 
 
 3,000 
 
 00.00 
 
 1,000.00 
 
Studies in Practical Life Insurance 
 
 109 
 
 NET EFFECTIVE RATES OF INTEREST, 1908. 
 
 A. DERIVED FROM COMPANY'S ENTIRE FUNDS. 
 
 I. Mean amount of Funds drawing DEO. 31, 1907. 
 
 Interest: Liability No. Amount. 
 
 Entire Assets, on basis of Company's 
 Book Values 
 
 (a) Liabilities not required to bear 
 interest : 
 
 1. Surrender Values unsettled. . 
 
 2. Policy Claims unsettled 
 
 3. Unpaid on supplementary con- 
 tracts not involving life con- 
 tingencies 
 
 4. Interest in advance 
 
 5. Commissions due to agents... 
 
 6. Accrued Expenses 
 
 7. Accrued Taxes 
 
 8. Due agents under NYLIC con- ' 
 tracts 
 
 9. Reserve for death-claims not 
 
 yet reported at Home Office.. 
 
 10. Dividends unpaid 30 
 
 <b) Liabilities normally drawing in- 
 terest : 
 
 1. Policy Reserve 8 
 
 2. Trust Funds 9 
 
 3. Premiums paid in advance 19 
 
 4. Additional Policy Reserve 34 
 
 5. Interim Accumulation Fund.. 33 
 
 6. Contingency Funds, on basis 
 of Assets admitted by Insur- 
 ance Department of New York 34 
 
 7. "Latent Fund for Contingen- 
 cies and Dividends", on basis 
 
 of Company's Book Values 
 
 8. Dividends 31/32 
 
 9. Dividends left with Company 
 
 to accumulate at interest 
 
 10. Reserve for NYLIC contracts 
 
 Total of (a) and (b) 
 
 Funds represented by Liabilities nor- 
 mally drawing interest (b) 
 
 Mean amount of Funds represented 
 by Liabilities normally drawing in- 
 terest 
 
 II. Net Income from Interest, Rents 
 and Profits: 
 Interest and Rents due and accrued 
 
 Dec. 31 
 
 Deduct interest paid in advance 
 
 Increase in net Interest and Rents 
 due and accrued 
 
 Interest and Rent received In 1908, 
 after deduction of miscellaneous 
 interest payments ($8,378) 
 
 Net profit on sale or maturity of 
 ledger assets 
 
 Other profits (Items 32 and 34 and 35 
 of Income) 
 
 DEO. 31, 1908. 
 Liability No. Amount. 
 
 
 $516,762,763 
 
 
 $559,422,543 
 
 10 
 
 $257,562 
 
 10 
 
 $267,687 
 
 17 
 
 3,094,070 
 
 17 
 
 3,355,971 
 
 18 
 
 
 
 18 
 
 199 
 
 20 
 
 1,599,730 
 
 21 
 
 1,950,243 
 
 21/22 
 
 65,448 
 
 22/23 
 
 59,160 
 
 24/26 
 
 105,695 
 
 f 25/26 
 \ 27 
 
 190,150 
 762,674 
 
 $511,200,537 
 516,762,763 
 
 $511,200,537 
 
 $5,593,353 
 1,599,730 
 
 $3,993,623 
 
 .$531,548,804 
 
 118,981 
 
 23,343,809 
 
 27,188 
 
 96,185 
 
 $23,586,163 
 
 26,770 
 
 439,721 
 
 40 
 31 
 
 500,000 
 412,618 
 
 $5,562,226 
 
 $7,525,472 
 
 $432,872,357 
 
 2,099,624 
 
 712,149 
 
 2,791,558 
 
 35,863,716 
 
 8 
 
 9 
 
 20 
 
 35 
 
 34 
 
 $459,209,411 
 
 2,319,830 
 
 812,888 
 
 3,129,402 
 
 67,181,561 
 
 8,306,240 
 
 35 
 
 8,946,843 
 
 22,353,955 
 6,200,938 
 
 32/33 
 
 2,135,872 
 7,602,905 
 
 
 19 
 42 
 
 1,278 
 557,081 
 
 $551,897,071 
 559,422,543 
 
 $551,897,071 
 
 $6,062,847 
 1,950,243 
 
 $4,112,604 
 
110 Studies in Practical Life Insurance 
 
 DEC. 31, 1907. DEO. 31, 1908. 
 
 Deduct : Amount. Amount. 
 
 Taxes on Real Estate 168,698 
 
 Expenses on Real Estate 296,507 
 
 Income Tax on Interest Receipts 17,640 
 
 Expenses involved in general care 
 of investments, and in care of all 
 policies (including paid-up poli- 
 cies) in respects which have no 
 reference to premiums received, 
 and which may therefore be 
 properly considered a charge in 
 proportion to the policy reserve: 
 3/16% of the mean invested as- 
 sets; i. e., 3/16% of $523,214,913 
 (consisting of the mean "total 
 i ledger assets"; less the mean 
 
 (1) of cash in Company's office, 
 
 (2) of cash in Company's Branch 
 Offices, (3) of cash in banks not 
 on interest, and (4) of Branch 
 
 Office balances) 981,028 
 
 Net decrease in Book "Value of 
 
 ledger assets 45,744 
 
 Doubtful debts marked off ($19,- 
 
 881, plus $899 included in item 
 
 14 of Disbursements) 20,780 
 
 Exchange' 60,330 1,590,727 $21,995,436 
 
 III. Divisor for calculation of Net Ef- 
 fective Rate of Interest: 
 
 Mean amount of Funds drawing in- 
 
 terest (see I above) $531,548,804 
 
 Deduct y 2 of net income (under II) 
 
 from Interest, Rents and Profits 10,997,718 
 
 Divisor for calculation of Net -Effect- 
 
 ive Rate of Interest $520,551 ,086 
 
 IV. Net Effective Rate of Interest is equal to II divided by III; or $21,995,436 -=- 
 $520,551,086 = 4.225%. This rate, derived from the Company's entire Funds, 
 is applicable to Gain and Loss Accounts of insurances in the Company's 
 several classes of participation in profits, where such insurances, of the 
 same mode of participation in profits, were issued both in and outside the 
 territory subject to the French Insurance Law of March 17, 1905. 
 
 B. .DERIVED FROM COMPANY'S FUNDS EXCLUSIVE OF FRENCH 
 INVESTMENTS [FRENCH BONDS]. 
 
 Net Income from Interest, Rents and Profits: 
 
 Amount of Item A II above $21,995,436 
 
 Deduct one year's gross effective interest on French Bonds, 3.3089% of 
 
 $5,993,475 $198,317 
 
 Less 3/16% of $5,993,475 11,238 187,079 
 
 $21,808,357 
 
 Divisor for calculation of Net Effective Rate of Interest: 
 
 Amount of Item A III above $520,551,086 
 
 Deduct book value of French Investments [French Bonds] forming part of 
 the Company's deposit as at June 30, 1908, under the provisions of the 
 French Law of March 17, 1905 5,993,475 
 
 Net Effective Rate of Interest is equal to I divided by II; or, $21,808,357 -=- 
 $514,557,611 = 4.238%. This rate derived from the Company's Funds ex- 
 clusive of French Investments [French Bonds], is applicable (1) to Gain 
 and Loss Accounts of insurances of the Company's several classes of partic- 
 ipation in profits where all insurances of the same mode of participation 
 in profits were issued exclusively outside the territory subject to the 
 French Insurance Law of March 17, 1905; and (2) to each and every 
 individual policy issued outside the French territory. 
 
 $514,557,611 
 
Studies in Practical Life Insurance 111 
 
 C. DERIVED FROM DEPOSIT WITH FRENCH GOVERNMENT, PER RESOLUTION* 
 OF BOARD OF TRUSTEES, DECEMBER 9, 1908. 
 
 I. Amounts taken for the present interest-rate calculation, as representing the 
 
 status June 30, 1908, of the Company's deposit with the French Government: Book Values. 
 
 French Investments [French Bonds] $5, 993, 475 
 
 American Securities 18,699,088 
 
 Policy Loans outstanding 2,115,676 
 
 Real Estate 1,300,000 
 
 $28,108,239 
 
 II. Net Effective Interest taken for the calendar year 1908: 
 
 One year's gross effective interest on French Bonds, 3.3089% of $5,993,475.. $198,317 
 
 Deduct 3/16% of $5,993,475 11,238 
 
 $187,079 
 
 Net Effective Interest on remainder of the deposit, 4.238% of $22,114,764 937,224 
 
 $1,124,303 
 
 III. Net Effective Rate of Interest is equal to II -=- I; or, $1,124,303 -=- $28,108,239 
 := 4.00%. This rate, derived from deposit with the French Government, per 
 Resolution of the Board of Trustees December 9, 1908, is applicable to all 
 insurances issued within the territory subject to the French Insurance Law 
 of March 17, 1905. 
 
 *Resolved, further — in view of the opinion * * * that the new French Law creates and 
 establishes a new class made up of the French and Algerian policy-holders giving to that class 
 the benefit of any additional security created by the investments and deposits which must be 
 made in compliance with the provisions of said law — that from the date of the deposit of the 
 securities by the Company, pursuant to the requirements of the French Government, the 
 participating policy-holders heretofore insured or hereafter to be insured in France and Algeria 
 shall, as regards interest earnings only, be placed by the Officers of the Company in a Special 
 Class to be known as the French Class; and in calculating the profits or dividends to be hereafter 
 apportioned and paid to members of that class, the rate of interest used shall be the rate 
 actually yielded by the investments forming the deposit under the provisions of the French 
 Law, provided that until 1912, on that portion of the Company's reserves deposited with the 
 French Government represented by American securities, by real estate and by policy loans, the 
 interest rate used in calculating such dividends shall be the average interest rate on the 
 Company's invested assets excluding the French Investments [French Bonds] already 
 referred to. 
 
 ASSESSMENT OF EXPENSES, 1908. 
 (Without deduction of Re-insurance Premiums or Commissions.) 
 
 A. PRELIMINARY CALCULATION FOR GAIN AND LOSS ACCOUNTS OF 
 DIVIDEND CLASSES. 
 
 I. Insurance Expenses chargeable to Annual Premiums, consisting of the following: 
 
 Entire expenses, without deduction of reinsurance commissions, $5,985; — and excluding 
 (1) Real Estate taxes and expenses, $465,205; (2) Income Tax on Interest Receipts, 
 $17,640; (3) Gross loss on sale or maturity of ledger assets, $342; (4) Gross decrease 
 in book value of ledger assets, $242,158; (5) Miscellaneous interest payments, $8,378; 
 (6) Exchange, $60,330; (7) Doubtful debts marked off, $19,881, plus $899 included in 
 
 Item 14 of Disbursements $10,017,102 
 
 Deduct. 
 
 (a) Policy Fees $30,539 
 
 (b) 3/16% of mean invested assets (see calculation 
 
 of effective rate of interest for 1908) 981, 02S 
 
 (c) Expense on annuities (five per cent, of $436,222 
 annuity considerations, and of $22,200, renewal 
 
 premiums on deferred annuities) 22,921 
 
 (d) Expenses on single premiums (7%% of $36,371)... 2,728 1,037,216 
 
 II. First Year's Commissions and Bonuses (excluding com- 
 missions on annuities and on single premiums) : 
 
 (a) Commissions on first year's premiums $2,431,724 
 
 (b) Bonuses 1,010 
 
 (c) Commissions advanced 7,082 
 
 (d) Salaries paid soliciting agents 12,697 
 
 $8,979,886 
 
 $2,452,513 
 
112 Studies in Practical Life Insurance 
 
 III. Physicians' Fees, $238,008; Bureau of Investigation, $62,- 
 
 690; Less Policy Fees, $30,539 270,159 
 
 IV. Direct Acquisition Expenses (II -|- III) $2,722,672 
 
 V. Commissions on Renewal Premiums, $933,127; Collection 
 
 Fees, $60,599; Commuted Renewal Commissions, $82,746. 1,076,472 
 
 VI. General Expenses (I, less IV & V) 5,180,742 $8,979,886 
 
 VII. Premiums, 1st Tear (Annual) $5,388,485 
 
 VIII. Premiums — Renewal with Commission, Renewal with Col- 
 lection Fees, and Renewal without charge (not includ- 
 ing renewal premiums on deferred annuities) 72,173,007 
 
 IX. Entire Annual Premiums (VII + VIII) $77,561,492 
 
 X. Expense ratio on 1st Year's pre- 
 miums exclusively (IV -=- VII) 50.53% 
 
 XI. Expense ratio on Renewal premi- 
 ums exclusively (V -=- VIII) 1.49% 
 
 XII. Expense ratio on entire annual 
 
 premiums (VI -=- IX) 6.68% 
 
 XIII. Entire ratio on 1st Year's premi- 
 
 ums (X -|- XII).... 57.21% 
 
 XIV. Entire ratio on Renewal premiums (XI -j- XII) 8.17% 
 
 B. SPECIAL CALCULATION FOR CONTRIBUTION ANNUAL DIVIDEND RATES. 
 
 I. Adjusted Premiums. 
 
 1. Premiums received 
 
 2. Ordinary Life element 
 
 3. Adjusted Premiums, being the mean between 
 
 1 and 2 
 
 II. Expenses: 1st Year; Renewal. 
 
 1. Commissions: 1st Year; Renewal 
 
 2. Other Expenses, exclusively 1st Year 
 
 3. Total Expenses chargeable exclusively to 1st 
 
 Year and to Renewal Premiums received, 
 respectively 
 
 III. General Expenses. 
 
 IV. Expense Ratios. 
 
 1. 1st Year and Renewal (II -=- I) 
 
 2. General Expenses (III -f- I) 
 
 3. Entire Expense Ratios chargeable to Ad- 
 
 justed 1st Year and Renewal Premiums, 
 
 respectively 64.44% 9.56% 
 
 On let Year'B 
 Premiums. 
 
 $5,388,000 
 
 4,229,000 
 
 On Renewal 
 Premiums. 
 
 $72,173,000 
 
 50,837,000 
 
 Total. 
 
 $4,808,000 
 
 $61,505,000 
 
 $66,313,000 
 
 $2,453,000 
 270,000 
 
 $1,076,000 
 
 
 $2,723,000 
 
 $1,076,000 
 
 
 
 1.75% 
 7.81% 
 
 $5,181,000 
 
 56.63% 
 7.81% 
 
 7.81% 
 
 TAXES PAID BY THE NEW-YORK LIFE INSURANCE COMPANY IN 1910. 
 
 Alabama. — Total taxes, $10,100.75 made up as follows: On premiums less dividends @ 
 2%, $9,101.92; State licenses $111; State fees $10; Agents' licenses, State $168; 
 Local $639.02; Personal property tax $25.99; City premium tax $44.82. 
 
 Arizona. — Total taxes, $5,263.67, made up as follows: On premiums @ 2%, $5,087.87; 
 Territorial license $5; Territorial fees $7.50; Agents' licenses, Territorial $132; 
 Local $20; Personal property tax $11.30. 
 
 Arkansas.— Total taxes, $7,218.87, made up as follows: On premiums less losses, endow- 
 ments and commissions @ 2%%, $7,092.12; State license $2; State fees $60; Agents' 
 licenses, State $58; Personal property tax $6.75. 
 
 California. — Total taxes, $21,499.57 made up as follows: On premiums @ 1%, $19,728.23; 
 State licenses $20; State fees $98.25; Agents' licenses, State $228; local $543; City 
 premium tax $789.10; Personal property tax $92.99. 
 
Studies in Practical Life Insurance 113 
 
 Colorado. — Total taxes, $14,209.65 made up as follows: On premiums @ 2%, $13,964.19; 
 State license $5; State fees $<61.80; Agents' licenses, State $134; Personal property 
 tax $44.66. 
 
 'Connecticut. — Total taxes, $5,569.72 made up as follows: On premiums less annual 
 
 dividends @ 1%, $5,548.56; State license $10; State fees $10; Agents' licenses, 
 
 State $1.16. 
 Delaware. — Total taxes, $1,570.15 made up as follows: On premiums @ 2%, $1,453.15; 
 
 State license $27; State fees $15; Agents' licenses, State $75. 
 LDist. Columbia. — Total taxes, $3,700.37 made up as follows: On gremiums less dividends 
 
 @ 1%%, $3,549.79; District license $10; District fees $6; Agents' licenses, District 
 
 $134.58. 
 
 IFIorida. — Total taxes, $10,075.42 made up as follows: On premiums @ 2%, $9,288.42; 
 State license $200; State fees $10; Agents' licenses, State $295; Local $282. 
 
 •Georgia. — Total taxes, $9,317.81 made up as follows: On premiums @ 1%, $7,323.91; 
 State licenses $40.50; State fees $9.80; Agents' licenses, State $252; Local $907.20; 
 City taxes on premiums $780.54; Personal property tax $3.86. 
 
 Idaho. — Total taxes, $3,426.49 made up as follows: On premiums less losses and endow- 
 ments @ 2%, $3,221.49; State licenses $50; State fees $20; Agents' licenses, State 
 $135. 
 
 Illinois. — Total taxes, $57,404.07 made up as follows: On premiums less annual divi- 
 dends @ 1%, $56,630.51; State licenses $1; State fees $115; Agents' licenses, State 
 $560; Personal property taxes $97.56. 
 
 (Indiana. — Total taxes, $20,454.50 made up as follows: On premiums less death-losses 
 @ 3%, $20,130.81; State licenses $5; State fees $75; Agents' licenses, State $207; 
 Local $34.50; Personal property tax $2.19. 
 
 .Iowa. — Total taxes, $21,872.23 made up as follows: On premiums @ 2%%, $21,676.96; 
 State license $2; State fees $20; Agents' licenses, State $142; Personal property 
 taxes $31.27. 
 
 (Kansas. — Total taxes, $12,780.73 made up as follows: On premiums @ 2%, $12,454.59; 
 State fees $100; Agents' licenses, State $114, Local $110.75; Personal property taxes 
 $1.39. 
 
 Kentucky. — Total taxes, $16,695.26 made up as follows: On premiums @ 2 %, $15,743.51; 
 State license $1.00; Agents' licenses, State, $220, Local $385.33; City premium tax 
 $276.44; Personal property tax $68.98. 
 
 Louisiana. — Total taxes, $16,047.80 made up as follows: On premiums @ 6/10 of 1%, 
 $7,740; State license $10; State fees $303.80; Agents' licenses, State $220, Local 
 $352.40; City premium taxes $7,320; Personal property taxes $101.60. 
 
 Maine. — Total taxes, $4,617.37 made up as follows: On premiums @ 1%%, $4,492.57; 
 State license $20; Agents' licenses, State $94; Personal property tax $10.80. 
 
 Maryland. — Total taxes, $11,244.44 made up as follows: On premiums @ 1%%, 
 $10,642.83; State license $300; State fees $105.80; Agents' licenses, State $178; 
 Personal property taxes $17.81. 
 
 .Massachusetts. — Total taxes, $42,882.06 made up as follows: On reserve @ % of 1%, 
 $42,404.72; State fee $20; Agents' licenses, State $428; Personal property tax $29.34. 
 
 Michigan. — Total taxes, $20,703.67 made up as follows: On premiums @ 2%, $20,688.63; 
 State fees $5 ; Personal property tax $10.04. 
 
 Minnesota.— Total taxes, $15,506.27 made up as follows: On premiums @ 2%, $15,153.83; 
 State license $2; State fees $153.86; Agents' licenses, State $152; Personal property 
 tax $44.58. 
 
 Mississippi. — Total taxes, $4,752.40 made up as follows: On premiums first-year @ 2% 
 and on premiums-renewal of policies issued since March 5, 1902, @ 1/10 of 1%, 
 $2,274.48; State licenses $250; State fees $26; Agents' licenses, State $1,386.92, Local 
 $815. 
 
 Missouri. — Total taxes, $43,979.33 made up as follows: On premiums @ 2%, $43,112.11; 
 State license, $1.00; State fees $40; Agents' licenses, State $354, Local $435.10; 
 Personal property tax $37.12. 
 
 Montana. — Total taxes, $11,242.24 made up as follows: On premiums @ 2%, State 
 $6,921.79; County @ 3.16%, $4,109.37; State fees $35; Agents' licenses, State $155, 
 Local $13; Personal property tax $8.08. 
 
 Nebraska. — Total taxes, $8,811.79 made up as follows: On premiums @ 2%, $8,704.47; 
 State license $2; State fees $26; Agents' licenses, State $68; Personal property tax 
 $11.32. 
 
114 Studies in Practical Life Insurance 
 
 Nevada. — Total taxes, $145.90 made up as follows: State license $100; State fees $20; 
 Agents' licenses, Local $20; Personal property tax $5.90. 
 
 New Hampshire. — Total taxes, $3,073.67 made up as follows: On premiums less death- 
 losses @ 2%, $3,033.67; State license $5; State fees $15; Agents' licenses, State $20. 
 
 New Jersey. — Total taxes, $7,791.02 made up as follows: On premiums less annual 
 dividends @ 1%, $7,535.32; State fees $20; Agents' licenses, State $226; Personal 
 property tax $9.70. 
 
 New Mexico. — Total taxes, $2,867.88 made up as follows: On premiums less dividends 
 @ 2%, $2,806.88; Territorial license $2; Territorial fees $20; Agents' licenses, terri- 
 torial $24, Local $15. 
 
 New York. — Total taxes, $119,819.08 made up as follows: On premiums less annual 
 dividends @ 1%, $119,424.59; State fees $315; Agents' licenses, State $79.49. 
 
 North Carolina. — Total taxes, $9,447.59 made up as follows: On premiums @ 2%%,. 
 $9,119.59; State license $250; State fees $27; Agents' licenses, State $51. 
 
 North Dakota. — Total taxes, $9,324.43 made up as follows: On premiums (a) 2%%,. 
 $8,908.69; State license $2; State fees $353.90; Agents' licenses, State $44; Personal 
 property taxes $15.84. 
 
 Ohio.— Total taxes, $57,565.32 made up as follows: On premiums @ 2%%, $57,130.87; 
 State license $2; State fees $134.18; Agents' licenses, State $277; Personal property 
 tax $21.27. 
 
 Oklahoma. — Total taxes, $11,036.02 made up as follows: on premiums less dividends- 
 @ 2%, $10,771.02; State license $200; State fees $20; Agents' licenses, State $45. 
 
 Oregon. — Total taxes, $1,304.33 made up as follows: On premiums less dividends and 
 policy claims @ 2%, $770.33; State license $100; State fees $29; Agents' licenses,. 
 State $365, Local $40. 
 
 Pennsylvania. — Total taxes, $85,012.14 made up as follows: On premiums @ 2%,. 
 $84,456.14; State license $2; State fees $20; Agents' licenses, State $468, Local $66. 
 
 Rhode Island.— Total taxes, $5,397.23 made up as follows: On premiums @ 2%, $5,320.52; 
 State fees $34; Agents' licenses, State $36; Personal property tax $6.71. 
 
 South Carolina. — Total taxes, $23,288 made up as follows: State tax on premiums less 
 dividends @ 2%, $8,117.38; County taxes (for 1907-1908 paid in 1910 under law 
 since repealed) on premiums @ 1.53%, $14,085.58; State license $150; State fee $100; 
 Agents' licenses, State $20.50, Local $807.50; Personal property tax $7.04. 
 
 South Dakota. — Total taxes, $5,473.56 made up as follows: On premiums @ 2%%,. 
 
 $5,227.06; State license $2; State fees $194.50; Agents' licenses, State $50. 
 Tennessee. — Total taxes, $18,134.88 made up as follows: On premiums less dividends 
 
 used in reduction of premium-payments, @ 2%%, $17,544.88; State fees, $25; Agents' 
 
 licenses $565. 
 Texas. — New- York Life Insurance Company is not transacting business in this State,. 
 
 on account of oppressive laws. 
 Utah. — Total taxes, $5,351.41 made up as follows: On premiums @ 1%% less State tax. 
 
 on personal property, $5,203.11; State license $5; State fees $65; Agents' licenses,. 
 
 State $58; Personal property tax $20.30. 
 Vermont. — Total taxes, $4,773.10 made up as follows: On premiums less dividends @ 
 
 2%, $4,650.10; State licenses $55; State fees $20; Agents' licenses $48. 
 Virginia. — Total taxes, $8,129.95 made up as follows: On premiums @ 1 1/10% $6,730.44; 
 
 State licenses $76.67; Agents' licenses, State $79, Local $1,221.25; Local premium 
 
 taxes $17.44; Personal property taxes $5.15. 
 Washington. — Total taxes, $15,549.93 made up as follows: On premiums, less dividends. 
 
 @ 2%, $15,129.22; State license $10; State fees $85; Agents' licenses, State $280; 
 
 Personal property tax $45.71. 
 West Virginia. — Total taxes, $7,441.49 made up as follows: On premiums @ 2% 
 
 $7,026.20; State license $10; State fees $20.75; Agents' licenses, State $270, Local 
 
 $30.50; Local premium tax $84.04. 
 Wisconsin. — Total taxes, $10,287.96 made up as follows: On premiums less annual divi- 
 dends @ 1%, $10,150.96; State fees $25; Agents' licenses, State $112. 
 Wyoming. — Total taxes, $4,315.77 made up as follows: On premiums @ 2Vz%, $4,248.47; 
 
 State license $25; State fees $15.30; Agents' licenses $27. 
 Porto Rico, Hawaii, Philippines and Alaska. — Total taxes, $6,145.81. 
 United States. — Corporation Excise tax 1% of net income, $106,411.02. 
 Foreign Countries. — Total taxes, $144,928.67. 
 Total Taxes, licenses and fees, all countries, $1,073,962.79. 
 
FROM THE LAWS OF NEW YORK. 
 
 Insurance Law. 
 
 § 6. Fees. 
 
 Every corporation or person to whom this chapter shall be applicable shall pay 
 the following fees to the superintendent, unless remitted by him. For filing the declara- 
 tion and certified copy of charter required by law, thirty dollars. For filing the annual 
 report required by law, twenty dollars. For each certificate of authority and certified 
 copy thereof, and for each certificate of deposit; valuation or compliance, not exceeding 
 five dollars. For every copy of any paper filed in his office, ten cents per folio; and for 
 affixing the official seal on such copy and certifying the same, one dollar. All fees, 
 perquisites and moneys received by the insurance department, or any officer thereof, 
 from or on account of any insurance corporation, shall be paid into the state treasury 
 monthly. 
 
 Source. — Former § 6, as amended by L. 1893, ch. 725. 
 
 § 7. Expenses of examinations. 
 
 The expense of every examination or other investigation of the affairs of an 
 insurance corporation, pursuant to the authority conferred by the provisions of this 
 chapter, shall be borne and paid by the corporation so examined, unless remitted by the 
 superintendent. 
 
 No charge shall be made for any examination of an insurance corporation by the 
 superintendent or his deputy personally, or by one or more of the regular clerks of the 
 department except for necessary traveling and other actual expenses. All charges for 
 making any examination and all charges against an insurance corporation by an attorney 
 or appraiser of the department shall be presented in the form of an itemized bill 
 approved by the superintendent, audited by the comptroller, and paid on his warrant 
 drawn in the usual manner on the state treasurer, to the person making the examination. 
 
 The corporation examined on receiving a certified copy of such bill so approved, 
 audited and paid, shall repay the amount thereof to the superintendent of insurance, 
 to be by hirn paid into the state treasury to replace the money drawn out as above 
 provided. No insurance corporation, or any officer or director thereof, shall either 
 directly or indirectly pay by way of gift, credit or otherwise, any sum of money or other 
 valuable thing to the superintendent or any clerk or employe of the insurance depart- 
 ment or any examiner for extra service or for purposes of legislation, or by way of a loan, 
 or on any other pretense whatsoever. 
 
 Source.— Former § 7, as amended by L. 1898, ch. 171; L. 1906, ch. 326, and L. 1909, 
 ch. 301. Amended by L. 1910, ch. 634. 
 
 § 16. Investment of capital and surplus. 
 
 The cash capital of every domestic insurance corporation required to have a 
 ■capital, to the extent of the minimum capital required by law, shall be invested and 
 kept invested in the stocks or bonds of the United States or of this state, not estimated 
 above their current market value, or in the bonds of a county or incorporated city in 
 this state authorized to be issued by the legislature, not estimated above their par value 
 or their current market value, or in bonds and mortgages on improved unencumbered 
 real property in this state worth fifty per centum more than the amount loaned thereon. 
 
 * * * The residue of the capital and the surplus money and funds of every 
 domestic insurance corporation over and above its capital, and the deposit that it may 
 he required to make with the superintendent, may be invested in or loaned on the 
 pledge of any of the securities in which deposits are required to be invested or in the 
 public stocks or bonds of any one of the United States, or in bonds and mortgages 
 on improved unencumbered real property in this state worth fifty per centum more than 
 the amount loaned thereon, or except as in this chapter otherwise provided, in the 
 stocks, bonds or other evidence of indebtedness of any solvent institution incorporated 
 under the laws of the United States or of any state thereof, or in such real estate as 
 it is authorized by this chapter to hold ; but no such funds shall be invested in or loaned 
 on its own stock or the stock of any other insurance corporation carrying on the same kind 
 of insurance business. Any domestic insurance corporation may, by the direction and 
 consent of two-thirds of its board of directors, managers or finance committee, invest, 
 hy lean or otherwise, any such surplus moneys or funds in the bonds issued by any city, 
 county, town, village or school district of this state, pursuant to any law of this state. 
 
 * * * Every such domestic corporation doing business in other states of the 
 United States or in foreign countries, may invest the funds required to meet its obliga- 
 
116 Studies in Practical Life Insurance 
 
 tion incurred in such other states or foreign countries and in conformity to the laws 
 thereof, in the same kind of securities in such other states or foreign countries that such 
 corporation is by law allowed to invest in, in this state. Any life insurance company 
 may lend a sum not exceeding the lawful reserve which it holds upon any policy, on 
 the pledge to it of such policy and its accumulations as collateral security. But nothing 
 in this section shall be held to authorize one insurance corporation to obtain, by purchase 
 or otherwise, the control of any other insurance corporation. 
 
 Source.— Former § 16, as amended by L. 1893, chap. 112; L. 1895, chap. 917; L. 1897, 
 chap. 218; L. 1906, chap. 326; L. 1907, chap. 239; L. 1909, chap. 240 and chap. 302. 
 Amended by L. 1910, chap. 634. 
 
 § 18. Stocks, bonds and other evidences of debt. 
 
 If any domestic insurance corporation shall have invested any of its funds in or 
 loaned any of its funds upon the stock, "bonds or other evidences of debt of other cor- 
 porations or of any nation, state, county, city, town, village, school district, municipality, 
 or other civil division of any state, pursuant to the laws of this state, and the super- 
 intendent shall have reason to believe that such stock, bonds or other evidences of 
 debt are not amply secured or are not yielding an income he may direct it to report 
 to him under oath the amount thereof, the security therefor and its market value. No 
 stock and no bond or other evidence of debt if in default as to principal or interest, 
 or if not amply secured, shall be valued as an asset of the corporation above its market 
 value. All bonds or other evidences of debt held by any life insurance corporation, 
 authorized to do business in this state shall, if amply secured and if not in default as 
 to principal or interest, be valued as follows: If purchased at par, at the par value; 
 if purchased above or below par, on the basis of the purchase price adjusted so as to 
 bring the value to par at maturity and so as to yield meantime the effective rate of' 
 interest at which the purchase was made; provided that the purchase price shall in 
 no case be taken at a higher figure than the actual market value at the time of purchase, 
 and provided further that the superintendent of insurance shall have full discretion 
 in determining the method of calculating values according to the foregoing rule, and the 
 values found by him in accordance with such method shall be final and binding; 
 provided, also, that any such corporation may return such bonds or other evidences of 
 debt at"their market value or their book value, but in no event at an aggregate value 
 exceeding the aggregate of the values calculated according to the foregoing rule. The- 
 superintendent of insurance may, at any time, in his discretion, require any insurance- 
 corporation, other than a life insurance corporation, authorized to do business in this 
 state to value its bonds or other evidences of debt in accordance with the foregoing rule. 
 
 Source. — Former § 18, as amended by L. 1909, chap. 301. Amended by L. 1910, 
 chap. 634. 
 
 § 20. Restrictions as to real property. 
 
 Every insurance corporation transacting business in this state may purchase, 
 hold and convey real property only for the following purposes and in the following: 
 manner : 
 
 1. The building in which it has its principal office and the land upon which it 
 stands. 
 
 2. Such as shall be requisite for its convenient accommodation in the transaction, 
 of its business. 
 
 3. Such as shall have been acquired for the accommodation of its business. 
 
 4. Such as shall have been mortgaged to it in good faith by way of security for 
 loans previously contracted or for moneys due. 
 
 5. Such as shall have been conveyed to it in satisfaction of debts previously con- 
 tracted in the course of its dealings. 
 
 6. Such as shall have been purchased at sales upon judgments, decrees or mort- 
 gages obtained or made for such debts. 
 
 7. Such as shall have been acquired under sections thirteen and fourteen of the 
 general corporation law. 
 
 All such real property specified in subdivisions three, four, five, six and seven of 
 this section, as shall not be necessary for its accommodation in the convenient trans- 
 action of its business, shall be sold and disposed of within five years after it shall have- 
 acquired title to the same, or within five years after the same shall have ceased to be 
 necessary for the accommodation of its business, and it shall not hold such property 
 for a longer period unless it shall procure a certificate from the superintendent of 
 insurance that its interests will suffer materially by the forced sale thereof, in which 
 event the time for the same may be extended to such time as the superintendent shall 
 direct in such certificate. 
 
 ********** sit- 
 
 No real property shall be acquired by any domestic life insurance corporation 
 under subdivisions one or two hereof or under section fourteen of the general corpora- 
 
Studies in Practical Life Insurance 117 
 
 tion law and no real property within the state shall be acquired by any foreign life 
 insurance corporation under, subdivision two hereof, except with the approval of the 
 superintendent of insurance. No real property shall be disposed of by any- domestic 
 life insurance corporation and no real property within the state shall be disposed of 
 by any foreign life insurance corporation, by exchange for other real property, wherever 
 situated, as the consideration for the transfer jn whole or part unless the acquisition of 
 the latter shall be requisite for the convenient accommodation of the corporation in the 
 transaction of its business and shall be approved by the superintendent. 
 Source. — Former § 20, as amended by L. 1906, chap. 326. 
 
 § 36. Officers and directors not to be pecuniarily interested in transactions. 
 
 No director or officer of an insurance corporation doing business in this state shall 
 receive any money or valuable thing for negotiating, procuring, recommending or aiding 
 in, any purchase by or sale of such corporation of any property, or any loan from such 
 corporation, nor be pecuniarily Interested, either as principal, coprincipal, agent, or 
 beneficiary, in any such purchase, sale or loan; provided that nothing herein contained 
 shall prevent a life insurance corporation from making a loan upon a policy held therein 
 by the borrower not in excess of the net value thereof. 
 
 Any person violating any provision of this section shall be guilty of a misde- 
 meanor. 
 
 Source. — Former § 36 as amended by L. 1906, chap. 326. 
 
 § 39. Examiners and examinations. 
 
 The Superintendent of insurance shall, as often as he deems it expedient, and, if 
 a domestic life insurance corporation, at least once in three years, or, if any other 
 domestic insurance corporation, association, society or order, at least once in five years, 
 examine into the affairs of any insurance corporation doing business in this state, and 
 into the affairs of any corporation organized under any law of this state or having an 
 office in this state, which corporation is engaged in or is claiming or advertising that 
 it is engaged in organizing or receiving subscriptions for or disposing of stock of, or in 
 any manner aiding or taking part in the formation or business of, an insurance corpora- 
 tion or corporations, or which is holding the capital stock of one or more insurance 
 corporations for the purpose of controlling the management thereof as voting trustee 
 or otherwise. For such purpose he may appoint as examiners one or more competent 
 persons not officers of or connected with or interested in any insurance corporation other 
 than as policy holders; and upon such examination he, his deputy or any examiner 
 authorized by him may examine under oath the officers and agents of such corporation 
 and all persons deemed to have material information regarding the company's property 
 or business. Every such corporation, its officers and agents, shall produce its books 
 and all papers in its or their possession relating to its business or affairs, and any other 
 person may be required to produce any book or paper in his custody deemed to be 
 relevant to the examination, for the inspection of the superintendent, his deputies or 
 examiners whenever required; and the officers and agents of such corporation shall 
 facilitate such examination and aid the examiners in making the same so far as 
 it is in their power to do so. Every such examiner shall make a full and true report 
 of every examination made by him, verified by his oath, which shall comprise only facts 
 appearing upon the books, papers, records or documents of such corporation, or ascer- 
 tained from the testimony, sworn to, of its officers or agents or other persons examined 
 under oath concerning its affairs, and such conclusions and recommendations as may 
 reasonably be warranted from such facts so disclosed, and said report so verified shall 
 be presumptive evidence in any action or proceeding in the name of the people against 
 the corporation, its officers or agents, of the facts stated therein. The superintendent 
 shall grant a hearing to the corporation examined before filing any such report; and may 
 withhold any such report from public inspection for such time as he may deem proper 
 and may, if he deems it for the interest of the public to do so, publish any such report or 
 the result of any such examination as contained therein, in one or more newspapers 
 of the state. 
 
 Source. — Former § 39, as amended by L. 1906, chap. 326. Amended by L. 1910, 
 chap. 634. 
 
 § 44. Reports of corporations. 
 
 Every corporation, engaged wholly or in part in the transaction of the business of 
 insurance in this state, whether heretofore or hereafter incorporated by a general or 
 special law, shall annually, on the first day of January, or within two months thereafter, 
 if a corporation under article two of this chapter, and on or before the fifteenth day of 
 February, if a corporation under the other articles of this chapter, file in the office of the 
 superintendent of insurance a statement verified by the oath of at least two of the 
 principal officers of such corporation, showing its condition on the thirty-first day of 
 December then next preceding which shall be in such form and shall contain such 
 
118 Studies in Practical Life Insurance 
 
 matters as the superintendent shall prescribe. If a foreign corporation incorporated 
 under the laws of a state or country outside of the United States such oath may be 
 made by the manager thereof within the United States. 
 
 The superintendent may also address any inquiries to any such insurance corpora- 
 tion or its officers in relation to its doings or condition, or any other matter connected 
 with its transactions. Every corporation so addressed shall promptly and truthfully 
 reply in writing to any such inquiries, and such reply shall be verified, if required by the 
 superintendent, by such officer of the corporation as he shall designate. 
 
 Source. — Former §. 44, as amended by L. 1897, chap. 493. Amended by L. 1910, 
 chap. 634. 
 
 § 45. Forms of report to be furnished by superintendent. 
 
 The superintendent shall cause to be prepared and furnished to every corporation 
 required by the provisions of this chapter to report to him, printed forms of the reports 
 and statements required of such corporations. He may make such changes from time 
 to time in the form of the same as shall seem to him best adapted to elicit from such 
 corporations a true exhibit of their condition in respect to the several matters which they 
 are required to report, or m respect to any other matters which he may deem 
 material. * * * 
 
 * * * In addition to any other penalty prescribed by law, every insurance 
 corporation failing to make and file the reports and statements required by this chapter 
 or to reply to any inquiry of the superintendent, shall forfeit to the people of the state 
 five hundred dollars for the first offense, and an additional five hundred dollars for 
 every month that such corporation shall thereafter continue to transact any business of 
 insurance in this state. 
 
 Source. — Former § 46, as amended by L. 1906, chap. 326. 
 
 § 50. Agent's certificate of authority. (See also § 91.) 
 
 No person or corporation shall act as agent for any foreign insurance corporation 
 in the transaction of any business of insurance within this state, or negotiate for or place 
 risks for any such corporation) or in any way or manner aid such corporation in effecting 
 insurances or otherwise in this state, unless such corporation shall have fully complied 
 with the provisions of this chapter. Every such agent shall, annually, on the first day of 
 January, or within six months thereafter, procure a certificate of authority from the 
 superintendent of insurance, who shall file in his office evidence of the issuance of such 
 certificate to the agent aforesaid. Any person or corporation violating the provisions 
 of this section shall forfeit to the people of the state the sum of five hundred dollars for 
 the first offense, and an additional sum of one hundred dollars for each month during 
 which any such person or corporation shall continue to act in violation of this section. 
 This section shall not apply to the agents of corporations transacting business under 
 the provisions of article six [relating to life or casualty corporations upon the coopera- 
 tive or assessment plan] of this chapter. 
 
 Source. — Former § 50, as amended by L. 1893, chap. 725, and L. 1909, chap. 301. 
 
 § 53. General penalties. 
 
 Any corporation or person violating any provision of this chapter, except where 
 such violation constitutes a felony, shall in addition to any penalty otherwise prescribed 
 for such violation, be guilty of a misdemeanor. 
 
 Source. — Former § 53, as amended by L. 1906, chap. 326. 
 
 § 58. Policy to contain the entire contract; statements of insured to be representa- 
 tions and not warranties. 
 
 Every policy of insurance issued or delivered within the state on or after the 
 first day of January, nineteen hundred and seven, by any life insurance corporation 
 doing business within the state shall contain the entire contract between the parties and 
 nothing shall be incorporated therein by reference to any constitution, by-laws, rules, 
 application or other writings unless the same are endorsed upon or attached to the 
 policy when issued; and all statements purporting to be made by the insured shall in 
 the absence of fraud be deemed representations and not warranties. Any waiver of the 
 provisions of this section shall be void. 
 
 Source. — Former § 58. 
 
 § 59. Certain provisions in policies prohibited. 
 
 No corporation issuing policies of insurance upon the lives of persons, whether 
 such corporation is a domestic one, existing under the laws of the state, or a foreign 
 one which has become entitled to do business within the state, shall provide in any 
 application, policy or certificate of insurance, that the person soliciting such insurance, 
 or any person who is engaged in the business of soliciting insurance for the company 
 issuing such policy, or certificate, and whose compensation is either paid by said com- 
 
Studies in Practical Life Insurance 119 
 
 pany, or is contingent upon the issuing of such policy, is the agent of the person insured 
 under said policy or certificate, or shall insert in said policy or certificate any provision 
 to make the acts or representations of such person binding upon the person so insured 
 under said policy or certificate. 
 
 Source. — Former § 59, as amended by L. 1906, chap. 326. 
 
 § 60. Estimates and misrepresentations prohibited. 
 
 No life insurance corporation doing business in this state and no officer, director 
 or agent thereof shall issue or circulate, or cause or permit to be issued or circulated, 
 any estimate, illustration, circular or statement of any sort misrepresenting the terms 
 of any policy issued by it or the benefits or advantages promised thereby, or the divi- 
 dends or share of surplus to be received thereon, or shall use any name or title of any 
 policy or class of policies misrepresenting the true nature thereof. Nor shall any such 
 corporation or agent thereof make any misrepresentation to any person insured in 
 another company for the purpose of inducing or tending to induce such person to lapse, 
 forfeit, or surrender his said insurance. Any violation of this section shall constitute 
 a misdemeanor, and it shall be the duty of the superintendent of insurance to revoke 
 the license of the corporation or agent so offending. 
 
 Source. — Former § 60, as amended by L. 1908, chap. 347. 
 
 § 83. Distribution of surplus to policy-holders. 
 
 Except as herein provided, every domestic life insurance corporation heretofore 
 or hereafter organized, whether incorporated by special act or under a general statute, 
 anything in its charter or certificate of incorporation or in such special act or general 
 statute to the contrary notwithstanding, shall provide in every policy issued on or after 
 the first day of January, nineteen hundred and seven, that the proportion of the surplus 
 accruing upon said policy shall be ascertained and distributed annually and not other- 
 wise. Upon the thirty-first day of December of each year, or as soon thereafter as may 
 be practicable, every such corporation shall well and truly ascertain the surplus earned 
 by such corporation during said year. After setting aside from such surplus such sums 
 as may be required for the payment of authorized dividends upon the capital stock, if 
 any, and such sums as may properly be held for account of existing deferred dividend 
 policies, and for a contingency reserve not in excess of the amount prescribed in this 
 article, every such corporation shall apportion the remaining surplus equitably to 
 all other policies entitled to share therein. Except in the case of a term or an industrial 
 policy, the share of surplus so apportioned in the case of a policy issued oh or after 
 the first day of January, nineteen hundred and seven shall, at the option of the owner of 
 the policy, be payable in cash, or shall be applicable to the payment of any premium 
 or premiums upon said policy or to the- purchase of a paid-up addition thereto or shall 
 be permitted to accumulate to the credit of the policy- at such rate of interest as shall 
 be allowed by the company, and with such interest shall be payable upon the maturity 
 of the policy or shall be withdrawable in cash by the owner of the policy on any anni- 
 versary of the date of issue thereof. Such corporation may require the owner of the 
 policy to elect the manner in which said dividends shall be applied as above provided 
 by mailing a written notice of the amount of the said dividends and the options 
 available as aforesaid in a sealed envelope in the manner required by the provisions 
 of this chapter for notices of premium payments, and in case the owner shall fail to 
 notify the company in writing of his election within three months after the date of 
 the mailing of said notice, the surplus shall be applied by the company to the purchase 
 of a paid-up addition to the sum insured. In the case of a term or industrial policy 
 issued on or after the first day of January, nineteen hundred and seven the share of 
 surplus so apportioned shall be payable to the owner of the policy in cash or shall 
 be applicable to the payment of any premium or premiums upon said policy, or if so 
 provided in the policy shall be permitted to accumulate to the credit of the policy at 
 such rate of interest as shall be allowed by the company and in such case shall be 
 payable upon the maturity or expiration of the policy or shall be withdrawable in cash 
 by the holder of the policy on any anniversary of the date of issue thereof. The divi- 
 dends declared as aforesaid in the case of a policy issued on or after the first day of 
 January, nineteen hundred and seven, shall be payable respectively either upon the 
 anniversary of the policy next after said thirty-first day of December or upon a 
 day certain in the year following said date, according to the rules of the corporation 
 or the terms of the policy, and upon the sole condition that the premium payments 
 for the policy year current upon said thirty-first day of December shall have been 
 completed. 
 
 This section shall not apply to any stock life insurance corporation which on or 
 after the first day of January, nineteen hundred and seven, shall transact and shall 
 represent itself as transacting its business exclusively upon a nonmutual basis and shall 
 after said date issue only nonparticipating policies. Nor shall this section apply to 
 paid-up or temporary and pure endowment insurance issued or granted in exchange 
 for lapsed or surrendered policies. A foreign life insurance corporation which shall 
 
120 Studies in Practical Life Insurance 
 
 not provide in every participating policy issued or delivered in this state on or after 
 the first day of January, nineteen hundred and seven, that the proportion of the surplus 
 accruing upon said policy shall be ascertained and distributed annually and not other- 
 wise, and which shall not ascertain and distribute the surplus accruing upon said 
 policies annually either by providing for their payment in cash or their application 
 to the payment of premiums or to the purchase of paid-up additions or for their accu- 
 mulation as above provided in the case of domestic corporations shall not be permitted 
 to do business within this state. 
 
 Source. — Former § 83, as amended by L. 1906, chap. 326. 
 
 § 84. Valuation of policies. 
 
 The superintendent of insurance shall annually make valuations of all outstanding 
 policies, additions thereto, unpaid dividends, and all other obligations of every life 
 insurance corporation doing business in this state. All valuations made by him or by 
 his authority shall be made upon the net premium basis. The legal minimum standard 
 for contracts issued before the first day of January, nineteen hundred and one, shall 
 be the actuaries' or combined experience table of mortality with interest at four per 
 centum per annum, and for contracts issued on or after said day shall be the American 
 experience table of mortality with interest at three and one-half per centum per annum; 
 provided that the legal minimum valuation of all contracts issued on or after the first 
 day of January, nineteen hundred and seven, shall be in accordance with the select and 
 ultimate method, and on the basis that the rate of mortality during the first five years 
 after the issuance of said contracts respectively shall be calculated according to the 
 following percentages of the rates shown by the American experience table of mortality, 
 to wit, first insurance year fifty per centum thereof, second insurance year sixty-five 
 per centum thereof, third insurance year seventy-five per centum thereof, fourth insur- 
 ance year eighty-five per centum therof, and fifth insurance year ninety-five per centum 
 thereof. The superintendent may vary the standards of interest and mortality in the 
 case of corporations from foreign countries as to contracts issued by such corporations 
 in other countries than the United States; and in particular cases of invalid lives and 
 other extra hazards, and value policies in groups, use approximate averages for fractions 
 of a year and otherwise, and accept the valuation of the department of insurance of any 
 other state or country if made upon the basis and according to the standards herein 
 required in place of the valuation herein required if the insurance officer of such state 
 or country accepts as sufficient and valid for all purposes the certificate of valuation 
 of the superintendent of insurance of this state. No policy issued after the thirty-first 
 day of December, nineteen hundred and six, shall be valued as term insurance unless 
 premiums are based upon net term rates; and no policy with level premiums issued 
 after said date shall be valued as term insurance for the first policy year. The legal 
 minimum standard for the valuation of annuities issued after January first, nineteen 
 hundred and seven, shall be McClintock's "Tables of Mortality among Annuitants" with 
 interest at three and one-half per centum per annum, but annuities deferred ten or more 
 years and written in connection with life or term insurances shall be valued on the 
 same mortality table from which the consideration or premiums were computed, with 
 interest not higher than three and one-half per centum per annum. The legal minimum 
 standard for the valuaticn of industrial policies issued after the first day of January, 
 nineteen hundred and seven, shall be the American experience table of mortality with 
 interest at three and one-half per centum per annum, provided, that any life insurance 
 corporation may voluntarily value its industrial policies written on the weekly premium 
 payment plan according to the standard industrial mortality table or the substandard 
 industrial mortality table. Any life insurance corporation may voluntarily value its 
 policies, or any class thereof, according to the American experience table of mortality, 
 or if industrial, at its option, according to the standard industrial mortality table or sub- 
 standard industrial mortality table, at a lower rate of interest than that above prescribed, 
 but not lower than three per centum per annum, and with or without reference to the 
 select and ultimate method of valuation, and in every such case shall report any excess 
 of its valuations over those computed by the said legal minimum standard and also 
 the standards used by it in making the same to the superintendent of insurance in 
 its annual statement, provided that no such standards if adopted shall be abandoned 
 without the consent of the superintendent of insurance first obtained in writing. 
 Source — Former § 84, as amended by L. 1893, chap. 147; L. 1901, chap. 346; L. 1906, 
 chap. 326, and L. 1909, chap. 301. Amended by L. 1910, chap. 616. 
 
 § 87. Contingency reserve. 
 
 Any domestic life insurance corporation may accumulate and maintain in addition to 
 an amount equal to the net values of its policies computed according to the standard 
 adopted by it under section eighty-four of this chapter a contingency reserve not 
 exceeding the following respective percentages of said net values, to wit: When said 
 net values are less than one hundred thousand dollars, twenty per centum thereof 
 or the sum of ten thousand dollars, whichever is the greater; when said net values are 
 
Studies in Practical Life Insurance 121 
 
 greater than cne hundred thousand dollars, the percentage thereof measuring the 
 contingency reserve shall decrease one-half of one per centum for each one hundred 
 thousand dollars of said net values up to one million dollars; one-half of one per centum 
 for each additional one million dollars up to ten million dollars; one-half of one per 
 centum for each additional two million five hundred thousand dollars up to twenty- 
 million dollars; one-half of cne per centum fcr each additional five million dollars up 
 to fifty million dollars; cne-half of one per centum for each additional twenty-five 
 million dollars up to seventy-five million dollars; and if said net values equal or exceed 
 the last mentioned amount, the contingency reserve shall not exceed five per centum 
 thereof; provided that as the net values cf said policies increase and the maximum 
 percentage measuring the contingency reserve decreases such corporation may main- 
 tain the contingency reserve already accumulated hereunder, although for the time 
 being it may exceed the maximum percentage herein prescribed, but may not add to 
 the contingency reserve when the addition will bring it beyond the maximum per- 
 centage. Provided however that nothing herein contained shall be construed to affect 
 any existing surplus or contingency reserves held by any such corporation save that 
 whenever the existing surplus and contingency reserves, exclusive of said net values 
 and of all accumulations held on account of existing deferred dividend policies or groups 
 of such policies, shall exceed the limit above mentioned it shall not be entitled to 
 maintain any additional contingency reserve. Provided further that for cause shown 
 the superintendent of insurance may at any time and from time to time permit any 
 corporation to accumulate and maintain a contingency reserve in excess of the limit 
 above mentioned for a prescribed' period, not exceeding one year under any one per- 
 mission, by filing in his office a decision stating his reasons therefor and causing the 
 same to be published in his next annual report. This section shall not apply to any 
 corporation doing exclusively a non-participating business. 
 Source. — Former § 87. 
 
 § 88. Surrender value of lapsed or forfeited policies. 
 
 Whenever any policy of life insurance issued after January first, eighteen hundred 
 and eighty, and before January first, nineteen hundred and seven, by any domestic life 
 insurance corporation after being in force three full years, shall, by its terms, lapse 
 or become forfeited for the non-payment of any premium or any note given for a pre- 
 mium or loan made in cash on such policy as security, or of any interest on such note 
 or loan, the reserve on such policy computed according to the American experience 
 table of mortality at the rate of four and one-half per centum per annum shall, on 
 demand made, with surrender of the policy within six months after such lapse or 
 forfeiture, be taken as a single premium of life insurance at the published rates of the 
 corporation at the time the policy was issued, and shall be applied, as shall have been 
 agreed in the application or policy, either to continue the insurance of the policy in 
 force at its full amount so long as such single premium will purchase temporary 
 insurance for that amount, at the age of the insured at the time of lapse or forfeiture, 
 cr to purchase upon the same life at the same age paid-up insurance payable at the 
 same time and under the same conditions, except as to payments of premiums, as the 
 original policy. If no such agreement be expressed in the application or policy, such 
 single premium may be applied in either of the modes above specified at the option of 
 the owner of the policy, notice of such option to be contained in the demand herein- 
 before required to be made to prevent the forfeiture of the policy. 
 
 The reserve hereinbefore specified shall include dividend additions calculated at 
 the date of the failure to make any of the payments above described according to the 
 American experience table of mortality with interest at the rate of four and one-half 
 per centum per annum after deducting any indebtedness of the insured on account of 
 any annual or semi-annual or quarterly premium then due, and any loan made in cash 
 on such policy, evidence of which is acknowledged by the insured in writing. . 
 
 The net value of the insurance given for such single premium under this section, 
 computed by the standard of this state, shall in no case be less than two-thirds of the 
 entire reserve computed according to the rule prescribed in this section after deducting 
 the indebtedness as specified; but such insurance shall not participate in the profits 
 of the corporation. 
 
 If the reserve upon any endowment policy applied according to the provisions of 
 this section as a single premium of temporary insurance be more than sufficient to 
 continue the insurance to the end of the endowment term named in the policy, and if 
 the insured survive that term, the excess shall be paid in cash at the end of such term, 
 on the conditions on which the original policy was issued. 
 
 This section shall not apply to any case of a policy issued before January first, 
 nineteen hundred and seven, where the provisions of the section are specifically 
 waived in the application and notice of such waiver is written or printed in red ink on 
 the margin of the face of the policy when issued. If any policy of life insurance (other 
 than a term policy for twenty years or less), issued on or after January first, nineteen 
 hundred and seven, by any domestic life insurance corporation, after being in force three 
 
122 Studies in Practical Life Insurance 
 
 full years shall by its terms lapse or become forfeited by the nonpayment of any premium 
 or any note therefor or any loan on such policy or of any interest on such note or loan, 
 the reserve on such policy computed according to the standard adopted by said company 
 in accordance with section eighty-four of this chapter, together with the value of any 
 dividend additions upon said policy, after deducting any indebtedness to the company 
 and one-fifth of the said entire reserve, or the sum of two and fifty one-hundredths 
 dollars for each one hundred dollars of the face of said policy if said sum shall be more 
 than the said one-fifth, shall upon demand not later than three months after the date 
 of lapse with surrender of the policy be applied as a surrender value as agreed upon 
 in the policy, provided that if no other option expressed in the policy be availed of by the 
 owner thereof, and if the policy itself dees not direct what option shall become 
 operative in default of selection by the owner, the same shall be applied to continue the 
 insurance in force at its full amount including any outstanding dividend additions less 
 any outstanding indebtedness on the policy but without future participation and without the 
 right to loans, so long as such surrender value will purchase nonparticipating temporary 
 insurance at net single premium rates by the standard adopted by the company, at the 
 age of the insured at the time of lapse or forfeiture, provided in case of any endowment 
 policy if the sum applicable to the purchase of temporary insurance shall be more than 
 sufficient to continue the insurance to the end of the endowment term named in the 
 policy, the excess shall be used to purchase in the same manner pure endowment 
 insurance payable at the end of the endowment term named in the policy on the con- 
 ditions on which the original policy was issued, and provided further that any attempted 
 waiver of the provisions of this paragraph in any application, policy or otherwise, shall 
 be void, and provided further that any value allowed in lieu thereof shall be at least 
 equal to the net value of the temporary insurance or of the temporary and pure 
 endowment insurance herein provided for. The term of temporary insurance herein 
 provided for shall include the period of grace, if any. In every case where a contract 
 provides for both insurance and annuities, the foregoing provisions shall apply only 
 to that part of the contract which provides for insurance, but every such contract con- 
 taining a provision for a deferred annuity on the life of the insured only (unless paid 
 for by a single premium) shall provide that in the event of the nonpayment of any 
 premium after three full years' premiums shall have been, paid, the annuity shall 
 automatically become converted into a paid-up annuity for such a proportion of the 
 original annuity as the number of completed years' premiums paid bears to the total 
 number of premiums required under the contract. 
 
 Source.— Former § 88, as amended by L. 1906, chap. 326, and L. 1909, chap. 301. 
 Amended by chap. 595 of 1909 and chap. 614 of 1910. 
 
 § 89. Discriminations prohibited." 
 
 No life insurance corporation doing business in this state shall make or permit 
 any discrimination between individuals of the same class or of equal expectation of 
 life, in the amount or payment or return of premiums or rates charged for policies of 
 insurance, or in the dividends or other benefits payable thereon, or in any of the terms 
 and conditions of the policy; nor shall any such company permit or agent thereof offer 
 or make any contract of insurance or agreement as to such contract other than as 
 plainly expressed in the policy issued thereon; nor shall any such company or any 
 officer, agent, solicitor or representative thereof pay, allow or give, or offer to pay, 
 allow or give, directly or indirectly, as inducement to any person to insure, or give, sell 
 or purchase, or offer to give, sell or purchase as such inducement or in connection with 
 such insurance, any stocks, bonds or other securities of any insurance company or 
 other corporation, association or partnership, or any dividends or profits accruing 
 thereon, or any valuable consideration or inducement whatever not specified in the 
 policy, nor shall any person knowingly receive as such inducement, any rebate of 
 premium, or any special favor or advantage in the dividends or other benefits to accrue 
 thereon, or any paid employment or contract for services of any kind or any valuable 
 consideration or inducement whatever, not specified in the policy. No person shall be 
 excused from' attending and testifying cr producing any books, papers or other docu- 
 ments before any court or magistrate, upon any investigation, proceeding or trial for a 
 violation of any of the provisions of this section, upon the ground or for the reason 
 that the testimony or evidence, documentary or otherwise, required of him may tend 
 to convict him of a crime or subject him to a penalty or forfeiture; but no person shall 
 be prosecuted or subjected to any penalty or forfeiture for or on account of any trans- 
 action, matter or thing concerning which he may so testify or produce evidence, docu- 
 mentary or otherwise, and no testimony so given or produced shall be received against 
 him upon any criminal investigation or proceeding. No premium upon any policy of life 
 insurance issued on or after January first, nineteen hundred and seven, shall be charged 
 for term insurance for one year, higher in amount than the premium for term insurance 
 for one year at the same age under any other form of policy issued by such corporation. 
 
 Source. — Former § 89, as amended by L. 1906, chap. 326, and L. 1907, chap. 729. 
 
Studies in Practical Life Insurance 123 
 
 § 91. Business to be accepted from licensed agents only; agents' certificate of 
 authority. 
 
 No life insurance corporation doing business within this state, or agent thereof, 
 shall pay any commission or other compensation to any per-.on for services in obtaining 
 new insurance, unless such person shall have first procured from the superintendent of 
 insurance a certificate of authority to act as an agent of such company as hereinafter 
 provided. No person shall act as agent, sub-agent or broker, in the solicitation or 
 procurement of applications for insurance, or receive for services in obtaining new 
 insurance any commission or other compensation from any life insurance corporation 
 doing business in this state, or agent thereof, without first procuring a certificate of 
 authority so to act from the superintendent of insurance, which must be renewed 
 annually on the first day of January, or within six months thereafter. Such certificate 
 shall be issued by the superintendent of insurance only upon the written application 
 of persons desiring such authority, such application being approved and countersigned 
 by the company such person desires to represent, and shall be upon a form approved 
 by the superintendent of insurance, giving such information as he may require. The 
 superintendent of insurance shall have the right to refuse to issue or renew any such 
 certificate in his discretion. No such certificate shall be valid, however, in any event 
 after the first day of July of the year following the issuing of such certificate. Renewal 
 certificates may be issued upon the application of the company. Such certificate of 
 authority shall be executed in triplicate; one copy thereof shall be filed in the office 
 of the superintendent, and two copies thereof shall be issued to such agent, subagent 
 or broker, one of which copies such agent, subagent or broker shall, within thirty days 
 after such certificate is issued, cause to be filed in the office of the county clerk of the 
 county in which such agent, subagent or broker resides, or, if a non-resident, in the 
 office of the county clerk of the county in this state in which he has an office for the 
 transaction of business. Agents operating solely for companies transacting industrial 
 cr prudential insurance on the weekly-payment plan of insurance are exempted from 
 the provisions of this section, and nothing contained herein shall be construed as 
 prohibiting any corporation transacting industrial or prudential insurance on the weekly- 
 payment plan from accepting business on the plan from unlicensed agents. Any person 
 or corporation violating the provisions of this section shall forfeit to the state the sum 
 of five hundred dollars. On the conviction of any person acting as agent, subagent or 
 broker, of the commission of any act which is a violation of any of the provisions of this 
 chapter the superintendent of insurance shall immediately revoke the certificate of 
 authority issued to him and no such certificate shall thereafter be issued to such con- 
 victed person by the superintendent within three years from the date of his conviction. 
 
 Source. — Former § 91, as amended by L. 1895, chap. 995; L. 1907, chap. 623, and 
 L. 1909, chap. 301. 
 
 § 92. No forfeiture of policy without notice. 
 
 No life insurance corporation doing business in this state shall within one year 
 after the default in payment of any premium, installment or interest declare forfeited, 
 or lapsed, any policy hereafter issued or renewed, and not issued upon the payment of 
 monthly or weekly premiums, or unless the same is a term insurance contract for one 
 year or less, nor shall any such policy be forfeited, or lapsed, by reason of nonpayment 
 when due of any premium, interest or installment or any portion thereof required by 
 the terms of the policy to be paid, within one year from the failure to pay such premium, 
 interest or installment, unless a written or printed notice stating the amount of such 
 premium, interest, installment, or portion thereof, due on such policy, the place where 
 it shall be paid, and the person to whom the same is payable, shall have been duly 
 addressed and mailed to the person whose life is insured, or the assignee of the policy, 
 if notice of the assignment has been given to the corporation, at his last known post- 
 office address in this state, postage paid by the corporation, or by any officer thereof, 
 or person appointed by it to collect such premium, at least fifteen and not more than 
 forty-five days prior to the day when the same is payable. The notice shall also state 
 that unless such premium, interest, installment or portion thereof, then due, shall be 
 paid to the corporation, or to the duly appointed agent or person authorized to collect 
 such premium by or before the day it falls due, the policy and all payments thereon 
 will become forfeited and void except as to the right to a surrender value or paid-up 
 policy as in this chapter provided. If the payment demanded by such notice shall be 
 made within its time limited therefor, it shall be taken to be in full compliance with 
 the requirements of the policy in respect to the time of such payment; and no such 
 policy shall in any case be forfeited or declared forfeited, or lapsed, until the expiration 
 of thirty days after the mailing of such notice. The affidavit of any officer, clerk, or 
 agent of the corporation, or of any one authorized to mail such notice that the notice 
 required by this section, has been duly addressed and mailed by the corporation issuing 
 such policy shall be presumptive evidence that such notice has been duly given. No 
 action shall be maintained to recover under a forfeited policy, unless the same is insti- 
 
124 Studies in Practical Life Insurance 
 
 tuted within two years from the day upon which default was made in paying the 
 premium, installment, interest or portion thereof for which it is claimed that forfeiture 
 ensued. 
 
 Source.— Former § 92, as amended by L. 1897, chap. 218, and L. 1906, chap. 326. 
 
 § 94. Election of directors. 
 
 The following provisions are hereby established for the election of directors: 
 
 1. At every election of directors in any domestic mutual life insurance corporation, 
 whether incorporated by special act or under general law and anything to the contrary 
 in its charter, certificate of incorporation or by-laws notwithstanding, every policy- 
 holder whose insurance shall be in force and shall have been in force for at least one 
 year prior thereto shall be entitled to vote without other qualification. 
 
 2. Every such policyholder, and every other person having a right to vote by 
 virtue cf any contract made prior to the enactment of this section which shall remain 
 in force until the date of such election, shall be entitled to vote in person or by proxy 
 or by mail, as herein provided. 
 
 3. Except as otherwise now provided with reference to existing policies, every 
 policyholder shall be entitled to one vote only irrespective of the number of policies 
 or the amount of insurance held by him; and unless a policy shall have been assigned 
 more than six months prior to the election by an assignment absolute on its face to an 
 assignee other than the corporation which shall have issued the policy the person upon 
 whose application the policy shall have been issued, or if the application be signed by 
 more than one person, the person whose life is insured shall be deemed to be a 
 policyholder entitled to vote as aforesaid; in case a policy shall have been assigned 
 as aforesaid, the assignee shall be deemed to be a policyholder entitled to vote, provided 
 his signature, either attested by the assignor or acknowledged in like manner as in 
 case of a deed to be recorded in this state, shall have been filed at the home office of the 
 corporation which shall have issued the policy. 
 
 4. At least six months prior to every such election every such corporation shall 
 file with the superintendent of insurance two full and correct lists of the names and 
 last known post-office addresses of all policyholders whose insurance was in force 
 twelve months prior to the date fixed for such election, and all other policyholders 
 entitled to vote by virtue of contracts made prior to April twenty-seven, nineteen 
 hundred and six. The names of said policyholders shall be arranged on said lists 
 alphabetically, placed in separate volumes containing not to exceed three thousand 
 names, and shall be classified by states, territories and possessions of the United States 
 and by foreign countries. Such corporation shall also maintain two similar lists at its 
 home office; and these lists shall be corrected from the records of the home office 
 so that a list as nearly correct as may be shall be on file to within three months of 
 such an election. 
 
 5. All said lists shall be subject to inspection and copy under regulations pre- 
 scribed by the superintendent of insurance at any time during business hours by 
 any policyholder in said corporation or by his authorized representative during the six 
 months prior to such election; provided, however, that after such election, or, if no 
 candidate shall have been nominated other than those nominated by the board of 
 directors, then after the time for such independent nominations shall have expired, 
 such lists may be withdrawn by the corporation filing and maintaining the same as 
 aforesaid; and thereafter, prior to the next election, new lists shall be filed and main- 
 tained, subject to inspection and copy, as above provided, which may be similarly 
 withdrawn. 
 
 6. Where policyholders of any domestic stock life insurance corporation have 
 become or shall become entitled to vote for directors, they shall be entitled to vote in 
 person, by proxy or by mail, as herein provided and two similar lists of policyholders, 
 qualified to vote, in accordance with the charter or by-laws of such corporation, except 
 the holders of industrial policies, shall be filed and maintained in the office of the 
 superintendent of insurance and at the home office respectively, similarly arranged and 
 similarly subject to inspection and copy and withdrawal as in the case of mutual corpo- 
 rations as above provided. 
 
 7. Where policyholders in any company shall have made nominations as herein- 
 after prescribed, they, or a committee representing them, shall upon demand, with the 
 approval of the superintendent of insurance and the payment to the company of the 
 actual cost of making such copies, be furnished by such company with a copy of such 
 list of policyholders or with a copy therefrom of the list for a separate jurisdiction. 
 A copy of a list so taken, or of any part thereof, shall be held by persons receiving the 
 same inviolate for the purposes of said nominators in a pending election and shall not 
 be transferred to other persons for any other use whatever. At the close of the canvass 
 of the votes all copies cf such lists shall be returned to the company. 
 
 8. At least seven months prior to the date of any election of directors in any suet, 
 corporation, the board of directors shall nominate candidates for every vacancy to be 
 
Studies in Practical Life Insurance 125 
 
 filled at such election and shall also appoint three persons, jointly or severally, to 
 receive proxies to be voted for said nominees, and shall also file with the superintendent 
 of insurance and at its home office a certificate of the names of the candidates so 
 nominated and of the persons so designated to receive said proxies which shall be 
 described as the "administration ticket." 
 
 9. Any one hundred or more qualified voters of such corporation may make other 
 nominations for one or more vacancies to be filled at any such election by filing with the 
 superintendent of insurance at least five months before the election a certificate signed 
 and acknowledged, giving the names and addresses of the candidates nominated, the 
 names and addresses of three persons, jointly or severally, designated to receive proxies 
 to be voted for said nominees, and an appropriate name or title designated by the 
 superintendent of insurance to distinguish the ticket from the administration ticket and 
 other nominations. Such nominators must also file a copy of said certificate, certified by 
 said superintendent, at the home office of the company at least five months before such 
 election. 
 
 10. All certificates of nominations shall be accompanied by a written acceptance 
 of such nomination by each nominee thereon. A court of record may for cause shown 
 direct the name of any candidate to be stricken from a ticket on file and may authorize 
 the nominators of such ticket to substitute the name of another person to fill the vacancy 
 so made. 
 
 11. If no independent nomination shall have been made as hereinbefore provided, 
 then and in that case all further proceedings in connection with such election as 
 provided by this section may be omitted, and said election shall then be conducted and 
 held under such rules and regulations as the superintendent of insurance may prescribe; 
 but no votes shall be cast or counted except for said candidates nominated by the board 
 of directors, or for such candidates as the board of directors may have nominated to 
 fill vacancies among said candidates caused by the death, disability or refusal to stand 
 as candidates of any one or more of those so nominated. 
 
 12. At least three months prior to any such election the corporation shall cause 
 to be mailed, in a serially numbered sealed envelope with postage prepaid, to each 
 policyholder whose name shall be upon said list and whose policy shall still be in force, 
 at his last known post-office address, a corresponding serially numbered official ballot 
 in a form approved by the superintendent of insurance and containing the respective 
 tickets nominated as hereinbefore provided and the names and addresses of the persons 
 so appointed to receive proxies. A corresponding serially numbered stub or card 
 containing the name and address of the policyholder to whom each ballot is sent shall 
 be retained at the home office of the company for the purpose of identifying said ballot 
 when returned. Such official ballot shall be conveniently arranged under t"he names 
 or titles by which the nominations have been designated and shall have printed upon it 
 \he name of the company, the post-office address of its home office, the number of 
 directors to be elected and the names of those whose terms expire, the date of the 
 election and instructions as herein provided for executing such official ballot or for the 
 use of a proxy as herein provided and a designated space for the signature of the 
 policyholder, the number of one of his policies and the signature of a subscribing 
 witness. 
 
 13. No other or different ballot shall be used, except that a duplicate ballot or 
 ballots may be supplied to any policyholder and voter or to the holder of his proxy, for 
 his own use, pursuant to rules and regulations prescribed by the superintendent of 
 insurance. 
 
 14. There shall be enclosed in such sealed envelope with such official ballot a 
 suitable returned gummed envelope having thereon the name and post-office address of 
 the home office of the corporation and the words "ballot for directors." There shall 
 also be enclosed in such sealed envelope a suitable blank proxy upon which shall be 
 printed a statement of the right of the policyholder to vote either by mail or by proxy as 
 herein provided or in person. 
 
 15. No other papers or written or printed matter shall be enclosed in such sealed 
 envelope. Specimen copies of such sealed envelope and enclosures shall be approved 
 by the superintendent of insurance before being so mailed. 
 
 16. A policyholder desiring to vote by mail must indicate the name of the nominee 
 or nominees for whom he desires to vote or strike out the name or names of those for 
 whom he does not desire to vote upon the official ballot so provided or must otherwise 
 suitably indicate in the blank space thereon the nominee or nominees for whom he 
 desires to vote, and must sign the said official ballot in his own handwriting in the 
 presence of a subscribing witness, and place or caused to be placed thereon the number 
 of at least one policy held by him. Failure to state or to correctly state such policy 
 number shall not render a ballot void or subject the policyholder to any penalty. 
 
 17. Such policyholder must enclose the official ballot so marked in such return 
 envelope or in a similarly inscribed envelope. Such envelope containing the ballot 
 sealed and postpaid shall be mailed by the policyholder to the home office of the 
 
126 Studies in Practical Life Insurance 
 
 company. No policyholder may vote for more than the number of directors so to be 
 elected and all ballots upon which the intent of the policyholder does not fairly appear 
 shall be void. 
 
 18. Any policyholder may vote by proxy executed to any person, whether des- 
 ignated in the certificates filed as aforesaid or otherwise. The execution of a proxy 
 shall be attested by a subscribing witness and the proxy shall set forth the number 
 of at least one policy held by the person giving it. A proxy shall not be valid unless 
 executed within three months prior to the election and shall be used only at such 
 election or any adjournment thereof and may be revoked by the policyholder giving the 
 same at any time prior to the opening of the polls upon the day of such election. In 
 exercising such proxy the holder or holders thereof shall vote only upon the official 
 ballot, or the duplicate thereof, furnished to such policyholder as hereinbefore provided, 
 to which such party shall be attached. In so voting the proxy holder shall sign said 
 ballot in the name of the policyholder, and shall also sign his own name as proxy. 
 Ballots voted by proxy holders shall be mailed to the home office, or voted in person 
 by said proxy holder, in the same manner as herein provided for ballots voted directly 
 by policyholders. 
 
 19. The votes cast at such election shall be limited to the candidates nominated as 
 aforesaid except that in case of a vacancy occurring upon any ticket so nominated the 
 board of directors of such corporation, if the candidate was upon the administration 
 ticket, and a majority of the nominators if the candidate was upon an independent 
 ticket, shall nominate another candidate in his place by filing a certificate of said 
 nomination with the superintendent of insurance and a certified copy thereof at the 
 home office of the company if such vacancy occurs more than five months prior to the 
 day set for the election, and the name of the candidate so selected shall be set forth 
 in the official ballots sent out by the company. If such vacancy occurs within five 
 months prior to such election then the directors elected at such election shall have 
 power to fill such vacancy. 
 
 20. All ballots by mail shall be received at the home office of a company holding 
 an election by two or more persons, one-half of whom shall be appointed for that 
 purpose by the superintendent of insurance and one-half by the directors of the company. 
 The compensation of the custodians so appointed shall be paid by the company. Such 
 custodians shall keep a daily record of the envelopes marked as containing ballots for 
 directors which are received at the home office, and shall securely retain them in their 
 joint custody in safety vaults or compartments accessible only to such custodians and 
 not to either of them separately, under regulations prescribed by the superintendent 
 of insurance. Prior to the closing of the polls election day said custodians shall deliver 
 all ballots so received by them to the inspectors of election. 
 
 21. The election shall be held at the home office of the company. The polls 
 shall be opened at ten o'clock in the forenoon and remain open until four o'clock in the 
 afternoon of the day of election, at which time they shall be closed. All votes cast at 
 such election shall be by ballot as hereinbefore provided. 
 
 22. The superintendent of insurance shall appoint an adequate number of inspec- 
 tors of election who may employ expert accountants and assistants and may procure 
 stationery and supplies for conducting the election and canvassing the votes. Their 
 compensation and necessary disbursements shall be paid by the company. Such 
 inspectors shall have power to determine all questions concerning the verification of 
 the ballots, the ascertainment of the validity thereof, the qualifications of the voters 
 and the canvass of the vote; and with respect thereto shall act under such rules and 
 regulations as shall be prescribed by the superintendent of insurance. 
 
 23. All envelopes marked substantially as hereinbefore prescribed received by 
 mail at the home office of the company at any time prior to the day of election or on 
 that day before the polls are closed shall be forthwith delivered intact without opening 
 to the custodians appointed as hereinbefore provided and before the polls .are closed 
 shall be delivered to the inspectors of election. 
 
 24. No person shall conceal or withhold or aid or abet any other person in con- 
 cealing or withholding from the custodians or inspectors any such envelope; nor shall 
 any person, other than an inspector, open or aid or abet any person to open any such 
 envelopes. 
 
 25. No ballots received by mail at the office of the company or offered personally 
 or by proxy after the polls are closed shall be counted. All ballots offered personally 
 or under proxies and all ballots received by mail at the office of the company as afore- 
 said before the polls are closed shall be received by the inspectors subject to verification 
 and ascertainment of the validity thereof and of the qualifications of the voter. 
 
 26. Immediately upon the closing of the polls the inspectors shall proceed to the 
 examination of the ballots and shall canvass the votes lawfully cast. The canvass shall 
 proceed from day to day and the inspectors shall certify the result to the company and 
 to the superintendent of insurance as soon as it is completed. 
 
Studies in Practical Life Insurance 127 
 
 27. Representatives designated by a majority of each three persons who shall 
 have been appointed to receive proxies to be voted for tickets nominated as aforesaid 
 may, in such number as shall be approved by the superintendent of insurance, be 
 present during the casting, verification and canvass of the votes. The compensation of 
 such representatives shall not be a charge upon or paid from the funds of the company. 
 
 28. All ballots and proxies received by the inspectors of election shall immedi- 
 ately upon the completion of the canvass be placed in sealed packages and shall be 
 preserved by the said inspectors for a period of four months subject to the order of 
 any court having jurisdiction of any proceedings relating thereto. 
 
 29. The superintendent of insurance shall have power to supervise and direct the 
 methods and procedure of all elections herein provided for and to make all further 
 needful rules and regulations concerning the same. All bills for or on account of the 
 custodians of ballots and inspectors of election, their employees, assistants, necessary 
 expenses or disbursements, during the conduct of such election, and the canvass of the 
 votes, shall be approved by the superintendent of insurance before payment by the 
 company. 
 
 30. The said elections and the conduct thereof shall at all times be subject to the 
 supervision and control of the courts in like manner as elections for state, county and 
 municipal officers so far as applicable. 
 
 31. The including by any corporation of the name of any person in any list of 
 policyholders required by this section shall not be construed as an admission by the 
 corporation of the validity of any policy, and no such list shall be competent evidence 
 against the corporation in any action or proceeding in which the question of the validity 
 of any policy or of any claim under it is involved. 
 
 32. No insurance company, and no officer, agent or employee thereof shall know- 
 ingly omit the name of a policyholder and voter from the lists herein required to be 
 filed, or shall knowingly omit to give the correct name and address of such policyholder 
 and voter, or knowingly give a wrong address, or shall expend, advance or loan any 
 money of the company contrary to the provisions of this section. 
 
 33. Except where such expenditure is authorized or required by this section, 
 no money of the company shall be expended in connection with such election or in 
 canvassing therefor, and no officer or agent of the company shall directly or indirectly 
 make any advance or loan of such moneys to any person in connection with or for 
 the purpose of such election or canvass. 
 
 34. No officer, salaried agent or employee shall, within the period between the 
 filing of the nominations and the election, during business hours, devote any of his time 
 in soliciting votes in support of or in opposition to any candidate or list of candidates 
 in connection with any such election. No officer, agent, or employee shall compel or 
 coerce any other officer, agent or employee to support, work for, or oppose any candidate 
 or any list of candidates. The stationery or supplies of the company or office space 
 devoted to the conduct of its business shall not be used for furthering the interest of 
 any ticket or candidate thereon. 
 
 35. No person, whether connected with the company or otherwise, shall issue or 
 cause to be issued any circular or other written or printed communication either in 
 behalf of or in opposition to any ticket or any candidate thereon containing any false 
 statement. 
 
 Source. — Former § 94, as amended by L. 1907, chap. 623. 
 
 § 96. Limitation of new business. 
 
 No domestic life insurance corporation shall issue in any year new policies for a 
 larger amount in the aggregate than as follows, to wit : If the total amount of insurance 
 by said corporation in force on the thirty-first day of December of the preceding year 
 is more than fifty million dollars, and not in excess of one hundred million dollars, not 
 more than thirty per centum thereof; if more than one hundred million dollars, and not 
 in excess of three hundred million dollars, not more than twenty-five per centum 
 thereof, or thirty million dollars, whichever is the larger; if more than three hundred 
 million dollars, and not in excess of six hundred million dollars, not more than twenty 
 per centum thereof, or seventy-five million dollars, whichever is the larger; if more 
 than six hundred million dollars, not more than one hundred and fifty million dollars, 
 or it may increase its new business over the largest amount issued in any one of the 
 three years immediately preceding in the proportion in respect to said amount which 
 the difference between twenty-five per centum of its net renewal premiums computed 
 according to the bases of mortality and interest assumed in calculating its liabilities, 
 and its total expenses for such preceding year, after deducting from said total expenses 
 (1), the items of first year expenditure specified in the first sentence of section ninety- 
 seven of this chapter, (2) its actual investment expenses (not exceeding one-fourth of 
 one per centum of the mean invested assets) and (3) taxes on real estate and other 
 outlays exclusively in connection with real estate, bears to said net renewal premiums; 
 
128 Studies in Practical Life Insurance 
 
 provided, that in determining the amount of insurance in force and the amount of new 
 insurance issued, industrial policies issued upon the weekly premium plan and all 
 premiums on such policies and the expenses in connection with such policies, shall be 
 excluded and there shall be included only that insurance upon which the first premium 
 or instalment thereof has actually been received. A foreign life insurance corporation, 
 which shall not conduct its business within the limitation and in accordance with the 
 requirements imposed by this section upon domestic corporations, shall not be permitted 
 to do business within this state. 
 
 Source.— Former § 96. Amended by L. 1910, chap. 697. 
 
 § 97. Limitation of expenses. 
 
 No domestic life insurance corporation shall in any calendar year, after the year 
 nineteen hundred and six, expend or become liable for, including any and all amounts 
 which any person, firm or corporation is permitted to expend on its behalf or under any 
 agreement with it (1) for commissions on first year's premiums, (2) for compensation, 
 not paid by commission, for services in obtaining new insurance exclusive of salaries 
 paid in good faith for agency supervision either at the home office or at branch offices, 
 (3) for medical examinations and inspections of proposed risks, and (4) for advances 
 to agents, a total amount exceeding in the aggregate (a) the loadings upon the premiums 
 for the first year of insurance received in said calendar year (calculated on the basis 
 of the American experience table of mortality with interest at the rate of three and 
 one-half per centum per annum) and (b) the present values of the assumed mortality 
 gains for the first five years of insurance on policies in force at the end of said calendar 
 year en which the first premium, or instalment thereof, has been received during said 
 calendar year, as ascertained by the select and ultimate method of valuation as 
 provided in section eighty-four of this chapter; and (c) on policies issued and terminated 
 in said calendar year the full gross premiums received, less the net cost of insurance 
 for the time the insurance was in force, computed by the American experience select 
 and ultimate table, three and one-half per centum. No such corporation shall make or 
 incur any expense or permit any expense to be made or incurred upon its behalf or under 
 any agreement with it, except actual investment expenses (not exceeding one-fourth of 
 one per centum of the mean invested assets) and also except taxes on real estate and 
 other outlays exclusively in connection with real estate, in excess of the aggregate 
 amount of the actual loadings upon premiums received in said year calculated according 
 to the standards adopted by the company under section eighty-four of this chapter, 
 and the present values of the assumed mortality gains hereinbefore mentioned. No 
 such corporation, nor any person, firm or corporation on its behalf or under any agree- 
 ment with it shall pay or allow to any agent, broker or other person, firm or corpo- 
 ration for procuring an application for life insurance, for collecting any premium thereon 
 or for any other service performed in connection therewith any compensation other 
 than that which has been determined in advance. All bonuses, prizes and rewards, and 
 all increased or additional commissions or compensation of any sort based upon the 
 volume of any new or renewed business or the aggregate of policies written or paid for, 
 are prohibited. No such corporation shall pay commissions upon renewal premiums 
 received upon policies issued after the year nineteen hundred and six, in excess of five 
 per centum of the premium annually for fourteen years after the first year of insurance 
 in the case of endowment policies providing for less than twenty annual premiums, 
 nor in excess of seven and one-half per centum of the premium annually for the first 
 nine years after the first year of insurance and five per centum of the premium annually 
 for the next ensuing five years in the case of other forms of policies; provided that an 
 amount found to be equivalent to the aggregate amount so payable by a calculation 
 approved by the* superintendent of insurance and based upon mortality, interest and 
 lapse rates, may be distributed through three or more years, or through a period 
 exceeding fourteen years, but not more than two-fifths of such amount shall be payable 
 for any' one year; provided further that in any agency district subject to the supervision 
 of a local salaried representative the renewal commission payable to. agents of such 
 district shall not exceed two-thirds cf the iforegoing rates annually for fourteen years, 
 subject to the calculation as aforesaid; provided further that any such corporation may 
 condition the allowance or payment in whole or in part of any of the renewal com- 
 missions allowed to be paid as aforesaid upon the efficiency of service of the agent 
 receiving the same or upon the amount and quality of the business renewed under his 
 supervision; and also provided that a fee not exceeding three per centum may be paid 
 for the collection of premiums which shall be received for any year after the fifteenth 
 year of insurance. If any such corporation shall compensate its agents, or any of them, 
 after the first insurance year, in whole or in part, upon any other plan than commissions 
 and collection fees, the aggregate sum so paid shall in no year exceed the limitations 
 herein imposed and the schedule and plan of such compensation shall be submitted 
 to and approved by the superintendent of insurance. No such corporation, nor any 
 person, firm or corporation on its behalf or under any agreement with it, shall make 
 a,ny loan or advance to any person, firm or corporation soliciting or undertaking to 
 
Studies in Practical Life Insurance 129 
 
 solicit applications for insurance without adequate collateral security, nor shall any such 
 loan or advance be made upon the security of renewal commissions, or of other compen- 
 sation earned or to be earned by the borrower except advances against compensation 
 for the first year of insurance. A foreign life insurance corporation which shall not con- 
 duct its business within the limitations and in accordance with the requirements imposed 
 by this section upon domestic corporations shall not be permitted to do business within 
 the state. This section shall not apply to expenses made or incurred in the business 
 of industrial insurance nor, except as to the limitation of expenses for the first year of 
 insurance and as to compensation of and loans and advances to agents or solicitors, 
 to stock corporations issuing and representing themselves as issuing nonparticipating 
 policies exclusively. 
 
 Source. — Former § 97, as amended by L. 1909, chap. 301. Amended by L. 1910, 
 chap. 697. 
 
 § 98. Salaries of officers and agents; when fixed by board of directors. 
 No domestic life insurance corporation shall pay any salary, compensation or 
 ■emolument to any officer, trustee or director thereof, nor any salary, compensation or 
 emolument amounting in any year to more than five thousand dollars to any person, ' 
 firm or corporation unless such payment be first authorized by a vote of the board of 
 •directors of such life insurance corporation. No such life insurance corporation shall 
 make any agreement with any of its officers, trustees or salaried employees whereby it 
 agrees that for any services rendered or to be rendered he shall receive any salary, 
 compensation or emolument that will extend beyond a period of twelve months from the 
 date of such agreement. No such corporation shall grant any pension to any officer, 
 director or trustee thereof or to any member of his family after his death. 
 Source. — Former § 98. 
 
 § 99. Vouchers. 
 
 No domestic life insurance corporation shall make any disbursement of one 
 hundred dollars or more unless the same be evidenced by a voucher signed by or on 
 behalf of the person, firm or corporation receiving the money and correctly describing 
 the consideration for the payment, and if the same be for services and disbursements 
 setting forth the services rendered and an itemized statement of the disbursements 
 made, and if it be in connection with any, matter pending before any legislative or 
 public body or before any department or officer of any government, correctly describing 
 in addition the nature of the matter and of the interest of such corporation therein, 
 or if such a voucher cannot be obtained by an affidavit stating the reasons therefor 
 and setting forth the particulars above mentioned. 
 
 Source. — Former § 99. 
 
 § 100. Investments. 
 
 No domestic life insurance corporation, whether incorporated by special act or 
 under a general law, shall invest in or loan upon any shares of stock of any corporation, 
 other than a municipal corporation, nor, excepting government, state or municipal 
 securities, shall it invest in, or loan upon, any bonds or obligations which shall not be 
 secured by adequate collateral security or where more than one-third of the total value 
 of the collateral security therefor shall consist of shares of stock. Every such corpora- 
 tion which on the first day of June, nineteen hundred and six, owned any shares of 
 stock ether than public stocks of municipal corporations whenever the same were 
 acquired, or any bonds or obligations of the kinds above described where said bonds 
 or obligations were acquired after the first day of March, nineteen hundred and six, 
 shall dispose of the said shares of stock and of said bonds and obligations within five 
 years from the thirty-first day of December, nineteen hundred and six, and in each year 
 prior to the expiration of said five years shall make such reduction of its holdings of 
 said securities as may be approved in writing by the superintendent of insurance. No 
 investment or loan shall be made by any such life insurance corporation unless the 
 same shall first have been authorized by the board of directors or by a committee 
 thereof charged with the duty of supervising such investment or loan. No such corpo- 
 raticn fhall subscribe to or participate in any underwriting of the purchase or sale 
 cf securities or property, or enter into any transaction for such purchase cr sale on 
 account of said corporation jointly with any other person, firm or corporation; nor shall 
 any such corporation enter into any agreement to withhold from sale any of its property, 
 hut the disposition of its property shall be at all times within the control of its board 
 of directors. Any such corporation, in addition to other investments allowed by law, 
 may invest any of its funds in any duly authorized bonds or evidences of debt of any 
 city, county, town, village, school district, municipality or other civil division of any 
 state and may loan upon the security of improved unencumbered real property in any 
 ■state worth fifty per centum more than the amount loaned thereon. Provided, how- 
 ever, that nothing in this section contained shall be construed as prohibiting a life 
 insurance company from entering into an agreement for the purpose of protecting the 
 
130 Studies in Practical Life Insurance 
 
 interests of the company in securities lawfully held by it, or for the purpose of reorgani- 
 zation of a corporation which issued securities so held, and from depositing such, 
 securities with a committee or depositaries appointed under such agreement; but suck 
 agreement and the deposit of securities thereunder must first be approved in writing 
 by the superintendent of insurance with a statement of his reason's for such approval. 
 Nor shall this section be construed as preventing such company from accepting cor- 
 porate stock or bonds or other securities, which may be distributed pursuant to any- 
 such agreement approved as aforesaid or to any plan of reorganization approved in 
 writing by the superintendent of insurance with a statement of his reason for such, 
 approval. But if any securities so received shall consist in whole or in part of stock 
 in any corporation or of bonds or obligations which shall not be secured by adequate 
 collateral security or where more than one-third of the total value of the collateral 
 security therefor shall consist of shares of stock, then any stock and any such bond or 
 obligation so received shall be disposed of within five years from the time of their 
 acquisition or before the expiration of such further period or periods of time as may- 
 be fixed in writing for that purpose by the superintendent of insurance. 
 » Source. — Former § 100, as amended by L. 1908, chap. 9. 
 
 § 101. Standard provisions. 
 
 On and after January first, nineteen hundred and ten, no policy of life or endowment 
 insurance shall be issued or delivered in this state unless and until a copy of the form 
 thereof has been filed with the superintendent of insurance and approved by him; 
 nor shall such policy, except policies of industrial insurance where the premiums are 
 payable weekly, be so issued or delivered unless it contains in substance the following; 
 provisions : 
 
 1. A provision that the insured is entitled to a grace either of thirty days or of one 
 month within which the payment of any premium after the first year may be made, 
 subject at the option of the company to any interest charge not in excess of six per 
 centum per annum for the number of days of grace elapsing before the payment of 
 the premium, during which period of grace the policy shall continue in full force, but 
 in case the policy becomes a claim during the said period of grace before the overdue 
 premium or the deferred premiums of the current policy year if any are paid, the 
 amount of such premiums, with interest on any overdue premium, may be deducted 
 from any amount payable under the policy in settlement. 
 
 2. A provision that the policy shall be incontestable after two years from its date 
 of issue except for nonpayment of premiums and except for violation of the conditions 
 of the policy relating to military or naval service in time of war. 
 
 3. A provision that the policy shall constitute the entire contract between the 
 parties, but if the company desires to make the application a part of the contract it 
 may do so provided a copy of such application shall be endorsed upon or attached to 
 the policy when issued, and in such case the policy shall contain a provision that the 
 policy and the application therefor shall constitute the entire contract between the 
 parties. 
 
 4. A provision that if the age of the insured has been misstated the amount 
 payable under the policy shall 'be such as the premium would have purchased at the 
 correct age. 
 
 5. A provision that the policy shall participate in the surplus of the company 
 annually. 
 
 6. A provision specifying the options to which the policyholder is entitled in the 
 event of default in a premium payment after three full annual premiums shall have 
 been paid. 
 
 7. A provision that after three full years' premiums have. been paid, the company 
 at any time, while the policy is in force, will advance, on proper assignment or pledge 
 of the policy and on the sole security thereof, at a specified rate of interest, a sum 
 equal to, or at the option of the owner of the policy less than, the reserve at the end 
 of the current policy year on the policy and on any dividend additions thereto, less a 
 sum not more than two and one-half per centum of the amount insured by the policy 
 and of any dividend additions thereto; and that the company will deduct from such loan 
 value any existing indebtedness on the policy and any unpaid balance of the premium 
 for the current policy year, and may collect interest in advance on the loan to the end 
 of the current policy year; which provision may further provide that such loan may be 
 deferred for not exceeding six months after the application therefor is made. A com- 
 pany may, in lieu of the provision hereinabove permitted for the deduction from a 
 loan on the policy of a sum not more than two and one-half per centum of the amount 
 insured by the policy and of any dividend additions thereto, insert in the policy a pro- 
 vision that one-fifth of the entire reserve may be deducted in case of a loan under the 
 policy, or may provide therein that the deduction may be the said two and one-half per 
 centum or the one-fifth of the said entire reserve at the option of the company. 
 
Studies in Practical Life Insurance 131 
 
 8. A table showing in figures the loan values, if any, and the options available 
 under the policy each year upon default in premium payments, during at least the first 
 twenty years of the policy. 
 
 9. In case the proceeds of a policy are payable in installments or as an annuity, 
 ■a table showing the amounts of the installments or annuity payments. 
 
 10. A provision that the holder of a policy shall be entitled to have the policy 
 reinstated at any time within three years from the date of default unless the cash 
 value has been duly paid, or the extension period expired, upon the production of 
 •evidence of insurability satisfactory to the company and the payment of all overdue 
 premiums and any other indebtedness to the company upon said policy with interest 
 at a rate not exceeding six per centum per annum payable annually. 
 
 Any of the foregoing provisions or portions thereof not applicable to single pre- 
 mium or nonparticipating or term policies shall to that extent not be incorporated 
 therein; and any such policy may be issued or delivered in this state which in the 
 opinion of the superintendent of insurance contains provisions on any one or more of 
 the several foregoing requirements more favorable to the policyholder than herein- 
 before required. 
 
 Source. — Former § 101, and this section added by chap. 301 of 1909. In effect 
 January 1, 1909. 
 
 § 103. Annual reports of life insurance corporations. 
 
 In addition to any other matter which may be required by law or pursuant to law 
 ly the superintendent of insurance to be stated therein every annual report of every 
 life insurance corporation doing business in the state of New York, made pursuant to 
 section forty-four of this chapter, shall contain an accurate, concise and complete 
 statement of the following matter, to wit: (1) All the real property held by the corpo- 
 ration, the dates of acquisition, the names of the vendors, the actual cost, the value at 
 •which it is carried on the company's books, the market value, the amounts expended 
 ■during the year for repairs and improvements, the gross and net income from each 
 parcel, and if any portion thereof be occupied by the company the rental value thereof, 
 a statement of any certificate issued by the superintendent extending the time for the 
 disposition thereof, and all purchases and sales made since the last annual statement, 
 -with particulars as to dates, names of vendors and vendees,' and the consideration. 
 (2) The amount of existing loans upon the security of real property, stating the amount 
 loaned upon property in each state and foreign country. (3) The moneys loaned by the 
 ■corporation to any person other than loans upon the security of real property above 
 mentioned and other than loans upon policies the actual borrowers thereof, the maturity 
 and rate of interest of such loans, the securities held therefor, and all substitutions of 
 securities in connection therewith, and the same particulars with reference to any 
 loans made or discharged since the last annual statement. (4) All other property 
 ■owned by the company or in which it has any interest including all securities, whether 
 or not recognized by the law as proper investments, the dates of acquisition, from whom 
 acquired, the actual cost, the value at which the property is carried upon the bocks, 
 the market value, the interest or dividends received thereon, during the year; also all 
 purchases and sales of property other than real estate made since the last annual 
 statement, with particulars as to dates, names of purchasers and sellers, and the con- 
 sideration; and also the income received and outlays made in connection with all such 
 property. (5) All commissions paid to any persons in connection with loans or pur- 
 chases or sales of any property, and a statement of all payments for legal expenses, 
 giving particulars as to dates, amounts and names and addresses of payees. (6) All 
 Tnoneys expended in connection with any matter pending before any legislative body 
 or any officer or department of government, giving particulars as to dates, amounts, 
 names and addresses of payees, the measure or proceeding in connection with which 
 the payment was made, and the interest of the corporation therein. (7) The names of 
 "the officers and directors of the company, the proceedings at the last annual election, 
 .giving the names of candidates and the number of votes cast for each and whether in 
 person, by proxy or by mail. (8) The salary, compensation and emoluments received by 
 officers or directors and where the same amounts to more than five thousand dollars 
 that received by any person, firm or corporation, with particulars as to dates, amounts, 
 payees and the authority by which the payment was made; also all salaries paid to 
 any representative either at the home office, or at any branch office, or agency, for agency 
 supervision. (9) The largest balances carried in each bank or trust company during 
 •each month of the year. (10) All death claims resisted or compromised during the 
 year, with particulars as to sums insured, sums paid and reasons assigned for resisting 
 •or compromising the same in each case. (11) A complete statement of the profits and 
 losses upon the business transacted during the year and the sources of such gains and 
 losses, and a statement showing separately the margins upon premiums for the first year 
 of insurance ascertained according to the select and ultimate method of valuation as 
 provided in section eighty-four of this chapter and the actual expenses chargeable 
 to the procurement of new business incurred since the last annual statement as 
 
132 Studies in Practical Life Insurance 
 
 enumerated in section ninety-seven of this article. A foreign corporation, issuing both 
 participating and nonparticipating policies, shall make a separate statement of profits 
 and losses, margins and expenses, as aforesaid, with reference to each of said kinds 
 of business, and also showing the manner in which any general outlays of the company 
 have been apportioned to each of such kinds of business. (12) A statement separately 
 showing the amount of the gains of the company for the year attributable to policies 
 written after December thirty-first, nineteen hundred and six, and the precise method 
 by which the calculation has been made. (13) The rates of annual dividends declared 
 during the year for all plans of insurance and all durations and for ages at entry, twenty- 
 five, thirty-five, forty-five and fifty-five, and the precise method by which such dividends 
 have been calculated. (14) A statement showing the rates of dividends declared upon 
 deferred dividend policies completing their dividend periods for all plans of insurance 
 and the precise methods by which said dividends have been calculated. (15) A state- 
 ment showing any and all amounts set apart or provisionally ascertained or calculated 
 or held awaiting apportionment upon policies with deferred dividend periods longer 
 than cne year for all plans of insurance and all durations and for ages of entry as 
 aforesaid, together with the precise statements of the methods of calculation by which 
 the same have been provisionally or otherwise determined. (16) A statement of any 
 and all reserve or surplus funds held by the company and for what purpose they are 
 claimed respectively to be held. 
 
 (17.) A statement showing all sums of money expended in, or in any way con- 
 nected with, the election of directors or trustees, with a statement when expended, by 
 whom expended, to whom paid and for what purpose. 
 
 Source. — Former § 103, as amended by L. 1907, chap. 623. 
 
 From the Legislative Law. § 66. Legislative appearances. 
 
 Every person retained or employed for compensation as counsel or agent by any 
 person, firm, corporation or association to promote or oppose directly or indirectly the 
 passage of bills or resolutions by either house or to promote or oppose executive approval 
 of such bills or resolutions, shall, in each and every year, before any service is entered 
 upon in promoting or opposing such legislation, file in the office of the secretary of 
 state a writing subscribed by such counsel or agent stating the name or names of the 
 person or persons, firm or firms, corporation or corporations, association or associations, 
 by whom or on whose behalf he is retained or employed, together with a brief descrip- 
 tion of the legislation in reference to which such service is to be rendered. No notice 
 so filed shall be valid for more than thirty days after the adjournment of the session 
 of the legislature held in the year in which the same is filed. It shall be the duty of 
 the secretary of state to provide a docket to be known as the docket of legislative 
 appearances, with appropriate blanks and indices, and to forthwith enter therein the 
 names of the counsel and agents so retained or employed and of the persons, firms, 
 corporations or associations retaining or employing them, together with a brief descrip- 
 tion of the legislation in reference to which the service is to be rendered, which docket 
 shall be open to public inspection. Upon the termination of such employment the fact 
 of such termination, with the date thereof, may be entered by direction of either such 
 counsel or agent or of the employer. No person, firm, corporation or association shall 
 retain or employ any person to promote or oppose legislation for compensation 
 contingent in whole or in part upon the passage or defeat of any legislative measure or 
 measures. No person shall for compensation engage in promoting or opposing legisla- 
 tion except upon appearance entered in accordance with the foregoing provisions of 
 this section. And no person shall accept any such employment or render any such 
 service for compensation contingent upon the passage or defeat of any legislative 
 measure or measures. It shall be the duty of every person, firm, corporation or associa- 
 tion within two months after the adjournment of the legislature to file in the office 
 of the secretary of state an itemized statement verified by the oath of such person, 
 or in case of a firm of a member thereof, or in case of a domestic corporation or associ- 
 ation of an officer thereof, or in case of a foreign corporation or association of an officer 
 or agent thereof, showing in detail all expenses paid, incurred or promised directly or 
 indirectly in connection with legislation pending at the last previous session, with the 
 names of the payees and the amount paid to each, including all disbursements paid, 
 incurred or promised to counsel or agents, and also specifying the nature of said 
 legislation and the interest of the person, firm, corporation or association therein. 
 The provisions, however, of this section requiring docket entries shall not apply to duly 
 accredited counsel or agents of counties, cities, towns, villages, public boards and public 
 institutions. And the provisions hereof shall not be construed as affecting professional 
 services in drafting bills or in advising clients and in rendering opinions as to the 
 construction and effect of proposed or pending legislation where such professional 
 service is not otherwise connected with legislative action. Every person, every member 
 of any firm, and every association or corporation violating any provision of this section 
 and every person causing or participating in a violation thereof shall be guilty of a 
 misdemeanor and, in case of an individual, shall be punishable by imprisonment in 
 
Studies in Practical Life Insurance 133 
 
 a penitentiary or county jail for not more than one year or by a fine of not more than 
 one thousand dollars or by both, and, in case of an association or corporation, by a fine 
 of not more than one thousand dollars. And in addition to the penalties hereinbefore 
 imposed any corporation or association failing to file the statement of legislative 
 expenses within the time required shall forfeit to the people of the state the sum of 
 one hundred dollars per day for each day after the expiration of the two months within 
 which such statement is required to be filed, to be recovered in an action to be brought 
 by the attorney-general. 
 
 Penal Law. § 665. Misconduct of directors, officers, agents and employees of 
 corporations. 
 
 A director, officer, agent or employee of any corporation or joint-stock association 
 who: 
 
 1. Knowingly receives or possesses himself of any of its property otherwise than 
 in payment for a just demand, and with intent to defraud, omits to make or to cause 
 or direct to be made a full and true entry thereof in its books and accounts; or, 
 
 2. Makes or concurs in making any false entry, or concurs in omitting to make 
 any material entry in its books or accounts; or, 
 
 3. Knowingly (a), concurs in making or publishing any written report, exhibit or 
 statement of its affairs or pecuniary condition containing any material statement which 
 is false, or (b), omits or concurs in omitting any statement required by law to be con- 
 tained therein; or, 
 
 4. Having the custody or control of its books, wilfully refuses or neglects to make 
 any proper entry in the stock book of such corporation as required by law, or to exhibit 
 or allow the same to be inspected, and extracts to be taken therefrom by any person 
 entitled by law to inspect the same, or take extracts therefrom; or, 
 
 5. If a notice of an application for an injunction affecting the property or business 
 of such joint-stock association or corporation is served upon him, omits to disclose the 
 fact of such service and the time and place of such application to the other directors, 
 officers and managers thereof; or, 
 
 6. Refuses or neglects to make any report or statement lawfully required by a 
 public officer, 
 
 Is guilty of a misdemeanor. 
 
 Penal Law. § 1200. Rebates. 
 
 Any person knowingly receiving any rebate or allowance or deduction 
 from any premium, or any valuable thing, special favor or advantage whatever, 
 as an inducement to take any policy of life insurance, not specified in the policy is 
 guilty of a misdemeanor. No person shall be excused from attending and testifying, 
 or producing any books, papers or other documents before any court or magistrate, 
 upon any investigation, proceeding or trial, for a violation of any of the provisions of 
 this section, upon the ground or for the reason that the testimony or evidence, docu- 
 mentary or otherwise, required of him may tend to convict him of a crime or to subject 
 him to a penalty or forfeiture; but no person shall be prosecuted or subjected to any 
 penalty or forfeiture for or on account of any transaction, matter or thing concerning- 
 which he may so testify or produce evidence, documentary or otherwise, and no testi- 
 mony so given or produced shall be received against him upon any criminal investiga- 
 tion or proceeding. 
 
 Penal Law. § 1627. Contradictory statements under oath. 
 
 In any prosecution for perjury the falsity of the testimony or statement set forth 
 in the indictment shall be presumptively established by proof that the defendant has 
 testified, declared, deposed or certified under oath to the contrary thereof in any other 
 written testimony, declaration, deposition, certificate, affidavit or other writing by 
 him subscribed. 
 
 From the Tax Law. § 187. Franchise Tax on Insurance Corporations. 
 
 An annual State tax for the privilege of exercising corporate franchises or for 
 carrying on business in their corporate or organized capacity within this State equal 
 to one per centum on the gross amount of premiums received during the preceding 
 calendar year for business done at any time in this State, which gross amount of pre- 
 miums shall include all premiums received during such preceding calendar year on all 
 policies, certificates, renewals, policies subsequently canceled, insurance and reinsur- 
 ance during such preceding calendar year, and all premiums that are received during 
 such preceding calendar year on all policies, certificates, renewals, policies subsequently 
 canceled, insurance and reinsurance executed, issued or delivered in all years prior to such 
 preceding calendar year, whether such premiums were in the form of money, notes, 
 credits, or any other substitute for money, shall be paid annually into the treasury of 
 
134 Studies in Practical Life Insurance 
 
 the State, in the year nineteen hundred and five on or before July first, and in all subse- 
 quent years, on or before the first day of June by the following corporations: 
 
 1. Every domestic insurance corporation, incorporated, organized or formed 
 under, by, or pursuant to a general or special law. 
 
 2. Every insurance corporation, incorporated, organized or formed under, by, 
 or pursuant to the laws of any other State of the United States, and doing business in 
 this State, except a corporation doing a fire insurance business or a marine insurance 
 business. 
 
 3. Every insurance corporation, incorporated, organized or formed under, by, or 
 pursuant to the laws of any State without the United States, or of any foreign country, 
 except such a corporation doing a life, health or casualty insurance business, and doing 
 business in this State; but the tax on gross premiums of a corporation so incorporated, 
 organized or formed and doing a fire or marine insurance business within the State 
 shall be equal to five-tenths of one per centum. This section does not apply to a fra- 
 ternal beneficiary society, order or association, a corporation for the insurance of 
 domestic animals, a town or county cooperative insurance corporation, nor to any 
 corporation subject to the supervision of or required by or in pursuance of law to report 
 to the superintendent of banks ; but this section does apply, to an individual, or part- 
 nership, or association of underwriters known as Lloyds in so far as corporations doing 
 the same kind of insurance business are subject to its provisions. The taxes imposed 
 by this section shall be in addition to all other fees, licenses or taxes imposed by this 
 or any other law, except that in assessing taxes under the reciprocal provisions of 
 section thirty-four of the Insurance Law, credit shall be allowed for any taxes paid 
 under this section. The term insurance corporations as used in this article shall 
 include a corporation, association, joint stock company or association, person, society, 
 aggregation or partnership by whatever name known doing an insurance business in 
 this State. (Thus amended by L. 1897, chap. 494, L. 1901, chap. 118, and L. 1905, 
 chap. 94.) 
 
 FROM THE INSURANCE LAW OF MASSACHUSETTS. 
 
 Section 75. On and after January first, nineteen hundred and eight, no policy of 
 life or endowment insurance shall be issued or delivered in this commonwealth until a 
 copy of the form thereof has toeen filed at least thirty days with the insurance commis- 
 sioner; nor if the insurance commissioner notifies the company in writing within said 
 thirty days that in his opinion the form of said policy does not comply with the require- 
 ments of the laws of this commonwealth, specifying his reasons for his opinion: pro- 
 vided that this action of the insurance commissioner shall be subject to review by the 
 supreme court of this commonwealth; nor shall such policy, except policies of industrial 
 insurance where the premiums are payable monthly or oftener, be so issued or delivered 
 unless it contains in substance the following provisions: 
 
 1. A provision that the insured is entitled to a grace of thirty days within which 
 the payment of any premium after the first year may be made, subject at the option of 
 the company to an interest charge not in excess of six per cent, per annum for the 
 number of days of grace elapsing before the payment of the premium, during which 
 period of grace the policy shall continue in full force, but in case the policy becomes a 
 claim during the said period of grace before the overdue premium or the deferred pre- 
 miums of the current policy year if any are paid, the amount of such premiums with 
 interest on any overdue premium may be taken from the face of the policy in settlement. 
 
 2. A provision that the policy shall be incontestable after two years from its date 
 of issue except for non-payment of premiums and for engaging in military or naval 
 service in time of war without the consent in writing of. an executive officer of the 
 company. 
 
 3. A provision that the policy and the application therefor shall constitute the 
 entire contract between the parties and that all statements made by the insured shall, 
 in the absence of fraud, be deemed representations and not warranties and that no such 
 statement shall be used in defence to a claim under the policy unless it is contained in 
 a written application and a copy of such application shall be endorsed upon or attached 
 to the policy when issued. 
 
 4. A provision that if the age of the insured has been understated the amount 
 payable under the policy shall be such as the premium would have purchased at the 
 correct age. 
 
 5. A provision that the policy shall participate in the surplus of the company 
 annually, beginning not later than the end of the third policy year. 
 
Studies in Practical Life Insurance 135 
 
 6. A provision specifying the options to which the policy-holder is entitled in the 
 event of default in a premium payment after three full annual premiums shall have 
 been paid. 
 
 7. A provision that not later than the third anniversary of the policy the holder 
 of the policy shall, upon a proper assignment thereof to the company, be entitled to 
 borrow of the company on the sole security of the policy a sum not more than ninety- 
 five per cent, of the cash surrender value thereof, less any indebtedness to the company, 
 at a rate of interest not exceeding six per cent. Said provision shall include such other 
 conditions as, in conformity to the laws of Massachusetts, the company will impose 
 when the application for the loan is made. 
 
 8. A table showing in figures the loan values, if any, and the options available 
 under the policy each year upon default in premium payments, during at least twenty 
 years of the policy, beginning with the year in which such values and options first 
 become available. 
 
 9. In case the proceeds of a policy are payable in instalments or as an annuity, a 
 table showing the amounts of the instalment and annuity payments. 
 
 10. A provision that the holder of a policy shall be entitled to have the policy 
 reinstated at any time within three years from the date of default unless the cash value 
 has been! duly paid or the extension period expired, upon the production of evidence of 
 insurability satisfactory to the company and the payment of all overdue premiums and 
 any other indebtedness to the company upon said policy with interest at the rate of not 
 exceeding six per cent, per annum. 
 
 Any of the foregoing provisions or portions thereof not applicable to single pre- 
 mium or non-participating or term policies shall to that extent not be incorporated 
 therein, and paragraph seven shall not apply to foreign companies. 
 
 POSTSCRIPT. 
 
 Amendments to Insurance Law, State of New York, in 1911: 
 
 Section 16, amended to make it lawful for a domestic life insurance company to 
 purchase and hold its own capital stock. 
 Section 22, amended to read as follows: 
 
 § 22. Reinsurance. Every insurance corporation doing business in this state may 
 reinsure the Whole or any part of any policy obligation in any other insurance corpora- 
 tion; provided that if any domestic insurance corporation, other than ■ a life insurance 
 corporation, shall reinsure or determine to reinsure substantially all its risks, such 
 reinsurance shall be su'bmibted in advance to, and have the approval of, the superin- 
 tendent of insurance, and provided, further, that no domestic life insurance company 
 shall reinsure its whole risk on any individual life except by permission of the superin- 
 tendent of insurance, but may reinsure any portion of an individual risk and receive 
 credit for the reserve on any policy covering a risk reinsured if the reinsuring corpora- 
 tion is authorized to transact business in this state, and may also receive credit for 
 taxes on the premiums paid on any such policy. Nothing in this chapter contained shall 
 be construed as permitting the reinsurance of a life insurance corporation having over 
 two hundred and fifty million dollars of insurance outstanding and in force. When a 
 reinsurance agreement is made between other than life insurance corporations, the 
 parties to such agreement shall, upon the policies involved, compute their unearned 
 premium funds as follows: The reinsuring or ceding corporation shall, upon the por- 
 tion of its liability not reinsured, maintain a reserve to be computed in accordance with 
 section one hundred and eighteen of the insurance law; the corporation assuming lia- 
 bility by reinsurance from the corporation issuing the original policy shall maintain a 
 reserve equal to that which the reinsuring corporation would have been required to 
 maintain upon the amount reinsured had it retained the liability ceded by it. No credit 
 of any kind shall be allowed or given, either as a reduction of taxes or liabilities, to any 
 corporation transacting business in this state, for reinsurance made in corporations not 
 authorized to issue policies in this state. The superintendent of insurance shall require 
 schedules of reinsurance to be filed by each corporation at the time of making its annual 
 report to the department. 
 
 Section 96, amended by inserting the words "policies of reinsurance and" after the 
 words "insurance issued", in line 2, page 128 of this book. 
 
 Section 101, amended by adding the words — "The provisions of this section shall not 
 apply to policies of reinsurance." 
 
136 Studies in Practical Life Insurance 
 
 ITEMS FEOM NEW- YORK LIFE'S ANNUAL REPORT FOR 1908. 
 
 I.— CAPITAL STOCK. 
 
 1. Amount of Capital paid up in cash 
 
 2. Amount of ledger Assets (as per balance), December 
 
 31, of previous year $503,681,718.38 
 
 3. crease of Capital during the year 
 
 4. Extended at $503,681,718.38 
 
 II.— INCOME. 
 
 5. First year's premiums on original policies without de- 
 
 duction for commissions or other expenses, less $ 
 
 for first year's re-insurance $5,424,856.35 
 
 6. Surrender values applied to pay first year's premiums . 
 
 7. Total first year's premiums on original policies. $5,424,856.35 
 
 8. Dividends applied to purchase paid-up additions and 
 
 annuities 479,312.80 
 
 9. Surrender values applied to purchase paid-up insurance 
 
 and annuities 
 
 10. Consideration for original annuities involving life con- 
 
 tingencies 436,221.51 
 
 11. Consideration for supplementary contracts involving 
 
 life contingencies 48,821.00 
 
 12. Total new premiums 6,389,111.66 
 
 13. Renewal premiums (in addition to items 14, 15 and 16) 
 
 without deduction for commissions or other ex- 
 penses, less $125,393.77 for re-insurance on renewals, $71,331,0*5.25 
 
 14. Dividends applied to pay renewal premiums 699,996.44 
 
 15. Surrender values applied to pay renewal premiums 16,611.56 
 
 16. Renewal premiums for deferred annuities 20,2iOO.4O 
 
 17. Total renewal premiums 72,069,813.64 
 
 18. Total premium income $78,458,925.30 
 
 19. (A) Consideration for supplementary contracts not involving life 
 
 contingencies 272,954.78 
 
 20. Dividends left with the Company to accumulate at interest 1,268.65 
 
 21. Ledger Assets, other than premiums, received from other companies 
 
 for assuming their risks 
 
 22. Gross interest on mortgage loans $2,363,915.99 
 
 23. Gross interest on collateral loans per Sched. C 34,861.11 
 
 24. Gross interest on bonds, less $192,123.19 accrued inter- 
 
 est on bonds acquired during 1908, per Schedule D. . 15,238,937.53 
 
 25. Gross interest on premium notes, policy loans or liens . 4,414,464.94 
 
 26. Gross interest on deposits in trust companies and banks 264,282.12 
 
 27. Gross interest on other debts due the Company 2,378.41 
 
 28. Gross Discount on claims paid in advance 667.18 
 
 29. Gross Rent from Company's property, including $267,- 
 
 845.22 for Company's occupancy of its own buildings 
 
 per Schedule A 1,032,739. 55 
 
 30. Total gross interest and rents 23,352,186.86 
 
 31. Prom other sources, (give items and amounts): 
 
 32. Commissions advanced in previous years now repaid. . $50,346.35 
 
 33. Policy Pees 30,539.29 
 
 34. Award from City of New York for damages 35,125.00 
 
 35. Doubtful debts recovered 10,713.75 
 
 36 126,724.39 
 
Studies in Practical Life Insurance 137 
 
 37. From agents' balances previously charged off 
 
 38. Gross Profit on sale or maturity of ledger assets, viz.: 
 
 (a) Real estate per Schedule A $8,375.78 
 
 (b) Bonds per Schedule D 19,154.35 
 
 (c) Stocks per Schedule D 
 
 $27,530.13 
 
 39. Gross increase by adjustment in book value of ledger 
 
 assets, viz.: 
 
 (a) Real estate per Schedule A 
 
 (b) Bonds per Schedule D $196,414.18 
 
 (c) Stocks per Schedule D 
 
 196,414.18 
 
 40. Total Income $102,435,994.29 
 
 41. Amount carried forward $606,117,712.67 
 
 III.— DISBURSEMENTS. 
 
 1. (a) For death claims (less $10,193.29 re-insurance), 
 
 $21,096,339.09; additions, $1,034,951.68 $22,131,290.77 
 
 2. (a) For matured endowments (less re-insurance), 
 
 $6,304,539.45; additions, $155,981.12 6,460,520 57 
 
 3. Net amount paid for losses and matured endow- 
 
 ments $28,591,811.34 
 
 4. For annuities involving life contingencies 1,739,250.24 
 
 5. Premium notes, and liens voided by lapse 
 
 6. Surrender values paid in cash or applied in liquidation 
 
 of loans or notes 12,801,190.82 
 
 7. Surrender values applied to pay new premiums (see 
 
 Income No. 6) $ ; to pay renewal premiums (see 
 
 Income No. 15) $16,611.55 16,611.55 
 
 8. Surrender values applied to purchase paid-up insur- 
 
 ance and annuities (see Income No. 9) 
 
 9. Dividends paid to policy-holders in cash or applied in 
 
 liquidation of loans or notes 4,861,926.56 
 
 10. Dividends applied to pay renewal premiums (see In- 
 
 come No. 14) 699,996.44 
 
 11. Dividends applied to purchase paid-up additions and 
 
 annuities (see Income No. 8) 479,212.80 
 
 12. Dividends left with the Company to accumulate at in- 
 
 terest (see Income No. 20) 1,258.65 
 
 13. (Total paid policy-holders, $49,191,258.40.) 
 
 14. Expense of investigation and settlement of policy- 
 
 claims, including $22,811.16 for legal expense 28.994.0S 
 
 15. Paid for claims on supplementary contracts not involv- 
 
 ing life contingencies 164,801.80 
 
 16. Dividends held on deposit surrendered during the year 
 
 $ ; Interest thereon $ 
 
 17. Paid stockholders for interest or dividends 
 
 18. Commissions to agents (less commission on re-insur- 
 
 ance); first year's premiums, $2,434,531.10; renewal 
 premiums, $987,740.58; annuities (original), $12,960.- 
 83, (renewal), $17.19 3,435,249.70 
 
 19. Commuted renewal commissions 82,746.41 
 
 20. Salaries and allowances for agencies, including mana- 
 
 gers, agents and clerks 1,630,045.04 
 
 21. Agency supervision, traveling, and all other agency 
 
 expenses 392,222.27 
 
 22. Medical examiners' fees, $238,007.64; inspection of 
 
 risks,. $62,690.01 300,697.65 
 
 23. Salaries and all other compensation of officers, direc- 
 
 tors, trustees and Home Office employees 1,401,672.08 
 
 24. Rent, including $267,845.22 for Company's occupancy 
 
 of its own buildings, less $21,276.34 received under 
 
 sub-lease 545,838.66 
 
 (A) Including commuted value of instalments or other benefits not payable at the time of 
 death or maturity of endowments, such commuted value being entered also under No. 1 or 2 of 
 Disbursements. 
 
 (a) Including commuted value of supplementary contracts — see No. 19 of Income. 
 
138 Studies in Practical Life Insurance 
 
 25. Advertising, $67,594.27; printing and stationery, $196,- 
 
 375.34; postage, telegraph, telephone and express, 
 
 $210,568.22; exchange, $60,330.07 $534,867.90 
 
 26. Legal expense not included in item 14 35,233.37 
 
 27. Furniture, fixtures and safes 86,623.9S 
 
 28. Repairs and expenses (other than taxes) on real es- 
 
 tate 296,506.97 
 
 29. Taxes on real estate 168,697.83 
 
 30. State taxes on premiums 788,280.19 
 
 31. Insurance Department licenses and fees 16,849.95 
 
 32. All other licenses, fees and taxes (give items and 
 
 amounts) : Local licenses and taxes $64,874.45 
 
 33. Tax on policy reserve 37,792.65 
 
 34. Miscellaneous taxes 18,023.66 
 
 35. Income tax on interest receipts 17,639.52 
 
 138,330.08 
 
 36. Other disbursements (give items and amounts) : 
 
 37. Commissions advanced $7,081.93 
 
 38. Paid agents under Nylic contracts 494,882.03 
 
 39. Restaurant, $37,339.23; Premiums on Fidelity Bonds, 
 
 $8,700.49; custody of securities, $14,993.07; papers, 
 books, subscriptions, $9,913.84; legislative and de- 
 partmental expenses, $12,710.07; Association of Life 
 Insurance Presidents, not including amount paid 
 them for legislative expenses, $14,535.32; expenses 
 Trustees' election, 1908, $9,151.25; expenses Trus- 
 tees' election, 1909, $25,584.77; miscellaneous interest 
 payments, $8,378.42; inspection reports not in con- 
 nection with new business, $1,502.84; executive com- 
 mittee miscellaneous expenses, $168.24; examination 
 of Company by New York State Insurance Depart- 
 ment, $18,925.03; miscellaneous items of expense, 
 $16,846.02 178,748.59 
 
 40. Doubtful debts marked off 19,880.82 
 
 700.593.37 
 
 41. 
 42. 
 
 43. Agents' balances charged off 
 
 44. Gross loss on sale or maturity of ledger assets, viz.: 
 
 (a) Real Estate, per Schedule A $180.00 
 
 (b) Bonds, per Schedule D 161.69 
 
 (c) Stocks, per Schedule D 
 
 341.69 
 
 45. Gross decrease by adjustment in book value of ledger 
 
 assets, viz.: 
 
 (a) Real Estate, per Schedule A $4,394.80 
 
 (b) Bonds, per Schedule D 237,763.09 
 
 (c) Stocks, per Schedule D 
 
 242,157.89 
 
 46. Total Disbursements $60,172,009.25 
 
 47. Balance $545,945,703.42 
 
 IV.— LEDGER ASSETS. 
 
 1. Book value of Real Estate, per Schedule A $12,645,993.97 
 
 2. Mortgage Loans on Real Estate, per Schedule B, first 
 
 liens, $58,706,413.36 (other than first liens, $ ) . . 58,706,413.36 
 
 3. Loans secured by pledge of Bonds, per Schedule C. . . . 500,000.00 
 
 4. Loans made to policy-holders on this Company's poli- 
 
 cies assigned as collateral '. 82,631,137.09 
 
 5. Premium notes on policies in force, of which $ is 
 
 for first year's premiums 4,685,504.3.1 
 
 6. Book Value of Bonds, $377,518,182.19 and stocks, $ , 
 
 per Schedule D 377,518,182.19 
 
 7. Cash in Company's office 10,086.54 
 
 8. Deposits in trust companies and banks, not on interest 1,579,417.61 
 
 9. Deposits in trust companies and banks, on interest 7,553,918.45 
 
Studies in Practical Life Insurance 139 
 
 10. Bills receivable, $ ; agents' balances, (debit, 
 
 $ , credit, $ ); net, $ ; Branch Office 
 balances, debit, $134,341.02, credit, $133,049.32; net 
 $1,291.70 $1,291.70 
 
 11. Cash in Company's Branch Offices 113,759.16 
 
 12. Total Ledger Assets, as per balance on page preceding $545,945,703.42 
 
 NON-LEDGER ASSETS. 
 
 13. Interest due, $112,871.67 and accrued, $372,961.50 on 
 
 Mortgages, per Schedule B $48'5,833.17 
 
 14. Interest due, $144,636.69 and accrued, $5,149,716.57 on 
 
 Bonds, per Schedule D, Part 1 5,294,353.26 
 
 15. Interest due, $ and accrued, $20,000 on Collateral 
 
 Loans, per Schedule C, Part 1 20,000.00 
 
 16. Interest due, $ and accrued, $211,997.20 on Premi- 
 
 um Notes, Policy Loans or Liens 211,997.20 
 
 17. Interest due, $ and accrued, $34,042.79 on other 
 
 Assets 34,042.79 
 
 18. Rents due, $6,415.10 and accrued, $10,205.32 on Com- 
 
 pany's property or lease 16,620.42 
 
 19. Total interest and rents due and accrued $6,062,846.84 
 
 20. Market value of Real Estate, over book value, per Schedule A 
 
 21. Market value (not including interest in item 14) of Bonds and stocks 
 
 over book value, per Schedule D 
 
 22. Due from other Companies for losses or claims on policies of this 
 
 Company reinsured 
 
 (1) (2) 
 
 New Business. Renewals 
 
 23. Gross premiums due and unreported on 
 
 policies in force Dec. 31, 1908 $83,118.49 $4,726,256.10 
 
 24. Gross deferred premiums on policies in 
 
 force Dec. 31, 1908 330,770.00 4,745,179.00 
 
 25. Totals $413,888.49 $9,471,435.10 
 
 26. Deduct loading, 25 per cent 103,472.12 2,367,858.78 
 
 27. Net amount of uncollected and deferred 
 
 premiums $310,416.37 $7,103,576.32 
 
 $7,413,992.69 
 
 28. All other Assets (give items and amounts) : 
 29. 
 
 30. \ 
 
 31. \ 
 32. 
 
 33. Gross Assets $559,422,542.95 
 
 DEDUCT ASSETS NOT ADMITTED. 
 
 34. Company's stock: owned, ; loans on, $ 
 
 35. Supplies, stationery, printed matter, $ ; furniture, 
 
 fixtures and safes, $ 
 
 36. Commuted commissions, $ ; agents' debit balances, 
 
 $ 
 
 37. Cash advanced to or in the hands of officers or agents . 
 
 38. Loans on personal security, endorsed or not, $ ; 
 
 bills receivable, $ 
 
 39. Premium notes and loans on policies and net premiums 
 
 in item 27 in excess of the net value of their policies 
 
 40. Book value of Ledger Assets over market value, viz.: 
 
 on Bonds 2,001,531.17 
 
 41. Branch Office debit balances 134,341.02 
 
 2,135,872.19 
 
 42. 
 
 43. Admitted Assets $557,286,670.76 
 
140 Studies in Practical Life Insurance 
 
 V.— LIABILITIES. 
 
 Net present value of all the outstanding policies in force on the 31st day of December, 
 1908, as computed by the Insurance Department of the State of New York on the 
 following tables of mortality and rates of interest, viz.: 
 
 1. Actuaries' table at 4 per cent, on issues prior to 1901, 
 
 except those bearing 3% guarantees $199,015,041.00 
 
 Same for reversionary additions 
 
 -$199,015,041.00 
 
 2. American Experience table at 3 per cent, on insur- 
 
 ances bearing 3% guarantees $173,914,429. 00 
 
 Same for reversionary additions 69,356.00 
 
 American Experience table at 3%% on issues of 1901 
 
 and since, except those bearing 3% guarantees $3,898,763.00 
 
 Same for reversionary additions 2,401,884.00 
 
 Other tables and rates, viz. : 
 Double American Experience table at 3% on tropical 
 
 insurances and those on impaired lives $33,905,246.00 
 
 Same for reversionary additions 133,137.00 
 
 Sesqui American Experience table at 3 per cent, on 
 semi-tropical insurances ana those on partially im- 
 paired lives $30,282,919.00 
 
 Same for reversionary additions 20,283 00 
 
 173,983,785.00 
 
 6,300,647.00 
 
 34,038,383.00 
 
 30.303,202.00 
 
 Net present value of annuities (including those in re- 
 duction of premiums). Give tables and rates of in- 
 terest, viz.: 
 
 Actuaries' table at 4 per cent, on issues prior to 
 
 1901 $8,018,394.00 
 
 American Experience table at 3 per cent, on issues 
 
 of 1901 to 1906, inclusive 6,658,550.00 
 
 McClintock's Annuity table, 3% per cent, on issues 
 
 of 1907-1908 1,039,078.00 
 
 15,711,0'22.00 
 
 Total $459,352,080.00 
 
 Deduct net value of risks of this Company reinsured in other solvent 
 
 companies 142,669.00 
 
 $459,209,411.00 
 Reserve to provide for health and accident benefits contained in life 
 
 policies 
 
 8. Net Reserve $459,209,411.00 
 
 9. Present value of amounts not yet due on supplementary contracts 
 
 not involving life contingencies, computed by the Company $2,319,830.24 
 
 10. Liability on policies canceled and not included in "Net Reserve" upon 
 
 which a surrender value may be demanded 267,687.36 
 
 11. Claims for Death Losses due and unpaid 
 
 12. Claims for Death Losses in process of adjustment or 
 
 adjusted and not due $765,446.13 
 
 13. Claims for Death Losses which have been reported and 
 
 no proofs received 1,888,427.63 
 
 14. Claims for Matured Endowments due and unpaid 328,881.10 
 
 15. Claims for Death Losses and other Policy Claims re- 
 
 sisted by ihe Company 231,780.62 
 
 16. Due and unpaid on Annuity Claims, involving life con- 
 
 tingencies ' 141,435.83 
 
 17. Total Policy Claims $3,355,971.31 
 
 18. Due and unpaid on supplementary contracts not involving life con- 
 
 tingencies $199.38 
 
 19. Dividends left with the Company to accumulate at interest, 
 
 $1,258.65, and accrued interest thereon $18.87 1,277.52 
 
Studies in Practical Life Insurance 141 
 
 20. Premiums paid in advance, including surrender values so applied. . $812,888.13 
 
 21. Unearned interest and rent paid in advance: Premium Notes, 
 
 $86,732.23; Policy Loans, $1,856,275.61; Real Estate, $7,234.87 1,950,242.71 
 
 22. Commissions due to agents on premium notes when paid 48,648.60 
 
 23. Commissions to agents, due or accrued 10,511.22 
 
 24. "Cost of Collection" on uncollected and deferred premiums, in 
 
 excess of the loading thereon 
 
 25. Salaries, rents, office expenses, bills and accounts, due or accrued. 161,324.86 
 
 26. Medical Examiners', Inspectors' and legal fees, due or accrued 28,825.03 
 
 27. State, County and Municipal taxes, due or accrued 762,673.63 
 
 28. Advances by officers or others on account of expenses of organiza- 
 
 tion or otherwise 
 
 29. Borrowed money and interest tnereon. 
 
 30. Unpaid dividends to stockholders 
 
 31. Dividends or other profits due policy-holders, including those con- 
 
 tingent on payment of outstanding and deferred premiums 412,617.76 
 
 32. Dividends declared on or apportioned to annual dividend policies 
 
 payable to policy-holders during 1909, whether contingent upon 
 
 the payment of renewal premiums or otherwise 1,665,027.00 
 
 33. Dividends declared on or apportioned to deferred dividend policies 
 
 payable to policy-holders during 1909. 5,937,878.16 
 
 34. Amounts set apart, apportioned, provisionally ascertained, calcu- 
 
 lated, declared or held awaiting apportionment upon deferred 
 
 dividend policies, not included in Item 33 67,181,561.00 
 
 35. Reserve or surplus funds not otherwise included in Liabilities 
 
 (give items and amounts separately, and state for what purpose 
 each of said funds is held), consisting of additional Reserve on 
 policies which the Company voluntarily sets aside in excess of 
 the State's requirements, $3,129,402; War Risk Fund, $501,000; 
 Mortality Fluctuation Fund, $500,000; Security Fluctuation and 
 General Contingency Fund, $7,945,842.84 12,076,244.84 
 
 36. 
 
 37. 
 
 38. 
 
 39. All other liabilities (give items and amounts) : 
 
 40. Reserve for death-claims not yet reported at Home Office 50O,0'0O.0O 
 
 41 . Due agents under Nylic contracts 26,770.01 
 
 42. Reserve for Nylic contracts 557,081.00 
 
 43. 
 
 44. Capital Stock 
 
 45. Unassigned funds (surplus) 
 
 46. Total Liabilities $557,286,670.76 
 
142 Studies in Practical Life Insurance 
 
 ITEMS FROM NEW- YORK LIFE'S ANNUAL REPORT FOR 1910. 
 
 I.— CAPITAL STOCK. 
 
 1. Amount of Capital paid up in cash $ 
 
 2. Amount of ledger Assets (as per balance), December 
 
 31, of previous year $589,604,609.41 
 
 3 crease of Capital during the year 
 
 4. Extended at $589,604,609.41 
 
 II.— INCOME. 
 
 5. First year's premiums on original poli- 
 
 cies without deduction for commis- 
 sions or other expenses, less $ for 
 first year's re-insurance $6,516,105.78 
 
 6. Surrender values applied to pay first 
 
 year's premiums 
 
 7. Total fir^t year's premiums on 
 
 original policies 6,516,105.78 
 
 8. Dividends applied to purchase paid-up 
 
 additions and annuities 706,568.69 
 
 9. Surrender values applied to purchase 
 
 paid-up insurance and annuities 
 
 10. Consideration for original annuities in- 
 
 volving life contingencies 496,109.05 
 
 11. Consideration for supplementary con- 
 
 tracts involving life contingencies .... 271,155.70 
 
 12. Total new premiums 7,989,939.22 
 
 13. Renewal premiums (in addition to items 
 
 14, 16 and 17) without deduction for 
 commissions or other expenses, less 
 $107,287.44 for re-insurance on renew- 
 als 70,395,669.03 
 
 14. Dividends applied to pay renewal pre- 
 
 miums 1,899,486.68 
 
 15. Dividends applied to shorten the endow- 
 
 ment or premium paying period 
 
 1 6. Surrender values applied to pay renewal 
 
 premiums 29,775.99 
 
 17. Renewal premiums for deferred annui- 
 
 ties 38,540.46 
 
 18. Total renewal premiums 72,363,472.16 
 
 19. Total premium income 80,353,411.38 
 
 20. (A) Consideration for supplementary contracts not 
 
 involving life contingencies 160,060 51 
 
 21. Dividends left with the Company to accumulate at 
 
 interest 44,896.64 
 
 22. Ledger assets, other than premiums, received from 
 
 other companies for assuming their risks 
 
 23. Gross interest on mortgage loans, per 
 
 Schedule B, less $ accrued inter- 
 est on mortgages acquired during 1910 3,481,947.10 
 
 24. Gross interest on collateral loans, per 
 
 Schedule C 
 
 25. Gross interest on bonds, less $124,941.99 
 
 accrued interest on bonds acquired 
 
 during 1910, per Schedule D 16,891,258.92 
 
 26. Gross interest on premium notes, policy 
 
 loans or liens 5,218,630.98 
 
 (A) Including commuted value of instalments or other benefits not payable at the time 
 of death or maturity of endowments, such commuted value being entered also under No. 1 or 2 
 of Disbursements. 
 
Studies in Practical Life Insurance 143 
 
 27. Gross interest on deposits in trust com- 
 
 panies and banks $276,951.35 
 
 28. Gross interest on other debts due the 
 
 Company (give items and amounts) : 
 
 29. Interest Agents' Accounts 1,996.29 
 
 30. 
 
 31. Gross discount on claims paid in advance 8,339.33 
 
 32. Gross rent from Company's property, 
 
 including $275,534.93 for Company's 
 occupancy of its own buildings, per 
 Schedule A 918,173.83 
 
 33. Total gross interest and rents 26,797,297.80 
 
 34. Prom other sources (give items and 
 
 amounts) : 
 
 35. Commissions advanced in previous years 
 
 now repaid 73,428.62 
 
 36. Policy fees 37,012.43 
 
 37. Doubtful debts recovered 1,025.94 
 
 38. Exchange 19,164.26 130,631.25 
 
 39. 
 
 40. From Agents' balances previously 
 
 charged off 
 
 41. Gross profit on sale or maturity of led- 
 
 ger assets, viz.: 
 
 (a) Real Estate, per Schedule A 7,065.66 
 
 (b) Bonds, per Schedule D 52,695.47 
 
 (c) Stocks, per Schedule D 59,761.13 
 
 42. Gross increase, by adjustment, in book 
 
 value of ledger assets, viz.: 
 
 (a) Real Estate, per Schedule A 
 
 , (b) Bonds, per Schedule D (including 
 $189,535.41 for accrual of dis- 
 count) 440,482.93 
 
 (c) Stocks, per Schedule D 440,482.93 
 
 43. Total Income $107,986,541.64 
 
 44. Amount carried forward $697,591,151.05 
 
 III.— DISBURSEMENTS. 
 
 1. (a) For death claims (less $199,485.35 
 
 re-insurance), $22,787,698.24; addi- 
 tions, $938,436.29 $23,726,134.53 
 
 2. (a) For matured endowments (less $ 
 
 re-insurance), $6,433,670.97; addi- 
 tions, $35,159.60 $6,468,830.57 
 
 3. Net amount paid for losses and matured endow- 
 
 ments $30,194,965.10 
 
 4. For annuities involving life contingencies 1,659,508.48 
 
 5. Premium notes and liens voided by lapse, less $ 
 
 restorations 
 
 6. Surrender values paid in cash or applied in liquidation 
 
 of loans or notes 13,054,871.09 
 
 7. Surrender values applied to pay new premiums (see 
 
 Income No. 6), $ ; to pay renewal premiums (see 
 
 Income No. 16), $29,775.99 29,775.99 
 
 8. Surrender values applied to purchase paid-up insur- 
 
 ance and annuities (see Income No. 9) 
 
 9. Dividends paid to policy-holders in cash or applied in 
 
 liquidation of loans or notes 5,974,370.47 
 
 10. Dividends applied to pay renewal premiums (see In- 
 
 come No. 14) 1,899,486.68 
 
 11. Dividends applied to shorten the endowment or pre- 
 
 mium paying period (see Income No. 15) 
 
 (a) Including commuted value of supplementary contracts — see No. 20 of Income. 
 
144 Studies in Practical Life Insurance 
 
 12. Dividends applied to purchase paid-up additions and 
 
 annuities (see Income No. 8) $70'6,568.69 
 
 13. Dividends left with the Company to accumulate at in- 
 
 terest (see Income No. 21) 44,896.64 
 
 14. (Total paid policy-holders, $53,564,443.14) 
 
 15. Expense of investigation and settlement of policy 
 
 claims including $32,276.02, for legal expense 38,935.97 
 
 16. Paid for claims on supplementary contracts not involv- 
 
 ing life contingencies 175,078.07 
 
 17. Dividends and interest thereon held on deposit sur- 
 
 rendered during the year 3,179.13 
 
 18. Paid stockholders for interest or dividends 
 
 19. Commissions to agents (less commission on re-insur- 
 
 ance) : 
 First year's premiums, $2,915,193.71; renewal premi- 
 ums, $1,307,238.62; annuities (original), $22,435.54 
 (renewal), $872.85 1.245,740.72 
 
 20. Commuted renewal commissions 3,10'2.00 
 
 21. Compensation of managers and agents not paid by 
 
 commission for services in obtaining new insurance. 20,335.65 
 
 22. Agency supervision and traveling expenses of supervi- 
 
 sors (except compensation for Home Office super- 
 vision) 956,553.39 
 
 23. Branch Office expenses, including salaries of managers 
 
 and clerks not included in item 21 1,001,791.71 
 
 24. Medical examiners' fees, $255,649.94; inspection of 
 
 risks, $65,824.33 321,474.27 
 
 25. Salaries and all other compensation of officers, direc- 
 
 tors, trustees and Home Office employees 1,581,628.88 
 
 26. Rent, including $275,534.93 for Company's occupancy of 
 
 its own buildings, less $8,284.97 received under sub- 
 lease 526,744.12 
 
 27. Advertising, $66,477.34; printing and stationery, $191,- 
 
 706.24; postage, telegraph, telephone and express, 
 
 $201,974.34; exchange, $ 460,157.92 
 
 28. Legal expense not included in item 15 .... , 14,&87.99 
 
 29. Furniture, fixtures and safes 59,452.97 
 
 30. Repairs and expenses (other than taxes) on real estate 217,297.90 
 
 31 . Taxes on real estate 146,491j54 
 
 32. State taxes on premiums 808,394.06 
 
 33. Insurance Department licenses and fees 14,117.26 
 
 34. All other licenses, fees and taxes (give items and 
 
 amounts) : 
 
 35. Local licenses and taxes $72,384.96 
 
 36. Tax on policy reserves, $42,404.72; Fed- 
 
 eral Income Tax, $106,411.02 148,815.74 
 
 37. Miscellaneous taxes (including $5,406.99 
 
 income tax on interest receipts) 35,250.77 256,451.47 
 
 38. Other disbursements (give items and 
 
 amounts) : 
 
 39. Paid agents under Nylic contracts $509,099.84 
 
 40. Doubtful debts marked off 9,619.18 
 
 41. Premium on Fidelity Bonds, $8,771.75; 
 
 Special Inspection Reports, $4,103.29; 
 Restaurant, $43,393.85; Custody of Se- 
 curities, $21,506.39; Papers, Books, 
 Subscriptions, etc., $9,337.90; Legisla- 
 tive and Departmental Expenses, 
 $4,340.21; Expenses Trustees' Election, 
 1911, $27,934.07; Traveling Expenses 
 not included in Item 22, $15,255.95; 
 Miscellaneous Items of Expense, 
 $16,752.86 151,396.27 670,115.29 
 
 42. Commissions paid on real estate sales . . 775.00 
 
 43. Miscellaneous Interest Payments, $3,085.21; Bank 
 
 charges, $18,835.44 21,920.65 
 
 44. 
 
 45. Agents' balances charged off 
 
Studies in Practical Life Insurance 145 
 
 46. Gross loss on sale or maturity of ledger 
 assets, viz.: 
 
 (a) Real Estate, per Schedule A $6,932.14 
 
 (b) Bonds, per Schedule D 73,830.54 
 
 (c) Stocks, per Schedule D 
 
 (d) Bond and Mortgage per Schedule B 239.44 81,002.12 
 
 47. Gross decrease, by adjustment, in book 
 value of ledger assets', viz.: 
 
 (a) Real Estate, per Schedule A 
 
 (b) Bonds, per Schedule D (including 
 $276,027.55 for amortization of 
 premiums) $1,205,005.28 
 
 (c) Stocks, per Schedule D 1,206,005.28 
 
 48. Total Disbursements $66,388,876.50 
 
 49. Balance $631,202,274.55 
 
 IV.— LEDGER ASSETS. 
 
 1. Book value of Real Estate, per Schedule A $11,554,601.09 
 
 2. Mortgage Loans on Real Estate, per Schedule B, first 
 
 liens, $92,523,123.00; other than first liens, $ ... 92,523,li23.00 
 
 3. Loans secured by pledge of bonds, per Schedule C 200,000.00 
 
 4. Loans made to policy-holders on this Company's poli- 
 
 cies assigned as collateral 99,737,917.78 
 
 5. Premium Notes on policies in force, of which $ is 
 
 for first year's premiums 4,578,992.59 
 
 6. Book value of bonds, $413,530,908.58 and stocks, $ , 
 
 per Schedule D 413,530,908.58 
 
 7. Cash in Company's office $3,651.49 
 
 8. Deposits in trust companies and banks, 
 
 not on interest 1,340,273.58 
 
 9. Deposits in trust companies and banks, 
 
 on interest 7,560,704.77 8,904,62i9.84 
 
 10. Bills receivable, $ ; agents' balances (debit, $ , 
 
 credit, $ ); net, $ . Branch Office balances, 
 
 debit, $67,204.73, credit, $49,757.71; net, $17,447.02... 17,447.0'2 
 
 11. Cash in Company's Branch Offices, $150,953.28; Cash in 
 
 Transit, $3,701.37 154,654.65 
 
 12. Total Ledger Assets, as per balance above $631,202,274.55 
 
 NON-LEDGER ASSETS. 
 
 13. Interest due, $15,567.50 and accrued, $799,396.24 on 
 
 Mortgages, per Schedule B $814,963.74 
 
 14. Interest due, $542,394.62 and accrued, $5,642,617.81 on 
 
 Bonds, per Schedule D, Part 1 6,185,012.43 
 
 15. Interest due, $ and accrued, $244.44 on Collateral 
 
 Loans, per Schedule C, Part 1 244.44 
 
 16. Interest due, $ and accrued, $237,318.63 on Pre- 
 mium Notes, Policy Loans or Liens 237,318.63 
 
 17. Interest due and accrued, on other Assets (give items 
 
 and amounts) : 
 
 18. Interest due, $13,568.40 and accrued, $12,698.03 on 
 
 Bank Balances 26,266.43 
 
 19. 
 
 20. Rents due, $4,455.96 and accrued, $5,281.39 on Com- 
 pany's property or lease 9,737.35 
 
 21. Total interest and rents due and accrued 7,273,543.02 
 
 22. Market value of Real Estate over Book Value, per 
 
 Schedule A 
 
 23. Market value (not including interest in item 14), of 
 
 Bonds and Stocks over book value, per Schedule D. . 
 
 24. Due from other companies for losses or claims on poli- 
 
 cies of this Company, reinsured 
 
146 Studies in Practical Life Insurance 
 
 U) (2) 
 
 New Business. Renewals 
 
 25. Gross premiums due and unreported on 
 
 policies in force December 31, 1910 
 
 (less re-insurance premiums) $80,914.22 $4,428,395.67 
 
 26. Gross deferred premiums on policies in 
 
 force December 31, 1910 (less re-insur- 
 ance premiums) 370,404.00 4,877,031.00 
 
 27. Totals $451,318.22 $9,306,426.67 
 
 28. Deduct loading, 25% 112,829.55 2,3<26,3'56.67 
 
 29. Net amount of uncollected and deferred 
 
 premiums $338,488.67 $6,879,070.00 $7,317,558.67 
 
 30. All other Assets (give items and amounts) : 
 
 31 ; 
 
 32 
 
 33 
 
 34 
 
 35. Gross Assets $645,793,376.24 
 
 DEDUCT ASSETS NOT ADMITTED. 
 
 36. Company's stock owned, $ ; loans on, $ $ 
 
 37. Supplies, stationery, printed matter, $ , furniture, 
 
 fixtures and safes, $ 
 
 38. Commuted commissions, $ ; agents' debit bal- 
 
 ances, gross, $ 
 
 39. Cash advanced to or in the hands of officers or agents . 
 
 40. Loans on personal security, endorsed or not, $ ; 
 
 bill receivable, $ 
 
 41. Premium Notes and loans on policies and net pre- 
 
 miums in item 29 in excess of the net value of their 
 
 policies 
 
 42. Book value of Ledger Assets over market value, viz., 
 
 on Bonds 7, $49,604.37 
 
 43. Branch office debit balances ' 67,204.73 
 
 44 7,916,809.10 
 
 45. Admitted Assets $637,876,567.14 
 
 V.— LIABILITIES, SURPLUS AND OTHER FUNDS. 
 
 Net present value of all the outstanding 
 policies in force on the 31st day of De- 
 cember, 1910, as computed by the Insur- 
 ance Department of the State of New 
 York on the following tables of mortal- 
 ity and rates of interest, viz.: 
 
 1. Actuaries' table at per cent, on 
 
 Same for reversionary additions ... 
 
 American Experience table at 3 per cent. 
 On general risks: all policies issued 
 1898 and since; all insurances bearing 
 3 per cent, guarantees; Free Tontine 
 Ordinary Life policies issued 1892 and 
 since; Accumulation policies having 
 completed their Accumulation period; 
 all Annual Dividend policies; all paid- 
 up Term Extension insurance, and 
 
 Premium Return additions $332,884,598 
 
 Same for reversionary additions... 2,939,784 $335,824,382 
 
Studies in Practical Life Insurance 147 
 
 American Experience table at 3% per 
 cent, on all other insurances except 
 
 those specified under 4 $101,771,822 
 
 Same for reversionary additions... 101,771,822 
 
 4. Other tables and rates, viz. : 
 
 Double American Experience table 
 at 3 per cent, on tropical insurances 
 
 and those on impaired lives $38,067,758 
 
 Same for reversionary additions. 115,844 38,183,602 
 
 Sesqui American Experience table at 
 3 per cent, on semi-tropical insur- 
 ances and those on partially im- 
 paired lives $36,590,319 
 
 Same for reversionary additions. 48,133 36,638,452 
 
 Reserve to cover contingent waiver of 
 premium contained in certain poli- 
 cies, based upon Fraternal experi- 
 ence and 3% 3,820 
 
 Net present value of annuities (includ- 
 ing those in reduction of premiums). 
 Give tables and rates of interest, 
 viz.: 
 
 McClintock's Annuity table, 3% per 
 cent, on issues prior to 1909 _. 15,020,441 
 
 McClintock's Annuity table, 3 per 
 cent, on issues of 1909 and subse- 
 quent 916,366 15,936,807 
 
 Total $528,368,885 
 
 Deduct net value of risks of this Company re-insured 
 
 in other solvent companies 136,756 
 
 $528,222,129 
 7. Reserve to provide for health and accident benefits 
 
 contained in life policies 
 
 8. Net Reserve (Paid-for basis) $52.8,222,129.00 
 
 9. Present value of amounts not yet due on supplementary contracts not 
 
 involving life contingencies, computed by the Company 2,460,909.25 
 
 10. Liability on policies canceled and not included in "net reserve" upon 
 
 which a surrender value may be demanded 292,735.33 
 
 11. Claims for Death-Losses due and unpaid 
 
 12. Claims for Death-Losses in process or adjustment, or 
 
 adjusted and not due ?981,0'38.38 
 
 13. Claims for Death-Losses which have been reported and 
 
 no proofs received 1,865,704.03 
 
 14. Claims for Matured Endowments due and unpaid 345,585.0i3 
 
 15. Claims for Death-Losses and other Policy Claims re- 
 
 sisted by the Company 278,395.89 
 
 16. Due and unpaid on Annuity Claims involving life con- 
 
 tingencies 136,960.23 
 
 17. Total Policy Claims 3,607,683.56 
 
 18. Due and unpaid on supplementary contracts not involving life contin- 
 
 gencies 840.07 
 
 19. Dividends left with the Company to accumulate at interest, and ac- 
 
 crued interest thereon 61,1<60.66 
 
 .20. Premiums paid in advance, including surrender values so applied .... 732,075.74 
 
 21. Unearned interest and rent paid in advance 2,366,148.7'5 
 
 22. Commissions due to agents on premium notes when paid 46,792.50 
 
 23. Commissions to agents, due or accrued 10,611.89 
 
 24. "Cost of Collection" on uncollected and deferred premiums, in excess 
 
 of the loading thereon 
 
 25. Salaries, rents, office expenses, bills and accounts due or accrued 71,198.81 
 
 26. Medical Examiners' fees and salaries, $16,587.43, and legal fees and 
 
 salaries, $10,066.35 ; due or accrued 26,653.78 
 
148 Studies in Practical Life Insurance 
 
 27. State, County and Municipal taxes due or accrued $906,465.93 
 
 28. Advances by officers or others on account of expenses of organization 
 
 or otherwise 
 
 29. Borrowed money, $ , and interest thereon, $ 
 
 30. Unpaid dividends to stockholders 
 
 31. Dividends or other profits due policy-holders, including those contin- 
 
 gent on payment of outstanding and deferred premiums 798,696.34 
 
 32. Dividends declared on or apportioned to annual dividend policies pay- 
 
 able to policy-holders during 1911, whether contingent upon the 
 
 payment of renewal premiums or otherwise 3,390,239.00 
 
 33. Dividends declared on or apportioned to deferred dividend policies 
 
 payable to policy-holders during 1911 5,720,377.37 
 
 34. Amounts set apart, apportioned, provisionally ascertained, calculated, 
 
 declared or held awaiting apportionment upon deferred dividend 
 
 policies, not included in Item 33 77,545,164.00' 
 
 35. Reserve, special or surplus funds not included above (give items and 
 
 amounts separately, and state for what purpose each of said funds 
 is held), War risk fund, $601,395; Security Fluctuation and General 
 Contingency fund, $8,438,334.30; Mortality Fluctuation Fund, 
 $500,000; Annual Dividend Equalization Funds, $387,532 9,827,261 30' 
 
 36 
 
 37 
 
 38 
 
 39. All other liabilities (give items and amounts) : 
 
 40. Due agents under Nylic contracts 1,641.87 
 
 41. Reserve for Nylic contracts 1,293,782.00 
 
 42. Reserve for death claims not yet reported to Home Office 500,000.00' 
 
 43. Reserve for unclaimed receipts 5,000.00' 
 
 44. Capital Stock 
 
 45. Unassigned funds (surplus) 
 
 46. Total $637,876,567.14 
 
HHH 
 
 ■ 
 
 ^v 
 
 
 H