4 63 954 DUP[ HG I~)-L52 N8KIA5 1 >. I "4 ( —c?63 / 5 "a Z, , 9 I'I ~~ ~;,i9e f '*lr:~, 1I c 3~: ~. ~; 1 ``;f` h.. p `p~ ~--~.~lr ~;~,~.~;" -~:;i ~rii ~' ' '.~~ ~,;.~.; g a b -- Ui i..: P J 9 i~1..~ \~. ~ 1: 1.;5~~~ ~~ Ir~~ d jl ( B R,d.::?P*t r ~ ~~ ~ '~ ~,~ `L P I?~: * ~t~, ~" *' t. - ~- ~ rl I HOME OFFICE OF THE COMPANY, 346 & 348 BROADWAY, NEW YORK. SEMI-CENTENNIAL HISTORY OF THE NEW-YORK LIFE INSURANCE COMPANY I845-I895 BY JAMES M. HUDNUT NEW YORK PUBLISHED BY THE COMPANY 1895 COPYRIGHT, 1895, BY THE NEW-YORK LIFE INSURANCE COMPANY. TO THE AGENTS OF THE COMPANYLIVING AND DEAD-WHOSE LABORS CONSTITUTE A HISTORY TOO VOLUMINOUS TO BE WRITTEN, THIS VOLUME IS RESPECTFULLY INSCRIBED. I I PREFACE. WHILE I have endeavored to set forth in their order the dominant facts pertaining to the history of the NEW-YORK LIFE INSURANCE COMPANY, as seen from the Home Office, I am conscious that the greater part of the work involved in the upbuilding of such an organization, and the greater part of the benefits conferred on the community by its operations, are beyond the power of my pen to describe. The history of a great army can only give an outline of its organization, campaigns, victories and losses; it cannot take account of the toils, the sufferings, the hopes and the fears of the hundred thousand individuals of which the army is composed. The labors of a large corps of faithful agents during half a century; the motives that have induced the application for over six hundred thousand policies of insurance, each one of which had in view certain benefits to others in the event of the applicant's death while the policy was in force; the benefits actually received by reason of payments aggregating nearly two hundred million dollars, over half of which was paid in death-claims and endowments; -these are the things that can never be described by mortal man, and yet they all belong to the history of the NEW-YORK LIFE INSURANCE COMPANY. Every great corporation is the product of two forces-the one internal, the other external-the management, and the times in which it has its existence. It did not seem possible, therefore, to write a history of the NEW-YORK LIFE INSURANCE COMPANY without making copious references to the history of Life Insurance during the last half century and to the conditions by which its growth has been affected. The logbook of a ship makes mention of the weather, as well as of the distance sailed, and sometimes the best of seamanship avails but little save to keep the vessel to her course. The life companies of fifty years' standing have vi Preface. sailed over stormy seas, and it is not a little to the credit of their managers to have brought their precious cargoes safely into port. They have shown themselves skillful seamen, not only in breasting financial storms, but also in taking advantage of fair weather. The references to contemporaneous history have added considerably to the size of this work, and I trust will add something to the interest of those who may be its readers. Acknowledgments are due, for information furnished, to Hon. Carroll D. Wright, Commissioner of Labor, in charge of the Eleventh Census; Hon. James H. Eckels, Comptroller of the Currency; Hon. W. J. Harris, United States Commissioner of Education; Hon. Charles Preston, Superintendent Banking Department, State of New York; Daniel O'Dell, Esq., formerly the Company's Superintendent of Agencies; and to the Edithrs of the "World Almanac " and of the "Iron Age"; also to the Librarian of Columbia College, for courtesies extended; and to the Equitable Life Assurance Society, for free access to the " Walford Library." J. M. H. Mew York, November, 1895. CONTENTS. CHAPTER I. CHARTER AND ORGANIZATION. PAGE. Acts of May 21, I841, and April I8, I843..................................... I Election of the first Board of Trustees........................................ 2 Election of Officers and issue of first Policy................................... 2 Name changed by Act of April 5, 1849....................................... 3 General powers under the Charter........................................... 3 Amended Charter of 1893................................................. 3 Subscription Notes-list of-how used....................................... 4 Dividends-how to be made and redeemed................................... 5 Advertisement of the Company, August 14, I845.............................. 6 CHAPTER II. LIFE INSURANCE IN 1845. Life companies doing business in the United States in 1845..................... 7 Early history of life companies in Philadelphia................................. 7 Companies in Massachusetts and in the South................................. 8-9 The New York Life and Trust Company..................................... 9 Report of President Bard on Mutual Insurance................................ 10 The Magna Charta of Life Insurance....................................... I Organization of the Mutual Life............................................. 11 English life companies in I845.............................................. I2 CHAPTER III. THE UNITED STATES IN I845. Constituency and population of the Union..................................... 13 Political questions of the time................................................ 13 Men prominent in public life................................................ 14 Means of communication.................................................... 17 Postal and telegraphic systems............................................... I7 An agricultural people....................................................... 18 Growth in elements of civilization............................................. 18 Increase of the humane spirit................................................ 19 Relation of changes to Life Insurance.......................................... 9 Viii Contents. CHAPTER IV. THE FIRST THOUSAND POLICIES. PAGE. First office at 58 Wall Street................................................ 20 First Policy and Application formiis........................................... 20 Policy conditions and limit of risk............................................ 21 Extra premiums charged.................................................... 22 Slave policies-first death-claim.................................... 22 Schuyler Colfax appointed agent............................................. 23 Business of first year-first dividend......................................... 24 Premium notes authorized to be taken........................................ 25 Tabular history of first i,000 policies......................................... 25 Early policies in force in i894............................................... 26 Portraits of two policy-holders insured in i845................................. 26-8 CHAPTER V. THE FIRST MILLION DOLLARS. i845-i855 -Mr. Merchant elected President.........................-.. 29 Mr. Franklin succeeds Mr. Merchant as Presidet............................. 29 Notable men brought into the Company's service.............................. 29 Efforts to increase the business.......................................... 30 Interest paid on dividends................................................... 30 Office removed to 68 Wall Street......................................... 30 Traveling agents appointed.......................................... 32 Changes in the Vice-Presidency......................................... 32 Business year made from January I to December 3I........................... 32 Prevalence of cholera in i849......................................... 32 Company's action re cholera, and deaths fromi................................. 32 Special Agency Committee and appointments................................. 33 California risks........................................... 34 Yellow fever and rates in Southern sea-ports................................. 35 Suicide clause eliminated from policy....................................... 35 Subscription notes canceled............................. 35 Removal to io6 Broadway............................. 35 Premium notes exchanged for dividends on lapsed policies...................... 36 Re-insurance of the Phoenix Insurance Company of St. Louis................... 37 Deposit law of April 8, i85i................................................. 37 Massachusetts law of 1852.................................................. 38 General decline of life insurance business..................................... 38 Reports required of life companies under laws of i849 and i851................. 39 NEW-YORK LIFE'S report criticised.......................................... 39 First valuation of policies.................................................. 40 Comptroller certifies to Company's solvency.................................. 40 Yellow fever in I853; yellow fever losses.................................. 41 Contents. ix PAGE. Life Insurance promoted by higher elements of character....................... 43 Yellow fever at Norfolk and Portsmouth, Va., in 1855.......................... 43 Extra rates on Southern risks............................................... 43 Eleventh annual report shows assets $1,o59,oo8.65............................. 44 CHAPTER VI. NON-FORFEITING POLICIES AND THE REDEMPTION OF DIVIDENDS. 1856-I860. Laws governing life insurance companies, I855-60............................ 46 Financial crisis of 1857.................................................... 49 Purchase of property 112 and 14 Broadway......................... 49 Distribution of business and losses.......................................... 50 Canadian agency opened and closed........................................ 50 Redemption of dividends discussed and postponed............................ 5 Report of Examining Board on Mutual Life's dividends........................ 5I Attempts at fraud on the Company......................................... 53 Pike's Peak risks and hand-bill............................................. 53 American Life Underwriters' Convention.................................... 53 California agency and rates................................................ 57 Comparison of Northern and Southern business.............................. 58 Second meeting of Life Underwriters' Convention............................. 58 Discussion on non-forfeiting policies........................................ 59 Customs of the companies................................................ 60 The NEW-YORK LIFE issues a non-forfeiting policy........................... 63 An Epoch in Life Insurance................................................ 63 Subscriptions for Post Office and Captain Wilson............................. 63 Question of war risks raised and postponed................................... 64 Plan for redemption of dividends adopted.................................... 65 Table of life insurance business for I86o.................................... 66 CHAPTER VII. PERIOD OF THE CIVIL WAR. I86I-1865. Perplexities of the life companies........................................... 68 Fidelity of Southern agents................................................ 68 Business continued until forbidden....................................... 69 Inquiries of Southern policy-holders........................................ 70 A prophetic letter........................................................ 70 An inquiry from Fort Sumter............................................ 71 The companies decide to issue war permits................................... 73 Status of Southern policies................................................. 74 Business interrupted by war preparations.................................... 76 "Home Guard" permits granted free....................................... 77 Effect of secession on the Company's policies................................ 79 x Contents. PAGE. Effect of proclamations and court decisions.................................. 8 Mails to seceded States discontinued........................................ 82 Exchange on New York at a high premium.................................. 83 The "American Letter Express"........................................... 84 Commercial intercourse with the South forbidden............................. 85 Hard times at the North.................................................. 86 Liberal measures of the Company.......................................... 87 Subscription for Sanitary Commission....................................... 88 First investment in Treasury Notes......................................... 89 A nnual report for 186I.................................................... 90 Taxation of life companies by Congress..................................... 91 Resumption of business in Norfolk.......................................... 92 Resumption of business in New Orleans..................................... 94 Dr. Copes' retrospect in I879............................................... 95 An inquiry from Mobile via Havana........................................ 96 " Home Guard " permits for Baltimore policy-holders................98, 1o4-6 Colonel Donnelly's war permit............................................. 99 Business in Norfolk....................................................... I00 Annual report for I862.................................................... IOI Death of General Agents; war losses........................................ 02 Liability for "scrip dividends"............................................. 103 Claim paid under Mobile policy............................................ 04 Policy heading used in 1863................................................ 105 Resignation of Actuary Freeman........................................... 107 Annual report for 1863.................................................... 10o7 Construing the non-forfeiture clause........................................ Io8 M r. Beers elected Actuary................................................. 1o8 Increasing competition for business and agents............................... I09 "Home Guard" permits issued in 1864..................................... II W ar losses paid in 1864.................................................... III A nnual report for 1864................................................... 113 First letters from Savannah and Richmond.................................. 114 First letters from Mobile and other Southern cities............................ 116 Re-instatement of Southern policies...................................... 117 W ar losses paid in 1865.................................................... 18 Review of the Company's war experience................................... I19 Business of all companies in I865........................................... I20 CHAPTER VIII. FROM PEACE TO THE PANIC. 1866-1873. Industrial and commercial activity.......................................... 121 Extension of the Company's business........................................ 122 Agents and taxes in the South............................................I22-3 Contents. xi PAGE. Commissions and extra rates.............................................. I23 Distribution of the Company's business...... 125 Copy of application attached to policy......................................1. I26 Plans for building at 346 and 348 Broadway..1 26 Contribution plan of distributing surplus adopted............................. 127 Flood and yellow fever in Louisiana...........................9.............. 29 Issue of a " Return-Premium Endowment Policy".............................. 130 Annual report for I867....................................... 131 Increase in the executive staff......................131.. '.. 13I Volume I., Number I, "New-York News-Letter"............................... 32 Letter from Bishop Green, of Mississippi................................... I33 The " Southern Department " established................................ I34 The Company enters Canada................................ 134 Death of Mr. George I. Richardson........................................ I35 A competitive circular of the time................................1........... 36 Annual report for i868...........................1.......................... 38 Redemption of dividends completed..............1 38 Re-insurance of Southern Life Assurance and Trust Co.140 Extension of the Company's business westward. I40 "Black Friday" and profits on gold. I41 Notable claims paid in i869. 43 Business extended to Pacific coast and to Europe.44 The Home Office moves to 346 and 348 Broadway.45 Competition in the South. I46 Payment of General Thomas' policy. I49 Surplus by three different standards.149 First death-claim paid in England.50 Issue of the " Ten-Year Dividend Policy"..................................... Life companies' suggestions to Insurance Commissioners.151 Death of Mr. Henry A. Dyer. 52 Contribution to Chicago fire sufferers. 53 Letter of Rev. Edward Everett Hale......................................... 154 Issue of the " Tontine Investment Policy "................................... I55 The cash surrender value feature........................................ 156 Approval of eminent actuaries......................................... 58 The Mutual Life proposes to reduce premium rates........................... 159 Opposition of eighteen other companies.16................................. 0 The Colvocoresses case................................ 161 Disasters of I873 on sea and land........................................ I62 Southern coast mortality and rates..................................... I64 Laws governing the purchase of wives' policies................................ I65 Financial panic of I873.................................... i66 Business of all companies in I873..................................... I66 Agencies returning over $ioo,ooo in I870 and I873........................... I67 xii Contents. CHAPTER IX. EFFECT OF THE PANIC ON LIFE INSURANCE. i874-i879. PAGE. Commercial and financial failures..1 68 A "Life Insurance Tree "....................................... following page I68 Life Insurance failures.................................. I69 Public hostility to Life Insurance.................................. 170 The "Chamber of Life Insurance "................................... 171 Cartoon ridiculing the companies.................................. 172 Examinations by Insurance Department...................... 173 Abuses of receiverships.................................................. 174 Business of the companies.................................. 175 Effect on the NEW-YORK LIFE.................................. 176 Withdrawal from California................................................ 177 Frauds in Ireland......................................................... 177 Spanish-American Department established.................................. 178 The Custer massacre and death-claims.....................................178 Attempt to blackmail the Company................................, 8o A forged check................................................182.......... 82 A legislative inquiry.......................................................1 83 A bogus interview printed in the " Herald ".................................. I84 Superintendent's report on the Company.................................... I85 The Company withdraws from Canada...................................... 187 The Company re-enters California.. 187 Notable policies paid...................................................... i88 Enlargement of the Home Office......................... Igo Belated and insufficient legislation.......................................... Igo Business of all companies in 1879.. 192 CHAPTER X. TEN YEARS OF RAPID GROWTH. i880-i889. A period of industrial and commercial prosperity............................ I93 Prosperity of Life Insurance................................................ 195 Results under old, and new, policies........................................ I97 Important bills -fail of passage.................................. 197 A policy-holder's letter..i98 Results under Ten-Year Dividend Policies..200 Notable claims paid in 188..202 Letter from Mrs. Garfield............................ 203 Results under IO-year Tontine policies..206 Purchase of an office building in Paris....................... 209 Contents. xiii PAGE. Other office buildings in Europe........................................... 210 Business of the Paris office 1876-I882....................................... 20 The Company's Paris Building............................................. 211 A false report contradicted............................................... 2 Contested claims in 882.................................................. 212 The Company's Amsterdam Building....................................... 213 The Company's Berlin Building............................................ 215 The Company's Vienna Building........................................... 217 Attacks on the Tontine plan of insurance....................................217 The Company's Budapest Building......................................... 219 Death of Dr. Charles Wright..................................... 221 Dr. Henry Tuck elected Second Vice-President..............................221 Issue of the "Non-Forfeiting Limited-Tontine Policy"........................ 222 An old farce re-enacted.................................................... 223 Death of Trustee W illiam Barton........................................... 223 The limit of risk increased to $Ioo,ooo...................................... 224 Property saved from tax sale............................................... 224 An anti-Tontine crusade................................................... 225 Investigation by the New York Assembly.................................... 226 Investigation by the Ohio Senate........................................... 227 Report of the Ohio Senate Committee.......................................228 Issue of a "Five-Year Dividend Policy".................................... 231 Death of President Franklin............................................... 231 Mr. Beers elected President............................................... 233 Issue of the " Non-Forfeiting Tontine Limited-Endowment".................. 233 Superintendent McCall investigates Tontine accounts......................... 234 Notable claims paid in I886............................................... 235 Office Buildings erected in the W est........................................ 237 The Company's Kansas City Building....................................... 238 The Company's Omaha Building........................................... 239 The Company's St. Paul Building......................................... 240 The Company's Montreal Building.......................................... 241 The Company's Minneapolis Building...................................... 242 Repeal of the law taxing income of life companies............................. 243 Fifteen-year Tontine policies mature...................................... 244 Charges of mismanagement.............................................. 245 Report of Investigating Committee.......................................... 246 Issue of the "Insurance Bond with Guaranteed Interest"..................... 247 Issue of the "Non-Forfeiting Free Tontine Policy"........................... 248 Notable claims paid in I888.............................................. 248 An "incontestable clause" authorized...................................... 249 Anti-rebate law passed.................................................... 250 The Johnstown disaster................................................ 251 A relic of the Johnstown flood.............................................. 252 Issue of the " Distribution Policy "......................................... 253 xiv Contents. PAGE. Exhibits sent to the Paris Exposition...................................... 254 A Silver Medal awarded the Company...................................... 256 Notable claims paid in I889...................................... 256 Paris Exhibits in miniature...................................... 257-9-61-3-5 Death of Mr. H. S. Homans............................................... 260 The Company's assets exceed $104,000,000.................................. 262 A ten years' review........................................................ 266 Business of i889.......................................................... 267 CHAPTER XI. A PERIOD OF CHANGE. i890-i895. Controversy over the Distribution Policy..................................... 269 Copy of the Policy........................................................ 272 The Budapest Building authorized.......................................... 273 Notable claims paid in i890................................................ 273 The Merzbacher defalcation................................................ 276 An official examination requested............................................ 277 A five years' review........................................................ 278 Results under 2o-year Tontine policies.8.................................0 28 Report of the Superintendent of Insurance................................. 280 Action of the Trustees on the report.28.................................. 283 Review of the report by Mr. Beers.......................................... 284 Mr. Beers resigns......................................................... 285 Hon. John A. McCall elected President...................................... 289 Mr. McCall's address to the Trustees and Agents............................. 292 Address to the policy-holders............................................... 295 Reorganization of the executive staff......................................... 297 President McCall meets the Western agents.................................. 298 Re6rganization of the Board of Trustees..................................... 299 Re6rganization of Home Office............................................. 300 Death of Mr. J. Fisher Smith.............................................. 30i Montreal Convention...................................................... 301 Mr. Beers' contract referred to the courts..................................... 302 Issue of the "Accumulation Policy ".0.......................................... 3 Services of agents recognized............................................... 306 " Certificate of Merit and Appreciation "....................................... 307 A " Surprise Party ".......................................................... 308 The " Principle of Steady Production "........................................ 310 "A Christmas Greetig" to agents......................................... 3'I Changes in method of making annual report................................. 313 Enlargement of the Home Office............................................ 315 President's address to Western agents....................................... 3i6 Convention of agents in London............................................ 3i8 Contents. xv PAGE. President McCall's address before Columbian Insurance Congress.. 320 NEW-YORK LIFE'S Columbian Convention... 321 Action of the Convention on rebates....................................... 322 President McCall's address on form of report............................... 323 President McCall's letter on rebates................. 325 The Company's Columbian Exhibit...328 Awards at Chicago and San Francisco...335 Death of Mr. Beers...338 President McCall's " Special Bulletin "... 339 Action of the Board of Trustees...342 The Roach law and the Missouri Insurance Department.............. 343 Reviewing the work of i893.................... 346 The new methods vindicated.................................. 350 " A campaign of education"...............0. 351 The " Seven States' Examination "............... 351 Methods of the Agency Department....................................... 355 Distribution of the Company's business...356 President McCall on the expense question...357 Commissioners' Certificate............... 359 Death of Auditor James A. Brown............. 360 Mr. John C. Whitney appointed Auditor...361 The Vice-President visits foreign agencies...361 The Company's report for i894........................................ 361 Issue of the " Registered Bond Policy "........................................ 363 Death of Associate Actuary Horace C. Richardson............................ 364 The "Golden Policy,"fac-simile............................... following page 364 Classification of extra-hazardous risks........................................ 365 Fiftieth anniversary of organization..............................366 Registered Bond, fac-simile................................... following page 366 President McCall's address on fiftieth anniversary...368 First annual report........................................................ 370 Resume of receipts and expenditures, I845-I894...371 Commemorative lines..................................................... 372 Business of the Company, I890-i894... 373 Business of all life companies in New York, i894.............................. 374 CHAPTER XII. RETROSPECT - PROSPECT. The changes of fifty years, -character of... 375 The reserve fund" nature and treatment of................................. 375 Growth of non-forfeiture customs... 376 Loans on policies... 376 Application of theories of mortality... 377 xvi Contents. PAGE. Application of investment theories.......................................... 379 Conditions of future progress.............................................. 380 Two prominent elements of Life Insurance.................................. 380 Moral laws underlying Life Insurance....................................... 381 APPENDIX. Statistical notes........................................................... 383 Tables of Income and Disbursements........................................ 387 Tables of Insurance, Assets, Surplus, etc.................................... 389 First premium table used by the Company................................... 390 Classification of deaths.................................................... 391 Trustees of the Company, I845-894........................................ 392 Currency of the United States in 1845, by James De P. Ogden................. 395 LIFE INSURANiCE Makes scientific adjustment between the possibilities and probabilities, the accidents and averages of life, It enables the individual to merge his constant liability to death in the average longevity of the race, and to share in the productiveness of life in general, whatever may be his own fate. It discounts probability and gives certainty. In its adaptations to practical life andfinance, Life Insurance enlists the cumulative power of small investments through long periods of time, and utilizes the far-off interest of prudencefor present needs. It applies scientific method to those impulses of generosity which would otherwise encourage improvidence, and provides for the needs of all through the love of each for his own. It gives affection a place to stand and a lever with which to work. It transforms forethought and good-will into practical helpfulness and well-being. It enables us to realizefor our loved ones the hopes we cherish for theirfiuture, which might otherwise be blighted by death. To the husband and father Life Insurance is duty, opiportunity, partnership with vast and indestructible forces, guaranty of average success in a field where individual failures are sure to be many and disastrous. Under all Accumulation and Endowmentforms, it is protection for loved ones during a term of years, and benefit to the insured in case of survival; it is manhood and middle age relievedfrom anxiety, and old age relievedfrom want. To the wife and mother it is protection, security, the fufillment of marriage vows, the assurance of love stronger than life and over which death has no power. It bridges over the abyss of overty that may at any time openfor herself and her children, thefear of which causes many an anxious hour. To children it is guardianship, the pledge of support and of the continuance of educational and social advantages, until they are prepared to take up the burdens of life with adequate preparation and strength. Founded in the nature and needs of man, allied to the most persistent forces in the business world, adapted to circumstances the most common, ministering to ends the most dear, approved by the wisest, and patronized by the best, of men-Life Insurance fufills a mission without parallel in the financial world. I I I rI PRESIDENT NEW-YORK LIFE INSURANCE COMPANY, APRIL 12, 1845-APRIL 19, 1847. SEMI-CENTENNIAL HISTORY OF THE NEW-YORK LIFE INSURANCE COMPANY. CHARTER AND ORGANIZATION. UNTIL the adoption of the State Constitution of 1846, all charters for insurance companies were granted by special Acts of the Legislature. The initial enactment, out of which the NEW-YORK LIFE INSURANCE COMPANY finally grew, was an Act passed May 2I, 184I, authorizing the establishment in the City of New York of an insurance company for marine, inland navigation and transportation, and fire risks, to be called the "NAUTILUS INSURANCE COMPANY." Messrs. Addison Dougherty, J. B. Nones, D. A. Cushman, H. W. Childs, Caleb S. Woodhull and William V. Brady were named in the Act commissioners to receive subscriptions to the capital stock of the Company, which was fixed for purposes of organization at two hundred thousand dollars. Two years were allowed for organization. Just before the two years expired (April 18, I843) the original Act was so amended as to allow the Company, "in addition to their chartered rights, the privilege of organizing and doing business under the plan of mutual insurance, and for that purpose to have and enjoy a charter similar in every respect to that of the New York Mutual Insurance Company," a corporation authorized by an Act passed April I 2, i842, with power to do life, fire and marine insurance. The commissioners named in the Act of May 21, i841, were continued, and they were authorized to organize the Company when applications for 2 Charter and Organization. insuran'ce- 'amoiiitirig-t-6"'$3O66,oo. had been received. "'Two years' from the date of the amended Act were allowed for organization. The records of the Company show that on April 10, 1845, a meeting of Commissioners Woodhull, Brady, Childs and Nones was held at the office of John N. Taylor, Esq., No. 3 Nassau Street, and it was voted that, "applications in excess of the amount required having been received and approved, and notice for the election of twenty trustees and three inspectors to preside at the next annual election having been duly published," the poll be opened for such election. Upon closing the poll the commissioners certified to the election of the following persons: JAMES BROWN, WM. H. ASPINWALL, HENRY W. HICKS, THOMAS W. LUDLOW, LEONARD SUAREZ, ADAM NORRIE, THOMAS B. RICHARDS, WILLIAM W. HOWLAND, TR US TEES. JOHN CRYDER, SCHUYLER LIVINGSTON, SPENCER S. BENEDICT, DAVID A. COMSTOCK, ALMER REED, ALBERT AVOODHULL, INSPECTORS. JAMES MAIRS, EDWARD C. CENTER, EDWARD F. SANDERSON, PROSPER M. WETMORE, RICHARD IRVIN, JAMES REYBURN, ROBERT L. TAYLOR, LORING ANDREWS. ADAM M. FREEMAN. At a meeting of the Trustees, held April twelfth, at the office of the Contributionship Insurance Co., 57 Wall Street, James De Peyster Ogden was elected President, A. M. Merchant Vice-President, and Lewis Benton was appointed Secretary. The Board adjourned, to meet on the sixteenth, at 15 Wall Street, the office of the President, at which time Pliny Freeman was appointed Actuary, to take charge of the Life Insurance Department. On the seventeenth, Policy No. I for $5,000 on the life of Lewis Benton and Policy No. 2 for $5,000 on the life of Pliny Freeman, were issued, and thus the long and glorious record began. Two fire risks were also taken for one year from April sixteenth, one for $5,000 at fifty cents per $I00, on merchandise in stores at 219 Greenwich Street and 71 Barclay Street, and one for $500 at thirty-five cents per $IOO, on furniture in residence at 27 Hudson Street; but the By-Laws reported by a Committee appointed Charter and Organization. 3 June second restricted the business of the Company to "insurance 'on life and all and every insurance pertaining to life," and the two fire risks were re-insured in the Alliance Mutual Fire Insurance Company. By an Act of the Legislature, passed April 5, 1849, the name of the Company was changed to " NEW-YORK LIFE INSURANCE COMPANY," and the scope of its authority was enlarged to include the power to "make and execute trusts," thus giving it all the privileges of a trust company, which it still retains and exercises, as occasion demands, in the interest of its policy-holders. Under this provision money is received by the Company as Trustee, whether from insurance under a policy or otherwise, and paid to beneficiaries as designated. Money thus deposited with the Company is protected by the laws applying to trust funds. The Acts of May 21, 1841, and of April 12, 1842, authorized the establishment of a corporation "to continue thirty years," and the Legislature might at any time alter or repeal the charter thereby granted; but, by Section 20, Chapter 463, of the Laws of 1853, it was provided that, every charter created by or under the laws of this State for the purposes of life, health, or casualty insurance should continue until repealed. By the "Insurance Law" of 1892, and the amendments thereto, approved May I8, I893, any domestic corporation then existing was allowed to amend its charter, or to adopt in whole or in part a new charter in accordance with the statute, with the approval of the Superintendent of Insurance; and upon such adoption and consent, and upon filing a copy of the new or amended charter with the record of adoption and consent in the office of the Superintendent of Insurance, such corporation was authorized to enjoy the same perpetually, and declared to be a continuation of the corporation which existed prior to such re-incorporation. In accordance with these provisions of law the Board of Trustees adopted a new charter July I 2, I893, embodying in a single document the authority necessary to carry on the business of the Company. This charter was certified by the Attorney-General of the State to be in accordance with the law, on July 26, I893, and received the consent of the Superintendent of Insurance on the same day, upon being filed in the Insurance Department. 4 Charter and Organization. The original charter of the Company provided that, for the better security of its policy-holders, it might receive notes for premiums in advance, of persons intending to receive its policies, and might negotiate such notes for the purpose of paying claims or otherwise in the course of its business; and that upon such portion of said notes as should exceed the amount of premiums paid by the respective signers thereof, a compensation not to exceed five per cent. per annum might be allowed and paid from time to time. The total amount of the original subscription notes was $55,815.25.* These notes were to be given up and canceled when the accumulations of the Company reached two hundred thousand dollars. Of the fifty-six original subscribers forty-six took policies in the Company, and * SUBSCRIPTION NOTES RECEIVED " IN ANTICIPATION OF PREMIUMS AND TO CONSTITUTE A CAPITAL." \. M. Merchant, R. E. Purdy,.. Lewis Benedict & Co., David A. Comstock, John M. Flint, Alfred Freeman, M. D., Truman Roberts, A. M. Freeman & Co., John T. Gilchrist, John Rice..... Edward Kellogg,. Lord, Warren, Salters & Orsamus Bushnell,.. George H. Ellery,.. John V. Richardson, Samuel S. Hill,... William Salisbury, John Mairs, John W. Martin,. 1. N. Taylor,. Caspar W. Wever, G. Pitt Stevenson, P. M. Wetmore,. N. Carroll..... W. H. Townsend, G. H. Tracy,. O. S. Fowler,. Franklin Whiting,..... $2,500.00... 3,000ooo.00... 3,000.00..... 2,500.00...,000.00... 5,000.00...,000.00. 1,000.00..... 250.00 300.00.... 500.00 Co.; 500.00 Co..... 5,000.00 ~ I,OOO.00 350.00 500.00 5,000.00 2,000.00 5,000.00 2,000.00.....,000.00...... 1,000.00...... 500.00. 500.00 500.00 500.00 500.00. I,000.00..,o00.00.... 500.00 George Whitaker,...... $500.00 William Storie...... 500.00 Joseph Nelson,..... 500.00 Joseph Chamberlain... 500.00 R. C. Root & Co.... 500.00 Edward Pierce...... 500.00 George Cox..... 500.00 A. B. Tripler,......500.00 R. H. Brinckerhoff,...500.00 Lewis Benton...... 500.00 James P. Wallace,. 500.00 John J. Bryant...... 500.00 John McMichael....... 250.00 H. A. Hughson,....250.00 James B. Douglass,... I,250.00 Nathan W. Easton,...500.00 Edgar Van Kleeck,....500.00 H. F. Colesworthy..... 300.00 James Lawson........ 300.00 John J. Storm....... 250.00 Henry A. Nelson....500.00 Jeremiah M. Wardwell... 250.00 J. B. Nones...... 500.00 Thos. N. Ayers........ 1,200.00 C. Henry Edwards....... 250.00 Conrad Teese,......... 250.00 Joseph Hollingsworth,..... 250.00 Elias T. Aldrich,....... 115.25 $55,8I5.25 Charter and Organization. 5 on June second the Board of Trustees fixed the amount of the notes to be held at $50,oo000. The notes were to mature in one year, and at the end of the year settlement was made of the premiums chargeable against them and new notes were given. Notes which, through changes of business standing, became unnegotiable, were returned to the makers and others secured in their place. No compensation was made to the signers until December, I847, when it was voted to pay them five per cent. per annum, in accordance with the charter. This was continued until November 30, i85o, when, the cash assets of the Company being in excess of $200,000, the notes were given up and canceled. The makers of these subscription notes acquired no special rights in the Company which, from its inception was made a purely mutual organization. By the amended charter of I843 "every person having taken a policy during the preceding year, and every person holding in his own name certificates of dividends declared" to the amount of one hundred dollars, was to be deemed a member of the Company and entitled to vote in person or by proxy at all elections. This feature was re-affirmed in the amendatory act of I849, and was extended to cover running policies, by the provision that "each insured member for any sum paid in or secured as a premium of insurance to said Company during the year preceding such election shall have one vote either in person or by proxy," and certificate holders were allowed one vote for each hundred dollars in certificates held. Dividends were to be made annually from premiums earned, after deducting losses and expenses, and certificates were to be issued for the same for amounts of ten dollars and multiples thereof. Dividends for smaller amounts were credited on the books of the Company. While outstanding these certificates might, at the discretion of the Trustees, bear interest at a rate not exceeding six per cent. per annum, and were to be liable for losses until redeemed. The Trustees were authorized to begin their redemption, in the order of issue, when the sum outstanding should exceed $500,000, and were required to do so when the sum outstanding should exceed $I,000,ooo. An advertisement of the Company 6 Charter and Organization. published in the "Evening Mirror" of August I4th, 1845, says: "This Company, recently organized upon the improved and deservedly popular plan of Mutual Assurance, commences with a capital of $50,000, which will be continually augmenting as its business increases. One of the peculiar advantages attending insurance with this Company is that, all the assured share annually in its profits and are interested in its success. The earned premiums or profits will be safely invested by the Company, constituting a permanent fund annually augmenting for the benefit and security of all parties interested." However sanguine may have been the hopes of the promoters of the infant Company, we may be sure none of them dreamed that its fiftieth year would show over forty-five million dollars paid in dividends, and accumulations "for the benefit and security of all interested" of one hundred and sixty-two millions more! II. LIFE INSURANCE IN 1845. THE " NAUTILUS (MUTUAL LIFE) INSURANCE COMPANY "-as the early title ran-being now fairly launched, let us look about a little and consider upon what sort of sea it is to sail. When the NAUTILUS issued its first policy, there were in the United States eleven American companies and one English company doing a general life insurance business, and two corporations which issued insurances and granted annuities for the benefit of the families of clergymen. Eight of these organizations were trust companies, as well, and four of them still survive as such, having ceased to take life risks. The three companies which confined their operations to life insurance had all been organized during the preceding two and a-half years. The earliest life policies issued in this country were written by fire insurance companies and by individual underwriters. The earliest life companies were stock companies, and usually combined with their life business either a trust business or a fire insurance business. Life policies were mostly for short periods, the early premium tables providing for one year policies, seven-year policies, and whole life policies. The first company organized to do a general life insurance business was the Pennsylvania Company for Insurance on Lives and Granting Annuities, which was incorporated by the Legislature of Pennsylvania in 1812. The Girard Life Insurance, Aanuity and Trust Company, organized in Philadelphia in 1836, issued' 248 policies during the first ten months of its existence, and seems to have done most of the life business in Philadelphia thereafter until after 1845. It was the first life company in this country to share profits with policy-holders, and declared its first dividend December 27, 1844, in the form of reversionary insurance payable 7 8 Life Insurance in 1845. with the policy. On January I, 1845, the Pennsylvania Company announced that thereafter all premiums for one or more years would entitle the policy-holder to a credit of one-half the profits; certificates of profits to be issued every five years, or oftener, and to bear interest at six per cent. until redeemed. The first dividend, declared five years later, was paid in cash. This was the beginning of reversionary, and cash, dividends in American life insurance. The Massachusetts Hospital Life Insurance Company (I818-23) was required by its charter to pay the Massachusetts Hospital one-third of the net profits on its life business, after deducting legal interest on its paid-up THE FOLLOWING TABLE GIVES, AS NEARLY AS CAN BE ASCERTAINED, THE BUSINESS OF ALL THE COMPANIES DURING THE YEAR NEXT PRECEDING APRIL, I845: POLTCIES POLICIES E 3 6. | NAME OF ORGANIZATION. ISSED IN FORCE. REMARKS. No. Amount. No. Amount. A P, p I759 (I) Presbyterian Ministers' Fund, Pa........... 2 $214.24 $I,ooo $56.62 Annuities. i769 (2) Protestant Episcopal Corporation, Pa....... No record. 1812 (3) Pennsylvania Co. for Ins. and Annuities, Pa. No record. i818 (4) Massachusetts Hospital Life Ins. Co., Mass. 25 44,150142 238,I25 $6,22 Year i845. 1830 (5) New York Life Ins. & Trust Co., N. Y...... No record. I830 (6) Baltimore Life Insurance Co., Md.......... No record. I835 (7) New England Mutual Life Ins. Co., Mass... 343 948,IIO 340 946,110 23,499 I836 (8) Girard Life and Trust Co., Pa.............. 199 445,75 389 1,015,275 20,670 Year I845. 1838 (9) Globe Life and Trust Co., Pa............... No record. i840 (io) Ohio Life and Trust Co., Cincinnati, 0.... No record. i840 (ii) Odd Fellows Life and Trust Co., Pa...... No record. 1842 (12) Mutual Life Insurance Co., N. Y........... 6i6 1,968,922 908 2,960,083 83,233 i845 (I3) Mutual Benefit Life Insurance Co., N. J..... Be gan busi ness April, i8 45. 1837 (I4) National Loan Fund, London t............. 50 I25,000 IO 250,000 4,000 * Also 53 Family Annuities for $5,677.72, and 2 Deferred Annuities fcr $200. t Estimated Business in U. S. (i) Chartered January I, I759, as an annuity company for Presbyterian ministers; authorized to do a general life insurance business in i875. (2) Chartered February 7, I769, as an annuity company for Episcopal ministers; began life insurance in I833; business small-less than 250 lives insured during first ioo years. (3) Incorporated March io, i812, with authorized capital of $500,000; began business in i813 with $ioo,ooo capital paid in; authorized to do trust business in 1836; ceased to take new life risks about I870; still in business as a trust company; January i, i894, had 46 life policies in force, insuring $I8i,700. (4) Chartered in i818 as a life and trust company; began business in i823 with capital of $5oo,ooo; life business always small, last risk matured in 1793; still in business as a trust company. (5) Chartered i830 as a life and trust company with $i,ooo,ooo capital; ceased to take new life risks in IS85; still in business as a trust company; January I, i895, had 21 life policies in force insuring $6o,500. (6) Organized x83Q with,$5o,ooo capital stock, which was increased to $ioo,ooo in Life Insurance in I845. 9 capital, and the same requirement was to be imposed upon any other life company that should be chartered. The result of this was two-fold-the company did very little life business, and no other life companies were organized in Massachusetts for twenty years. The New England Mutual, chartered in I835, did not begin business until December, 1843, and then with a guarantee capital that was to be retired at the end of ten years. In the South there had been several attempts to establish life insurance in connection with the trust business and marine insurance, but the only Southern company doing a life business in I845, was the Baltimore Life. This company was essentially a banking company, doing but little life insurance and that on a very conservative basis, all premiums received being reserved for the payment of its policies. In transferring its risks to the Equitable in 1867, it exacted for them more favorable conditions than they enjoyed by the terms of their contracts, and three or four that refused to be transferred were kept on its own books until they expired. Its former building, at II South Street, still bears its name cut in the marble. The New York Life Insurance and Trust Company, chartered in I830, issued during the first nine years of its existence 1,821 life policies, of which 694 were in force, insuring $2,451,958, on January i, I840. At the end of this period the profits on its life business, as estimated by its President and Actuary, Mr. William Bard, and confirmed by the London Actuary, Mr. Finlaison, amounted to $I89,000. This result was reached, 1836; in 1838 authorized to do a trust business and to have a capital of $2,000,000; life business small; re-insured risks, 99 in number, with Equitable of New York in 1867. (7) Incorporated April I, 1835; began business December I, 1843, with a guarantee capital of $Ioo,ooo redeemable at the end of ten years. (8) Began business in 1836 as a life and trust company with $250,000 capital; had the largest life business of any of the early companies; ceased to take new life risks in I888; still in business as a trust company; January I, I894, had 318 policies in force insuring $809,934.40. (9) Began life business in 1838; did but little; closed in 1857. (io) Chartered 1840 with $Ioo,ooo capital to do life and trust business; banking business large, life business small; risks re-insured in i856 in Jefferson Life Insurance Company of Cincinnati; both failed in 1857. (II) Chartered 1840 with $50,000 capital to do fire and life business; name changed in 1857 to City Insurance Company,.and business confined to fire insurance. (12) Incorporated as a purely mutual company April, I842; began business February I, 1843. (13) Incorporated January 31, 1845, as a purely mutual company; began business April, I845. (14) Began business in London in 1837; had board of directors in New York in 1845 and issued 32 policies through New York office; name changed to International in I855; excluded from Massachusetts in 1859; did little new business in United States after i860; re-insured later in the Hercules, which became insolvent. The figures of the Presbyterian Ministers' Fund, of the Massachusetts Hospital Life, and of the Girard Life and Trust, were kindly furnished by these organizations for this table. IO Life Insurance in 1845. however, by compounding premiums semi-annually at six per cent., charging the business with no other expense than commissions and deathlosses and with the reserve necessary to re-insure outstanding policies. From the surplus thus earned the company resolved to pay a dividend of two per cent. per annum upon its capital, but was soon obliged to use the gross amount to make good an embezzlement of funds by its secretary. In February, 1844, the company had in force 711 policies, of which 126 were life policies, and the remainder for shorter terms. The success of the mutual principle as applied to fire and marine insurance, as well as the surplus earnings of life insurance companies, led the board of trustees to inquire of the president whether it would not be for the interest of the company to adopt the mutual principle, or whether they would not be forced by competition to do so. In a special report dated February 6, 1844, Mr. Bard reviewed the history of the Equitable, of London-the oldest and most successful English life company-and the experience of his own company, and after considering the probable profits of life insurance in this country, he gave it as his opinion that the mutual principle offered no advantage to the insured that should lead the board to apprehend its influence on the business of the company, or which should induce them to alter its charter from a stock, to a mutual, company. It is interesting, in the light of subsequent events, to look back to this report and consider how much depended on it; since if the company had adopted the mutual principle and had made diligent efforts to increase its life business, there seems no reason to doubt that, with its established position, its large capital, and the high repute of its officers and directors, it might have become the leading life insurance company of the country. Mr. Bard's underestimate of the volume of business available, and his conclusion that most men would take policies for short terms, were natural enough under the circumstances; but his estimate of the amount of surplus that could be divided among policy-holders contained an error that should not have escaped notice, since he assumed that surplus in hand at the end of five years would not be available to the policy-holder except in case of death, and would, therefore, only have Life Insurance in 1845. I a present value in proportion to a man's chances of death.* If only the dying received any part of the surplus, their share would be greatly increased, both by forfeitures and by expiring term policies, and the amount arising from each maturing life policy would be increased by interest until maturity. April i, 1840, New York placed upon her statute books a law which has proved the Magna Charta of life insurance, viz., the law authorizing a married woman to insure her husband's life for her own benefit, free from the claims of her husband's creditors. This beneficent statute has been very generally adopted by other States, and where it was lacking the companies of the period sometimes introduced its provisions in their charters. The era of mutuality was now at hand, and its most notable exponent was the Mutual Life Insurance Company of New York, which was incorporated April 12, 1842, and began business February I, I843. During this interval of eight months applications were secured for over $700,000 insurance, and the issues of the first year were 470 policies, insuring $1,640,718. At the end of nineteen months (September, I844)' 796 policies had been issued, of which 419 were for whole life, 287 for seven years, and the balance for shorter terms. Life insurance in the United States had passed the experimental stage. The conservatism and high financial standing of most of the early life and trust companies undoubtedly did much to establish confidence in the safety of life insurance. The early tables of premium rates had been based upon English experience, modified by such data as had been collected in this country and which showed a higher death-rate than in Europe. The mortality experience of the companies thus far had been less than the assumptions, and rates had been gradually reduced until, in I845, the English Carlisle Table was generally accepted as the standard.t The Actuaries' Table, based upon the experience of seventeen English life companies, and published in 1843, had not yet displaced the Carlisle, either in England or America. * Report to the Board of Trustees of the New York Life Insurance and Trust Company, on Mutual Insurance, by William Bard. New York, I844. t McCulloch's Dictionary of Commerce. 12 Life Insurance in 1845. In England the social and financial conditions had been more favorable to the growth of life insurance, and in 1845 there were 115 English companies in existence, with an estimated premium income of nearly $25,000,000 per year, under policies approximating $675,ooo,ooo.* The English companies were also adopting the mutual system, only 8 of the I 15 being classed as proprietary, while 20 were purely mutual, and 87 mixed.t In a pamphlet of the time,J written in the interest of the older companies, it was said that 25 new companies were organized in 1845, and 71 more projected; and that the mixed companies were striving to outbid each other in the proportion of profits offered policy-holders, from one-half in the "Guardian" to nine-tenths in the "Star." It was estimated that in order to give each company an income of /I 50,000 per year-which was not so much as some of the older companies were receiving-would require an amount equal to twelve per cent. of all the incomes in Great Britain and Ireland above ~I50 per year. A heavy mortality in companies was epredicted, which came to pass in due time. The business of American life companies in 1845 was still small, but the principle was well-established, and under the stimulus of the mutual principle and the energy of the life insurance solicitor, who was soon to appear upon the field, the system was destined to take its place among the great financial interests of the country, and to claim pre-eminence among the beneficent forces of the time. 'Theory and Practice of Life Assurance, by W. E. Hillman, Actuary of the Star Assurance Office. London, I847. tLife Insurance Offices, by George Isabel Soper. London, I846. Life Insurance Offices, New and Speculative. London, I846. III. THE UNITED STATES IN I845. THE conditions under which the NAUTILUS INSURANCE COMPANY began its career in I845 can hardly be appreciated by the present generation without a glance at the political, industrial and social conditions of half a century ago. In April, 1845, there were twenty-seven States and three Territories in the Union, and the total population was about twenty millions. Florida had been admitted during the month preceding, and the same Act had made provision for the admission of Iowa upon her acceptance of certain boundaries prescribed. The other two Territories were Wisconsin and Minnesota. The only States west of the Mississippi River were Louisiana, Arkansas and Missouri; Kansas and Nebraska, Montana and the two Dakotas, Colorado, Wyoming and Oklahoma were as yet unorganized and unsettled. The only territory west of the Rocky Mountains to which the United States laid claim was known as the "Oregon country," and comprised the present States of Oregon, Washington and Idaho. Its title to this, by virtue of discovery and original occupation, had been acknowledged by Spain under the treaty of I819; but it had been jointly occupied by the United States and Great Britain, without prejudice to the rights of either, since the treaty of I818, which fixed the northern boundary of the United States, from the Lake of the Woods to the "Stony Mountains," at the 49th parallel of north latitude. The vast domain which now includes the States of Texas, California and Nevada, and the Territories of Utah, Arizona and New Mexico, was yet to be acquired. James K. Polk had just been inaugurated President, having been elected over Henry Clay on a platform that declared for the annexation I3 14 The United States in r185. of Texas, and the occupation of Oregon as far north as 54~ 40'-one of the war-cries of the presidential campaign having been "fifty-four forty or fight." Texas was admitted to the Union in December after Mr. Polk's CITY HALL PARK, NEW YORK, 1845. From a Steel Engraving in the possession of William Abbatt, Esq. [The building on the right, showing the large flag, is the Park Theatre; the church beyond is the old Brick Presbyterian, where Dr. Gardiner Spring preached; its site is now occupied by the "Potter," and "N. Y. Times," buildings. Beyond it, and beyond the trees, is seen Tammany Hall, where the "Sun" building now stands. The engraving was made shortly before the large fountain, at the southern end of the Park (now many years gone) was erected; otherwise, the scene is exactly correct as in 1845.] inauguration, and this brought on the Mexican War, in May, 1846. The Oregon boundary dispute was settled under the treaty of June 15, 1846, which provided that the 49th parallel of latitude should be the line from the Lake of the Woods to the Pacific Ocean.* Many of the most notable men the country has produced were then living and in public life. John * President Polk announced as the four great measures of his administration —a reduction of the tariff, the independent Treasury, a settlement of the Oregon boundary question, and the acquisition ot California; and he carried them all to successful completion.-Schouler's History of U. S., vol. iv., p. 498. The United States in I845. I5 C. Calhoun had just left the office of Secretary of State where, by his zeal for the annexation of Texas, he had regained-what he was never again to lose-his place in the affections of the southern people. Andrew Jackson, from his retirement at the Hermitage, was looking with gratification upon the political changes that had brought his old opponent, Calhoun, again into favor, and defeated the political aspirations of his "heir apparent," Martin Van Buren,-because these changes had also compassed the defeat of his later opponent, Henry Clay. Mr. Clay was not in the Senate at this time, but five years later was to come forth from his retirement to lead the great compromise debate, with which his name will always be inseparably connected. Mr. Webster had just been returned to that body, in which he had won his great fame, after valuable but inconspicuous service in the Cabinets of Presidents Harrison and Tyler. John Quincy Adams, "the old man eloquent," who had seen J!- " *_i T, ~ THE SOCIETY LIBRARY BUILDING, AT 346 & 348 BROADWAY, IN 1845. [From a lithograph in the possession of the Society Library. Copied by permission.] thirty-one years of public service in various offices, including the highest, before he entered the House of Representatives, was now completing his fourteenth year in that body, where he had gained his greatest renown as champion of "the right of petition." The United States in 1845. Besides these great names there were others little less conspicuous, the mere mention of which recalls much of the history of their time. Among the older of these men were Thomas H. Benton, Lewis Cass, John J. Crittenden and Thomas Corwin, in the Senate, Joseph Story, of the Supreme Court, Richard Rush, Minister to France, Sam Houston, ex-President of Texas, and Silas Wright, Governor of New York-who were then at the zenith of their fame; while others, like James Buchanan, Secretary of State, Robert J. Walker,* Secretary of the Treasury, George Bancroft, Secretary of the Navy, Edward Everett, Minister to England, Hannibal Hamlin, John P. Hale, Joshua R. Giddings, Stephen A. Douglas, David Wilmot, Andrew Johnson and Alexander H. Stephens, in Congress, and Millard Fillmore,t William H. Seward, Thaddeus Stevens, Samuel J. Tilden, Charles Francis Adams, Charles Sumner and Abraham Lincoln, outside of it, were the rising young men of the time. In literature the great names were Cooper and Irving, Bryant and Emerson; Longfellow and Poe, Lowell and Whittier, Hawthorne and Prescott, Bancroft, Holmes and Willis were men of brilliant promise; Francis Wayland, Eliphalet Nott, Lyman Beecher and Horace Mann were the foremost educators. Looking backward from I845, the last war with Great Britain was no farther in the past than the Civil War is to the observer of to-day; General Scott, who had won his first laurels and his first star at Lundy's Lane, was commander-in-chief of the army, and destined to win still greater renown upon the plains of Mexico in the war then impending. A retrospect of fifty years at that time brought one to the first administration of Thomas Jefferson; and the elderly men of 1845 were the sons and the familiars of the founders of the Republic. *Mr. Walker, who was author of the "Walker tariff" of I846, insured in the NAUTILUS, April io, I847, under Policy No. I,o72, for the term of one year. In consideration of an extra of $I2.09 per $I,ooo, all restrictions and all conditions of the policy, except the payment of premiums, were waived. t In I859 Mrs. Fillmore sold her life interest in the Schuyler Mansion in Albany, N. Y., which she inherited from her first husband, to Mr. John Tracey, for the sum of $6,ooo. In order to protect himself in case of her early death, Mr. Tracey took a-policy of insurance on Mrs. Fillmore's life for the same amount. This policy, No. 12,877, was issued by the NEW-YORK LIFE, February i, i859, and upon Mrs. Fillmore's death, in I88I, was paid to the son and executor of Mr. Tracey. The United States in 18'5. I7 Perhaps nothing marks the difference between 1845 and 1895 more distinctly than the difference in means of communication. In 1845 the world was just upon the threshold of that wonderful development in the use of steam and electricity that has revolutionized methods of production and distribution. Steamboats were in common use on our lakes and rivers in I845, but of railroads there were only 4,633 miles in the whole country. Only one railroad-the Harlem-entered New York City, and the first all-rail route to Albany was not yet completed. Before the opening of the Erie Canal it cost one hundred dollars to transport a ton of freight from Buffalo to New York; hence any considerable commerce between distant points not connected by water-ways or the few railroads that then existed was practically impossible. Mr. Edward Atkinson estimates that to do the present freight work of our railways would require fourteen million horses. The first line of telegraph had been put up between Baltimore and Washington in 1844, and Mr. Morse's offer to sell his invention to the Government for a small sum had been refused on the ground that it was of no practical importance.* Letter postage was from six to twenty-five cents, according to distance, for each single sheet of paper. On July I, 1845, it was reduced to five cents per sheet for three hundred miles or less, and to ten cents for over three hundred miles. The total revenue of the Post-Office Department was only about one-eighteenth as much as at the present time. The material civilization of the present day may be said to rest practically upon coal and iron; in 1845 the coal mined was only about one-eightieth, and the iron manufactured about oneone hundred and eightieth, of the present annual output.t For illuminating purposes whale oil and tallow were then the chief reliance; petro*The first number of ".Fisher's National Magazine," published in June, I845, contains an article onElectro-Magnetic Telegraphs, by F. O. J. Smith, of Maine, afterwards prominent in the business, reviewing the progress made, and closing as follows: "Who is fool-hardy and blind enough to doubt that the time has come when these structures [telegraphic lines] will start into being and action all over our country, and that the business and calculations of our merchants and men of enterprise should be shaped with reference to such a new condition of their relations?" t The early railroads used a wooden rail with an iron strap. The first iron T rail used in this country was laid on the Erie road in I845. The Erie was then complete from Piermont to Middletown, 53 miles. The price of wrought iron was then about $80 per ton; the present price of steel rails is about $22 per ton. Wood was generally used for fuel until about i860. 2 The United States in 1845. leum, of which the present annual product is over thirty-five million barrels, was first obtained by boring during that year, but it was not generally used until about twelve or fifteen years later. In 1840 about seventy per cent. of the total population were engaged in agriculture, and about fifteen per cent. in manufactures and trades; in I890 the percentages were about forty-eight, and twenty-four, respectively. In I840 there were twenty-two cities with a population of over fifteen thousand each, and 8.52 per cent. of the total population dwelt in cities;* in I890 there were two hundred and sixteen cities with a population of over fifteen thousand each; and 29.12 per cent. of the total population dwelt in cities. In 1840 the population was a little more than one-fourth (27.I per cent.) as great as in I890, but the value of manufactures was only about one-thirtieth as great, imports and exports about one-seventh as much, the moneyt in circulation about one-eleventh as much, the deposits in savings banks about one-hundredth as large, the children in common schools about one-seventh as many, and the newspapers about one-twelfth as many. Of the almost numberless labor-saving machines of the present day, the sewing-machine, the rotary printing-press, the mower and reaper, the steam elevator, and the type-writer are the most common,-yet not one of these was in practical use in I845. The result of their introduction has been to increase very largely the productive capacity of mankind, and so ^The " National Magazine" for October, 1845, contains an article on Chicago, by D. D. Griswold, giving its population by the census of I844 at Io,864, and estimating its population in 1845 at "nearly I3,000." It contains the following pen-picture of its business: "Wheat, the great staple of northern Illinois, is brought into the city in wagons, not unfrequently from a distance of 250 miles. Long trains, reminding one of the caravans of the East, are seen crossing the prairies and approaching the city, heralded by clouds of dust, in all directions. The business streets are rendered almost impassible by the number of wheat wagons and fine strings of oxen attached to them. Those employed in the warehouses are constantly and actively engaged in the reception of this grain; runners are eagerly and noisily competing with each other in the purchase of it; you run against a load of wheat or a wheat buyer at every turn. During a portion of the winter the pork trade is carried on under almost equally brisk and lively circumstances." The article concludes in this hopeful strain: "We have good reason for the confident belief that the business interests and prosperity of Chicago are as firmly based as those of any town in the Western States." tThe "National Magazine," already quoted, contains an article by the first President of the Company, Mr. Ogden, on the Currency of the " United States," which is re-printed in full in the appendix. The figures for 1845, upon which the above comparison is based, are taken from "Twenty Years in Congress," vol. i., p. 643. The United States in I845.. I9 to enable men to secure more of the comforts and luxuries of life. Mr. Edward Atkinson has shown by elaborate statistics that, while the hours of labor were greatly reduced between I850 and I890, the wages of men of special skill and those of the average mechanic will now purchase about twice as much of the ordinary articles of food and clothing as in I850. The census of I850 showed the average wealth per capita to be $308; the census of I890 showed it to be $I,039. In addition to the marked changes in the material conditions of our civilization since I845, there has been a marked increase in the humane spirit, which will not tolerate organized injustice or oppression, and which seeks to alleviate human suffering of every kind. This spirit has found expression in the abolition of slavery and of dueling; in the reform of laws relating to married women and to the employment of children; in the temperance and prison reforms; and in the rapid increase of industrial schools, orphan asylums and other institutions for the care of the unfortunate. The bearing of all these -changes upon the possibilities of life insurance is obvious. Easier communication between all parts of the country, a greater average intelligence, more leisure to read and to think, more money to spend, and an increase of the humane spirit, have supplied the conditions and motives necessary to a rapid growth of the system............................................ ~.........:..............,~............,~....:...~:~-.,.~.~~-...........~.................~....... —. —..-.a....... THE CAPITOL AT WASHINGTON IN 184,. IV. THE FIRST THOUSAND POLICIES. THE offices of the Company were first established at No. 58 Wall Street, and the first policies were dated there. We give on the following pages fac-simile illustrations, slightly reduced, of the first application and policy forms. The policy selected is No. 5, issued May I7, i845, on the life of John Rice, one of the signers of subscription notes which constituted the first financial basis of the Company. Mr. Rice afterward took two other policies in the Company and kept them all in force until his death, which occurred in I856. The application shows the numbers and amounts of all his policies, and the approval of the Loss Committee when they became claims, also an extract from the law under which such insurances might be made for the sole benefit of married women and their children. The law was construed literally in those days-the application was signed by the wife, her name appeared on the books as the owner of the policy, and she frequently conducted the correspondence in paying the premiums. Medical Examiners of the Company were not appointed until June second, and policies issued prior thereto were issued by the officers of the Company, on the statements of the applicant, the family physician of the person insured, and the certificate of an intimate friend. This application bears the signatures of Mrs. Rice, Dr. A. Sidney Doane, and Ammi Dows. The first policy form differs in its terms but slightly from the form in use by the Girard Life and Trust Company of Philadelphia as far back as i837, but the difference, such as it is, gives larger liberty to the policyholder, namely, permission to travel in the United States south of Virginia and Kentucky between November first and June first. The only benefit 20 , THE NAUTILUS (MUTUAL LIFE) INSURANCE COMPANY OF NEW YORK, ~~r~i~ ~~$r~T ~ g ~~Es~ sla P~ceWITNIESSETH9,71,,f THE NAUTILUS (MUTUJAL LIFE) INSURANCE COMPANY OF NEW YORK, e, endi l/ezalt.n o/ dam anal -C 1L/0 ezeIY(r)m dEaM nd Z~ --- Ena~acm i ANNUAL PREMIUM. $ //se SUMI INSURED. -41-s - 6 — c 132 oS d?< anlznta//zlewnegc oS t /52;-C-Md~ yr _ /gd ana(_ ~C + icentd, 60 i6 lave/ on o0 lagsze g/7 r8t, c 4 ~ —. ~- o C _ eveyc ~ee z auzanlt g cZ/nhOcwance oB g ge66w, d0 #Zfiure gRI y7 ~6 a2p -, >=> c~nl, k c~Do aoourc ele, c —_,v-, go/ef~ncA<;36 aw 9,Il~eve tgaled, or / i ze &nce~ea t5ale'ed, or- le,;(jet ganX zogoleyC dia,14voa nullS~ Ezanal? z elle Vit ft s also UnesEtool anl agrrerlb 4,. ge e zme 6cIenl anr meantry lewlE e e a ecfia Za6g1 4 Mawe 4,12 i'ie ddt anal l eazb.lz da"M.. _.,, a/ rb~t~ ad~.td~ IC9LL4 jlG-_etR -(e ~~el nnar ando-(w oiy anaedo wozelts~ I zt6 alzevel cZZaaale ~j llalvce7 97/~~a~~f6w z 10analfcdA6,z~mn6c Ree/ ref-414etze/j636l aM1Z/e, Ilen, analc t, rez - neW caf-4e e-le f t0 dlael null-wanalvotW.- in ear de e dael c G 2 l c l el Zga e daeV annua I tzemw c; oanv cz on yere (le devewu6alql, ezeeig 6'eiare menfioneallo /l4e 1almenen eleesol i/el~e a~ale n eve:?-cl d~ccade, Ile dar gom,4a?7 d~baof6 Xnc6 C46e 44e I(O 16ia~ymene ole Ie dcm, c6ndaze~al oz anl liacz'ielreol anal e'IC ~oAIM7 d llallceade ana.1 ali C? el/laodex alreea; era/{c ew evi caje wlexe edlicj 6 z7,01424 dlealceade, oz fecomO oz en4.a c Mzcv c meda made' e/lleen Vzatv rouedae/o uae dez&Voxsean. 6,, 5S Jynedd rce foxe doa/Ren iN, vmfPy H o "o r r N so too 0 fin IjitneFF hterfof, Me eaui JIWutilts (Mutual.ife) Insurance Company of MJew' ork, Fez 6 Aed' elmeo, 95wedtene azna Ye5e~eu' d;/P >C7neCla-nal aleZItiem Olmb gotzacte taac b 9Emmyr- ucc~C~,~ "B- 7'"T -— ~ O nda ~6tZeg aaC//z= h c~C~cL --- -,9Ae aces Ozedwwn.? At~2 1h saga 41111-6 The First Thousand Policies. 2I provided under the policy was the insurance payable at death, while it became null and void, and all payments thereon were forfeited to the Company, from any of the following causes: (i) The non-payment of any premium; (2) death by the insured's own ZINS FIRST ENGRAVED POLICY HEADING USED. [Policy No. I9 was issued May 30, 1845, on the life of Edward Pierce, a boatman, of Kingston, N. Y. Mr. Pierce died early in x85o, and the policy bears the receipt of Mrs. Gertrude Pierce, dated March 5, 1850, in payment of the claim.] hand; (3) any untrue statement in the application; (4) death upon the high seas; (5) death in consequence of a duel; (6) death by the hands of Justice; (7) death in the known violation of any law of the United States, or of any State or Province wherein residence and travel were permitted; (8) residence or travel south of the southern boundaries of Virginia and Kentucky, between July first and November first, or at any time beyond the settled limits of the United States and the British Provinces of Canada, Nova Scotia and New Brunswick; (9) military or naval service, the militia not in actual service excepted. The limit of risk upon one life was placed at $5,000. Among the first I,ooo policies there were six for $Io,ooo each; all others were for $5,ooo or less. In the case of the six $Io,ooo policies, the excess was re-insured in the National Loan Fund, the Mutual Life, and the Mutual Benefit of N. J. The premium rates were based on the Carlisle Table 0 22 The First Thousand Policies. of Mortality with interest at four per cent. There seems to have been no discrimination made between northern and southern risks upon persons who were thoroughly acclimated, but liberty of residence and travel was very much restricted in the South, even to residents. Under the first 1,ooo policies twenty-six persons residing in the cities of New Orleans, Mobile, Natchez, Little Rock and Augusta, paid extra premiums of from one-half to one per cent. on the amount insured, to travel or reside in any part of their respective States. Northern policy-holders were charged one-half of one per cent. for permission to travel or reside in any part of the Union (except New Orleans and Mobile) between July first and November fifteenth. Passengers by sea to southern ports, to Havana, and to Europe, were charged one-half of one per cent.; a sea captain was charged one per cent., with many restrictions as to the ports he might enter. One per cent. extra was charged for permission to go to California and return, and three per cent. extra for permanent residence there. A surgeon of the United States Army paid five per cent. extra to accompany the army to Mexico, the permit not to cover the risk of death in battle or from wounds received. Beginning with May, 1845, the business of the Company averaged about 20 policies per month during the remainder of the year; in January, 1846, there were 36, and in February 119. This sudden increase was due to the enterprise of a few southern agents who persuaded the Company to accept risks on the lives of slaves. During these two months 86 slave policies were issued, and of the first 1,000ooo policies 339 were on the lives of slaves. The amounts were usually less than $500, and the term one year; occasionally one policy covered several lives. Policy No. 799 was issued on the lives of three slaves, and Policy No. 268 was issued on the lives of ten slaves and one white man. The first death-claim paid by the Company was under a slave policy, the entry in the Journal, under date of November 2, 1846, reading as follows: "Paid F. Alonzo Clarke [of Richmond, Va.,] the amount insured on his slave, Philip Swan, per Policy No. 228 [died August, 28, 1846], $225." There were three deathclaims under slave policies in the period under review, the total amount r. -En T - - I Thne two first questions will have the same answer when the applicant Assures his own life-differentan erifeAsustelfeoaohrpro. N. B. Persons proposing an Assurance, are desired to answer all the questions; to fill tip one of the declarations. and to affix their Signatures in the presence o r" r4 'Z( ~ i\S ^^ ^ ' <^ S s IN R s ^",s'a^ $^ C $ ^ SS ^ ^C?^ ^ ^^, \$ ^ ^ \tkr ^- I ~ > ^ II. ^ -^^ P ^ r ^ ^ ^^ ' ^ N c^ r > ^^ ^(a ^ o ^ s.? ~ zy^ ^ ii M | IIZ^ ^ln |^?.^ ^1 ilM~itH-l~ i^"^1^ ^ ^ ^^^ ^11 14. IN I -- ll- 4::^^ C ^Hlk*^^ r~ti~m sH ^r~tU~n^ h F a witness, previous to transmission to this office. k^ 5N < ^^ NI ti? -^ i UM I.N INZ: 5 $ a ^ ( ^c E<1': F1 -r r^ K^^ LN C, ) B. ^~d tr r in the Countv of o > in the State of GAL-one of the Pet-son nae nteohrsd, being desirous of effecting an ASSURANCE With THE NAUTILUS (MUTUAL LIFE) INSURANCE CO. OF; NEW YORK, in the sum of 6 71i o Dollars, upon the Life of Idof G&?Hiin the County of ia n the State of Adc the other person described on the other side, during the* Do H1EREBYr DECLARE, that the Age of the said ~ anext Birth-day, will be e IS~ - Years: That he has ~ had the Small Pox. That lie has ben Vaccinated. That he has had the Gout: And that he has not been afflicted with Rupture~, Fits, Dropsy, Asthma, or Spitting of Blood; and that he is not now afflicted with any Disorder which tends, to the shortening of life. And that I have an interest in the Life of the said ~ o ecucAto the full amount of the said Sum of aCc Dollars. And I hereby agree, that this Declaration shall be the basis of the. Contract between myself and the said Conlpany: And if any untrue or fiaudulent allegation is contained in this Decilartion, all Moneys which shall have been paid to the said Company, on account of the Assurance.made in consequence thereof, shall be forfeitecf for the benefit of the Company. A.ND I WoHEREBY FURTHE:R ]DECLARE, that of the Medical Referee, and — of A _>cco are, in my belief, fully competent to give Information as to the present and general state of health of the said < x AND 0 _. cn VI CD C:: PI ax CD U0 CD rl Want-sa~ to the Dated this a l day of 11- _"thousand eight hundred and fbrtv/T — _SIGNED, * Whbole contl n u ne thereof, Or term of in the year of our Lord one,-A C Years. The First Thousand Policies. 25 ance was largely for short periods only. Of the 449 policies issued by the NAUTILUS during its first year, only 127 were for the whole term of life; the remainder were mostly for one year or for seven years. As by the terms of the charter dividends were not to be paid at once and were to be liable for losses until paid, they answered all the purposes of a reserve fund. This was the first life insurance dividend declared to policy-holders in this country, except that of the Girard Life and Trust Company, already referred to, which was declared in reversion. During the first year all premiums were required to be paid in cash, except in the case of persons giving subscription notes; but the business of the year did not equal the anticipation of the officers and trustees, and on May 16, 1846, it was voted to allow policy-holders the option of giving notes for forty per cent. of the premium. Policy No. I,OOO was issued March 16, I847. To reach this point had required twenty-three months. During the year I894, over 8I,OOO policies were issued-an average of nearly 7,000 per month. The measure of the Company's service to the public is therefore about I60 times as great now as it was in I845-6. The following table shows the distribution of the first I,ooo policies, according to the periods for which they were written, the modes of their termination, and the domicile of policy-holders: TABULAR HISTORY OF THE FIRST I,000 POLICIES ISSUED BY THE NEW-YORK LIFE INSURANCE COMPANY, TO JUNE 24, I894. No. Not Surren- Ex- Death- In Term. Issued. Taken. Lapsed dered. pired. Claims. Force. DISTRIBUTION BY RESIDENCE. __ Life..... 342 34 78 26.... 97 7 I5 Years. i I.... Me....... I S. C. 44 14 I" 2 2 Io N.H..... 4 Ga..... 30 7 ". 224 6 153.... 55 IO. Vt....... 2 Ala...... Io 6 "................ Mass.... 6 La....... 12 5 " 7 I 4.... I I R. I...... 14 Ark...... 7 4 ". I.... Conn..... I2 Cuba... I 3 "...... N. Y..... 382 Ohio.... 9 2 ". 2.... 2................ N.J...... 8 M ich... 6 ". 2.... I.... I Pa....... I3 Ind...... I ". 374 4.... 364 3.... Md....... 24 Il...... 7 6 mos.... 27............ 27 Va...... 179 Wis.. 5 4.I 2........... Ky....... 114 Iowa.... 3 2 "........... 2........ N.C...96 I ".. 2...... 2 865 I35 TOTALS. I,000 47 355 26 454 III 7 26 The First Thousand Policies. Among these policies was one joint-life policy, issued upon the lives of husband and wife, and fourteen other policies upon the lives of women, in addition to many policies on the lives of female slaves. Of the 342 whole life policies ten per cent. were not taken, fifty-two per cent. lapsed, eight per cent. were surrendered, and thirty per cent. have become claims or are still in force. The names of the seven policy-holders whose policies are in force at this writing (July 25, I894) are as follows: James P. Wallace, Brooklyn,.N.Y.; John R. Lee, Hamburg, N. Y.; William H. Sweet, East Saginaw, Mich.; Morris E. Fuller, Schuyler, Neb.; Joseph Lee, Brooklyn, N. Y.; Daniel W. Ingersoll, St. Paul, Minn.; John Hinde, New York City. Of these seven policy-holders, two, Messrs. James P. Wallace and John R. Lee, insured in 845, and have both paid their fiftieth premium. Their record entitles them to the foremost h yers an.- place among the policy-holdone < r e/Q Ad _ ers of the Company, and their ____ _ portraits are given herewith. 4 Go, > Mr. Wallace was born April 3, I8i6. His policy is No. I5, and was issued May 24, 1845. In reply to the Company's congratulations and its request for his photograph, Mr. Wallace wrote under date of July 13, I894: I accept with pleasure your congratulations that I have reached the age of seventyeight years, and that I hold the earliest' policy of your Company now in force. I was one of the original subscribers in getting up your Company, and have a pride in its suc THE NAUTILUS (MUTUAL LIFE) INSURAKNCE COMPANY OF NEW YORK. THE NAUTILUS (MIUTUAL LIFE) INSURANCE COMPANY OF NEW YORK. Questions' to' be answered by the Physician of the Party applying for Insurance. Questions to be answered by the Friend of the Party applying fpr Insurance. If. CAmW Sona 1arve yocl f11noazon ' ve ryoa 4een n Ile ya1 cf oeetaI lum /zeymentl.z, anag t'v n7 4t'77z t11&etatcafnecance, andf oz wXal a4eatezo? - - - - - - - -- At a^ — - < ^ Z y-^ ^, ^^t-'i'^ ^ J ^~x - >^ E i - ^^ +2^^/^^ *. <-a> fi / a u h a A vs / / ty^ fy^^ c^'. ^.^,,/Sf^ CC^ * S. o lze As 'cnzat g alosh ra 14a m/zeza Ce c' cliezws'je? 2. ea4 I fIe /lazgj i'acz tu, Ar ct1 Jnnwce~d-f/e, leen al/ac wUi Sualmonary'y VOm/zflatnI', aZ any atzez ccdteae Mal lenc/i 4? /lzoern A?9 e-.,>/t^ ^^z^ecf Afa _-<-eL I^ e- /y-G-/ t '?-< 114^1c1 3 - ";,^To- <^-^ f': <<- -~;^7'~ 3. >M 1e actdr/ovea" a /o witc exczct4'e, oz t'j -le eealenltyy? I 4. Xaci Ale /iatfy' otawc~z, to Scuzz Xnowlfnae, 4cen afucl cactl Mvftaraty<8c'c^^ (4f 6.Z aN12 o/ icet ae-ea'je diea (endlo /o iazlen W/e? -1 I U.C C<9YLt$ at, c t>C C^^'^ tLrC^ ^ a ^^^p^^-<^t/^C 2^ /c~c^~ ^^6f^ ^ Mf/^^A-^to m^C^ C~ci~f ud w.e. /8't~= >7^ dan U', te 0, e Zer/, na, / t?^ of ag Aa/ /-e -0116eave, C/ i, 1e "-Yeate, w?$6m, >izize, a C7,?f1, o. SGwoaX, v//ecf602n o lde SLzna, or olute CicetZ, or wani o'yanmc ^Smeade-? 4.. Qff Zocr 4et6ve ae brig Ae j notzo {n a ooa nea /a. / 5. 4e daz anal lewl/emafe.' /, tfZ 5 tcad hXe een alflc~ca (euve any I ^Zoa aS/a>. / ~f^ K. ad A 4X neen aIxled wl 2 an1 X X,, l,^ " iU^ h, / zf vienfa alezanyemeni ' r 7. ao you evleem /lem a leatll/l Ri man, uMnaiec loorm anuo ceiclm. r y GLt oancev tenffina 169 d ozlen i/? V. _ 6). Oo war aete&ve mm ~o ve now en o Jw e -00, Jy^ oi e/un^ nt C.Atll (7//u{t= Z v - 9 a oaze^ ff? 1 P,.a - 6. Xj Ie accudomne(/ to w2cmc exez' - -. -, - Z>1 L,- 4. -.. ^e- a-. ^^C^AL^^^,^ ^^<^^acS />/e Life of e,. / --- Age 4/. Sum assured $ -./ C —, Term of 4 -Premiumn,.. /f Policy., $ - O.i f ir I, 0 to X flaj $$!UA ks 42 The First Million Dollars. 43 by the record of a single day. It would seem that life insurance is not stimulated to any great extent by fear, but rather by the higher elements of human character.* The year I849 was the worst cholera year, and the year 1853 was the worst yellow fever year, this country has ever known; yet the first immediately preceded, and the second occurred in the midst of, a period marked by the greatest apathy toward life insurance. rn 1854 and 1855 both cholera and yellow fevert prevailed to a considerable extent, and the latter was epidemic at Norfolk and Portsmouth, Va., in I855. On September twenty-fifth of the latter year the Company contributed $250 toward a fund raised in New York for the sufferers in these cities. The Company had eight losses in Norfolk, including its Medical Examiner.:t Late in the year 1854 a circular letter was sent to agents asking their views respecting the effect on the business of a change to the all-cash system. The replies were, upon the whole, adverse to a change from the custom of receiving forty per cent. of the premiums in notes, when desired by the policy-holder. Late in December of this year the Company decided to make an extra charge of one-half of one per cent. on whole life policies issued to residents of Southern States, and of one per "' January 25, I854. Accompanying this note please find my life policy No. 7,350, which I send to you for obvious reasons. At the time I took the above policy it was made, as you will observe, 'for the benefit of my two sisters,' being then, as I am yet, unmarried, but how long I may continue so, time will determine. I also at that time learned that I could have it transferred to any other person (or persons) whenever I might choose, and now, in accordance with those conditions, I feel warranted in requesting that you will transfer said benefit from my sisters therein mentioned, to my esteemed friend (Miss) C E H." Whether or not the course of true love failed to run smoothly, we do not know, but the new policy was not issued at this time. Cupid, however, had his way at last, for in 1877 a policy was issued on this life in favor of C- E, " wife" of the insured. t Deaths from yellow fever in New Orleans in I854, 2,423; in 2855, 2,670. tPORTSMOUTH, VA., Nov. 30, 1855. The late terrible affairs in our stricken town have caused me to be absent for some time, having had to remove the wreck of my family to North Carolina. My sufferings are truly great, but I am now home again, and next week will remit to you my account and balance due up to the end of this month. On my return I was sick and sent to the hospital, but am now, thank God, convalescent. The death of my wife, sister, eldest son, and two dear friends, I trust will be sufficient excuse for my late remissness. * * * * * * MATT. W. AYLWIN, Agent. 44 The First Million Dollars. cent. on short term policies. These rates were for acclimated persons; rates for unacclimated persons were left to be determined when the insurance was applied for. kjife iz U14 FROM A CIRCULAR USED IN 1854. AT the meeting of the Trustees held in January, I855, the Fi1855. nance Committee reported that the present value of outstanding policies had been carefully made by Mr. Beers and that the surplus of the Company was $I I7,682.59. A dividend of thirty per cent. upon the premiums of policies one year in force was declared, and interest at six per cent. in cash ordered paid on dividends outstanding. The eleventh annual report was presented to the Trustees January 26, i856, and showed the assets of the Company to be $i,059,008.65. Of this amount $392,288.21 was in premium notes, $573,652.63 in other ii July 3, 1855, application received from J. C. Lewis, agent at Washington, D. C., for $500 insurance on life of Mary Hawkins, colored, in favor of Thomas Bates, as security for money advanced to purchase her freedom. The First Million Dollars. 45 interest-bearing securities, $42,560. I I in cash, and $50,507.70 in accrued interest, deferred premiums and agents' balances. There was over a clean million dollars, therefore, in cash and invested securities; and the Finance Committee reported that, after making provision for the re-insurance of all existing policies, all dividends previously declared, together with interest due and all other claims, there remained a surplus of $I48,718.23. The dividend declared was the same as that of the previous year. Nearly eleven years had passed since the Company began business, and, although its officers were inexperienced and its early methods were crude, it had paid to policy-holders $1,027,202.64, and had on hand $I,059,008.65 as security for policies in force amounting to $10,277,1IO. It was now on solid ground as respects liability and reserve under its policies, and was prepared.henceforth to conduct its operations intelligently and effectively.,1-t.RS N' NIN -LO 'SC. C DESIGN USED ON ENVELOPES IN 1855-6. VI. NON-FORFEITING POLICIES AND THE REDEMPTION OF DIVIDENDS. i856-i86o. DURING the year I855 the NEW-YORK LIFE paid taxes, licenses and fees in twelve different States to the amount of $3,0I 5.44, and made certified statements concerning its organization, business and financial condition to the officials of five States.* At the close of the period now under review twenty of the thirty-three States of the Union had enacted laws for the regulation of the business of life companies, and in most of them annual statements were required.t These statements were of all degrees of fullness, from a simple return of premiums received, for taxation, which in some States was made by the chief agency, as in Maryland, to the full statement demanded by the Insurance Department of Massachusetts, which had been created in I855. The requirements of the laws were new both to officers of the States and to company officials, and it was not always easy to present acceptable evidence of the condition of a company.t * New York, Ohio, Illinois, Kentucky and Tennessee. The statement for Rhode Island was prepared but-not filed, as ino new business was done there in i855. tThe Company filed its statement for i86o in ten States -New York, Ohio, Illinois, Kentucky, Tennessee, Rhode Island, Wisconsin, South Carolina, Pennsylvania and Michigan. The Michigan statement was returned to have the acknowledgment taken before a Commissioner of Deeds instead of a Notary. The South Carolina statement has the following note: " Forwarded to James H. Taylor, Charleston, Feb. II, i86i; Feb. i8th, received back with a string of objections." tOffice of PENN MUTUAL LIFE INSURANCE Co., N. E. cor. of Third and Dock Sts. MORRIs FRANKLIN, Esq., President, PHILADELPHIA, June 13, i856. NEW-YORK LIFE INS. Co., New York, N. Y. Dear Sir:- * * * * * * s We have not decided yet to comply with the new Kentucky Law regarding Foreign Insurance Companies. I should like to know what you are going to do, and whether in your opinion the second paragraph of section 8 of the law applies to life companies, and what you intend to give the Auditor as liabilities. I am very much at a loss on these points and shall be very glad to have your views to assist me in deciding. Very respectfully, 46 JNO. W. HORNOR, Secre/ay. Non-forfeiting Policies-Redemption of Dividends. 47 A LONG correspondence was had with the Auditor of Illinois in 1856, in order to satisfy him that the Company was duly incorporated and that it was possessed of securities to the amount of $IOO,OOO, as required by the law of his State. The evidence required was such that, under date of February fifteenth, the President of the Company wrote somewhat despairingly: "We are desirous to comply with your law if it can be done, but we are now altogether at a loss, with assets amounting to $I,ooo,ooo, what evidence will enable us to do so." It was not until November eleventh that the Company's agent at Springfield wrote: "The papers forwarded me for Auditor are satisfactory. Certificates have been issued and mailed to agents." The legislation which was increasing every year had behind it three motives: First, the protection of the people from insolvent corporations; second, the collection of taxes; and third, local jealousy of other-State companies. The influence last named came first in the order of time. The early laws of Pennsylvania (1829-1849) and New York (1828-1837) taxing the premiums of other-State companies twenty, and ten per cent., respectively, had been practically prohibitive of such companies, and were intended so to be. The great fire of 1835 taught New York that insurance should not be made a local matter, and Pennsylvania learned the same lesson when she saw the insurance sceptre-which she held prior to 1845 -depart from her borders. The New York deposit law of 185I was a step backward, but it was soon retraced. The highest tax imposed on premiums during this period was three* per cent., and the highest price demanded for a county license was $300; t the latter was practically prohibitive except in large cities. In New York no tax was imposed on the premiums of life companies, but home companies were assessed on personal property to nearly the full amount of their assets,.under the law i In Pennsylvania, Maryland and Rhode Island; reduced to two per cent. in the latter State in I857. t In Missouri; reduced to $4o-in 1859. 48 Non-forfeiting Policies-Redemption of Dividends. taxing the capital of corporations.* The law of April 10, 1849, had provided that no life insurance company should be formed thereafter without at least $ioo,ooo capital; the Act of June 29, 1853, provided that any mutual life insurance company incorporated previous to the law of 1849 should be subject to taxation in the same manner as if it were incorporated under the law of 1849 with a capital of $Ioo,ooo; while the law of March 4, 1855, declared that any such company should be subject to taxation on $ioo,ooo for personal property, and no more, and that such was the intention and true construction of the Act of 1853. The life companies contended for the construction of the law given by the Act of 1855, and in 1857 the Court of Appeals decided that they were right only with respect to assessments made subsequent to the passage of the law, -that it had no retroactive application.t It was soon perceived by those who had the public welfare at heart that the possession of a certain amount of assets was no guarantee of a life company's solvency, unless the liabilities under its policies were ascertained in a scientific manner, and a balance struck between the two sides of the account. The crude attempt made under the Massachusetts law of 1852 was supplemented under the law of i858 by requiring the life companies to furnish the Insurance Commissioners with the data necessary to make an annual valuation of their policies. No table of mortality or rate of interest was prescribed by the law, but the Commissioners adopted the Actuaries' Table of Mortality with four per cent. interest. The first returns were made under this law as of November I, 1858. The system of supervision by an Insurance Department, and the requirements of an annual net valuation of outstanding policies, thus begun, have since been established in nearly every State in the Union. TAX COMMISSIONERS' OFFICE, NEW YORK, May 17, 1856. The President, etc., of the NEW-YORK LIFE INSURANCE Co. are hereby notified that said Company are assessed for the year i856 at $r,ooo,ooo, the same as last year. The Tax Commissioners cannot allow the Company-s construction of the law and its amendments, which regulate the assessment of said Company, until the same is so settled and disposed of by the Court of Appeals, to which the question has been carried. Respectfully, etc., J. W. ALLEN, W. J. PP.CK, A. J. WILLIAMSON, Tax Comnmissioners. t People ex. rel. The Mutual Life Insurance Company vs. Board of Supervisors County of New York. Non-forfeiting Policies-Redemption of Dividends. 49 At the meeting of the Trustees, held January 3I, 1857, the usual dividend of thirty per cent. was declared, and six per cent. interest on dividends outstanding. The reserve value of policies in force was $598,816.54; dividends outstanding were $457,027; leaving an unappropriated balance of $I35,702.05. The dividend declared required $82,058, and interest $27,421.62. THE year 1857 was marked by a severe financial crisis. The 1857. failures were nearly five thousand in number, with aggregate liabilities of nearly three hundred million dollars. The failure of the Ohio Life and Trust Company O A 1 & 4.":,.i..was. the beginning of the crisis, but it had previi ously ceased to do a I,! life insurance business. The other life companies stood firm and'did about i the same amount of business as in'56; the NEWYORK LIFE'S business showed an increase. ]' IAmong the prominent failures in New York.:1 1 1 1 City was that of the dry iII J I _goods house of Bowen, - McNamee & Co., at II2,1 & 114 Broadway. In November a Committee Oil, of the Trustees, appointed in 1856 on a perma_- nent location for the = - Company, reported that OFFICE AT 112 & II4 BROADWAY. the premises then oc[Occupied May, I857.] cupied by this firm could 4 50 Non-forfeitiing Policies- Redemptclz of Dividends. be bought for $I Io,ooo. After having the premises examined by an architect, the Board voted, on November nineteenth, to make the purchase. The second floor of the building was at once put in order for the accommodation of the Company, the remainder being arranged for rental. When the Company took possession of its new offices in May following, the rents from tenants were equal to over six per cent. on the purchase price and the cost of improvements. At the meeting of the Trustees, held January 29, 1858, the Finance Committee reported that, notwithstanding the financial crisis of the previous year, the Company had sustained no losses on its investments. The annual report showed a decrease in the number of term policies in force, and upon this it was remarked: "The officers believe such a result rather desirable than otherwise. Experience demonstrates that the present rates of premium are not sufficient for the risks incurred, most of which are of an extra hazardous character, and such as were not contemplated in the establishment of the rates." The number of shortterm policies issued during the year was 62, insuring $I69,000, and the number in force was 276, insuring $785,000. About ten per cent. of the applications received during the year were rejected. The results under "Phoenix" policies and California risks were shown to be favorable. The general agency from which most business had been received up to this time was that in Baltimore.* The usual dividend of thirty per cent. of the premiums on whole life policies one year in force, and interest at six per cent. on former dividends, were voted. IN February, 1858, a Canadian agency was established at Toronto, 1858. with Mr. J. Leander Starr as General Agent. The agency was discontinued in January, I860, on account of the excessive cost of business procured. *The new business and losses at the Home Office and principal agencies to July I, 1857, were reported as follows: Home Office.... Policies, 2,I27 Premiums, $672,080 Losses, $2I6,2I2 Mobile...... 266 I24, 163 94,700 New Orleans... 386 " 84,438 83,170 Baltimore... 786 254,309 1", 174 Buffalo.. 364 84,211 29,350 Cincinnati.... 121 42,633 I3,000 St. Louis..... 292 113,616 21,750 Non-forfeiting Policies-Redemption of Dividends. 51 In July, 1858, a Committee of the Trustees was appointed to consider the question of beginning the redemption of dividends. The Committee reported adversely in December. The charter permitted such redemption after the dividends reached the sum of $500,000, and required it after they reached the sum of $I,OOO,OOO; but the amendment of I849 forbade the declaration and payment of any dividend "that would impair the capital or accumulation of the Company." The total dividends now outstanding were $593,234, of which $59,740 were declared prior to I85o. The language of the Act of I849 was obscure, and it was thought that additional authority would be required to redeem the scrip issued subsequent to I85o, and that to begin redemption without a comprehensive plan, and full authority to continue, would be unwise. A further reason for postponing the subject as long as possible was found in the fact that the dividends were really funded surplus which was held subject to the liabilities of the Company, and that until redeemed they constituted an additional resource which greatly strengthened its position in case of financial disaster or a mortality in excess of the tables. Up to this time no considerable tabulation of American mortality had been made, and whether English experience would prove trustworthy at the older policy ages was still an open question.* In this position the Trustees were confirmed by the report of a Board of Examiners appointed by the Mutual Life Insurance Company in I856. The dividends of the Mutual Life had up to this time been declared every five years, and were in the form of reversionary additions to the policies and payable with them. In I853 the insured were allowed the option of converting the dividends into annuities for permanent reduction of the premiums on the policies. The principle underlying dividends in life in*The most important contribution made to mortality upon insured lives in the United States that had been made public at this time was the experience of the Mutual Benefit Life Insurance Company, published in 1857. The data covered eleven years and the equivalent of 45,000 lives for one year. The number of deaths was 510 as compared with 578 expected deaths by the Carlisle Table, and 538 by the Actuaries' Table. The Mutual Life of New York published in the same year a brief table showing 315 actual losses as against 387 losses expected during the preceding four years, to which was added this comment: "It must be borne in mind that life insurance is only in its infancy in this country, and that full thirty years must elapse before we can calculate results with any degree of certainty." (Mutual Life's Fourteenth Annual Report.) 52 Non-forfeiting Policies-Redemption of Dividends. surance is that the policy-holder has paid more than was necessary; but this was the very point that was not yet considered settled by actual experience, and the Examiners did not approve the relinquishment of any part of the premiums, and expressed the opinion that funding the surplus, after the manner of the NEW-YORK LIFE, was the safer method.* At the meeting of the Trustees, held January 26, I859, it was found that the assets exceeded one and one-half million dollars, and that the surplus, after the usual dividend of thirty per cent. on premiums and six per cent. interest on outstanding scrip, was $IOO,296.73. The short term policies had decreased to 237, insuring $654,900. AN OID LETTER HEADING. *The Examining Board consisted of Hon. Luther Bradish, Hon. William Kent and Professor Henry James Anderson, L.L.D., and its report was in part as follows: "A reduction of these future premiums as a concession for the waiver of claims, avowedly subject to numberless contingencies, may hereafter under a less skillful administration than the present, surrender prematurely and irrevocably funds to which the company has an uncontested right, and which should be retained under the control of the Trustees until the last moment allowed by the charter. And the Examiners cannot refrain from approving the disposition which they understand prevails with the Trustees to watch with increasing vigilance the real object of remitting positive and secured future income in exchange for a release from contingent and secondary obligations. So much do the Examiners commend this view of the matter, that they cannot withhold the expression of their hope that the company will prefer to see their reversionary additions assume a more durable, rather than a less durable form. This might be effected, within the limits of the charter, by offering as the equivalent they present for the additions to the sums insured, not an extinction of a part of their future assets, but the conversion of the present, or reversionary value of each distributive share which exceeds a small fixed amount, into shares of proprietary stock [i.e., scrip like the NEW-YORK LIFE'S dividends] bearing a suitable interest, negotiable under the usual conditions, and subject, in the legal order of liabilities, to respond in case of failure of earlier resources. A surplus thus funded would obviate the only sound objection to the mutual principle, and would not be open to the complaint so often urged against proprietary companies, that the stockholders reap the fruits of others' savings than their own." 0 Non-forfeiting Policies- Redemption of Dividcnds. 53 The report recited several cases of attempted fraud upon the Company. In one case a conspiracy was entered into by the insured and several other persons. All went fishing; the insured fell overboard and (was not seen to rise." Some time afterward a body in an advanced state of decomposition was found, and upon it clothing and a finger ring belonging to the insured. When the scheme seemed about to succeed the conspirators quarrelled among themselves, the plot was exposed, and the insurance was not claimed. Another case was cited to show the prejudice of courts and juries against corporations. An itinerant Methodist minister in Kentucky disappeared and it was claimed that he had been murdered, and suit was brought against the Company for the amount of his policy. Witnesses were produced by the Company who testified that they had seen him alive subsequent to the time of his alleged demise; one of them had been married by him. Upon the first two trials the jury disagreed; upon the third a verdict was found against the Company. The Court of Appeals refused to interfere on the ground that it was a question of fact for the jury, and not of law for the court. Meanwhile an attachment was issued against the property of the insured on the ground that he was an absconding debtor; it was resisted on the ground that he was dead, but the attachment was sustained. By these two decisions the insured was judicially dead with respect to the Company, but judicially alive with respect to his creditors. GOLD was discovered near the base of Pike's Peak, Colorado, in 1859. 1858, and early in 1859 the Company, after a careful consideration of its experience on California risks, issued a circular to agents announcing that it would accept risks upon emigrants to the new gold regions at an extra of one and one-half per cent. A circular of the time, reduced about one-half, is shown on the following page. In May, 1859, the NEW-YORK LIFE united with thirteen other American, and two English, companies in the American Life Underwriters' Convention.* The first suggestion of such a gathering seems to Aetna, American Mutual of New Haven, American Temperance, Berkshire, Charter Oak, Connecticut Mutual, Knickerbocker, Manhattan, Massachusetts Mutual, Mutual Life, Penn Mutual, Union Mutual, United States, Eagle and Albion of London, Royal of Liverpool. PIKE'S PEAK ~! LIFE INSURANCE I! Policies granted by THE NIlYORK LlFE INSURAME I. iL &.114 Broadway, N.Y. ACCUMTLATED CAPITAL ONE MILnION SIX UNIIDRED THOUSIND LLIA S In view of the extensive emigration to the Gold Regions, the above well-known Company of 14 years standing, are now prepared to issue policies for that locality. Parties can thus secure to their families or friends some resource in case of accidents, and creditors protect themselves from loss for advances. For full particulars, a of Rates, &c., apply to Agent, at 54 Non-forfeiting Policies-Redemption of Dividends. 55 have come from Mr. Gilbert E. Currie, Editor of the "United States Insurance Gazette," who, by correspondence and personal solicitation, induced the principal companies to promise representation, and who acted as Secretary until the Convention was organized. Mr. Franklin, of the NEWYORK LIFE, was made temporary Chairman, and Vice-President of the permanent organization. Mr. /. Winston, of the Mutual Life, K' was made President. The sesTHE FIRSTr EAGLE USED BY THE COMPANY, IN 1859. visions of this continent, and the collection of vital statistics; the renewal of lapsed policies; and State legislation. It was voted that the companies be requested to contribute the data from which the combined mortality experience of American life companies could be deduced, according to residence, occupation and term of insurance.* On the subject of lapsed policies, informal conversation between members of the Convention was recommended. The report on legislation set forth the difficulties under which the companies labored in complying with the laws of the various States,t and recom* At the session of the Convention held in May, i860, the Committee on Vital Statistics, of which Mr. Sheppard Homans, then Actuary of the Mutual Life, was Chairman, reported that returns had been promised by twenty-two companies and already received from thirteen. These statistics were afterward made the basis of the American Table of Mortality," constructed by Mr. Homans. t The laws of the States which relate to life insurance and their agencies are found to be very dissimilar, and in many instances not only conflicting, but retaliatory, in their origin and character. [During the debate it was stated by Mr. E. A. Bulkeley, then President of the Aetna Life of Hartford, that in one State " a law had been passed which expelled every company that had complied with the law of a neighboring State."] * * * The frequent modification of these laws, and the severe enactments which are added, and the complications that grow out of the various forms for making returns adopted by the officers which these laws create, have so far confused the public mind and embarrassed the business of life insurance, that relief should be afforded. The uniform law-abiding spirit which is interwoven into the management of life insurance companies induces on their part a strenuous effort to comply with all laws and evade none; but they are met constantly by new laws and new requirements 56 lNon-forfeiting Policies-Redemption of Dividends. mended that a committee be appointed to draft a general law relating to life insurance companies incorporated in other States and in foreign countries. The Convention adjourned, after a very harmonious session, to meet at the call of the President, on request of any three companies represented. President Winston in his closing address dwelt upon the zeal, intelligence and harmony that had marked the proceedings and upon the value of their combined experience with respect to mortality and the investment of funds. He urged the companies to unite in collecting, arranging and perfecting such a system as would be useful to themselves, and reflect credit on the Convention. The sessions of the Convention were followed by a dinner at the Astor House, at which Vice-President Franklin presided. In his opening address Mr. Franklin dwelt upon the blessings of life insurance in protecting the family from distress, saying there was no act of his life which he performed with greater satisfaction than the payment to widows and orphans of the funds which their husbands and fathers had provided for them. Other addresses were made by Hon. Daniel F. Tieman, Mayor of the City, and members of the Convention.* which, by undertaking to comply with, literally established for them results in different States which conflict with each other, and again add to the difficulty above alluded to. Your Committee are not the advocates of no law; on the contrary, in their opinion it is eminently wise and just, on the part of every State, to enact laws relating to life insurance companies and their agencies. And they recognize the right of every State to hold the companies which are organized under their own laws to a strict accountability. * * * Each company should be required to exhibit its condition in a proper manner, so that the public may know the amount of its capital, accumulations and surplus, how the-same are invested, and such other facts as are necessary to a proper understanding of the condition of the company.-From the Committee's Report. At the session of the Convention held in I86o, the Committee appointed to draft a general law made a verbal report favoring the principles of the Massachusetts law, but questioning the advisability of the Convention endeavoring to secure such legislation in other States. * The following extracts will serve to indicate the growth both of the city and of life insurance: By Mayor TIEMAN: "I do not know that I can say anything to our friends from abroad, except that I am happy to meet them. I welcome them as the father of the city, though I am not a very old father. Perhaps it would not be amiss to tell our friends from abroad how old I am. I am so old, gentlemen, that I remember the market gardens on the other side of Chambers Street, opposite the City Hall. I remember when they used to raise cabbages, salads and radishes on the. ground where Stewart's store is. [Then at the corner of Chambers Street and Broadway.] I was mentioning to the President what seemed to astonish him-that I was born in New York, have never lived outside of New York, and never lived in a house adjoining another. When I was about three years old my father Non-forfeiting Policies-Redemption of Dividends. 57 1i; view of the heavy losses sustained in Mobile, Ala., it was decided August tenth to add two per cent. on the amount insured to the rates then charged upon policies issued at this agency. On the same day the Trustees voted to establish an agency in San Francisco, Cal. Mr. William F. Herrick was appointed agent. A local Board of Trustees was organized and, owing to the great distance from New York, authority was given to issue temporary policies good for ninety days, until applications could be passed upon at the Home Office. The extra rates fixed upon were one-half of one per cent. for San Francisco and one per cent. for the whole State. The protests against any extra charge became so numerous that the Company collected all the obtainable data on the mortality of the State, including a report of the State Register, and in November recommended to the Trustees that thenceforth residents of San Francisco be required to pay, in lieu of an extra, the fee for medical examination, and the exchange on New York in transmitting premiums. The recommendation concluded as follows: This we have reason to believe would satisfy applicants, as the objection does not appear to be so much the price for insurance as the, to them, apparently humiliating fact that the increase is called and charged an "extra," thereby alleging, at least by implication, that the climate of California is inferior to our own.* moved to Twenty-third Street and Fourth Avenue, where he now lives on the same ground. There our friends would come from the city to see us one day and go back the next. It was too far into the country to go and come the same day. I can remember distinctly that when they wanted to come to the city they got ready the day before. * * * At the time of which I speak, New York extended only up to Chambers Street, and when people used to go to see the stone bridge which was at Canal Street, they had to get a hack! " By J. GREEN PEARSON: " I suppose I am indebted for this call to an unfortunate remark I made this morning to my friend, Mr. Dennison, in relation to a circumstance connected with a marine insurance company, more than twenty year ago. [The company was the Union Marine, chartered in 1818.] The company set apart a fund of $Ioo,ooo for life insurance. Professor Renwick Lee, of Columbia College, was appointed actuary, and after a protracted effort and by bringing to bear the influence of the directors, embracing some of the most influential men of the city, they succeeded in about two years, I believe, in obtaining twelve policies. The majority of these were from the officers and members of the company. They found it was utterly impossible to induce people to effect insurance, upon their lives, and the community at that time was somewhat like the old lady who objected to traveling in steamboats, because she considered it wicked to go against wind and tide. After making these efforts for two or three years, they determined to abandon the business, and the policies were all canceled." " DOWNIEVILLE, LIMA CO., CAL., December 21, I859. Your Company ought to allow me two per cent. for residing in the heathiest country on the American Continent. C. A. JOHNSON, Insured under Policy No. 8,984." 58 Non-forfeiting Policies-Redemption of Dividends. In response to a resolution of the Trustees, the officers of the Company submitted in December, 1859, a report showing the premiums received and the losses incurred at Northern and Southern agencies, respectively, as follows: Premiums received on Northern business $2,556,929, Northern losses $904,941, being 35.5 per cent. of the premiums; premiums received on Southern business $580,225, Southern losses $309,870, being 53.5 per cent. of the premiums. The estimate of total insurance carried one year in the South was $I8,000,000, from which it was concluded that an addition of three-fifths of one per cent. to the extras then charged was necessary to place the business of the two sections on an equal basis. It was recommended, however, that no action be taken until further investigation could be made.* At the meeting of the Trustees, held January 24, I860, it was noted that the income for 1859 exceeded half a million dollars, and that the amount of insurance written was larger than in any previous year since I851. Of the new insurance written $2,914,825 was upon Northern, and $177,700 upon Southern, lives. The number of term policies in force showed a slight decrease, and the number and amount of applications declined showed an increase.t The surplus of the Company, after providing for a dividend of thirty per cent. on premiums and six per cent. interest on dividends outstanding, was $51,529. It was voted that the officers have prepared a more attractive policy heading. 86 AT the second meeting of the Life Underwriters' Convention, held 1 May 23-24, I860, the subject of the non-forfeiture of policies wa3 discussed at considerable length. Hon. Elizur Wright, senior Insurance Commissioner of Massachusetts, and Hon. William Barnes, the newlyappointed Superintendent of the New York Insurance Department, were * The mortality experience of the Mutual Life, 1843-1857, published in I86o, contains a table showing the extra that should be charged, according to the company's experience, to equalize the risks of the various sections; and a statement of the extras then charged. The latter (in I858) were slightly below the former (for the whole period) and were as follows: Southern Atlantic States, one-half of one per cent.; Gulf States, two per cent.; California, one per cent. The last corresponded very nearly to the California risk subsequent to 1853; prior to that date the risk had averaged over five per cent. above that of the Eastern, Middle and Western States combined. t Number declined in 1858, 66, amount $234,300; number declined in 1859, 96, amount $359,750. Non-forfeiting Policies-Redemption of Dividends. 59 present as honorary members and participated in the discussion.* Mr. Wright was the author of the system of net valuations adopted in Massachusetts, and in his reports of I858 and I859 had urged the passage of a SECOND ENGRAVED POLICY HEADING, FIRST USED JUNE 17, i86i. non-forfeiture law. In March, I859, he had submitted the draft of such a law to the Joint Standing Committee on Mercantile Affairs and Insurance of the Legislature of Massachusetts, but no action was taken.t Mr. Wright had urged with great pertinacity and force that forfeitures were unjust, because the policy-holder did not receive what he had paid for; impolitic, because the fear of forfeiture prevented many from insuring on the whole life plan, which was the most advantageous plan for the com* The law establishing 'the New York Insurance Department was passed April 15, I859. It simply created the Department and enacted that all insurance companies should report thereto instead of to the Comptroller, as under previous laws. William Barnes was appointed Superintendent, January 12, i86o. t The original draft of the Massachusetts Non-forfeiture Law provided that four-fifths of the net. value of the policy, according to the Actuaries' Table of Mortality with four per cent. interest, should be applied as a single net premium to the purchase of temporary insurance according to the age of the insured at the time of lapse. The law as finally approved, April o1, i86i, provided that any indebtedness on the policy should be first deducted from the net value, and that in case of the death of the insured during the term of extended insurance the Company should have the right to deduct from the amount insured the amount of premiums foreborne at the time of death, with interest at six per cent. per annum. 6o Non-forfeiting Policies- Redemption of Dividends. panies, as it secured the best risks; and that it enabled the worst-managed companies to keep up their financial standing with the best by a greater profit on forfeitures. He showed by tables of policies lapsed in i859 and not restored in i 86o that the profits on such policies, after deducting premium notes, amounted to about $I44,000, and that this profit was very unequally distributed among the companies, being eighty times as great in proportion to income in one company as in another. He also constructed tables by which the term of extended insurance under the proposed law could be easily ascertained. The discussion in the Convention elicited the fact that every life company in the United States, save one, paid surrender values for policies, either in cash or paid-up insurance, after about the fifth year, provided they were surrendered before lapse, and in some cases after lapse, but there was no common rule or practice, and none of the companies agreed in the policy to pay such values. The companies had already, therefore, admitted, by their practice, that some concessions were due to policy-holders which were not expressed in the contract. The argument for such expression was thus concisely stated by Superintendent Barnes: All the suggestion with which I will trouble the Convention is, whether it may not be desirable for companies to incorporate this idea in their policies to a greater extent than at the present time, so that I, or any other person, can have a certainty by the contract that, if we fail to pay at a certain time, for any reason, we can have a whole life policy, or term policy for a period regulated by the amount we have paid, according to the practice of the "Eagle and Albion," or something of that kind. The greatest objection to life insurance is in relation to these forfeitures. It is well to say that the companies do not enforce this; but, gentlemen, you should go further. If it -is just, you should incorporate it in the policy, as a part of the original contract. If you anticipate legislation [i. e., by putting non-forfeiture conditions in the policy], undoubtedly no legislation would be had in this State -the various officers can anticipate,- you can get at the true value of a lapsed policy a great dealer better than any Legislature can do it; and, in this way, by securing the parties on the face of the contract, you show to the community that you do not require insurers to come into your offices and beg of you, as a matter of favor,. that which you- are bound to give them. I simply suggest that, whatever the real value is, the assured should have it, under the circumstances, so that when the assured person comes into your office to ask for the value of his policy, he can come with boldness and ask for his rights, and not for a charity or gratuity on the part of the company. The objections of the companies to a hard and fast law on the sub Non-forfeiting Policies-Redemption of Dividends. ject, which could not be varied according to their mortality and financial experience, were thus set forth by Mr. Winston: First. It alters the contract in the policy, which is, that as long as the premium is paid the policy is in force-no longer; whereas this proposal says to the policy-holder, your policy is in force whether you pay or not. Second. It interferes with the law of average-so necessary to our safety-for the sound lives are those who decline to pay, and finally give up their policies, after having exhausted their dividends. The unsound and the feeble keep up their policies to an early end.* Third. It is dangerous to the Company. We have no American experience and can have none, which will be entirely reliable, as to mortality among assured lives, for years to come; therefore we do not know what it costs us to insure lives in this country. The rate we shall receive for interest on our accumulations in coming years is quite uncertain, and may be much lower than in our past history. There is a disposition in this country to tax life insurance, though it is not taxed elsewhere, and as we cannot raise our rates for insurance in competition with foreign companies, which are not taxed on their capital, taxation here would greatly reduce the financial ability of our companies, if it left them enough to pay their liabilities. Fourth. It would make policy-holders careless of life insurance, and lead them to undervalue and neglect it, and thus would be an injury to them and not a benefit. I cannot therefore believe that justice, sound policy or the good of policyholders, as a whole, would be promoted by the proposition of the Commissioner of Massachusetts upon this subject. The Officers of the NEW-YORK LIFE took no part in the discussion of the question;t but on June thirteenth, following, they submitted the following proposition to the Board of Trustees: * Mr. Wright had answered this objection in advance, as follows: "In actual practice, the presumption that only the sounder lives will wish to surrender is not considered as a good reason for withholding more than one-quarter or one-third of the value of the policy. From sixty-six to seventyfive per cent. of the value is paid to the healthiest, if the application to surrender is made while the policy is in force. Yet it has been the uniform practice in this country, and till very lately in Great Britain, to make the whole value of the policy, as well as the right to further insurance [i. e., renewal], the forfeit of a failure to pay the annual premium on a specified day. Failure to pay premiums may arise not only from confidence of long life, but from misfortune, imbecility of mind, preoccupation or unavoidable detention. Hence the class of lapsed policies may embrace cases below as well as above the average vitality of the company, and consequently there is less reason to justify the company in withholding the whole or a part of the value from the holders of lapsed policies, than from the holders of policies in force who wish to surrender. But when we carefully consider how the sense of vitality fails to correspond to the actual fact, and how much more likely the subjects of some of the most destructive maladies are to indulge in visions of longevity than the tenants of sounder constitutions, we can hardly believe that the average vitality of the holders of lapsed policies ever has been or ever will be appreciably above the average of those who remain.-Mass. Report for I859. The experience of the companies on this point, so far as published, has shown that the loss of average vitality by surrenders does not exceed two and one-half per cent. of the whole.-Adverse selection by Withdrawal, by Howvell W. St. John, Proceedings Actuarial Society of America, i889-9o, No. 3, page 18:' Hon. WILLIAM BARNES, Albany, N. Y. t August I4, i86o. Dear Sir: You may remember that at the late meeting of our Convention considerable discussion was had in reference to the valuation of lapsed policies and the duty of companies in relation thereto. 62 Non-forfeiting Policies- Redemption of Dividends. The officers represent for the sanction of the Board that they have prepared with great care a table of rates by which persons may purchase policies by ten annual payments, which will be forever thereafter exempted from forfeiture. Objections are not infrequently made to the present system that in the event of inability promptly to meet the annual premiums, the money previously paid becomes a total loss to the assured. By the proposed plan we design that after the payment of two or more premiums, and either from want of ability, or from any other cause, the payments are discontinued, the policy does not become forfeited, but that in lieu thereof a new one will be issued to the original policy-holder if living, for an equitable proportion of the money paid, or if deceased, a similar amount will be paid to his family or legal representatives. The officers are satisfied after a careful examination of the proposed system that it is not only strictly equitable, as between man and man, but is calculated when fairly understood to commend itself to the judgment of all who may investigate the same, and become a very popular and profitable measure to the Company. The Superintendent referred in his next annual report to the forfeiture of policies, as having "long been a serious obstacle to the increase of life insurance," and said: "I cannot but regard it, therefore, as a matter of public congratulation that the NEW-YORK LIFE INSURANCE COMPANY has issued a table of rates of premium for life policies, expressly stipulating that after the receipt of two or more annual premiums, if further payments are discontinued, a new policy will be issued to the original holder, if living, for a specified proportion of the sum insured; or, if deceased, an equitable sum will be paid to his family or legal representatives." The plan and rates were adopted, and thus the principle of nonforfeiture,.as a right, was first officially recognized by an American life insurance company doing a general business.* The rates first adopted were calculated on the Carlisle Table of Mortality with five per cent. interest, and with fifteen per cent. loading for expenses. The paid-up insurWe have acted upon the suggestions then made and have prepared a table predicated upon the purchase of a policy by ten annual payments, and providing for carrying out the original design of the assured if from any cause he should be unable [to continue], or desire to discontinue the regular payment of premiums. We beg leave to inclose you a copy, together with our circular explanatory thereof, and remain with great respect, Your obed't serv't, MORRIS FRANKLIN, President. * In 1852 the Presbyterian Corporation, which began about this time to do a life insurance business within the Presbyterian ministry, adopted a rule whereby the net value ol a policy, less five per cent., might be used as a single premium for the purchase of insurance due at death. The first policy of which this rule was made a part by reference was issued August 30, 1852, and the first policy in which the clause was incorporated was issued September 3, I856. This information was furnished by Robert P. Field, Esq., Actuary, for an address by Hon. John A. McCall on the "History of American Life Insurance," read before the Life and Accident Insurance Congress, Auxiliary of the World's Columbian Exposition, Chicago, I893. uAE wAc wAiflo -3 o I r r To t( ON VI)M laolit~t of aoTiMuaTicr WITNESSETH, THAT 2maiB,Rmw,OMM,331 _U27MAVO <~(~l~AV /Sa/ /f^ a>- ---— / / FG lomfacwa ao zezeey promise anb AgrCe,.o ana? 1(t1 Me daa execatea hutsf-, goadng+, C6ozcause do /Lea't, eWe dat; cfwz; do.wea, A!. Hio. di.o,< <./ f zo/ ze~ f cvcd, wekg" do av gda7 z alwe nc&ce, 'si r X i; k ~c~ 4 6~,x;c -/ I" ~s >~> W 'III. }z.'.1 Ns I" I-a kJl 01 anda oo- of' I Ale-, ~ f 4d At cen cade ol Mlet Ljt CCC '. C afa 44 ASa cl/ o Zren clciaen, A z / /I fec a A Xe (^..^.....zs vfPe Sceane c~ i 00 We * ea* e / de, azwene O/ie l tiwhgeene &fleallle leya~k wavz ale, winya 6cra'i Fce a ce z^ce cagz -MC__ -Y alez ade oki wmzd ~~ad Maty, _Zd~-46L4B01b6 z m w 'V) To x -j r-I n -3 z 0 IV O t" C) tell 3t w 11 x r Q 3 ITI Z 0 C) 0 r1 0-ji vl en M co Ft en Un a1 mCf '?n liPrOtlbeb aluwqps, awd? c 1ezety alcc zea to 4 6le U0e r. wf6' / &o'y Ime ofame m amleh t Ize < & 6 ea e.uz tio n ie ei e ^ co n ale,?tvwb, M a^ i cade "I /1./Z^ ^ a olaLd wicoufe Il conjenI 0l dw 'Wopvulna Azeveiu^j oolaecil, and/ efed'ot n ll (Cco 6a>onA ^e, (Il e ' a" / i;vz,~e Cw t l ou^ oee 0cw deOn tCd nn&d G /6 6(S oa/tw c and/ Od nficl, 44ween lre t f e 6u1m an^;,? ol Of-,ountez, o' ea f.^ zWCoi Zo oucz Mzev0cwm conedcn? ~Cw enfdoude ente cn,o a 'yr~ u ow?iwaz/ ef'dewcc. z^oaXuz, /e 76fcda noe Cn acfitaz dOwt ce ezox c o ZcX,, n Ca t o ^ e 6 J / ~ '~~" ' ~"~ Arr~,YC~~~e ~ +~U/~hI/~1~ _ rte-: c-,%Z >~~~~"2 ~~,-L ~r.,~ ~ ~2 C =Fre ze-up /1- % oi, L C 4 L / _p ~-0147 21f IV ~LerC-104; 411, 6 d y p ___ ~-~ 'v ~ ~ b~ ~ ~J z~ "4 l /Z~LC~L bL~ ~-.,* /c~-~P ~CL~Zcb~C~.c~c~ JZr~Z';A C~~~ ~ c~C ~~~1-6iC~S~ Q.~D~7Id~ ~-~L6~~~ -9~d 9-5 96 Period of the Civil War. of General Butler issued May nineteenth. Communication with the interior was soon forbidden, and for many months nothing was heard from the messenger. In September Dr. Copes was obliged to take the oath of allegiance to the United States, in order to continue the Company's business or his own. Mrs. Sheafe returned to the city in November and claimed that she had not been paid. In January, I863, she offered to withdraw the suit if payment were promised. The matter was left in Dr. Copes' hands and a final settlement was made in October. A creditor's policy on the same life was paid to a St. Louis firm on September 27, 186I. The Rice policy was paid in October, 1 862, as soon as the necessary proofs were submitted. After the interchange of several letters, Mr. Franklin had written to Dr. Copes on July thirtieth: We are very much gratified at the course you have pursued in protecting the interests of our Company during the terrible ordeal through which we are now passing. We heartily approve of the disposition and contemplated disposition of the funds, and you will add another obligation by furnishing us at your earliest convenience a detailed account current between you and the Company.* On May twenty-ninth the Company received via Havana, a letter dated April third, from Mr. James M. Muldon, agent at Mobile, saying he had previously sent statements of business to January, 1862, by same route. The letter continued: The New England Life Insurance Company, of Boston, have authorized their agent in this city (during the war) to receive notes at twelve months, bearing interest, for the full amount of premiums. As all our life policies are worth at least one year's premium there can be no loss to the Company on premiums, and [it] will enable many to continue their insurances who otherwise might be compelled to sacrifice their policies and all that has been paid on them. I have adopted the same course, and am receiving notes for premiums, bearing seven per cent. interest. I give a conditional receipt; in case it is not approved by the Company, the note is to be returned and premiums paid as formerly, otherwise the policy to be null and void. Do write me, if only to say my action in the matter is approved or not. To this Mr. Franklin replied on the same day, sending his letter by the same route, in care of Mr. Walter Douglass, Havana: Dr. Copes had on hand about $4,800oo in Confederate money when the city was captured. Of this amount he authorized the Company to charge him with $3,2oo, at fourteen cents on the dollar, in September, i863, and the balance was charged to Profit and Loss in the Company's report for the year. Period of the Civil War. 97 We are in receipt this morning of your valued favor of April third. It is indeed refreshing to look again upon the familiar handwriting of our esteemed correspondent at Mobile, from whom, for so long a time, owing to the melancholy situation of our national affairs, we have been debarred the privilege of hearing. The letter of January twenty-second, to which you refer, was received after its long journey and should have been answered, and I was not aware until this morning that it had not been. In reference to renewals of our policies in Mobile and other Southern cities, we are not at liberty, under present circumstances, to make any arrangements, and must leave the subject for future consideration and adjustment when a more healthy state of affairs shall disembarrass it of all the perplexing questions with which it is now encumbered; for the present, we are compelled to consider all of our Southern policies as cancelled, but we doubt not that our Board, in the exercise of a sound discretion, will do equal and exact justice between the parties. Your letter of August first, enclosing draft on London for /3II1-2-5, has not been received. Please therefore enclose the duplicate and forward at your earliest opportunity to South Cuba Western Express Co., Havana, Cuba. All of our Southern losses reported and to be reported, must be held in suspense until acted upon by the Board. At the meeting of the Trustees on July 9, 1862, the officers presented a report to the effect that, as the Southern ports were gradually being opened, and postal communication restored, applications were received for the renewal of policies which had lapsed and for the payment of losses occurring in the seceded States. The report cited portions of the correspondence which has already been presented herein, and asked instructions from the Board with respect to the payment of losses and the renewal of lapsed policies within the districts named, also as to the acceptance of the notes taken at the Mobile agency, and of Tennessee currency received at Memphis in renewal of policies while that city was within the Confederate lines. The report was referred to a Committee, which reported adversely on each proposition on August thirteenth, basing their action as to the first two upon the law of July 13, I86I, and the President's proclamation of August 16, 1861, declaring all commercial intercourse between citizens of the United States and those of the seceded States unlawful so long as hostilities should continue. The report was referred to the officers, with instructions to take legal counsel on the subject. On September tenth the officers presented an opinion by Hon. William Fullerton, to the effect that the restriction upon commercial intercourse referred to in the law and the proclamation did not apply to those parts of the seceded States which maintained a loyal adhesion to the Union and Constitution, or which 7 98 Period of the Civil War. might from time to time be occupied and controlled by forces of the United States. A resolution was thereupon adopted that the officers be authorized to pay losses in the localities last mentioned, and to renew such policies as had lapsed upon such terms and conditions as might be deemed equitable between the insured and the Company. This meeting of the Trustees affords a good illustration of how the Company was compelled to deal at the same time with questions arising out of two entirely different phases of the war then raging. Between September fourth and seventh the Confederate army, under General Lee, crossed the Potomac and advanced to Frederick, menacing both Baltimore and Washington, and on the ninth the Company's Baltimore agents wrote asking permission for policy-holders to join organizations for the protection of the city. Mr. Franklin replied on the same day: The proposition was submitted to the Board at a regular monthly meeting held this day, and it was unanimously decided, that permission be granted to the citizens of Baltimore to organize for the protection of their city from the violence of the rebels, without forfeiture of their policies. We recognize the principle that a home guard, such as you appear to contemplate, should not work a forfeiture, but in the event of your people going beyond a strictly home defence, and following the enemy outside of the limits of your city, it must be considered as a military organization not covered by the policy, although in the event of being obliged to pursue them so as to render the city perfectly secure, we shall hold that the risk is covered, provided the parties do not take the field as a general organization in defence of the Government. At the same meeting the officers reported the death of Colonel Dudley Donnelly, from wounds received at the Battle of Cedar Mountain, August ninth;* and a peculiar case from the San Francisco agency: Mr. Edward Roepke applied for, $3,000 insurance at this agency in July; he passed a satisfactory medical examination and received a temporary policy good for ninety days, or until the Home Office could act upon the application. Mr. Roepke embarked for Panama on the steamer "Golden Gate," July twenty-first, and his application was sent by the same vessel. On the twenty-seventh the steamer was found to be on fire, and of the 'The funeral of Colonel Donnelly, of the 28th New York Volunteers, occurred at Lockport, N. Y., August I9, 1862, and the i29th New York Volunteers (afterward the 8th Heavy Artillery), then in camp on the Fair Grounds, attended as a guard of honor. The writer was a member of this regiment, and this was his first military duty. OFIFICE- OF' TUE]P 112 & 114.BROA'DWAY, nfg,)/ / \, \,113, di4 ll~9lIduk( d PERMISS N / 't''4 &~K TO ENTER THE MILITARY OR NAVAL SERVICE OF THESE UNITED STATES, aw/4 4ve'lnl/?c itaip Ie//, dl4 $d *&mme / a/ 4akllwe 9v/(W /lian/rnve6 42 4eav'/elaw/' Jejtete SOUTH mloU Y~/ iekC7/ wigid' 442a,(al 1mZleeffwA4?4ed d(IC/ e1-e~C. ~jZ/l /4/1(i1(9i( wc1ai, el /4'l iellan o,)/4ja-~dff e~e7W ian,~ ke-exm.,itafcen, 4i cam fj 114 em~lelal~ 2/ce7 di ~ ~c~rn(W7 ~~W~a~14~,U'4 eWN 99 -r-o: 0 000::.:c w! 0:* es 0 e " -,.g. ":, ", -, I00 Period of the Civil War. 347 persons on board 219 were lost, among them Mr. Roepke. Thus, within about ten days, and while the papers were in transit, the temporary policy became a claim. It was ordered paid in full. In October the Company's traveling agent visited Norfolk and examined the affairs of that agency; as a result, Mr. Franklin wrote to Captain Ferguson under date of November seventh: Enclosed herewith we hand you receipt and statement of the unsettled part of the account as it stands on our books, and would express our extreme gratification at the honorable settlement you made with Mr. Bloss, and trust that nothing hereafter will occur to disturb our harmonious personal intercourse or business relations. We understand from Mr. Bloss that some of the old members in Norfolk would like to renew their policies. With the view of facilitating renewals, we would enquire if any of your savings banks will receive your currency on deposit and allow a specified interest, and if so, whether your policy-holders will agree that drafts on said deposits shall be received in payment of their policies when they become claims. We hope some arrangement satisfactory to all parties may be made, for be assured that instead of availing of the legal cancelment of the large number of policies now lapsed, as some have supposed, the officers will do everything in their power to aid in their revival in an equitable manner-which would appear to be by payment of back premiums and six per cent. interest, on satisfactory medical examination. The policies being revived, the dividends and benefits connected therewith would also revive. No reply being received to this letter, another of the same purport was written to Dr. R. B. Tunstall, the Company's Medical Examiner at Norfolk, on December fourth. Answers were received from both during the month to the effect that the banks were paying no interest, and the plan was reluctantly abandoned. At the October meeting of the Trustees, the following case was submitted for consideration: Mr. Hugh C. Irish, a resident of Paterson, N. J., insured for $2,000 in December, i86I. Premiums were paid to December, 1862. During the summer of 1862 Mr. Irish raised a company and joined the I3th New Jersey Volunteers, and was killed at the battle of Antietam. No war permit had been asked for and no war extra paid. Captain Irish had instructed his brother to pay the premium on his "war policy," and had assured his wife that if he was killed she would receive the money; from which it was inferred that he intended the war extra to be paid and supposed it was paid. His brother had paid the regular Period of the Civil War. IOI premium only. The case was referred to the officers with power, and the claim was paid. The annual report for I862 was presented at the meeting of the Trustees on January 28, I863. The year had been the most successful of any since the organization of the Company. Of the 6,528 new policies issued by the eleven life companies in New York City, the NEW-YORK LIFE had issued 3,302, or more than one-half.* This phenomenal success was attributed by other companies, the report said, to the fact that the NEW-YORK LIFE had continued to take war risks on new policies when other companies refused; but the Trustees, while admitting that such action had undoubtedly had a helpful influence, declared the main cause to be a change in agency methods. On this point, it was said: The officers are satisfied that no man can succeed in procuring applications for life insurance so long as his mind is occupied with other branches of insurance or with any general business; his time, talent and thoughts must be devoted to life insurance only. Experience has fully demonstrated that local agents absorbed in other pursuits are occupying unprofitably territory which might otherwise be cultivated to advantage, and the attention of the officers has been mainly directed during the past year to perfecting a new system. As a general rule, no man is appointed an agent except with the express understanding that all other occupations are to be discontinued, and his time devoted exclusively to the service of the Company. It is to this plan the officers attribute the success which has thus far more than surpassed their most sanguine expectations. In the selection and instruction of agents they have procured the services of men of character, industry and zeal who have labored to spread the blessings of Life Insurance in districts where it was comparatively unknown. The States of Indiana, Illinois, Wisconsin and Iowa have responded to the new method in a manner which promises large * Superintendent Barnes said, in his fourth annual report: " The two most remarkable events of the year, in the American Life Insurance world are, the unprecedented dividends of the Mutual Life, for its quinquennium, amounting to $3,000,000; and the issue by the NEW-YORK LIFE, of three thousand three hundred and two new policies during the year." t The Philadelphia offices decline all new business, or risks to go to the war. We believe this class of risks is also generally declined at New York, Hartford and Boston-though in the case of the NEW-YORK LIFE the office takes not to exceed $i,ooo on a volunteer's life, where the policy is for the benefit of the wife and children. There may be other exceptions, but we have not heard of them.Circular of American Life Insurance Co., of Philadelphia, 1862. The annual reports of the New England Mutual for I86I and 1862 indicate that this company also issued war permits with new policies. There appeared in the " United States Insurance Gazette " for September, 1862, an unsigned letter "from one of our city life insurance officials to an agent seeking information concerning war permits." It is a violent attack on companies issuing such permits, and said, among other things: " Some of the large companies may combine and take war risks, but their object is to lead the younger companies on to do the same, in order that they may be used up, and thus lessen competition! " I02 Period of the Civil War. results in the future. Competent men have been assigned certain territory, within which they select and instruct other agents who, after actual experiment, are appointed and assigned appropriate districts. The Io-payment non-forfeiting policy, it was said, had been received with such general favor that several other companies had adopted the premium table without credit to the NEW-YORK LIFE as the originator. The report noted the death within the previous four weeks of four of the Company's agents, Messrs. Henry Wingate, of Frankfort, Ky., Daniel Anthony, of Rochester, N. Y., L. Chapman, of Springfield, Ill., and E. Willard Trotter, of Albany, N. Y. All except Mr. Chapman had been long in the service of the Company. Of Mr. Trotter, whose service had been most conspicuous, it was said: He was peculiarly adapted to his position, and there are probably few if any who were more successful in canvassing for life insurance. It was by his industry and zeal that a business in Norfolk and other places in Virginia, yielding a gross income of nearly one hundred thousand dollars per annum, was built up. He was always a welcome guest of all our local agents, for he was highly educated and had enriched his mind by extensive reading and by foreign travel. He possessed unusual conversational powers, was good-hearted and a very genial companion. The results under "war policies" showed extra losses in excess of extra premiums to the amount of $815. The losses had been twenty-four: one at Fort Donaldson, five at Shiloh, one at Williamsburgh, two at Perryville, one at Cedar Mountain, two at Antietam, one by the explosion of the " Mound City," and eleven from disease. The losses had been almost evenly divided between risks in force at the beginning of the war and those afterward assumed. The action of the Company in assuming these risks was thus referred to: When it was decided to assume these risks the Board had in view only the establishment of such a rate as would indemnify the Company against loss, and with no expectation that it would yield a profit. It felt that persons voluntarily exposing themselves to the deprivations and dangers of the camp and the battle-field were entitled to every facility to enable them to make provision for their families in the event of death. Attention was called to the fact that there were included in the assets of the Company as reported "a large amount [$208,132.23] due for premiums from persons residing in the Southern States, a part of which was known to be in the hands of agents;" also that all the Southern policies Period of the Civil War. I03 had been considered in force and about $500,000 charged as a liability thereon.* It was unanimously voted that both items should remain in the report entire until the Company received more reliable information on the subject. A scrip dividend of thirty-five per cent. on the premiums of whole life policies twelve months in force was declared, and it was voted to redeem and pay in cash a third twenty per cent. of all dividends declared from I850 to 1860. On June 14, 1862, the Company complied with the Massachusetts law, and was admitted to do business in that State. The report of the Company to the Commissioners, as of November I, 1862, included in liabilities scrip dividends of a present value of $653,320.42, assuming that they would be paid in accordance with the plan already adopted, but which were still liable for any losses by the Company, and which could not be paid so as to impair the fund reserved against losses, nor.without farther action of the Board of Trustees. With this item charged as a liability and the policy reserve valued by the Actuaries' Table of Mortality with four per cent. interest, there was no surplus, but a slight deficiency. The Massachusetts Commissioners, however, decided, after the report was out, that the scrip dividends were not a legal liability, and by a circular, dated April 8, 1863, gave the Company credit for a surplus of over half a million dollars. The valuation of the reserve fund in the New York Report being made on the Carlisle Table as of December thirty-first, showed a surplus of $39,028.93, the scrip dividends being included as a liability at their full face value.t *In commenting on the NEW-YORK LIFE'S report to the Massachusetts Department, the Commissioners said: "The value of these policies can hardly be less than three times the amount due on them, so that if they had been stricken off, as has probably been done by most of the other companies which had business at the South, the ratio of net assets to premium reserve would have been increased, probably to II7 per cent., at least." —Consolidated Mass. Reports, page zoo. t Competition was sharp in those days as well as now, and the statement of the Actuary accompanying the Massachusetts Commissioners' circular says: "In the synopsis of the standing of Life Insurance Companies doing business in Massachusetts, which appears in the last Report of the Insurance Commissioner of that State, the NEW-YORK LIFE INSURANCE COMPANY is represented as having only 99.4I per cent. of assets to liabilities (though a modification of this is found in a subsequent page of the report), and we learn that interested parties are making use of this statement to the prejudice of I 04 Period of the Civil War. AT a meeting of the Trustees held on February 4, I863, a Spe863 cial Committee previously appointed to consider a claim under a policy for $6,000, upon the life of Joseph G. Chandler, of Mobile, Ala., reported that Mr. Chandler died July 3, 1862; that the premium due July 9, I86I, was paid to the Company's agent at Mobile, who gave the Company's regular renewal receipt therefor. Mobile was still within the territory with which commercial intercourse was forbidden by law, but it was represented that Mrs. Chandler was then (February, I863) in New York, and that the money was to be invested here for her children and not to be taken into a State then in insurrection against the authority of the United States. Under these circumstances the Committee recommended the payment of the policy, and it was paid February fifth. The New England Mutual paid $4,000 on the same life.* The invasion of Maryland and Pennsylvania by the Confederate forces in June, 1863, again brought the war to the doors of Northern cities. In response to a question from Messrs. Lancaster & Gaskill, agents at Philadelphia, the Actuary telegraphed, June seventeenth, "We give thirty days' war permit at one-half of one per cent., to be continued if desired." On the nineteenth the Company's agents at Baltimore reported that the authorities had been "for the past three days barricading the streets and alleys in the north-western portion of the city, evidently expecting the storm to burst in that quarter." Reference was made to the action of the Company in the preceding September, and the request this Company, by imputing to it a much smaller surplus than is possessed by other companies." Then follows an explanation of the item above referred to. The New York Insurance Superintendent, on the other hand, required the item of dividends declared and not paid to be entered in full in liabilities, and the NEW-YORK LIFE again had reason to complain of comparisons made of the surplus shown by the New York Report, by companies that did not include such dividends as a liability. This led to a considerable correspondence between Superintendent Barnes and the companies in question, and the publication of corrected figures of surplus. The NEW-YORK LIFE did not contend specifically for either view of the status of dividends declared and unpaid, it only insisted-then as now-that in the same report all companies should be required to conform to the same standard. Mrs. Chandler had come to New York via New Orleans, having reached the latter place after a journey of five days on a small vessel, which made its way through creeks and across Lake Pontchartraine. She was obliged to leave her two children-the youngest only fourteen months old -in the South. She proposed, as soon as she could receive and invest the proceeds of her policy, to return for her. children, and after a short visit to Europe to live with her mother in this city. 1) lez,.^^.^:..............:................................. - -...............................................A................................................,...........................,;............... C.................,, Z.^.....<......__"............ a........2.-....t. c4............. Payable..... J.............,, V,ey Al a. d 4./.........../ / AD,./ tt......jl...^10^of, for thu term of jii Jatural gift, rom#watriuag, 186......a...t U. POLICY HEADING FIRST USED IN MARCH, I863. [The reader will note a peculiar division of the premium; this was to give the insured the benefit of the premium note feature, as explained on page 87. On such a policy as the above the first payment would consist of a premium note for $2I, and $I6. 14 in cash. To this was added one year's interest on the note.] Io6 Period of the Civil War. made that policy-holders be allowed to join in the defence of the city without prejudice to their contracts. The Company responded by telegraph the same day: "Policy-holders defending their firesides will be protected without extra charge." On the twenty-third the Company again telegraphed: " We advise that you remit all funds belonging to this Company by bank draft on this city, and remove valuables east to place of safety during this day." The funds were remitted as directed, but after consultation with "discreet friends," the Messrs. Richardson wrote that there were no signs of alarm, but if occasion arose papers would be sent to the Home Office. The battle of Gettysburgh was only a week away, and after that the war cloud drifted southward.* On September twenty-eighth the Trustees voted that no more Southern policies that had lapsed for non-payment of premium be renewed or paid without the consent of the Board; and on October fourteenth it was resolved that all lapsed policies in the States then in insurrection be canceled. At the May meeting of the Trustees a Committee was appointed to investigate and report "what salary, commission and perquisites have been paid during each year from January I, 1858, to January I, 1863, and with the probable amount on the same basis during I863,-to the President, Vice-President, Actuary, and each of the General Agents, and employes of the Company, together with a statement of their respective duties; also what changes in the yearly expenses and management of the Company, if any, should be made." Ordinarily, the passage of such a resolution would be too much in the nature of office detail to be noticed in a formal history; but this resolution was destined to have a far-reaching effect upon the fortunes of the Company. Under a resolution adopted February I3, 1855, the salaries of the *The regiment to which the writer belonged was at this time in Fort McHenry. Unusual precautions were taken. The men were told off into gun squads every night, and slept near their pieces, and the approaches to the fort were picketed. One night there was an alarm; rockets were sent up and the garrison was aroused. Nothing came of it; but the next morning it was observed that the Io-inch columbiad in the north-western bastion was " in battery "-that is to say, run close to the parapet, in position for firing-and that it was elevated at the angle of longest range. Period of the Civil War. 107 President and Actuary had been fixed at $I,500 per annum, together with commissions at the rate of two and one-half per cent. upon the "increased accumulated assets" of the Company. The amounts of these increased accumulations had been made up from year to year, and the Committee claimed that there should be deducted therefrom the uncollected premiums on Southern policies, bad debts charged off, losses on stocks sold, rent for the premises occupied by the Company, canceled notes, and returned premiums on policies surrendered,-forming an aggregate of $360,840.09. Attention was called, however, to the fact that by reason of policies surrendered, notes canceled, and premiums returned, the liabilities of the Company had been diminished by the sum of $154,569.20, and it was submitted whether strict justice would not be done by requiring these officers to refund commissions on the difference. The first report was made July fifteenth; on August twelfth the officers presented their side of the case; on September twenty-eighth both offered their resignations to take effect November first, which were ordered to lie on the table. At the meeting on October fourteenth the resignation of the Actuary was accepted, and that of the President was unanimously declined. It was then voted that William H. Beers be appointed Actuary pro tern. The annual report for 1863 was presented to the Trustees on January 26, 1864; it showed a considerable larger business than that of the preceding year, the premium income having exceeded one million dollars. The lapsed policies in Southern States having been declared canceled in October, the Company in its report charged off the premiums, interest and premium notes due on such policies, and the balances due from Southern agents, and thus presented a schedule of assets free from doubtful items. The Finance Committee reported that, "after making reservation for the value of all policies at the highest rate of mortality adopted in the United States, together with an allowance of $I31,756.30 for extra climate and war risks, and for liabilities which may have been incurred on Southern policies," the surplus of the Company was $I58,I37.63. A scrip dividend of thirty-five per cent. was declared upon the premiums of all participat Io8 Period of the Civil War. ing life policies twelve months in force; and it was voted to pay in cash the fourth installment of twenty per cent. on dividends declared from 1850 to I860. At this meeting Mr. Beers was elected Actuary, and the salaries of President and Actuary were fixed at.$7,500 and $5,000 respectively. THE Massachusetts Commissioners, who had taken a deep interest 1864 in everything pertaining to non-forfeiture policies, called attention in their report for 1863 to the increasing number of policies issued on the Io-payment life plan, the whole number in force in all the companies being 3,751, of which number 1,707 were in the NEW-YORK LIFE. This was the result of the Company's precedence in the matter of non-forfeiture. The Commissioners had noted the fact that by the wording of the policy form a paid-up policy was promised on surrender of the original, and had addressed the Company as to the effect of a failure to surrender. In reply, Mr. Franklin wrote on March 4, 1864: We had supposed there could be no question in reference to the clause in our tenpayment policies. Whatever may be the legal construction, however, our practice has been, when such a policy ceases after two payments, to consider it a paid policy, even though the surrender should not have been made, and we consequently place it among our liabilities, and of course should pay it in case of death. Upon policies in which premium notes have been given, the Company now require that the surrender should be made within a year, as the interest on such notes is required to be paid annually; but for all cash policies no limit is fixed. The subject of the renewal of policies lapsed by reason of nonpayment of premium, while the insured were within the Confederate lines, which the Board of Trustees had forbidden (September 28, 1863,) without its approval in each separate case, was on March 9, 1864, referred to the Supervisory Committee, with power. In February Mr. Franklin had written to Dr. Copes and the Messrs. Richardson that the Board required in each case "evidence of loyalty and good health." In a letter dated April fourteenth, "loyalty" was defined to mean that the insured "had taken no part, either directly or indirectly, in the Rebellion." At the annual election held on May eleventh, there was a change in the ticket that had been elected every year without opposition since 85 I. Messrs. Franklin and Kendall were elected President and Vice-President, respectively, as before; Mr. Beers was elected Actuary. One result of Period of the Civil War. IO9 the change was noted in the report of the officers for the month of July, in which it was said: "Notwithstanding the disadvantages under which they labored during the present year, in consequence of increased competition, the large excess of commissions paid in other companies, and the organization of another company* under the presidency of our late actuary, the business has steadily increased." There was constant complaint through the year of agents and policyholders being enticed away from the Company by larger commissions and by misrepresentations concerning the relative standing of companies, amount of dividends, non-forfeiture privileges, etc. All the companies, except those under the Massachusetts non-forfeiture law, seem to have adopted non-forfeiting policies on the 10-year plan, but to have made variations in the conditions under which the benefit could be received. On the question of competition for agents, the officers reported at the meeting already referred to: In illustration of the competition with which we have to contend, it may be stated that an agent heretofore in our employ, and who has not equalled many others in the amount of business procured, has recently received an appointment in a very prominent and successful company at an annual salary of $5,ooo and a large commission on all the new business which comes to the office in this city. Other instances might be mentioned of very advantageous offers made to our agents-and which in some cases have been successful —to induce them to leave our employ and canvass for other companies. The course of the NEW-YORK LIFE with respect to agents and to controversy is indicated by two letters written late in 1863. On December twenty-first a letter was received from an agent of another company, inquiring what rate of commissions the NEW-YORK LIFE would allow to a traveling agent. Mr. Franklin replied: " Our invariable rule is never to interfere with an agent of any other company so long as he is in their employ, and not to engage an agent who is in connection with any other company." The letter referring to controversy said: Although we do not fear comparison, yet our experience is that newspaper controversies are unprofitable, and tend rather to weaken than to strengthen public confidence "The Globe Mutual, organized June 7, 1864. The Vice-President of the Globe was formerly a General Agent of the NEW-YORK LIFE. The Globe enjoyed eleven years of apparent success; it reported $4,353,5I6.02 in assets, and $543,5I6.02 in surplus December 31, 1875; from this point its surplus declined until May, I879, when it became insolvent and was placed in the hands of a Receiver. I IO Period of the Civil War. in Life Insurance. You are unquestionably correct in the position you have assumed, but there is room enough for all to work without attempting to disparage one another. My advice is, let Mr. N — keep up his fire, if it suits him; but if we do not supply him with fuel, it will very soon burn out. The year I864 witnessed the most daring and heroic efforts of the Confederate forces to retrieve their waning fortunes. In addition to the stubborn resistance made by their main armies, both Maryland and Missouri were invaded and their chief cities threatened. A battle was fought at the Monocacy River, near Frederick, Md., on July ninth, after which General Wallace fell back toward Baltimore, while General Early marched to the very gates of Washington. A brigade of cavalry was sent to cut the railroads north of Baltimore, and for a few days communication with the North was interrupted. On the twelfth the Company's agents at Baltimore wrote: Understanding that a mail for New York will leave at one o'clock to-day, we avail of the facility to write you. Business here is virtually suspended. Gloom and apprehension have brooded over our city ever since Sunday morning [July tenth] when, at six o'clock, we were summoned to the trenches, where all good citizens repaired, where a gun could be obtained. My boys left home without waiting to get a mouthful to eat and are still on duty. The youngest, just seventeen, I found yesterday on picket duty out on one of the turnpikes. To us every hour is an advantage, as our defences are being strengthened. This morning we are somewhat relieved from immediate apprehension, hearing the main force of the enemy have turned back toward Washington. God forbid they should ever capture it. I would rather Baltimore should fall. We have nothing here now very valuable except our books, our accounts for June having all gone and remittances made. This morning we are packing up our books and such papers as are of moment to send away for safety. Our banks are doing the same, having sent all their valuables away on Saturday night, placing them on gun-boats anchored off the city. We do not know when business will be resumed, of course, but will write you again shortly. On the thirteenth request was made that policy-holders be allowed to act in defence of the city without prejudice to their policies. To this the Company answered: We have upon former occasions recognized the privilege of our policy-holders to enlist for home defence, without prejudice to their assured rights, and we shall do so with reference to those in your jurisdiction; but the privilege must be confined strictly to the defence of their homes and not extend beyond them. In September a raid equal in daring to that of General Early, was led by General Price across Arkansas and into Missouri. A battle was Period of the Civil War. III fought at Pilot Knob on the twenty-seventh, and from there Price advanced the next day and attacked the southern defences of St. Louis.* On the thirtieth Mr. Morrison wrote: In consequence of the sudden invasion of our State and city, it became necessary for our officials hastily to organize a force for the defence of the city. In doing so, as a matter of course, many of our insured were enrolled. I have taken the responsibility to tell them to go, and if killed we would deduct one year's war premium from their policies. If the danger is over-which it will be, I think, in a few days-they will be disbanded. Wt are not obliged to go into camp or expose ourselves in any way except in case of attack. Will you please take as favorable a view of the case as you can and write me instructions for the future. I hope you will approve of what has been done. I believe others are doing the same. To this the Company replied, October sixth: We appreciate the situation in which you are placed and consider it our duty to protect the assured as far as possible; we have in similar instances held policies to be good so long as the party is only engaged strictly in defence of his home, and if killed in such defence we should deduct the regular war premium for one year and pay the balance. Should they, however, be obliged to go beyond the limits of the city, we would recommend that they pay the war extra, if circumstances permit, to put the matter beyond all question in case of death. Among the claims paid in 1864 which call for special mention are those of Lieutenant A. J. Howard, of Brighton, Vt., Captain J. Sewell Reed, of Dorchester, Mass., and private HoratioJones, of Fond-du-Lac, Wis. In each case there was evident the purpose on the part of the insured or the beneficiary to keep the policy in force by the payment of premium and extras, and in each there was a failure at some point. Lieutenant Howard died at Algiers, La., of disease; Captain Reed was killed at Dranesville, Va., by guerillas; and private Jones died at Port Hudson, La., of typhoid fever. Proof of death of the latter was furnished by a comrade while upon his death-bed. The acknowledgment from Mrs. Reed is addressed to Mr. Franklin, and says: The action of your Board removes from me a heavy burden, for I have an invalid child dependent upon me and cannot leave him to go out into the world to labor for a support, and therefore very much needed the assistance you have rendered me. If any *After leaving the vicinity of St. Louis, General Price marched westward, traversing the entire State, and destroying much property. No less than five pitched battles were fought in October, and his forces were finally driven into Arkansas. I I2 Period of the Civil War. of those dear to you are ever in need of a friend, may they find one as considerate and kind as you have been to me. Will you express my thanks to every member of your Committee, for indeed I am very grateful to them all. In the absence of strict proof much always depends on the character of the claimants, and Mrs. Reed had the endorsement of Rev. James H. ~,'~,~~ ~ ~ -' Z, ---,~~ not always easy to secure legal evidence of the death of a soldier, for the not always easy to secure legal evidence of the death of a soldier, for the ^ y^? Q^ \^C — (^d^ not always easy to secure legal evidence of the death of a soldier, for the Period of the Civil War. 113 reason that the Government refused to furnish any evidence upon which a claim against it might be based. In the case of Lieutenant Howard, the Company accepted as proof of death the fact, duly authenticated, that the Government had granted his widow a pension on account of her husband's death in the service; and in the case of private Jones, proof of death was furnished by a comrade, then at home sick, and who died two days afterward. During the year $2,250 was voted in gratuities for various purposes. One thaoisand dollars was contributed to the Mississippi Valley Sanitary Fair, held in St. Louis, to raise funds to be expended in the work of the Sanitary Commission along the Mississippi River; one thousand dollars was given to the Sanitary Association of the City of New York;* and two hundred and fifty dollars was given to a fund raised for Captain John Smith, of the propeller "D. S. Miller," who was instrumental in saving the lives of passengers on board the- steamer "'Isaac Newtrr-," whieh was destroyed by fire. In view of the increased cost of living and the general advance in wages, caused by depreciation of the currency, as compared with gold, a " bonus" of twenty-five per cent. upon their salaries for the year was voted to officers and employes of the Company.t The annual report for i864 was presented by the officers at the meeting of the Trustees on January 30, I865. Special attention was called to the large increase in cash premiums ($439,I95.95) and in net assets ($1,005,217.63). The general tendency to increased expenditure for business, and the loss of a number of the Company's most efficient agents were noted. It was said that greater care than ever had been used in the appointment of Medical Examiners and in the acceptance of risks, as a *The Citizens' Association of New York held a meeting February 29, 1864, and appointed a Committee upon the sanitary condition of the city. From statistics gathered by this Committee it appeared that the death-rate per i,ooo of population of the several cities named was as follows: New York 28 (it was 2i.05 in 1894), Boston 24.3, Philadelphia 22.9, Newark 23, Providence 2I.8, Hartford i8.2. tThis increase was far from being sufficient to offset the increase in cost of living-which was probably nearer one hundred per cent. The Government allowance for clothing to enlisted men was $3.50 per month in i862, and $7 per month in i865. 8 ii4 Period of the Civil War. result of which 299 applications for $892,000 insurance had been declined. Many of these had been accepted elsewhere, and losses among them to the amount of $35,000 had already come to the knowledge of the officers. The surplus of the Company, after making reservation for the value of all policies at the highest rate of mortality adopted in the United States (Actuaries' 4%), together with a liberal allowance ($45,000) for extra risks and other contingencies, was $426,317.06. The Finance Committee recommended a scrip dividend of fifty per cent. on the premiums of participating policies one year in force, the payment in cash of the last instalment of twenty per cent. on dividends declared from 1850 to I860, and the payment in cash and in full of the dividends declared in I86I and 1862. It was so voted. The schedule of policies showed 12,460 Whole Life Policies, I 4 Term Policies, 378 Endowments, one Joint Life Policy, one Survivorship, and seven Annuities in force.* THE year 1865 opened with the end of the war near at hand. 18. On January fifth Mr. Wyllie Woodbridge, the Company's agent at Savannah, wrote, expressing his gratification at restored communications, saying all his papers had been destroyed, and asking for a memorandum of his business, that his accounts might be adjusted at an early day. "I shall be happy," he continued, "to resume the agency if you so desire. This bloody war has existed long enough; let us hope that peace may soon be restored to our whole country, and civilization once more exist under our glorious Constitution. We are now passing through the worst agonies of the revolution in our social relations, and there must be much misery and want where once there was prosperity. But we will trust in God, who can bring light out of darkness." Mr. Franklin replied under date of the sixteenth, expressing his pleasure at hearing once more from "the Company's valued correspondent at Savannah," and saying that as soon as a definite rule of action had been decided upon in reference to Southern business he would be communicated with. "We are now," he *The ordinary form of Endowment at this time was a policy due at a specified age, as at 40, 45, 50, etc., to 65, or at prior death. Non-forfeiting policies-both Life and Endowment-were paid up in ten years. Period of the Civil War. 115 said, "heartily engaged in collecting funds for the relief of the sufferers among you. One vessel has already sailed with a good supply of provisions, and another is loading at our wharf and will very soon be on her heavenly errand."* Five days after the fall of Richmond Mr. Wortham wrote from that place. Unfortunately, both this letter and one written April twenty-second are not on file; but in answer to the latter, Mr. Franklin replied April twenty-seventh: Be assured, my dear sir, that your attempts to alleviate the sufferings of your fellow men, without regard to national proclivities, as a member of the association to which you allude, have our hearty sympathy, and with you we most fondly hope that you and your associates "have ministered to the comfort and relief of thousands from both armies." On May twenty-fourth Mr. Wortham wrote expressing his thanks "for the many kind acts and favors extended by the Company," including the balancing of his account, many of his papers having been lost or destroyed in consequence of the fire on April third. Among these papers was a scrip dividend.t Upon his affidavit that it had been lost, the Company paid it in cash, together with other similar obligations in his hands, which had been ordered redeemed subsequent to 1861. Eighty per cent. of the dividends declared from I850 to I860, and the dividends of I86I and 1862, had thus become redeemable since 1861, and these were now paid upon demand, without reference to the status of the policies upon which they had been declared. The delay in their redemption thus proved a great boon to Southern policy-holders, giving them money when needed as never before. The two vessels referred to were the "Rebecca Clyde," which sailed January fourteenth, and the " Daniel Webster," which sailed January sixteenth. The first was in charge of Archibald Baxter, and was furnished with provisions by committees of the Chamber of Commerce and the Produce Exchange. The "Daniel Webster" was in charge of Colonel Julian Allen, representing the people of Savannah, by authority of General Sherman. To this vessel's cargo Boston contributed largely, besides sending the steamer "Greyhound" on the fourteenth. The last public address of Edward Everett was made at a meeting held in Faneuil Hall, January ninth, in aid of the Savannah fund. Mr. Everett died January fifteenth following. Philadelphia subscriptions to the Savannah fund were announced on the fifteenth as amounting to $2I,ooo.- See New York Heraldfor January ig, 14, 15 and r6, I865. t This piece of scrip was afterward sent to the Company by Mr. Wortham, it having been found and restored to him by a negro. Period of the Civil War. Among the documents from the Richmond office that came to the surface in I865, was a receipt for Policy No. 9,890, on the life of James H. Morrison, which was surrendered to Mr. Wortham March 27, I862, for its "equitable value, as advertised and published by the said Company." This paper recited that the agent had no power to purchase policies, but the Company acknowledged the claim and paid the surrender value through the Baltimore agency in July, I865. Mr. Muldon wrote from Mobile on April nineteenth, saying he was "still in the land of the living," asking for Company news since 1862, and offering his services if business was to be resumed at Mobile. In a second letter, dated May fourteenth, he sent "third" of bill of exchange for ~'3I I-2-5, referred to in his letter of January 22, 1862, "first" and "second" of which had been sent through the blockade via Havana, August I, I862, and never received. This bill had a checkered history. When presented at the Union Bank of London, in June, 1865, it was refused acceptance; but the drawer (Southern Bank of Alabama) immediately wrote to its London correspondent, saying it was all right; and so, nearly three years after its date, it was paid, and thus both commercial honor and banking methods were vindicated. Mr. Muldon had on hand redeemable scrip in sufficient amount to pay back premiums and interest on two policies on his own life, which were thus re-instated, and a considerable amount of scrip in the hands of other persons was redeemed through his office. - Letters were also received during the next few months from Messrs. Martin and Taylor, of Charleston, Garland, of Petersburg, and Van Gilder, of Knoxville, all former agents of the Company. Two claims that had matured upon policies in force after communication was interrupted were paid through Mr. Garland. Mr. Van Gilder had been compelled to turn over to the Confederate Receivers at Knoxville and Jonesboro the cash and one note in his hands belonging to the Company, in lieu of which he forwarded copies of the decree of the court and receipts of the Receivers. Mr. Garland had escaped a like dilemma by refusing premiums on the ground that he would be obliged to report and pay them to the Confederate Receiver. Period of the Civil War. II7 At the June meeting of the Trustees the subject of paying losses in Southern States was discussed, and it was voted to obtain the opinion of counsel as to the authority and liability of the Company with respect to the payment of such claims. On July twelfth the opinion of counsel was submitted, and it was voted to pay losses occurring during the war where the premiums had been received by the Company and the deceased had not taken up arms against the Government. At the same meeting the subject of renewing Southern policies lapsed during the war was discussed and referred to the Supervisory Committee. The Committee reported August ninth, and a resolution was adopted authorizing the officers to renew such policies on the payment of back premiums and interest, upon receiving a satisfactory certificate of good health and that the insured had taken no active part in the war. The end of the period within which such re-instatements might be made was at first fixed at October first, but on November ninth this limitation was removed, and on January 31, 1867, the limitation respecting those who had served in the Confederate Army or Navy was also removed. The war had continued so long that it was found to be more advantageous for most policy-holders, and to require much less ready money in all cases, to take out new policies. The Southern business had been largely on the part note plan, under which nearly the whole reserve on policies was in the form of notes given by the insured. These having been canceled with the policies, the holders had received nearly their full surrender value at the time of lapse. In the Report of the Officers to the Trustees, in January, I862, the reserve on Southern policies was estimated at $500,000; and when these policies were canceled, in I863, there was charged to Profit and Loss about $400,000 on account of premiums and interest due on the same, balances due from Southern agents and premium notes canceled.* The re-instatements made after the war must have reduced the amount of forfeitures to a very inconsiderable sum.t Owing to the unsettled state of affairs in the *The total amount charged off was $469,o67.86. This included an unknown amount of premium notes canceled in I863 on Northern policies, of which there were in the preceding year $42,963.I7. t There was published in the "Morning News" (balance of name missing), in I869, a list of Southern policies re-instated, amounting to $731,345. Period of the Civil War. South, the liability of agents to legal complications, and the unfavorable mortality previously experienced, no efforts were made in 1865 to extend the business in the Southern States. In May, 1864, when the Governors of several Western States called out the militia to do garrison duty for one hundred days, the Company, in reply to inquiries on the subject, issued a circular stating that no extra would be required where the insured performed only garrison duty within their respective States, but when ordered beyond those limits, or engaged in actual hostilities, the regular war extra would be charged. One death-claim was paid in 1865 as a result of this circular. John Sandiland, of Mishawaka, Indiana, insured for $I,ooo under Policy No. 22,335, dated July 3, 1863, went out under the call as a member of the 138th Indiana Volunteers, and died of typhoid fever at Tullahoma, Tenn., October 3, I864. As he was doing duty beyond the limits of his State without a permit, he was not strictly covered by the terms of the circular, but the Company waived the technicality and paid the claim less one year's war extra, in February, 1865. During the same month the Company was notified of the death of William W. Kaye, of Philadelphia, insured for $I,ooo under Policy No. 13,822, taken out in i860. Mr. Kaye enlisted in the I83d Regiment Pennsylvania Volunteers, in January, 1864, and paid the war extra. Two of his comrades certified that he was wounded at the battle of Cold Harbor, Va., June 3, 1864, and had been missing since that time, and that the dead were not buried until they were unrecognizable.* Upon being furnished with these facts, the Trustees directed the payment to his widow of one year's interest on the amount of the policy, the principal to remain in abeyance until further action of the Board. In 1866 Mrs. Kaye was granted a pension by the Government, on the ground of her husband's death, and upon this evidence the Company paid the claim in full. * The Federal dead lay unburied where they fell, from the third until the eighth of June, when they "were in a horrible state of putrefaction" (Walker's History of the Second Army Corps, page 518). The regiment to which the writer belonged- the Eighth New York Heavy Artillery-took part in this bloody but fruitless assault, and the body of Colonel Peter A. Porter, who "was killed within a few yards of the enemy's works" (Gen. A. A. Humphreys) was brought off during the night of the fourth, under such difficulties and dangers that the men who rescued it were awarded medals by the Century Club, of New York, of which Colonel Porter was a member. Period of the Civil War. II9 In May of this year the limit of insurance upon one life was increased from $o0,000 to $20,000. In December the cholera made its appearance in New York, and the Trustees approved a subscription of five hundred dollars made by the officers to the funds of the Sanitary Association. Precautions were evidently taken none too soon, as the Company paid one loss by cholera in 1865 and eighteen in 1866. The annual report for the year was presented to the Trustees January 31, 1866, and showed a rapidly increasing business, the premiums being for the first year in the Company's history in excess of two millions of dollars. A dividend of fifty per cent. on participating life policies one year in force was declared, and the outstanding dividends declared in 1863 and 1864 were ordered paid in cash. A review of the Company's experience under war risks showed that 731 permits had been granted, on policies amounting to $I,15I,950; and that there had been 73 losses, amounting to $IO7,Ioo. The total mortality above the probable was $91,897, and the total amount received as "war extra" was $72,754.86. The war risks under policies issued prior to December 31, I860, amounted to $868,200, and the losses above the probable under these policies were $52,801.82; the new war risks were $283,750 in amount, under which the losses above the probable were $39,095.18. The insurance in force December 3I, I860, was $16,388,I09, and the war continued four years; an extra charge of eighty-one cents per $I,ooo annually upon the whole amount would, therefore, have made up for the extra losses incurred under old policies. Although, as we have seen, Life Insurance felt severely the hard times incident to the beginning of the Civil War, yet it had prospered during its continuance beyond anything in its previous history, and almost beyond any other business. Life Insurance, like-the Union, had stood the strain of war, and had emerged stronger than ever before. It had done something to mitigate war's sufferings, and to show to the adherents of each side how much they had in common, and how much they still loved and respected each other. It was yet to be in I20 Period of the Civil War. fluential in binding all sections of the country in closer bonds of brotherhood.* FROM A LETTER-HEAD OF THE PERIOD. *" One heart and one hand, One flag and one landOne nation evermore." Quoted by Major Livingston Mims, of Atlanta, in an address before the NEW-YORK LIFE'S " Columbian Convention," Chicago, July 12, 1893. TABLE SHOWING THE CONDITION OF THE LIFE COMPANIES DOING BUSINESS IN NEW YORK DECEMBER 31, 1865, THEIR BUSINESS FOR THE YEAR, THE SAME ITEMS FOR THE NEWYORK LIFE, AND THE NEW-YORK LIFE'S SHARE OF ALL: THIRTY NEW-YORK N.-Y. L'S COMPANIES. LIFE. SHARE. Assets................................ $64,232,123 $5,0I8,449 7.8 Premium Notes and Loans in Assets...... 14, 118,881 I,I86,988 8.4 Surplus............................... 17,890,624 685,967 3.8 Liabilities............................. 46,341,499 4,332,482 9.4 Surplus to Liabilities, Per cent........... 38.6 15.8.... Insurance in Force..................... 395,703,058 45,485,726 11.5 New Insurance Written........... 245,427,057 16,324,888 6.7 Total Income.......................... 24,887,020 2,181,494 8.8 Premium Notes and Loans in Income..... 6,322,464 349,445 5.5 Death-Claims Paid..................... 4,125,442 490,522 11.9 Death-Claims per $I,ooo Insured........ $I0.23 $o.8o.... Total Paid Policy-holders.............. 6,292,036 785,811 12.5 Expenses and Taxes.................... 4,025,6I9 333,68I 8.2 Per cent. to Income.................... I6. I 15.3.... VIII. FROM PEACE TO THE PANIC. I866- 1873. THE period following the Civil War was necessarily one of adjustment in industrial and commercial conditions, as well as in civil and political relations. The war had called from peaceful pursuits, for longer or shorter periods, upwards of three millions of men, and had caused the expenditure by the Government of over three thousand million dollars within the space of five years. The year 1865 saw more than a million men lay aside the implements of destruction and take up again those by which material and moral values are produced; it saw expenditures of the Federal Government reach the enormous total of twelve hundred and ninetyseven million dollars, from which they declined in a single year to five hundred and twenty millions, and in six years to less than three hundred millions. The increased production of the years immediately following the war was chiefly in manufacturing, in mining and in railroad construction. The grain raised in 1870 was but little more than in I860; the cotton and tobacco produced were less; but manufactures more than doubled; the output of mines and oil wells increased from fifty, to one thousand, per cent.; railroad construction, which was only 1,846 miles in I860, was 6,070 miles in I870. The hardy veterans turned to the tasks of peace with the same courage and energy they had shown in war; they occupied all the old fields and sought out new ones in the undeveloped West. Between 1860 and 1870 the increase in the total population of the United States was twenty-two per cent., and between 1870 and I880 the increase was thirty per cent.; the States and Territories lying west of the Missis121 I22 From Peace to the Panic. sippi River-excluding the five States admitted to the Union prior to I850-more than doubled their population in each decade. This period saw a wide extension of the general agency system of the NEW-YORK LIFE, and a large increase in its agency force. It brought into the service of the Company many of the best field men it ever had, some of whom continue with it to this day. It saw the Company's business re-established in the South, while new fields were occupied in the West; the Company again entered Canada; and, crossing the Atlantic, this new-comer of the nineteenth_ century established itself in the foreign field in competition with companies that were old before it was born. It was a period of fierce rivalry at home and abroad; competition was never before so severe, and never since so openly unscrupulous. The new business of all the companies was largest in I869, when it reached six hundred and fourteen million dollars, and this proved high-water mark for the next nineteen years. THERE was but little demand for life insurance in the South 10866. immediately after the war, and in 1865 the NEW-YORK LIFE transacted the business growing out of its former contracts either through its former agents, as correspondents, or directly with the insured. In 1866, however, a beginning was made in the re-occupation of the Southern field. Messrs. V. & F. A. Anderson, of Galveston, were appointed General Agents for Texas in January; in August Mr. Henry Harney was appointed General Agent for Georgia and Florida, with head-quarters at Savannah; in September the Trustees authorized the purchase of Virginia bonds to the amount of $50,000, for deposit with the Treasurer of the State, as required by the law of February 3, I866. The purchase and deposit were made by Mr. J. C. Deming, who had succeeded Captain Ferguson in the agency at Norfolk. The same month (August) saw the re-appointment of Dr. Copes as General Agent for Louisiana, and the appointment of Mr. Thomas Frost as General Agent for South Carolina. The Messrs. Anderson were to accept applications from acclimated persons on the Io-payment life plan only, and to charge one per cent. extra. In Georgia and Florida no extra charge was made on the Io-year From Peace to the Panic. 123 table for acclimated persons; those unacclimated were charged one per cent. extra for residence in Savannah and vicinity, but none for residence in the interior of the State. The tax on premiums in Georgia was one per cent., and the city license in Savannah was $ioo. In Louisiana the extra rates for acclimated persons were one-half of one per cent. on Ordinary Life Policies, and one per cent. for ten years on io-Payment Life Policies; unacclimated persons were insured only on the io-year table at two per cent. extra for the ten years. The State license in Louisiana was $I,ooo, and the city license in New Orleans was $500. In South Carolina applications were received only on the io-Payment Life table; onehalf of one per cent. extra was charged acclimated persons in Charleston, but for those residing in other parts of the State there was no extra charge. In Virginia no extra was charged; the State tax was one per cent. on premiums and a license fee of $25 for each agency. Mr. Muldon continued to act for the Company at Mobile, where an extra of three per cent. was charged acclimated persons insured on the Ordinary Life tables. Mr. Muldon was succeeded in the following year by Mr. Thomas Carson. As an illustration of the commissions paid at this time, the following alternative rates offered to Dr. Copes are cited: (i) Fifteen per cent. on new premiums and seven and a-half per cent. on renewals; or (2) twenty I/ / -- 0T a-.H -F = ' >i: PARTICIP ATE I4g.-? FROM A LETTER-HEAD OF THE PERIOD. THE OFFICE OF THE NORTH AMERICAN FIRE COMPANY WAS IN THE NEW-YORK LIFE BUILDING, 112 & 114 BROADWAY. 124 From Peace to the Panic. per cent. on new premiums and five per cent. on renewals; or (3) twentyfive per cent. on new premiums and two and a-half per cent. on renewals. The rates given under the second option were selected. During the early part of I866 Mr. Nelson Sayler, of Cincinnati, Ohio, worked in New Orleans in connection with Dr. Copes; he was unable, however, to endure the climate, and returned to Ohio in June. From a long report made by Mr. Sayler, on business conditions and prospects in New Orleans, the following extract is made, as bearing on the subject of compensation and extra rates: The Southern people, and especially the peculiar element represented in New Orleans, do not look upon life insurance as we Northern people do. * * * Their climate, so balmy and genial, produces almost the whole year round what they use. There is little or no storing in summer for a long, cold winter. They live on the day's bringing forth, and from this they learn to think of to-day and almost ignore to-morrow. * * * This one feature will always render life insurance in New Orleans a business requiring much harder work, with less remuneration, than in any Northern city. Another point: there are companies insuring in the South at the same table rates as in the North. Whether it is safe to do so or not, is another question. The Mutual Benefit withdrew its agency-as I understand-for this reason. The Mutual Life of New York will not insure there, and the Connecticut Mutual has never done business in the Southwest. Though the experience of insurance companies may prove that longevity is not so great in the South as in the North, yet the almost universal belief there is that it is. Doubtless this is a mistaken notion, but it is firmly fixed and truly believed. Their daily papers laud their climate and affirm its healthfulness; their leading citizens do the same, and the ignoble vulgus takes up the cry and sounds it on the street corners. * * They admit that a Northern man must become acclimated, but scout the idea that a native-born Southerner, or one who has had the yellow fever, or one who has passed through several epidemics of it, is any greater risk than a New Yorker in New York; and to tell an Alabama or Mississippi planter that he is shorter-lived than an Ohio farmer, would be considered the height of absurdity. The letters of Southern agents of this period contain many references to other companies that were insuring Southern risks at Northern rates, and the records of the Insurance Departments and of the courts are now all that remain of most of these companies. They paid higher commissions and promised larger dividends than the old and well-established companies, and for a time enticed away from them both agents and customers; but many of these returned in the course of time, after a dearlybought experience. From Peace to the Panic. 125 Extension of the Company's business westward was made during this year by Mr. Reuben Partridge, who had his head-quarters at Leavenworth, Kas. Mr. Partridge went as far west as Denver in search of business, and among the appointments made by him was that of Dr. W. B. Bancroft as Medical Examiner, a position which Dr. Bancroft held and honored for over twenty-five years. He is well-known throughout the western country as a giant in physical proportions, the Nestor of the medical profession, a skillful surgeon, and a man of unblemished character. In 1866 there were five agencies which received over $Ioo,ooo each in premiums —those of D. W. Russell, of Boston, $306,244.84; E. J. Richardson & Sons, of Baltimore, $I37,769.63; S. A. Mattison, Detroit, $I27,423.00; Curtis L. North, of New York, $I I6,513.10; and Lancaster & Gaskell, of Philadelphia, $105, I20.77.* Mr. Russell took charge of the Boston agency in July, 1864, and at once placed it in the front rank. For several years the premium receipts of the NEW-YORK LIFE in Massachusetts were larger than those of any other company; in 1869 they were over six hundred and thirty thousand dollars. Mr. E. J. Richardson had been the Company's representative in Baltimore since 1848, and his steady devotion to the interests of his clients bore fruit in a large and increasing business. He remained in the Company's service until his death in I868. Mr. Mattison was General Agent of the Western Branch of the Company, and Superintendent-of Agencies for the United States. Mr. Lancaster had been in the Company's service since the Company's entrance into Pennsylvania in 1849. If these achievements seem small to the most successful agents of to-day, they will probably be the first to acknowledge the changed conditions, and to say, "other men labored, and we have entered into their labors." According to an article The following memorandum of commissions paid in I866, attached to the report for that year, further indicates the distribution of the Company's business at that time: Massachusetts Agency........... $55,390.04 Missouri Agency................ $7,529.2I New York City Agency.......... 46,769.0o Illinois Agency................... 4,554.I6 Ohio Agency.................... I2,555.04 California Agency................ 3,87I.05 Maryland Agency................ II,89o.43 Wisconsin Agency................ 3,o06.6I Michigan Agency................ 11,794.22 All other agencies................ 90,250.95 Pennsylvania Agency............ I0,379.32 126 From Peace to the Panic. written by Mr. W. F. Morrill, General Eastern Agent of the Company, and published in the "Kennebec Journal" of April 13, I866, "the largest life insurance in the United States" was then carried "by a gentleman in Philadelphia," who was insured for $150,000. "A gentleman in Philadelphia"* still holds the record for the largest insurance on his life, but the amount is ten times as much as that mentioned by Mr. Morrill, and this is a fair illustration of the increased popularity of Life Insurance. t Early in this year the Company began the custom of attaching to each policy a copy of the application upon which it was issued. It seems strange that so natural and proper a thing should not have been done before, and stranger still that it should not have become the universal custom. All companies make the application a part of the contract; from which it follows that, if a copy is not attached to the policy, the insured is not in possession of the whole contract and cannot know what his rights and privileges are under it. It is made obligatory to furnish such copy in some States, and it does not speak well for the State of New York that bills to this effect have been introduced in several Legislatures and have failed to pass. The best preventive of litigation, after a policy becomes a claim, is a perfect understanding of its provisions during the time it is in force. At the meeting of the Trustees, held January 31, 1867, it was voted to pay the dividend of 1865 in cash, and to declare a new dividend of fifty per cent. on the premiums of Ordinary Life Policies one year in force. IT was now nine years since the Company took possession of its 187. offices at 112 and 114 Broadway. Its business had increased beyond all expectations. Its assets were more than four times as much, its annual income was over five times as much, and its new business was more than ten times as much, as they were nine years before. Its present quarters had become too strait for it. At the meeting of the Trustees, held on March I3, I867, the Finance Committee reported that the prem* Hon. John Wanamaker. t Since this was written it is reported that Mr. Wanamaker has increased his insurance to $2,000,000. From Peace to the Panic. 127 ises did not afford sufficient accommodation for the Company's employes, nor adequate security for its books, papers and assets. The Committee called attention to the plot of ground on the south-east corner of Broadway and Leonard Street-occupied formerly by the Society Library, and latterly by the publishing house of Messrs. D. Appleton & Co. and the dry goods house of Messrs. S. B. Chittenden & Co.-as offering unusual advantages for an office building. The building recently occupying the site had just been burned;* the plot had a frontage of sixty feet on Broadway and was about one hundred and seventy feet deep on Leonard Street and Catherine Lane, thus giving light and air on three sides. After a full discussion, the Committee was authorized to make the purchase at a price not exceeding five hundred thousand dollars. On April tenth the Committee presented the purchase contract, which was approved, and a Committee on Plans was appointed. The Company subsequently acquired the lot adjoining, in the rear, making a plot I96 feet deep. Plans were invited from five prominent architects, each to receive one thousand dollars, and the return of his plan if unsuccessful. The successful competitor was Mr. Griffith Thomas, who designed the Park Bank building, Pike's Opera House, and other noted structures of the day. The Building Committee, as finally appointed, consisted of the President and Actuary, and Messrs. William Barton, William H. Appleton, George Osgood and David Dows, Trustees of the Company. On December eleventh it was voted to build, in accordance with the plan adopted, a white marble structure, at a cost not to exceed one million dollars. The contract was awarded to Mr. Thomas Gardner, Jr., and the building was finished and ready for occupancy on May I, 1870. When the Company declared its first dividend in 1846, there was no established usage on the subject in this country. The only dividend declared to life policy-holders prior to that time was one by the Girard Life and Trust, in I844, which was added to the policies in the form of *On the morning of the fire, and while it was still burning, Mr. Beers called on Mr. Appleton and made a proposition for the site, subject to the approval of the Trustees. This proposition became the basis of the Committee's report. 128 From Peace to the Panic. reversionary insurance. The NEW-YORK LIFE adopted the percentage plan, which, with various modifications to adapt it to the new forms of policies, had been continued during twenty-one years. While preserving a fair degree of equity between policy-holders insuring in the same year and on the same premium table, this plan failed to take account of the surplus factors which vary according to the kind of policy taken and the number of years it has been in force. As a result, policies recently issued were paid too much and policies of long standing too little. In order to remedy this inequality, the officers of the Company submitted to the Finance Committee in October, 1867. a proposition to adopt the Contribution Plan,* devised by Messrs. Sheppard Homans and David Parks Fackler, at that time Actuary and Assistant Actuary, respectively, of the Mutual Life Insurance Company. The proposition was reported to the Trustees with the approval of the Committee, October ninth, with examples of its practical working. It was proposed to allow policy-holders thereafter the option to have the value of their dividends added to their policies in the form of reversionary insurance, payable with the policies, or to receive them in cash on the policy anniversaries. The report and recommendation were unanimously adopted. The State of Louisiana, in which the Company had just re-established its business, was sorely afflicted during this year. In April the Mississippi * With the report of January I, 1868, was printed the following explanation of the " Contribution Plan ": "Each policy is credited with the premium paid and its reserve from the preceding year, if any, and the interest earned thereon; it is charged with the net cost of insurance for the year, and the reserve (or amount requisite to be retained in the re-insurance fund). The difference between these constitutes the dividend, or sum which the assured has contributed during the year in excess of the amount actually required. The dividend (the conditions remaining unaltered) naturally increases each year, for the reason that the 'reserve' grows rapidly with the age of the policy, and is estimated to yield an interest of only four per cent. per annum, while it actually realizes a much higher rate, and the difference goes to increase the returnable sum on each particular policy. * * * Some of the older policies of the Company will the present year realize a cash dividend on the policy proper (without reference to profits on dividend additions) of over sixty-eight per cent. of the annual premiums." The Contribution Plan-which is now in almost universal use-was adopted by the older companies in the following order: Mutual Life 1863, NEW-YORK LIFE and New England Mutual I867, State Mutual I868, Connecticut Mutual I869, Mutual Benefit 1870, Penn Mutual I871. (See article by D. P. Fackler, in Proceedings of Actuarial Society of America, October 3, I889.) The percentage plan being more favorable to new insurants and more easily understood, companies which were paying large percentage dividends were loth to abandon it because it helped to secure new business. To the new companies the Contribution Plan offered an easy method of concealing their small dividends, and a fertile field for estimates of increasing returns to policy-holders. From Peace to the Panic. 129 and its tributaries overflowed their banks to such an extent that vast areas were swept of nearly everything movable by water. A committee of forty was formed in New Orleans to solicit subscriptions for the sufferers, of which Dr. Copes was a member. Upon his application the Company made a donation of one hundred dollars to the relief fund. Pestilence followed the flood; in July the yellow fever appeared; on September eighth it was declared epidemic; between July seventh and October twenty-fourth, out of 5,767 deaths occurring, 2,876 were from yellow fever. The Company paid five yellow fever losses, and contributed $250 to a relief fund raised for the sufferers. As regards competition in the South at this time, the following extract from a letter written by Dr. Copes under date of April thirtieth gives an inside view: I think, in view of the number of new life agencies coming in here, it would be well, as you have paid the license fee, to expend a little more in advertising. You have many objections to contend with, and it requires all the resources I can command to meet'them. Your tables are objected to as being higher than others; your restrictions in the matter of acclimation far more rigid, and your credit on premiums less; and you have an agent who is a poor hand at the work of deceiving his neighbors, or at telling a competitor he is a cheat and a swindler. * * * I have several times brought to the notice of the tax collector here the Knickerbocker, the Globe, the Columbia (of Cincinnati), and other companies not licensed; but he tells me he cannot find their offices, and if he does find them, they tell him they are doing no business. The St. Louis Mutual is doing business here without discrimination between Northern and Southern risks and on a very low table of premiums. A death-claim paid in 1867, under a Southern policy which lapsed during the war, deserves brief mention. Mr. Joseph George, Jr., of Savannah, Ga., insured in May, I850, for $2,000 under Policy No. 5,837. Mr. George paid his premiums regularly until May, I86I, when the Company's agent at Savannah refused to receive the premium then due-which was tendered in gold-not having the Company's renewal receipt. No further payment was made, and Mr. George died in January, I865. The Trustees ordered the policy to be paid in full. During these years of large dividends the most extravagant calculations and predictions were made concerning future returns from life insurance policies. In order to,meet these claims with a guarantee that should 9 130 From Peace to the Panic. have a solid mathematical basis, the NEW-YORK LIFE devised and introduced, in I867, a Return-Premium Endowment Policy. This contract agreed to pay the face of the policy, together with all premiums received thereon, at age sixty-five or at prior death. This was a straightforward offer to give the insured the face of his policy for the use of his premiums while the policy was in force-the premiums themselves to be returned at the maturity of the contract. It was something new-even the standard works on the theory of Life Insurance contained no formulas for the return of the gross premiums paid in case either of death or survival. But there was a young man in the Mathematical Department of the Company who thought such a formula could be made, and he made it. He is still in the Company's service, being none other than the present Actuary, Mr. Rufus W. Weeks. The large premium required for such a policy prevented it from becoming popular, but the results under maturing policies were very satisfactory.* The form of Premium-Return now in use by the Company, which guarantees, in addition to the face of the policy, a return of the whole or half of the annual premiums paid (as may be desired) in case of death within a stipulated period, is more in accord with * Policy No. E-2,788, issued in I868, on a life aged 31, for $5,ooo, annual premium $319.80, matured by death in i886, with the following result: Nineteen premiums, $319.80 each,.. $6,076.20 Less eighteen cash dividends,. I,8Io.oo Cash cost of policy I8 2 years,.$4,266.20 Face of policy,.. $5,oco.oo Return-Premiuy additions,.. 6,76.20 Paid at maturity,... $II,076.20 Profits over cost after I8 years' insurance,.... $6,8Io.00 Policy No. E-3,I62, issued in I868, on a life aged 43, for $5,000, annual premium $898, matured as an endowment in I890, and was paid to the insured. The costs and results were as follows: Twenty-two premiums, $898 each,.. $I9,756.oo Less twenty-one dividends. 5,368.72 Cash cost of policy 22 years,.. $14,387.28 Face of policy,... $5,000.00 Return-Premium additions,..... 9,756.00 Dividend at maturity,.... 240.50 Total paid at maturity,. $24,996.50 Profits over cost after 22 years' insurance,. $I0,609.22 From Peace to the Panic. 13I the genius and purpose of Life Insurance, and involves but slight additional outlay. The annual report for the year I867 was presented to the Trustees January 31, I868. It gave, in addition to the usual items of receipts, disbursements, assets and liabilities, the following schedule of policies in force: 12,888 Ordinary Life Policies, insuring $39,330,099; 7,364 Io-Payment Life Policies, insuring $24,645,963; one 20-Payment Life Policy for $5,000; 1,483 Endowment Policies, insuring $4,469,032; I,I65 Paid-up Policies, insuring $964,884; 91 Term Policies, insuring $213,900; and two Joint Life Policies, insuring $8,600. A dividend of $955,463.98 was declared, to be credited on the policies, or paid in cash, at their next anniversaries, in accordance with the new plan; and the scrip dividend of I866 was ordered to be paid in cash. It was also voted that, in making the apportionment of dividends to each policy-holder under the new plan, the officers be authorized, at their discretion, to deduct therefrom the pro rata of taxes that were then, or might thereafter be, imposed by the States in which the respective premiums were collected. This measure was made necessary by reason of the varying rates of tax laid upon premiums by different States. By this means the policy-holders of each State were made to bear the taxes imposed by their own State, and one State was not permitted to tax the citizens of another. This was the course and the reasoning generally adopted by life companies at this time; but the taxing States have since insisted that the tax is in the nature of a license to do business, and the companies. have acceded to this view. No deductions are now made from dividends on account of taxes paid by the Company. THE increase in the Company's new business during the last six 86 years had been over seven-fold-the Company was not only outgrowing its office accommodations, but' the capacity of its official staff to supervise it. A committee of three Trustees was therefore appointed January 31, I868, to take into consideration the need of additional assistance to the officers of the Company. The committee reported on April eighth, recommending that the Vice-President be made an active officer, 132 From Peace to the Panic. and that William H. Beers be elected to that office. The report was accepted, and at the annual election on May thirteenth following, Mr. Beers was elected Vice-President and Actuary. Meanwhile Mr. Henry A. Dyer, who had been in the employ of the Company for several years as a Special Field Agent, was transferred to the Home Office and made Superintendent of Agencies. In August of the same year Mr. P. S. Lincoln, an accomplished mathematician, was placed in charge of the mathematical work of the Actuary's Department, thus enabling Mr. Beers to devote his whole time and energies to executive duties. Mr. Franklin was at this time nearly sixty-seven years of age, and gave his special attention to the adjustment of policy claims, a duty for which his amiable disposition and legal training peculiarly fitted him. In March, I868, was issued Volume I., Number I, of the "NewYork News-Letter," which is described in a sub-title as "a Journal of Instructive and Entertaining Literature." The first number was in the eight-page form, in which it continued to be published until September, 1878, when it took its present form. It was not illustrated, but contained the Annual Report for 1867; a full-page article entitled "Two Hours at the Home of Dickens"; a story, showing how Mrs. Buffon surprised her husband with a sewing-machine purchased by saving a few cents a day, and how Mr. Buffon surprised his wife with a life insurance policy purchased by saving the money he usually spent for cigars-which his wife detested; shorter articles on Life Insurance and other topics; and three pages of advertisements. One of the shorter articles noticed a policy taken in the NEW-YORK LIFE in April, 1863, by Horace Greeley, at the age of fifty-two. This policy was kept in force until maturity, and was paid at Mr. Greeley's death in I872. No one was named as Editor; the publishers were Messrs. Francis Hart & Co., who (and their successors, Messrs. Theo. L. De Vinne & Co.) continued as such until August, I886, from which time it has been printed on the Company's own presses. During this year the Company made arrangements for the extension of its work in the South in an energetic and systematic manner. In April Messrs. B. G. Humphreys & Co. were made General Agents for the State QY IV5 wAAL *d4 A4C ~ A AO-.AA^-U4. &4 I ~ ~ ~ s% GA A41 -6 ~ ~ ~ lv'c 3~A 134 From Peace to the Panic. of Mississippi, with head-quarters at Jackson; and in December Messrs. J. E. Johnston & Co. were made General Agents for Georgia and Florida, with central offices at Savannah. The two firms were in reality one, and the partners were ex-Governor Humphreys, of Mississippi, General Joseph E. Johnston, and Major Livingston Mims. Although the " cause" of the Confederacy was "lost," the Southern people cherished their old leaders with a love all the more fervent, because they represented all that survived of the cause for which they had sacrificed so much. These three gentlemen were able, therefore, to command the best talent in the South in the work of soliciting life insurance, and under their hands the "Southern Department," into which the two firms were finally consolidated, became one of the Company's most prosperous agencies. In May the Trustees authorized the purchase of Tennessee bonds to the amount of twenty thousand dollars, for deposit with the Treasurer of that State, and Mr. Daniel O'Dell, who had been a General Field Agent since August, I866, was made General Agent at Memphis, from which point the business of the Company was extended into Arkansas and Texas. At the August meeting of the Trustees the Finance Committee reported that, at the suggestion of the Officers they had considered the policy of doing business in the Dominion of Canada, which would necessitate the deposit with the Canadian authorities of seventy-five thousand dollars in United States stocks. The Committee approved the proposition, and the Trustees authorized the deposit. At this time American currency was worth in gold about sixty-one cents on the dollar, while the Canadian currency was on a gold basis. The Trustees authorized the Officers of the Company to use their discretion with respect to the money in which Canadian policies should be payable. In order to meet all preferences, two kinds of policies were issued, one on a gold, and the other on a currency, basis. The gold-policy holder paid his premiums in gold or its equivalent, and was guaranteed payment in the same; the currencypolicy holder paid his premiums in American currency, and was guaranteed payment in the same. The latter class got the better bargain; they bought American currency for premiums at a discount during the next From Peace to the Panic. I35 ten years, and received payment in currency that constantly appreciated until it reached par with gold on the resumption of specie payments, January 1, I879. The deposit was made with the Dominion Government August twenty-eighth, and Mr. Walter Burke was made General Agent and Attorney for the Company. Mr. Burke managed the agency with marked ability and success until. his death,. in January, 1878. On account of a law passed by the Dominion Government in 1877, the Company withdrew from Canada March I, I878; no successor was, therefore, appointed to Mr. Burke until I883. Mr. Edward Jones Richardson, for twenty years the representative of the Company in Baltimore, died in that city August 29, i868. Mr. Richardson succeeded Mr. J. Smith. Homans, under whom he had been a successful solicitor, and by whom he was highly commended. During the period of his agency Mr. Richardson took two of his sons, Edward A. and George I., into partnership with him. The style of the firm, E. J. Richardson & Sons, was continued by the sons after the father's death, until 1872, when Mr. George I. Richardson became the Company's-representative in Baltimore, a position which he still holds after a longer period of service than that of his father before him. At the meeting of the Trustees in September, 1868, resolutions were adopted expressive of the loss sustained "in the death of one who had been a most faithful and efficient agent, who for more than twenty years had discharged all the duties devolving upon him to the entire satisfaction of the officers, and to the promotion of the best interests of the Company." The Company's scrap-books for this period contain many competitive circulars of other companies, but very few of its own. The subject that gave rise to more "claims" and "refutations ' than any other was the subject of dividends, involving as it did, both the plan of the companywhether organized on the purely mutual, stock, or mixed, basis-and the method of distributing surplus to policy-holders. Under the charters and by-laws of many of the younger companies on the mixed plan, stockholders were not only given entire control of the company, but also a large share of the surplus earned. A company paying-or claiming that 136 From Peace to the Panic. it would pay-large dividends, might not begin paying any dividends whatever until the fifth or sixth year; while others which declared dividends annually, beginning with the second year, might be a long time in redeeming them. The only NEW-YORK LIFE circular of the year found on file contains such a plain statement of facts from official sources, that it is printed herewith. The original is dated, "Branch Office New-York Life Insurance Company, Norwich, Conn., July I, I868," and signed "J. E. Linnell, M. D." LIFE INSURANCE. Life Insurance Companies are multiplying so rapidly of late, and State Legislatures are granting charters without stint, and frequently to men who have not the practical knowledge of the fundamental principles of Life Insurance adequate to conduct the business for the interests of the insured, it has become a matter of serious import to the community that they have at command a list of companies doing business in a given locality, from which they can determine whether the interests of the policyholders or those of stockholders are best cared for. To this end the following exhibit of the several companies doing business in New York is presented from qoicial returns made to the Insurance Commissioner of that State for the year ending December 31, 1867: NAME OF COMPANY. Etna................ American Popular.... Atlantic Mutual....... Berkshire Life........ Brooklyn Life........ Charter Oak.......... Connecticut Mutual... Connecticut General.. Continental........... Economical........... Excelsior............. Equitable............ Germania............ Globe................ When dividends are paid to policy-holders 3d year, None, 3d year, 3d year, 3d year, 2d year, 5th year, None, 4th year, 2d year, 3d year, 2d year, 4th year, 3d year, iS per cent. on participating premiums; $78,654 paid to stockholders in 1867, being 134 44-Ioo per cent. on cash capital. All profits to be paid to stockholders. 20 per cent. of the profits credited to the stockholders, besides interest on capital. All profits now paid to policy-holders. 20 per cent. of profits paid to stockholders and interest on capital. Stockholders are limited to 8 per cent. per annum of profits. $50,000 of stock notes paid up last year. Charter gives power to loan one-fourth of the capital, and other funds, upon endorsed promissory notes not having more than twelve months to run. All profits paid to policy-holders. All profits paid to stockholders. 123 per cent. of profits over legal interest. [$28,ooo paid stockholders, i868, being 28 per cent. on paid-up capital.] 20 per cent. of residue over an annual reserve toward a reserve fund of $200,000 to be applied to payment of stockholder's notes; 7 per cent. of profits to be paid yearly as dividend on capital stock, and when notes fully paid 20 per cent. to be paid stockholders as a surplus dividend over the 7 per cent. o1 per cent. of net profits paid to stockholders. All profits paid to policy-holders annually on contribution plan, except 7 per cent. interest on capital of $Ioo,ooo, paid in gold. Stockholders, after 1869, are limited to 5 per cent. on capital, over legal interest. Cash paid-up capital of $Ioo,ooo may be increased out of the profits to $6o00o,o, and the interest thereon paid to stockholders. STOCKHOLDERS' SHARE OF PROFITS UNDER CHARTERS AND BY-LAWS. From Peace to the Panic. I37 When diviCMPANY dends are STOCKHOLDERS' SHARE OF PROFITS UNDER paid to CHARTERS AND BY-LAWS. policy-holders Great Western........ Guardian............ Home.............. Hahnemann.......... John Hancock........ Knickerbocker....... Manhattan........... Massachusetts Mutual, Mutual Life......... Mutual Benefit....... National, N. Y........ National Travelers... National Life, Vt..... N. Y. Life and Trust.. NEW-YORK LIFE.... N. J. Mutual......... N. Y. State Life...... N. E. Mutual........ North American...... Phoenix Mutual...... Standard............. Security.............. Travelers........... Universal............. U. S. Life............ Union Mutual........ World Mutual........ Widows and Orphans Washington.......... 5th year, 4th year, 3d year, 3d year, 4th year, 6th year, 5th year, 2d year, 2d year, 5th year, 4th year, 4th year, 6th year, None, 2d YEAR, 3d year, None, 2d year, 4th year, 5th year, 4th year, 4th year, None, None, 4th year, 6th year, 3d year, 3d year, 2d year, 20 per cent. of profits paid to stockholders, besides interest on capital. All profits paid to policy-holders, except interest on capital. Stockholders now receive 5 per cent. on capital, over legal interest. A reserve fund of $200,000, to be made up out of the profits, at discretion of Directors. io per cent. set apart for retirement of capital. All profits paid to policy-holders, except interest on capital; dividends on cash premiums on 2d year; on cash and note 4th year. Stockholders are entitled to 13 per cent. annually on capital, over legal interest. Dividends declared to policy-holders the 6th year, and annually thereafter. I2% per cent. of profits paid to stockholders. Up to January, 1867, $140,786.82 had been paid, which included $31,285.81 apportioned January i, 1867, being over 3I per cent. per annim, besides interest on capital stock. All profits paid to policy-holders, except interest on capital. All profits paid to policy-holders, annually, on contribution plan. All profits paid to policy-holders. io per cent. of profits paid to stockholders, and interest on capital. io per cent. of profits paid to stockholders, and interest on capital. All profits paid to policy-holders. Dividends declared once in five years only. All profits paid to stockholders. ALL PROFITS PAID TO POLICY-HOLDERS, ANNUALLY, ON CONTRIBUTION PLAN. DIVISIBLE SURPLUS JANUARY I, I868, $1,642,425.59. io per cent. of profits paid to stockholders, besides interest on capital. All profits paid to stockholders. All profits paid to policy-holders, annually, on contribution plan. I22 per cent. of profits paid to stockholders. $30,000 paid stockholders in 1867, over legal interest, being 30 per cent. per annum on the capital. Stockholders received 3I Y per cent. on paid-up cash capital of $I6,ooo, over legal interest thereon. All profits paid to policy-holders, except interest on capital. 20 per cent. of profits paid to stockholders, and interest on capital. All profits paid to stockholders. This company is preparing a table for mutual rates. All profits to be first applied to create a permanent reserve capital fund of $I,800,ooo, and then the interest and profits to go to stockholders. 20 per cent. of profits paid to stockholders, besides annual interest on capital. At last triennial dividend of profits the stockholders received $39,932 over legal interest, being 39 93-Ioo per cent. on capital. All profits paid to policy-holders, except 3 per cent. on note capital of $50,000. I2% per cent. of profits paid to stockholders, besides interest on capital. All profits paid to policy-holders, except interest on capital. All profits paid to policy-holders, annually, on contribution plan, except interest on capital. From this table it will be observed how few of the different companies are doing business on the mutual plan. It will, moreover, be apparent to any one using ordinary business sagacity, that, other I38 From Peace to the Panic. things being equal, those four companies which have been in existence about a quarter of a century, have in their favor, besides mutuality of interests, the sure test of prosperous experience and the accumulation of a large surplus capital, never divisible to speculators in the misfortunes of widows and orphans, in opposition to the interests of stockholders, always having the precedence over those of the insured; the uncertainty of continued solvency even for a score of years, and the necessary greater cost of conducting a new business. In November of this year the NEW-YORK LIFE re-insured the risks of the General Life and Accident Company of Newark, N. J. The business thus acquired consisted of 41 policies, insuring $77,500, with annual premiums amounting to $3,614.68. The annual report for 1868 was submitted to the Trustees, January 29, I869. The Policy Schedule showed a decided tendency toward Endowments, the increase being 1,958 policies, as compared with an increase of 1,579 Ordinary Life, and of I,I34 Io-Payment Life, Policies. The year had been one of great prosperity, the new business larger than ever before, and the securities showed a market value of nearly four hundred thousand dollars over cost, in view of which a vote of thanks was tendered the Finance Committee.* The annual dividend declared on the "Contribution Plan" was $1, 109,009: I, and it was voted to pay in cash the scrip dividend of 1867. This completed the redemption of all outstanding Of this excess $I77,599.38 was on United States bonds. People are so accustomed in these days to consider Government bonds as the best of securities, that they have forgotten that they were ever questioned. Yet in June, 1867, Dr. Copes wrote the Company that its large investments in these bonds stood in the way of business among wealthy foreigners who wished large insurances. He called attention to the talk of repudiation, even in Northern newspapers, and said the whole negro vote would be used, if occasion offered, for repudiation. Repudiation in various forms became so much of an issue that Secretary McCulloch referred to it at length in his report of December, I867. Mr. Blaine says: "The Secretary argued bravely and wisely in his report, in favor of paying the principal and interest of the Government bonds in coin. His argument was designed to meet heresies which had found favor in unexpected quarters, The plea was urged by the new and short-lived school of finance that the notes of the national banks should be withdrawn and greenbacks substituted for them, that all payments by the Government on the principal of the bonds should be in its own paper. It was admitted by these novel theorists that the bonds on their face promised coin for interest; but they maintained that the bonds had been issued in large part when gold was at a heavy premium for paper, and could be rightfully liquidated for paper at its advanced value. Propositions were frequently presented to stop the issue of bonds and to pay out notes for any obligations of the Government offered at the Treasury or becoming due in any form."-("Twenty Years in Congress," Vol. ii., page 330.) The National Democratic Platform of i868 urged "that all the obligations of the Government, not payable by their express terms in coin, ought to be paid in lawful money." President Johnson, in his annual message for I868, said: " The holders of our securities have already received upon their bonds a larger amount than their original investments, measured by the gold standard. Upon this statement of facts it would seem but just and equitable that the six per cent. interest now paid by the Government should be applied to the reduction of the principal, in semi-annual instalments, which in sixteen years and eight months would liquidate the entire national debt." From Peace to the Panic. I39 dividends.* In each of the years 1868 and 1869 old policy-holders received two dividends, that for the current year and the scrip dividend of two years before, the total value of which exceeded in many cases the annual premium due. THE large amount of money put in circulation by the expenditures of the Civil War gave an impetus to business which, in the nature of things, could only be of transient duration. The prosperity which marked the years immediately following was based upon a depreciated currency, and was fictitious in many lines where the supply created was greater than the demand, and where important enterprises were intrusted to unskillful hands. About I869 the tide began to ebb; the time was at hand that would try every man's work. In I865 there were thirty life companies doing business in New York State; the number increased year by year until 1870, when there were seventy-one; from this point the number fell off gradually until, in I880, there was the same number as in 1865. The first failures were in I869, when two British companies re-insured their American risks in American companies which subsequently failed. Yet, so slow were men to discern the signs of the times that, on April I, I870, there were on file in the Insurance * The following table shows the dividends declared under the percentage system, and when they were redeemed: YEAR. DIVIDEND RATE. WHEN REDEEMED. 1846...........................50 per cent. 1847.................. 50 x848.......................... 50 1849...........................40 1850 (8 months).................40 851........................ 50 1852............................40 1853.......................... 1854............................30 I855.......................... 30 1856..........................30 I857....................... 30 1858............................30 1859...........................30 1860..................... 30 I86........................... 30 I862.......................... 30 1863..........................35 x864...........................35 I865.....................50 i866...................50 1867........................... ro................ In 86. Twenty per cent. in x861, 20 per cent. in 1862, 20 per cent. in 863, 2per cent in 864, and 20 per cent. in x865.................. In x865............... In I 866.................... In 1867..................... In I868.................. In x869. 140 From Peace to the Panic. Department at Albany, the charters Qf twelve projected companies, two of which were afterward organized and had a brief existence. Of sixteen New York companies that re-insured their risks, fourteen re-insured in companies that subsequently failed; and of six other-State companies that re-insured, three did so in companies that subsequently failed. In the light of the foregoing record, the Trustees of the Southern Life Assurance and Trust Company of Mobile, Ala., must be accounted wise, and their policy-holders fortunate. This company was organized in 1866, and on February 11, 1869, published the following "Notice to Policy-holders": Notice is hereby given to the policy-holders of this Company that, in accordance with the Resolution of the Board of Trustees, passed on the twenty-second day of January last, to discontinue the issue of new policies, and to re-insure those already issued, the Trustees have effected the re-insurance with the old-established and dividend-paying NEW-YORK LIFE INSURANCE COMPANY, of which Gen. Joseph E. Johnston is the General Agent for Alabama and Mississippi. The Cash Assets of this Company on the first of January, 1869, were $i i,oO,822.60. During the year 1868 it issued 9,105 new policies. Dividends not used in settlement of premiums will be added to the policy. A Circular, containing full information, will be sent to every policy-holder at an early day. ROBERT S. BUNKER, President. The number of policies taken over was 279, insuring $1,376,700, upon which the annual premiums were $62,869.63. These policy-holders were placed on the same footing as others, except that their dividends were subject to the actual mortality experienced-a wise provision, as it proved, for the mortality experienced was considerably above the expected. In March of this year the Trustees authorized the purchase of bonds of the States of Alabama, Georgia and Louisiana to the amount of two hundred and fifty thousand dollars, for deposit in these States in accordance with their laws. The extension of the Company's business westward, begun by Mr. Partridge in 1866, had been continued. Early in 1867 Colonel Alexander Hawes became a sub-agent of Mr. Partridge; before the year closed, the partnership of Partridge & Hawes was formed; and in 1868 the work was pushed along the line of the Union Pacific Railroad, the terminus of which was then at Julesburg. On May 10, I869, the "golden spike" was From Peace to the Panic. I4I driven,* to commemorate the completion of the roadway which united the Alantic with the Pacific, and during this year agencies were established in Utah, Montana and Nevada. Colonel Hawes personally wrote the first life applications taken in Salt Lake City, and found the field so ready for the harvest that he received fifteen thousand dollars in advance premiums before the first policy was ready for delivery. Mr. William B. Crane, who worked under Messrs. Partridge & Hawes, took fifty thousand dollars in premiums during this year in a single mining town in Nevada. The Company took advantage of the general prosperity and the increasing popularity of Life Insurance in 1869, to place its business more exclusively on a cash basis. It always maintained that loans upon policies, if kept within proper limits, were absolutely safe for a life insurance company, and of advantage to the policy-holder who was compelled to do business on credit. Of the advantage to the insured of all-cash payments, if he had the money, there was never any more question than there is that it is better to own the whole of a valuable property than it is to own a part. The arguments of the all-cash companies were based upon the tacit assumption that every man could pay his whole premium in cash if he would. The Company had, since the war, urged the all-cash plan more and more, and in May, 1869, it limited future credits to twenty-five per cent. of the premiums on Ordinary Life Policies, and to twenty per cent. on io-Payment Life Policies. No premium loans were to be allowed unless the premium exceeded fifty dollars per annum, and none where the premiums were payable quarterly. September 27, 1869, is known in the annals of the New York Stock Exchange as "Black Friday." Customs duties and interest on Government securities were payable in gold, while for other purposes greenbacks were a legal tender. Gold was an article of commerce and of speculation-being necessary chiefly to the importer and the Treasury. A clique of speculators stealthily bought up most of the private stock east of the Rocky *There were really two golden spikes, and two of silver used on this occasion. They were presented by the four States-Montana, Idaho, California and Nevada. The junction was made at Promontory, just north of Great Salt Lake. Telegraph wires throughout the country were connected with this point so that every stroke of the hammer was noted wherever there was a telegraph office. 142 Prom Peace to the Panic. Mountains and thus obtained control of the market. Importers with duties to pay in gold and speculators who had sold gold for future delivery, were at the mercy of the clique. The highest price in August had been 1365/; on September twenty-fourth, after several days of excitement, it rose to I64. Upon the announcement that the Treasury would sell gold, FROM A CIRCULAR USED IN 1869. From Peace to the Panic. I43 the price dropped to 135. The NEW-YORK LIFE owned at this time gold bearing bonds to the amount of over two million dollars, and as some of its policies were payable in gold, a gold account was necessarily kept. Its profits on gold sold during the year were over forty thousand dollars, the highest sale being made in September, at 155. During this year two cases occurred where the insured became sick and delirious just before a premium fell due, and died leaving it unpaid. In both cases the Trustees ordered payment of the policy in full. The necessity of some such provision as has since been incorporated in the Company's policies-namely, a month's grace in the payment of premiums, and automatic non-forfeiture conditions which assume that the insured intends to keep his policy in force-was probably then seen, but the time to supply it had not fully come. Another case of hardship came to light during this year against which it would be difficult for any Company to provide. In August, i862, the Company issued a policy for $I,ooo upon the life of Mr. Alden Josselyn, of Lawrence, Mass, the beneficiary being the mother of the insured. In April, 1863, Mr. Josselyn died of consumption, and when the attending physician filled out proofs of death he certified that he had treated the deceased before he insured, for hemorrhage of the lungs. As it was expressly stated in the application that the insured had never had any disease of the lungs, and as the Company would not have accepted the risk had the hemorrhage been acknowledged, payment of the claim was refused. It was placed in the hands of a lawyer, who wrote the President that he had a good case against the Company. The President replied that if he would make out a good case for the Trustees, they would be just as willing to pay the claim as a jury would be to compel payment. Thereupon affidavits were submitted from both parents, two sisters and an intimate friend of the deceased, to the effect that they had never known him to have any hemorrhage or disease of the lungs. Being convinced that a jury would accept this evidence rather than that of the attending physician, the Trustees ordered the payment of the claim. In I869 the lawyer was arrested for not having turned the money over. to his client. I44 From Peace to the Panic. For many years the Company has printed with its " Instructions " for preparing proofs of death the statement that, " the intervention of any third person is not necessary for the collection of any approved claim, and the payment of a commission to any person for services in regard to such claim is unnecessary." The annual report for I869 was submitted to the Trustees January 31, 1870, and showed a larger amount of new business than ever before; it proved to be the largest business of any year prior to 1882. The insurance in force, for the first time in the Company's history, exceeded one hundred million dollars. POLICY HEADING USED FROM OCTOBER, i869, TO JANUARY, I895. THE year I870 saw the agencies of the NEW-YORK LIFE ex1870. tended westward to the Pacific Coast. Colonel Hawes was made Superintendent of Agencies west of the Mississippi River. Mr. W. B. Crane, who had been for a short time General Agent for Nevada, Idaho, Oregon, Washington and British Columbia, became associated with Col. Hawes under the style of Crane & Hawes, Managers for the Pacific Coast, with head-quarters at San Francisco. On March twenty-sixth, of the same year, Mr. Harry S. Homans was appointed "General Agent for the Kingdom of Great Britain and the continent of Europe." The Company From Peace to the Panic. I45 thus entered upon a course that has since made its agencies as widely extended as the British military posts, whose morning drum-beat, Webster said, "following the sun and keeping company with the hours, circled the earth every day with the unbroken strains of the martial music of England." Mr. Homans established his head-quarters at Numbers 76 and 77 Cheapside, London, and soon afterward associated with himself Mr. Cornelius Walford, who was probably the best known writer on insurance HOME OFFICE IN 1870. topics in the United Kingdom. During the same year Mr. Homans established a General Agency in Paris, the offices being at No. I Rue Scribe, with Mr. Albert Lee Ward in charge, as General Agent. On May eleventh the Trustees held their first meeting in the new building, at 346 and 348 Broadway. It was an occasion for general congratulation, and to Mr. William Barton, Chairman of the Building Committee, a vote of thanks was tendered for his untiring industry and zeal in IO0 146 From Peace to the Panic. bringing to completion the plans of the Board. The structure was at that time one of the handsomest in the city. It was modeled after the Erectheum at Athens; the exterior was of pure, white marble; and it was finished and furnished in a style at once massive and elegant. The insignia of the Company-an eagle feeding her young-was sculptured in the marble architrave crowning the front entrance, and the arms of the State of New York appropriately crowned the center of the balustrade surrounding the roof. The building seemed complete and large enough for the needs of the Company for all time, but the march of Invention and of Progress have since compelled many changes. The Company had scarcely occupied it three months when it was found necessary, in order to rent the upper floors, to put in an elevator-a means of conveyance which had come into fashion since the building was begun. Other changes and enlargements, made necessary by the increasing business of the Company and the increasing value of land in lower New York, will be noted in their order. With the growth of the Company's business in the Southern States came various demands under old policies, and all sorts of attempts to discredit the Company in the eyes of the Southern people. The latter was chiefly the work of companies which had little or no business in the South before the war. Such as had here and there a policy made a great show of liberality; * while others traded upon the grievances of a few dissatisfied policy-holders in the NEW-YORK LIFE, and upon their own disregard of sound principles of underwriting. The names and character of the Company's agents in the South proved, however, a tower of strength; and they challenged all comers to gainsay the record, that "the NEWYORK LIFE received more Confederate money for premiums during the I The Knickerbocker Life Insurance Company, which had only 760 policies in force in the whole country on December 31, i860, published a letter, dated Mobile, Oct. 5, 1869, and signed Ellen B. Nicholson, saying her husband was insured before the war; allowed his policy to lapse; was offered the option of reviving it or accepting its surrender value; accepted the latter and died about a month afterward; whereupon the Company very generously paid her one thousand dollars additional! This statement was said to show that "no insurance company, North or South can, or will, deal more liberally with all its assured than that good and reliable old company, the Knickerbocker Mutual! " For further particulars, see records of Receiver of the company, appointed June 25, i888. From Peace to the Panic. 147 war, and paid more money for lapsed policies after the war, than all other companies combined." The dissatisfaction of a few policy-holders at the amount received as a surrender value for lapsed policies, it was said, grew out of "the wrong impression that they ought to have received back very nearly the entire amount of premiums paid, and for which they have received insurance"-an impression, it should be noted, which has always prevailed to a considerable extent.* A typical case of this kind was widely published in I870, to which Mr. Franklin replied in a letter to Dr. Copes, dated March 26th, as follows: My attention has been called to a letter in the " New Orleans Times " of the thirteenth inst., the evident intention of which is to give notoriety to certain alleged facts which could not be attained by a correspondence in regular course. I do not propose by a lengthy newspaper controversy to aid General Gaines by giving advertising value to the letter for competing companies, who are envious of the NEW-YORK LIFE, and whose interests he may or may not be desirous to advance. In justice to ourselves, and for the information of the numerous policy-holders of the NEW-YORK LIFE, we feel compelled to deny the statements made by General Gaines, through the same channel in which they were made. The documents and vouchers for our statement will be deposited with you, our esteemed agent, and may be investigated by any parties interested. The facts are as follows: I. The Company did not forfeit this policy in 1862. Gen. Gaines had ample opportunity to pay his premium in New Orleans, for, by an express, special arrangement, made by you as our agent, with the Confederate States authorities, such moneys were to be held in trust by you, and were not to be confiscated. Other parties paid their premiums, and Gen. Gaines could have done the same on the IIth March, 1862, when it was due, or at any time thereafter till May of that year, in the currency which you were then receiving. By his failure so to do, he voluntarily abandoned the policy and forfeited all claims under it. 2. The Company have, since the war, offered to re-instate this policy upon the payment of the back premiums, and to deduct from such amount all the dividends which the policy would have earned had it been in full force all the time, the effect of which would be that Gen. Gaines, had he accepted the proposition, would have been in exactly the same condition as if no lapse had occurred. 3. It being understood that some of the parties wishing to revive their policies could not conveniently pay the amount required for back premiums in cash, the Company offered to charge the whole amount of them against the policy as a loan, to be * It is not an unheard of thing, even to this day, for a policy-holder to present his policy and say, seeing he has not died he has cost the Company nothing, and if his premiums are returned he will give the Company the interest on them and call it quits. The guarantee of the amount of one's policy in case of death appears very intangible to those who live, but it must be made substantial with the money of the living to those who die. I48 From Peace to the Panic. paid by future dividends or otherwise, at the convenience of the policy-holder, and required only the future premiums to be paid in cash. This offer was made to Gen. Gaines, and he was at liberty to accept either mode of settlement. 4. The Company offered to make this adjustment, and to revive his policy without any oath or affidavit, the Medical Board having accepted the risk. 5. The surrender value of this policy at the time of its lapse was $1,o68. We proposed to settle this (notwithstanding it-had lapsed early in March, 1862,) by the cancellation of a debt which Gen. Gaines owed the Company, and for which we hold his note for $927. 12, and by the payment to him of cash for the balance, $I40.88. In addition to this, we authorized a further payment of $300 cash, if, in your estimation, under all the circumstances, it would be equitable and proper to do so. This, we are aware, you promptly offered him. 6. In reply to all these earnest endeavors of the Company to do what was fair, and even liberal, to the utmost verge of equity in regard to other policy-holders, we received a demand for the payment of $2,500 in cash, under penalty of being "published in the newspapers." As we are willing to go before any tribunal, North or South, on the record alone, without any argument, and could not, in justice to other policy-holders, concede this demand, the infliction of the threat was consequently risked. 7. The total cash paid to the Company by Gen. Gaines is $I,738.50, for which sum, divided into annual installments, it carried the amount of $5,ooo insurance on his life for fifteen years, during all of which time it [the Company] was liable to pay his family, at any moment, had he died, this $5,000. He now demands that, for the privilege of carrying this risk for fifteen years, we should return to him all the cash part of the premiums paid by him, and $761.50 additional, to say nothing of his indebtedness for loans as above mentioned, or he will "publish a full history of the case in the newspapers." We think further comment than this brief exhibit of the facts unnecessary, and are content to submit it to the public to decide whether faithfulness to the trust committed to us by the whole body of our policy-holders would permit any greater degree of liberality in the case of Gen. Gaines. One of the charges of General Gaines was that the Company refused any redress in the case of Colonel T. D. Merrick, of Little Rock, Ark. Colonel Merrick's policy lapsed during the war, for non-payment of premiums, and no attempt was made to revive it. After his death, in I866, its payment as a death-claim was of course refused, but upon a representation of all the circumstances by General James F. Fagan, the Company's agent for Arkansas, a liberal allowance was paid as a surrender value of the policy. Upon having his attention called to this fact, General Gaines promptly retracted so much of his letter as referred to this case, saying, "General Fagan's well-known gallantry is a sufficient guaranty that Mrs. Merrick has been justly settled with." From Peace to the Panic. 149 Among the death-claims paid in I870 was one for $15,530.99, upon the life of General George H. Thomas. General Thomas was insured under Policy No. 49,112, dated June i8, I868-a fifteen-year endowment.* He was at that time fifty-one years of age, and was the embodiment of physical strength, courage and will power, which, a few years before, had made him the "Rock of Chickamauga." He died in San Francisco, March twenty-eighth, after an illness of a few hours. The certificate of death said: "Died of apoplexy; probably rupture of blood-vessel in the brain from atheromatous degeneration of the vessel. No symptoms previous to day of his death to indicate this condition." Probably General Thomas could have passed a medical examination for insurance the day before his death. So near men may be to death from internal causes, and yet not know it! The annual report for the year 1870 was presented to the Trustees January 31, 1871. It showed a slight falling off in new business. The influences which culminated in the financial crisis of 1873 were already making themselves felt. The Company's standard of valuation of its policy liabilities was the Carlisle Table of Mortality, with interest at four per cent. for participating policies, and at five per cent. for non-participating policies. By this standard its surplus January I, 1871, was $I,I52,408.04. The New York State standard by the law of i868 was the American Table of Mortality, with interest at four and one-half per cent., and by this standard the surplus was $1,946,612.76. The Massachusetts standard was the Actuaries' Table of Mortality, with interest at four per cent., and by this standard the surplus was $587,795.89. An attempt, made in I868, to secure the adoption of a common standard in these two States having failed, the NEW-YORK LIFE Trustees now took the initial step toward FROM GENERAL THOMAS' APPLICATION.7- _ ---- -—. *FROM GENERAL THOMAS' APPLICATION. 15o From Peace to the Panic. increasing its reserve fund to correspond with the more rigid standard, by voting to open a special reserve fund account, to be credited annually with $50,000 and its accumulations during the next ten years. WHEN the NEW-YORK LIFE began business in England, it 1871. encountered the opposition that usually besets the foreign competitor. But when its first policy matured by death, in January, 1871, it received considerable kindly notice by reason of the promptness with which the claim was paid. It arose under Policy No. 73,754, issued August 17, 1870, upon the life of Mr. George W. Watts, of Brompton, the amount being ~300. Mr. Watts died December sixth following, under circumstances that might have delayed payment of the claim had the Company's policies contained the usual clause making them void in case of death by the insured's own hand. Mr. Watts died in Salisbury, at the house of a friend, whither he had gone to make arrangements for a business partnership. A coroner's inquest was held and the following verdict rendered: "That George Watkins Watts, suffering from extensive disease of the brain, and being in the habit of taking a medicine containing prussic acid, did, on the date first mentioned, and at the time and place named, accidentally, by misadventure and misfortune, take an overdose of the medicine, by means of which he, the aforesaid George Watkins Watts, then and there instantly died." Proofs of death were made to the Company's office in London, late in December-the certified copy of the coroner's verdict bearing date December twenty-third-and the claim was paid in London, January 19, 1871. Such expedition was something new in life insurance in England, and the newspapers published full accounts of it under the head of "Yankee Enterprise." In January of this year the Company began the issue of Ten-Year Dividend Policies, upon what afterward became known as the Tontine plan, which will be more fully described in connection with the introduction of the Company's "Tontine Investment Policy" in 1872. The TenYear Dividend Policy had nearly the same features as the Tontine Investment Policy with Io-year Tontine period, except that only one option was offered at the end of the period, namely, to continue the policy and From Peace to the Panic. I5I apply the surplus to purchase an annuity to be used in reduction of future annual premiums, the excess, if any, to be paid in cash.* When these policies matured, however, they were allowed the regular Tontine options. The NEW-YORK LIFE, as a purely mutual Company, holds to the principle that no privileges should be extended to any policy-holder not accorded to every other policy-holder holding a policy in the same class or of a similar character. In pursuance of this principle, it considered its old policies non-forfeiting when it adopted non-forfeiting policies on the same premium tables; and the new privileges of the Accumulation Policyfirst issued in I892-were at once extended to all other policies paying the same premium for the same risk. In May, 1871, a Convention of Commissioners and Superintendents of Insurance, of the various States having Insurance Departments, was held in New York City, and the life insurance companies were invited to lay before the Convention such matters as they might regard important to be considered. Representatives of the companies met at the office of the Mutual Life Insurance Company, on May twentieth, by invitation of President Winston. Mr. Winston was made Chairman of the meeting, and Mr. John E. De Witt, of the United States Life Insurance Company, was made Secretary. After discussion, it was voted that " the following are regarded by this meeting as of primary importance: " i. Uniformity in the forms of annual reports and other requirements made by the different State Departments of Insurance. t 2. The adoption 'of the same basis, principles and system in the valuation of policies and computation of reserves by the different State Departments, where such valuations and computations are to be made.. "3. The acceptance by each State Department of the valuations made by any other State Department (in which the companies were incorporated) when properly performed on sound and recognized principles, and a uniform basis. " 4. The lists of policies and securities in detail required in the annual statements to be made to one State Department only, and the certificate of the total amount of such policies, and amount and value of such assets from said Department where made, to be deemed sufficient in all other State Departments. * Instead of one month's grace in the payment of premiums and the privilege of re-instatement during a second month, the grace under these policies was for as many months, not exceeding six, as there had been full years' premiums paid at the time of lapse. I 52 From Peace to the Panic. "5. The deposit of securities by the companies to be made in the State only in which the company was incorporated, if there required, and the certificate of such deposit from the Insurance Department of the State where made, to be accepted by all other State Departments. "6. The appointment of one agent or attorney only in each State to be required by it to accept legal service in behalf of a company, thereby avoiding great possible dangers. "7. Taxation. If not practicable to have it entirely removed from Life Insurance, to be made uniform and reasonable in the different States, and not complicated and oppressive, as at present in many portions of the country." The following-named officers were appointed a Committee to present these views to the Convention: Messrs. F. S. Winston, of the Mutual, William H. Beers, of the NEW-YORK LIFE, Henry Stokes, of the Manhattan, Henry M. Alexander, of the Equitable, Hugo Wesendonck, of the Germania, and Jacob L. Green, of the Connecticut Mutual. This statement of what, in the opinion of the companies, should be, indicates by the rule of contraries what was not, and what obstacles beset the path of all life companies-the NEW-YORK LIFE included-at this time. The State insurance officials have held annual meetings since 1871, and in 1874-5 adopted a uniform blank for the statements of the companies, and the conditions set forth as desirable under the first, second, third and sixth heads above have been practically realized. The taxation of Life Insurance, however, continues very unequal in the different States. Mr. Henry A. Dyer, who had been for nearly three years Superintendent of Agencies for the Company, and who brought to the discharge of his duties marked executive ability and great fidelity and earnestness of purpose, died July 2, I87I. He was succeeded by Mr. Daniel O'Dell, who had been in the service of the Company since I865, and who at this time was General Agent at Memphis. In October of this year occurred the great Chicago fire, which destroyed property to the amount of $90,000,000o. The insurance thereon was about $Ioo,ooo,ooo, of which nearly $50,000,000 was paid. The losses were distributed among over two hundred companies, of which sixty-four were made bankrupt. The necessity which the fire companies would be under to realize upon their securities, and the consequent dis From Peace to the Panic. I53 turbance of the money market, were foreseen and, indeed, exaggerated at other money centers; the nominal shrinkage of values at the New York Stock Exchange during the week following the fire was greater than the insurance held by all the companies. A greater Chicago has since risen, as if by magic, upon the site of the blackened ruins of October, 1871, but had it not been for the fifty million dollars received from the insurance companies, Chicago's upbuilding must have been much more slowly accomplished and with much greater losses to her commerce and wealth. Although no such sweeping losses could occur in Life Insurance-except as the result of a calamity greater than has ever befallen the human race since the Flood-the Chicago fire, in its illustration of the value of the insurance principle, could not fail to be helpful in the long run to the progress of Life Insurance. In addition to the money paid by the fire companies, the whole country resolved itself into a vast insurance society whose contributions in money, provisions and clothing were estimated at over seven millions of dollars.* Toward this relief fund the Trustees of the NEW-YORK LIFE, on October eleventh, voted a donation of five thousand dollars. At the same meeting five hundred dollars were voted to the Committee of Seventy who were endeavoring to put a stop to the misappropriation of the funds of the city by the Tweed ring. The annual report for the year i871 was presented to the Trustees on February 3, 1872. It showed an increase in everything except new business, dividends and expenses. The increase in policies in forceover seventeen hundred-was nearly half in endowments. Over one* For down from the West came the bidding, " 0 Queen, lift in courage thy head! Thy friends and thy neighbors awaken, and hasten with raiment and bread! " And up from the South came the bidding, " Cheer up, fairest Queen of the Lakes! For comfort and aid shall be coming from out our savannas and brakes! " And down from the North came the bidding, " 0 City, be hopeful of cheer! We've somewhat to spare for thy sufferers, for all of our suffering here!" And up from the East came the bidding, " 0 City, be dauntless and bold! Look hither for food and for raiment-look hither for credit and gold! " And all through the world went the bidding, "1 Bring hither your choicest and best, For weary and hungry Chicago, sad Queen of the North and the West." -Will Carlton. AAeA Aylor 6z - a-,if Si &e A 2, P2 c 4?e 2tfv sz v o 2 f e? )4 Y-k~+ ~.. J3A ~ ~ vL Ljr r2 j t Dj x <'av 4-~w~l~aw > 4 eC & New York Life Ins. CO.13Merchants!Exc, nBoston, and was enbrely unsolcited, as was the insurance referred to therein, hen e regard it as more compmentay to the Company than it would therwise have cCIRCULR IN 87, AND LA J A T LRctL & PA CXo, 6tZ bee, c) hCIRCULAR USED T^ N I87, AND LATE. 154 From Peace to the Panic. 155 fifth of the Company's business was under endowment policies-a proportion which continues to this day. It was voted to set aside $50,000 as a real estate sinking fund; and a recommendation of the Officers to establish Local Boards in the larger cities of the State, and to loan money upon desirable property therein, was approved. THE marked favor with which the NEW-YORK LIFE'S "Ten872" Year Dividend Policy" was received induced its Officers to develop more fully the principles embodied therein, and to add other attractive features. The new form was called the "Tontine Investment Policy." It provided for dividend periods of either ten, fifteen or twenty years, selection to be made upon applying for the policy. In case of death, the beneficiaries received the amount insured only, all claims to surplus being waived in favor of survivors. In case of lapse, no paid-up or cash value was given, all claims to such values being waived in favor of those who survived and kept their policies in force. To guard against loss by forfeiture, so far as possible, a month's grace was allowed in payment of premiums, and a re-instatement was allowed during the month following lapse, provided the health of the insured continued good, as shown by satisfactory medical examination. In case the grace was availed of, or re-instatement was had, a fine at the rate of ten per cent. per annum was collected for the time the premium remained due and unpaid. At the termination of the dividend; or Tontine, periods the following options in settlement were allowed: I. To continue the policy, and with the surplus apportioned to purchase an annuity to be applied to the payment of future premiums on the policy, or to be received in cash. 2. To continue the policy by the payment of premiums, if not already paid-up, and to receive the surplus apportioned in cash. 3. To withdraw the entire cash value of the policy, consisting of the reserve-thereon and the surplus apportioned. 4. To convert the entire cash value into a paid-up policy, provided that in case such paid-up policy exceeded the amount of the original policy, a satisfactory medical examination be passed. 156 From Peace to the Panic. 5. To convert the entire cash value into an annuity for life. The new and most valuable feature which these options introduced into Life Insurance was the cash surrender value of the entire reserve upon the policy before its natural termination. It is a fundamental principle in Life Insurance that a certain amount-fixed by the rates of mortality and interest assumed, the age of the insured and the year of the policy-must be in the company's hands. The State had already declared what rates of mortality and interest should be assumed, and remorselessly wound up every company that failed to comply with this condition. If a policy was in force, its reserve, or re-insurance fund, was the company's contingent liability therefor; if the policy ceased to be in force by sale and cancellation, the company's liabilities-were correspondingly reduced. Yet it was not customary for companies to pay this amount in full, upon the surrender of a policy, nor to guarantee any surrender value in cash.* Some companies refused to pay any cash value whatever, contending that the money had been paid for insurance, and that nothing but insurance should be given for it. Others made a surrender charge, upon the ground that, as a class, discontinuing policyholders were the best risks, and, seeing the company could be held to its contract, the party wishing to retire should leave behind him enough to secure another member in his place. This surrender charge was fixed by law in Massachusetts, but companies of other States were each a law unto themselves, and the insured who wished to surrender his policy for cash could demand nothing, and must accept whatever was offered. This privilege of receiving a cash surrender value of the entire reserve fund before the natural termination of the policy, was all the more valuable because it was not obligatory. A man might wish to continue his policy; if so, the way was open under several options. In short, the *The single exception to this rule, in 1872, was the Brooklyn Life Insurance Company, which, in 1869, inserted in its policies a table of cash values showing how much would be paid in cash on the anniversary of the policy, or within thirty days thereafter, for its surrender to the company provided three annual premiums had been paid. According to a circular issued by Mr. D. P. Fackler, in I879, the Brooklyn was still the only company which guaranteed a cash surrender value at any time after a certain period. This value was not, however, the full reserve on the policy. From Peace to the Panic. I57 policy-holder was allowed to re-adjust his insurance to his changed circumstances-if change there should be. Instead of a policy that gave insurance only, or cash only, at the end of a selected period, the "Tontine Investment Policy" gave either insurance or cash. The prospectus of the new policy announced that it divided the profits of insurance between those who died soon after insuring and those who lived long, that policies maturing by death during the Tontine periods would give large returns without sharing in the surplus; and that the surplus being accumulated at compound interest and divided among a diminished number, would give a large share to each survivor, and so an incentive would be created which would tend to keep policies in force. Nevertheless, these advantages were purchased at some risk, and the policy was recommended only to those who had a reasonable prospect of being able to keep it in force. The clause making the policies null and void in case of non-payment of premium appeared less harsh at that time than it does now, after an experience of thirty-five years of non-forfeiture. It was then less than twelve years since the NEW-YORK LIFE had originated and introduced its Ten-Payment Life Non-forfeiting Policy, and considerably less since policies on the Ordinary Life tables had been made non-forfeiting. Moreover, the Tontine Policy was forfeitable during a limited period only; the policy-holder had unusual privileges in the month's grace and the privilege of re-instatement, and unusual advantages at the end of the period. Tontine Policies proved popular, notwithstanding their forfeitability-as the records of the Tontine companies conclusively show-; but it was found in actual practice that this feature added very little to their profitableness and entailed sacrifice where it was hardest to bear; the Company, therefore, began in 1884 the issue of a Non-forfeiting Tontine Policy. Meanwhile it continued to issue annual dividend policies with non-forfeiture provisions to all who preferred that form of contract.* * The word "Tontine" is derived from the name of a Neapolitan, Lorenzo Tonti, who in the seventeenth century introduced into France a system of Tontine Annuities. Under this system a number of persons joined in forming a fund, the income of which was divided among the living at stated periods. At the death of a member, his share of the principal passed to the survivors. The principal I58 From Peace to the Panic. The prospectus explaining the Company's Tontine plan was accompanied by estimates of results at the termination of the several periods. Much criticism has since been indulged in, by opponents of the Company and the system, because these estimates were not fully realized; but the same thing is true of all estimates of life insurance dividends made at that time, and all companies made estimates. Every company then paying dividends assumed that it would continue to do so at the same, or at higher rates, and such dividends were always taken account of in estimating the future cost and benefits of a policy. The Tontine estimates of i872 were based upon the dividends of the time and previous experience as to lapses, and were certified by competent and disinterested actuaries to be conservative.* The NEW-YORK LIFE took pains to print was divided when the membership reached a point agreed upon at the formation of the fund. The system has been used quite extensively in France, Germany and South ATnerica, and occasionally in Great Britain and the United States. A Tontine Association was formed in New York City in I79I, consisting of 203 persons who paid in $2oo each, the contributors having the privilege of nominating the persons to enjoy the benefits. It was agreed that the original fund should be divided when the shareholders should be reduced by death to seven. The fund was invested in a building at the corner of Wall and Water Streets, which was known as the "' Tontine Coffee House." The appointees were all children, and the number was reduced to seven in i87i by the death of Mr. John P. de Wint, of Fishkill, N. Y. The property, which had meantime become very valuable, then passed to the seven survivors. It will be seen from the foregoing that the word "Tontine " as applied to Life Insurance is, to a certain extent, a misnomer. The holder of a Tontine Policy who dies does not forfeit his premium payments, but receives a large return for his money. The only real forfeit was of the reserve-under the early Tontines-of policies which lapsed after two or three premiums had been paid. The long-term dividend system can hardly be called a system of forfeitures. The premiums of all participating policies are made somewhat higher than it is expected will be necessary to meet all claims; but as the whole system rests upon assumptions as to mortality and interest running through the life-time of the longest livers, it is an open question how soon surplus should be divided. The Tontine principle was first applied to life insurance in this country by the Equitable Life Assurance Society, in i868. These Tontines were forfeitable for non-payment of premium, and the dividend period was fixed by the length of time required for the premiums, with compound interest at ten per cent. per annum, to equal the face of the policy. Policies maturing by death under this plan could, therefore, never return less than this rate. The dividend, when apportioned, was payable in cash or in reduction of future premiums. There was no cash surrender option. In i870 the Mutual Life began the issue of Tontine Policies with IO-, 15- and 20-year dividend periods, and in i872 the Equitable introduced its "Tontine Savings Fund Policies," with substantially the same features as the NEW-YORK LIFE'S Tontine Investment Policies. The Mutual Life discontinued the issue of Tontine Policies in i872. WILLIAM H. BEERS, Esq., * NEW YORK, January i9, i872. Vice-President NEW-YORK LIFE INS. CO. Dear Sir: As requested by you, I have made a careful examination of your circular and estimates in relation to the "1 Tontine Investment Policy " issued by your Company. The assumed rates of interest, mortality and expense, upon which the estimates of probable results are based, are, in my opinion, less favorable than the experience of yours and other compa From Peace to the Panic. I59 in all its pamphlets on the subject, this caution-which is certainly more than was done by other companies with respect to estimates of annual dividends: While much larger results than these have been approved and endorsed by some of the most competent and experienced life insurance experts, and by men of great financial and business experience, it is expressly stated that the foregoing examples are presented as estimates only, and are not to be considered as promises or guarantees. The elements involved-viz., mortality, interest and miscellaneous profits-being variable in their nature, exact results cannot be foretold. In December of this year the officers of the Company were called upon to face a peculiar question. There appeared in the "Herald" of November thirtieth a communication from President Winston, of the Mutual Life Insurance Company, proposing to reduce premium rates by making the loading on all net premiums ten per cent. This reduction was recommended by the Actuary of the Mutual Life, Professor Bartlett, and the experience of the company was said to justify it. The expenses of the Mutual Life during the preceding year had been 7.87 per cent. of its gross premium receipts, and during the three years preceding they had nies would have justified, and therefore the estimates may be considered such as are likely to be realized. The benefits you propose to extend to those selecting this class of policy are more varied in their character and advantages than are afforded by any plan of insurance now in use by any company within my knowledge, and are such as cannot fail to render the Tontine Investment Policy a popular, safe, and highly remunerative form of insurance. Very truly yours, SHEPPARD HOMANS, Consulting Actuary. WILLIAM H. BEERS, Esq., NEW YORK, January 19, 1872. Vice-President NEW-YORK LIFE INS. Co. Dear Sir: In accordance with your request, I have carefully examined the scheme of the Tontine Investment Policy, issued by your Company. The estimates of the benefits likely to accrue to the holders of this class of policies (after the expiration of the term during which distributions of surplus are forborne) are based upon what I regard as very moderate assumptions of profit from the elements of mortality, interest, margins and gains from policies discontinued. I have no hesitation in saying that I think it more probable that the actual results will exceed, than fall short ofyour estimates. The various advantages of this form of policy are well presented in the circular explaining it, and I notice among them several methods of applying the surplus which do not appear to have ever beent offered by any other company. I see no reason why the Tontine Investment Policy should not at once become as popular as any other plan of insurance now known. Yours truly, EDWIN W. BRYANT, Consulting Actuary. Substantially the same opinions as to the estimated results under these policies were expressed by Hon. Elizur Wright and Mr. David Parks Fackler. I6o From Peace to the Panic. averaged 9.22 per cent. In seven of the preceding ten years the rate had exceeded ten per cent. The expenses of other companies doing business in Massachusetts had averaged 30.5I per cent. during the three years preceding. It was evident, therefore, that the Mutual was proposing to do business on a perilously narrow margin, and that many of the weaker companies must inevitably go to the wall in the competition that would follow. The three companies having the next higher expense ratios in 1871 were the NEW-YORK LIFE (IO.90), the Mutual Benefit of N. J..(Io.o6), and the Equitable (15.52). The NEW-YORK LIFE and the Mutual Benefit could evidently have met this reduction, if necessary; but it would have been a crushing blow to the business as a whole, and they resolved to make common cause with the weaker companies. In doing this they did not prevent policy-holders from securing their insurance at the lowest possible rates, since the higher premium need only be paid the first year; after that, whatever reduction was possible, by economy of management, was made by dividends. Mr. Beers headed a Committee of eighteen life insurance officers who, on December fourth, addressed a letter to Messrs. Elizur Wright, Sheppard Homans and David Parks Fackler, asking their views on the subject. Mr. Wright had won great and deserved fame as Insurance Commissioner of Massachusetts, and Messrs. Homans and Fackler were familiar with the business of the Mutual Life by reason of their previous official connection therewith. These gentlemen, under date of December sixth, gave it as their opinion that the proposed reduction was "a virtual abandonment of those cardinal principles of security and equity upon which the claims of the Mutual Life Insurance Company to the confidence of its policy-holders and of the community have rested"; and that "it cannot be carried into effect without injustice to existing policy-holders and a decrease in their security." On December twelfth an Executive Committee representing eighteen companies, and composed of Messrs. Henry B. Hyde, of the Equitable, William H. Beers, of the NEW-YORK LIFE, N. D. Morgan, of the North American Life, and John E. De Witt, of the United States Life, addressed a letter to President Winston, dis From Peace to the Paniic. claiming any wish to advise him as to the management of the Mutual Life, but expressing their belief that great injury to Life Insurance generally would result if the proposed change were carried into effect. Upon this ground they requested the Mutual Life to reconsider its action. To this Mr. Winston responded, on the same day, that he would lay their communication before the Board of Trustees and recommend their favorable action thereon. This was done, and the Board directed "that the proposed reduction of rates be not carried into effect until the further action of the Board." Subsequent events have confirmed, beyond all question, the wisdom of the associated companies. In i879* the Mutual Life made a reduction in rates much less radical than that proposed in i872, and after an experience of six years under the reduced scale it abandoned the project and adopted premium tables higher than those in use in i872. In only six, of the twenty-three, years that have elapsed since i87i, have the Mutual's expenses been as low as ten per cent. of its entire income. In November of this year the Company paid the Colvocoresses claimt the details of which form one of the most remarkable cases in * In September, i877, the Mutual Life announced that it had accumulated a vitality fund from the reserves of policies surrendered (the difference between reserve and surrender value paid in i876 was stated at $569,390 before the Assembly Committee in i877), which it proposed to use in securing new members by allowing them a rebate of thirty per cent. on the first two annual premiums. Early in i879, however, this plan was abandoned for a uniform reduction of fifteen per cent. on Ordinary Life Policies. tAt a late hour on the night of June third, Captain George M. Colvocoresses, a retired naval officer, was found in the streets of Bridgeport, Conn., in a dying condition, and he soon after expired without recovering consciousness. He was a resident of Litchfield, and had left home during the afternoon intending to take the eleven o'clock boat from Bridgeport to New York, where he had an engagement the next day with an agent who had recently placed a large amount of insurance on his life. He carried with him a leather valise, a small morocco traveling-bag, a sword-cane and an umbrella. He purchased a ticket for the boat, put his valise in the state-room, and went to a restaurant for his supper. During supper he kept his traveling bag in his lap. He was last seen by a druggist, from whom he purchased two sheets of writing paper and two envelopes, and who at half-past ten o'clock pointed out the nearest roude to the boat, which left at eleven. Just as the boat was putting off f pistol-shot was heard, and a police officer ran to the spot whence the sound proceeded and found the Captasinin a dying condition. His clothing was unbuttoned, and his shirt where the bullet entered his body was on fire; his sword-cane covering was broken and the sword was bent, but bore no stain; the cane and umbrella were found near him; the traveling bag was gone, but was subsequently found on the Naugatuck wharf, having been cut open with a dull knife, and rifled of its contents, except a blank check-book. I I I62 From Peace to the Panic. Life Insurance history. At the June meeting of the Trustees, it was voted to contribute $250 to the fund raised for the Committee of the New York Bar for the prosecution of corrupt judges. THE year I873 was comparatively uneventful in the history of the Company, but was big with events in the world at large. It was a year of disaster and distress upon sea and land. Of all the lives lost on transatlantic vessels between 1841 and 1873, nearly one-third were lost in the year 1873 alone. No less than twenty-one vessels hailing from New York or sailing thence were wrecked, burned or never heard from more. Among the most noted of these were the "Atlantic," the "Britannia," the " City of Washington," the "Erie," the " Ismailia," and the "Ville du Havre." The propeller "George S. Wright" was stranded in February, 1873, while en route from Sitka to Portland, Oregon. All on board were Diagonally across the street from the body was found a large, old-fashioned, percussion-lock horsepistol. The stock had been broken and glued together, and further secured by tarred twine; it was broken again at the old fracture. The bullet had entered his body about six inches below the left breast, taken a somewhat downward course, passed out of his back, struck the fence and lodged in the earth, where it was found. On the following day there was found, about sixty feet distant from where the body lay, a pill-box containing percussion caps, and a bullet about the size of the one which had passed through the body. Near this box was also found an old powder-horn, containing powder. Both the pill-box and the powder-horn were tied up in pieces of soiled cotton cloth. Query: Was he murdered or did he commit suicide? The first supposition seemed the more probable at the coroner's inquest, and a verdict was rendered that he came to his death from a pistol or gunshot wound at the hands of some person or persons unknown. Subsequent developments seemed to favor the theory that he committed suicide. The facts in support of the latter supposition are as follows: The deceased was, so far as known, and according to his oath before the assessors in the preceding October, a man of small means, yet he had insured his life during the preceding year for nearly two hundred thousand dollars. He had endeavored to give the impression that he had made consider-. able sums on Erie Railroad stock, through a certain broker in New York, and that he had a large claim for prize money pending at Washington-neither of which could be verified. Just before his death he told his executor that he was going to deposit some bonds in a safe deposit company in New York when he next visited that city, and that he would leave a memorandum of them in his tin box in the Litchfield bank. This memorandum included twelve bonds of the Connecticut River Valley R. R. Company, and it was claimed that all the bonds of this company had been traced to other owners and possessors. (This, however, was ascertained by the representative of the NEW-YORK LIFE to be not true.) It was also claimed that a few grains of powder were found in the Captain's empty bag, and that it showed an indentation into which the hammer of the pistol fitted when placed in the bag. The weak points in the suicide theory were-if the expression may be allowed-very strong ones. First, there was the physical impossibility-as claimed by physicians-of a man shooting himself in such a manner and then throwing the pistol across the street with force enough to break the stock. Second, no sufficient motive for the deed could be shown: the Captain's pay as a retired naval officer enabled him to live in comfort; he was suffering from no painful disease; and his domestic relations were unusually happy. From Peace to the Panic. I63 lost. One of her passengers, Major John S. Walker, Paymaster in the United States Army, who had been to Alaska to pay off the troops stationed there, was insured in the Company for $Io,ooo under Policy No. 58,582, taken in Washington February I3, I869. The loss was paid August 13, I873, as soon as the fate of the vessel was established and the claim made. Both yellow fever and cholera were epidemic at various points in the South and along the Mississippi River, cholera cases being reported as far north as Chicago. The yellow fever caused over three thousand deaths, and the Company paid nineteen losses from this cause, thirteen of which occurred in October. At the meeting of the Trustees held October eighth, it was voted to contribute five hundred dollars to the fund in aid of sufferers from yellow fever at Shreveport and Memphis, where it The deceased held four policies in the NEW-YORK LIFE, amounting in all to ten thousand dollars. The first was taken in 1847, and contained the usual clause making it void in case of suicide; the other three were taken after the clause had been expunged, the last one being for $3,500, and dated March 8, 1872. The Company paid these policies in full on November 25, 1872. Policies were held in nineteen other companies, to the amount of $I85,500. These companies made the agent who had negotiated the insurance chairman of a committee to investigate the case, and submitted the facts, as ascertained, to Judge Charles J. McCurdy, who gave his opinion that it was a case of suicide with intent to defraud the companies, and advised resistance of the claims. Upon this recommendation the companies refused to pay, and suit was brought by the executor, Mr. George M. Woodruff, in the Superior Court of Litchfield County, to recover. The case never came to trial, but, after repeated adjournments, the companies compromised the claims against them by paying fifty per cent. of the face of the policies. The writer hereof had a pleasant interview with Mr. Woodruff during the preparation of this narrative. He said no new light had been thrown on the case since the payment of the policies. The story published in a New York paper, in I885, to the effect that a dying sailor had confessed to the murder, was acknowledged by the reporter to be a pure fabrication. Mr. Woodruff confessed to being a good deal puzzled in his own mind by the strong array of facts tending to confirm the suicide theory, coupled with the contrary evidence-especially the absence of any sufficient motive. The latter phase was evidently the determining factor in the decision of counsel for the companies to compromise. Governor Hubbard, who was retained by the companies, said to Mr. Woodruff-" How a man with the blue sky above him and the green earth beneath his feet, could ever voluntarily plunge into such a hole, is more than I can see. Only the Almighty himself," he continued, " knows whether that man committed suicide or was murdered." Mr. Woodruff said the money received from the NEW-YORK LIFE was his main-stay in prosecuting the claims against other companies; and he related this incident in confirmation of the danger to the insured of the suicide clause in his policy: A physician went into the office of a life company, said he contemplated taking a policy, and asked if the company paid suicide claims. He was told it did not, and was asked if he expected to die in that way. He said no, but that he had been a physician in an insane asylum long enough to know that men sometimes became suddenly insane without having previously exhibited any signs of insanity. The representative of the NEW-YORK LIFE, however, was convinced that it was a case of murder, and in this opinion he was upheld by Mr. Robert Pinkerton, the famous detective. 164 From Peace to the Panic. was most virulent.* There were over seven thousand cases of cholera and about thirty-eight hundred deaths, and the Company paid eight cholera losses. The last policy written in 1872 was numbered 94,700, and it was evident that Policy No. IOO,OOO would be issued during I873. The privilege of placing this policy was given to Mr. Winfield M. Clarke, Manager for Indiana, who in return offered the privilege to the agent who should receive and pay over the largest amount in new premiums one week prior to the issuing of the One Hundred Thousandth policy. The prize was won by Mr. D. B. Sheidler, of Muncie, who began work for the Company on February first. The policy was issued August first, on the life of Mr. Marcus Claypool, of Muncie, and was a "Tontine Investment Policy" for ten thousand dollars. From the organization of the Company until I866 the Company's Medical Department had been under the exclusive control of Drs. Wilkes and Bogert. With the beginning of I866 the Department received a new accession in the person of Dr. Charles Wright. Dr. Wright had been employed by the Company, during the previous three years, to make examinations in New York and Brooklyn, and had developed a remarkable aptitude for the work. Upon being made a member of the Medical Board, he at once put into practice a system by which lives were classified according to their assumed insurable value, and all examinations were made to conform to the new system. The mortality experience of the Company, as afterward tabulated, showed a considerably lower deathrate in the years following this change. In December, 1873, the Company, after reviewing the mortality among its policy-holders in certain parts of the South, adopted, in conjunction with several other prominent companies, new premium rates for persons residing south and east of a line beginning at the point of intersection of the northerly boundary of North Carolina with the Atlantic * The number of deaths from yellow fever at various points were as follows: Pensacola 6i, Mobile 27, Montgomery o02, New Orleans 225, Shreveport 759, Memphis 2,000, Calvert (Tex.) I25, Marshall (Tex.) 36. From Peace to the Panic. I65 coast, thence running westerly along the said northerly boundary to a point one hundred miles from the coast, thence in a south-westerly direction, continuing one hundred miles from said coast to the thirty-fourth parallel of latitude, thence westerly along said parallel to the westerly border of Alabama (excepting the city of Atlanta and an area within a radius of fifty miles around it), thence northerly along the westerly border of Alabama and along the Tennessee River to the northerly boundary of Tennessee, thence westerly along the northerly boundary of Tennessee and Arkansas extended to the ninety-seventh degree of west longitude, thence southerly to the thirty-second parallel of north latitude, thence westerly along the said parallel to the Pacific Ocean. The climate extra included in these rates was $I0 per $i,ooo on Ordinary Life Policies, Twenty-Payment Life Policies and Twenty-Year Endowment Policies; $12.50 per $I,000ooo on Fifteen-Payment Life Policies; and $I 5 per $I,ooo on Ten-Payment Life Policies. This year saw an important change in the law governing the purchase of life policies. The law of April I, I840, authorized a married woman to insure the life of her husband for her sole use, free from the claims of the representatives of her husband, or any of his creditors, except that such exemption should not apply where the amount of premiums annually paid should exceed three hundred dollars. In case of the prior death of the wife, the insurance might be made payable to her children. This Act was so amended by subsequent Acts that the insurance in the latter case might be payable to his, her, or their children, and the amount of premiums which might be paid for insurance for the sole use of the wife and children was made five hundred dollars. Such policies, the courts ruled, were not assignable, and could not even be purchased by the issuing company. This sometimes involved hardship to an aged couple, to whom the cash value of the policy was more valuable than the insurance. On June 23, I873, it was enacted that such policies might be surrendered to, and purchased by, the company issuing the same. On May 5, I879, the law was further amended so that such policies may now, with the written consent of the husband, be assigned to any person I66 From Peace to the Panic. whomsoever. These amendments, however, are regarded as applying only to policies issued since the date of the amendments. In September occurred the great financial crisis, from which the country did not recover for many years. The immense destruction of wealth by the Chicago fire in 1871, and by the Boston fire in 1872, and the large indebtedness contracted by individuals, by municipalities, and by the unprecedented extension of railroads which followed the war, had laid upon the country greater burdens in the way of interest than could be borne. The gradual tendency of prices to a gold basis wiped out the margin upon which many traders were doing business, and left them no alternative but bankruptcy. The suspension of Jay Cooke & Co. on September eighteenth precipitated the crisis, and the credit of thousands was soon involved in a common ruin. With 1873 the era of prosperity which followed the war came to an end. The stimulus to business which had been imparted by unnatural conditions had spent its force, and there was now to follow a long period of reaction and convalescence. TABLE SHOWING THE CONDITION OF THE LIFE COMPANIES DOING BUSINESS IN NEW YORK DECEMBER 31, 1873, THEIR BUSINESS FOR THE YEAR, THE SAME ITEMS FOR THE NEWYORK LIFE, AND THE NEW-YORK LIFE'S SHARE OF ALL: ITEMS. FIFTY-SIX NEW-YORK SHAR ITEMS. SHARE COMPANIES. LIFE. OF ALL. Assets................................ $360, 40,684 $24,342,452 6.7 Premium Notes and Loans in Assets...... 57,628,863 962,113 1.7 Surplus............................... 48,589,757 1,623,288 3.3 Liabilities............................. 311,550,928 22,719,164 7.3 Surplus to Liabilities, Per cent........... 15.6 7..... Insurance in Force..................... 2,086,027,178 123,672,386 5.9 New Insurance Written................ 465,614,001 26,621,460 5-7 Total Income.......................... 118,396,502 7,456,424 6.3 Premium Notes and Loans in Income..... 10,764,58I 236,327 2.2 Death-Claims Paid..................... 27,124,575 1,446,123 5.3 Death-Claims per $I,000 Insured........ $12.83 $1.70.... Total Paid Policy-holders.............. 66,840,264 3,828,384 5.7 Expenses and Taxes.................... I7,661,I82 820,522 4.6 Per cent. to Income.................... I4.5 II..... From Peace to the Panic. THE FOLLOWING TABLE SHOWS THE PREMIUM RECEIPTS IN 1870 AND 1873 OF ALL AGENCIES OF THE NEW-YORK LIFE RETURNING OVER $Ioo,oOo: I Boston...............*.*.. Chicago......... Louisville........ Baltimore........ Savannah........ New Orleans..... Memphis........ Philadelphia..... Leavenworth..... San Francisco.... St. Louis........ New York....... Montreal........ Cleveland........ London, Eng..... Lawrence, Mass... D. W. Russell.................. Stocking & Austin............... S. McElroy.................... 0. P. Curran Q. P. Curran................... Curran & Perkins.............. Howe & Burdge................. R. C. Howe.................... E. J. Richardson & Sons......... J. E. Johnston & Co............. J. S. Copes.................... Copes and Ogden.............. O'Dell & Spicer................. L. A. Spicer.................... T. J. Lancaster................. R. C. Hill & Co................. Partridge & Hawes.............. Crane & Hawes................ W. G. Bentley.................. W. L. Hill..................... J. A. Rhodes................... McConnell & Moore............. Walter Burke................... 0. C. Kendrick................. H. S. Homans.................. C. E. Kimball.................. 1870. $506,299. I3 170,175-.i 5. 109,414.25 I84,579.I7 I83,990.57 195,7i6.I9* 140,300.32 t 121,713.27 t 144,552.81 207,436.02 I79,039-99 t t 158, i63.62 1873. $332,994.02 248,547.28 I65,616.80 149,628.37 153,980.90 148,807.66 I75,907.96 I28,396.87 t 126,541.21 I34,004.86 I26,461.87 201,893.09 223,573.82 I80,910.75 I59,708.51 t I I I * About 30 per cent. of this amount was returned by B. G. Humphreys & Co. t Returned less than $Ioo,ooo. t This firm was formed in I870. Ix. EFFECT OF THE PANIC ON LIFE INSURANCE. I874-I879. THIS is the dismal period of American Life Insurance. It was a period of great industrial depression and of wide-spread commercial disaster. During the five years immediately preceding, railroad obligations-many of them bonds at high rates of interest-had been incurred to the amount of nearly seventeen hundred million dollars. The increase in State, county and municipal indebtedness between i870 and i88o was over two hundred and fifty million dollars. Manufacturing and mining corporations had floated large amounts of securities while the currency was depreciated and prices were high. The day of reckoning had now fully come. During these six years one hundred and seventy-three railroads, with obligations outstanding to the amount of over nine hundred and seventy-seven million dollars, were sold under foreclosure or went into the hands of receivers. The commercial failures aggregated over one thousand million dollars. Nearly fifty national banks went into liquidation, with liabilities of over sixteen millions. Even savings banks were drawn into the financial maelstrom created by the general depreciation in prices. Of the one hundred and sixty-six such banks in New York, twelve went into voluntary liquidation, and twenty-six, having liabilities of nearly thirteen million dollars, failed. In Massachusetts there were eighteen failures-one-tenth of the whole number-with liabilities of nearly ten million dollars and an ultimate loss of nearly two millions. Over nine million dollars worth of real estate was acquired under foreclosure proceedings. The average earnings of all savings banks in the commonwealth declined from aver six, to less than four, per cent. The Superintendent of the i68 Effect of the Panic on Life Insurance. I69 Banking Department of the State of New York, in commenting on the savings bank failures between i87i and i877, by which he estimated that depositors would lose $4,500,000, said, if the funds of all savings banks had been invested in United States bonds in I87I, the shrinkage would have been $7,000,000; if in the best bank stocks, it would have been $35,ooo,ooo; if in the best railroad securities, over $30,000,000; and if in real estate, from $40,000,000 to $50,000,000. In such a general financial upheaval, Life Insurance did not escape heavy losses. Nine New York companies went into the hands of receivers, and two others re-insured their risks in companies that became insolvent during the period. Eleven other-State companies retired from the State; two of them re-insured in a company that has continued solvent; six finally went into receivers' hands; and the remaining three voluntarily wound up their affairs.* The liabilities of the New York companies, when they were found insolvent, were nearly twenty-seven million dollars, and the deficiency was nearly seven millions. OtherState companies, by their last reports to the New York Insurance Department, had liabilities of nearly twenty-five million dollars and a surplus of nearly three millions. Somewhat over three millions in assets were held by the companies that re-insured or went into voluntary liquidation, and the premium notes and loans of both classes of companies-which were never paid, and therefore were not lost-aggregated over twelve millions more. During this period there were also nineteen other small companies in the South and West that went out of existence with more or less loss and scandal. The total assets of the solvent companies doing business in New York in i879 was somewhat over four hundred million dollars. Although careful estimates made at the time showed that the deficiency of failed companies was not much in excess of one per cent. of the total receipts of all companies since organization, and was a mere bagatelle as *The situation, in i876, as regards the re-insured and the re-insuring companies, is graphically set forth in the '"Life Insurance Tree," reproduced on another page from the " Herald" (a Chicago insurance journal, predecessor of the present "Argus," of Chicago.) Of the eighteen companies which there appear as independenthbranches, ten have since failed, and one (the National Life U. S. A.) has ceased to be an active company. I70 Effect of the Panic on Life Insurance. compared with the losses in other lines of investment, yet the fact remained that companies holding about nine per cent. of the entire life insurance accumulations of the country either failed or ceased to do new business during this brief period of six years. The shock to public confidence by these cumulative failures in different fields of investment, was something almost unparalleled in financial history.* The actual losses sustained were aggravated by disclosures of flagrant mismanagement-of false returns to cover up deficiencies; of the enrichment of managers and their favorites; and of hard and unscrupulous dealings with patrons. A single life company had forty law-suits pending when it went into the hands of a receiver. The people were angry and vindictive. A crusade against corporations began, which has continued with varying degrees of intensity and rancor until the present time. Life Insurance was specially singled out as the object of attack.t In nearly every large city there were prominent journals which sought by one-sided and exaggerated statements to cast discredit upon the systemupon all companies, both bad and good. Politicians, who are ever ready to use public opinion for selfish purposes, found in hostile legislation a means of public preferment and a source of private gain. The number of bills introduced in the various legislatures for the regulation of Life Insurance was unprecedented. Many of these were the work of " strikers " and of men who wished to pose as the champions of the people against corporations; many failed of passage, and some were vetoed after pas* One of the worst features of the financial situation in America is the all but universal distrust of corporate management, whether as applied to railroads or to financial institutions. -N. Y. Cor. London Telegraph, ilarch 8, 1877. t For more than two years the press of the whole country has rung with the story of life insurance failures. A war more relentless and cruel in its effects has seldom been waged against any commercial interest; nor seemingly with greater cause. Public confidence in the business has everywhere been shaken to its depths. Courts, officials and legislatures have been driven by the prevailing sentiment into an organized legal crusade against it, and this ill-starred movement has entailed a greater loss than all the previous company failures, resulting from ordinary business causes, that have ever taken place in the entire history of Life Insurance in this country. The persecution is still actively maintained, and gives little sign of abatement. * ** The greatest danger to life insurance just now is not depreciated securities, nor excessive expenditures, nor fraudulent management; it is in blind legislation, official interference, and the loss of public confidence. The policy-holders' worst enemies are his professed friends, who lend their aid in denouncing without knowledge or discrimination the assumed maladministration of the business.-Insurance Monitor, February, 1878. S upolene-nt io The treald, Sepal &176 The upper filu ves oHl e&cli broaich i^A ikeo noult of r;sks j-, force (Lthie cLoe of toLut repoTt.the ovwerftJuwves.Utfie reevvte.? 1-1 0 I, t, where tAe re-nain s are nguo. Effect of the Panic on Life Insurance. I7I sage, yet no less than forty-two laws relating to life companies were placed upon the statute books of the various States during this period. The temper of legislators is indicated by the Iowa law of March 8, 1876, which was entitled "An Act relating to Life Insurance, and to prevent injustice to the assured." A compilation of the receipts and expenditures of the principal life companies of the country, from organization to the close of 1878, showed that nearly eleven per cent. of their total expenses had been for taxes, licenses and fees to government officials.* As a measure of self-defense, the life companies formed the "Chamber of Life Insurance," through which they proposed to act together in securing the favorable attention of the community and in securing just legislation in the interests of Life Insurance.t The reference to legislation aroused the antagonism of some portions of the press, and threw suspicion upon the motives of the Chamber. The NEW-YORK LIFE, although a member of the organization, does not appear to have been very zealous in its support; it did not furnish its vital statistics for the compilation made by the Chamber, nor did it adopt the application and policy forms devised with a view to prevent fraud. These forms included a stringent suicide clause; warranted all statements full, complete and true, and made all statements warranties, whether material or not; and voided the insurance absolutely in case of impairment of health by stimulants or narcotics, residence or travel beyond certain limits, or in case of engaging in forbidden employments. The light in which the proposed new contract was represented to the public may be judged by the cartoon, reproduced *By A. F. Harvey, Actuary of Missouri Ins. Dept., in " Insurance Times," August, I879. t The objects of the organization were thus stated by itself: ' I. To attract the favorable attention of the community to Life Insurance and its advantages. 2. To promote by all proper means, in any of the United States, such just and equitable legislation as may be in the interest of policy-holders, and by like means to oppose such proposed legislation as may be prejudicial to such interests. 3. To obtain by all proper means the repeal of obnoxious legislation now in force in any of the United States respecting Life Insurance, and particularly all statutes'for unfair taxation of Life Insurance. 4. To diminish the expense of Life Insurance in such manner as may be accomplished by means of co-operation, as compared with independent action. 5. Generally to promote and protect the interests of the holders of life policies, and the interests of the associated companies respectively." t For a full understanding of the cartoon, it is necessary to know that the initials " F. S. W." refer to President Winston, of the Mutual Life; "C. T. L." to Prof. Charleton T. Lewis, Secretary of the Chamber; "H. B. H." to President Hyde, of the Equitable; "W. H. B." to Vice-President Beers, of the NEW-YORK LIFE; and "J. G. B." to President Batterson, of the Travelers. 10 'Iht Q0nquirtr. January 2, 1875. THE SITUATION.! 3.~~, R Gem e c C / ^'. C^ z2 H' X7 He s- f, *^ ^- y -x^ }F7 I ' ^Ago^ Dizzy- 2 ~ <^'y A/^ X^ <-^ -.^^^^^ -^>^,v -^ _5w ^ A d A s ^" e^d^ A h^,g-^ ''^^ — V^^ G 204 4Ten Years of Rapid Growtk. go,_,,._.-._.:uyI I Andd pHekLL -he~ '.~, Ad 2 22 C ---'~ c~~e~~c 2a~-~ asC- A >c hi en Ad L C-L S7 e / — ~~~~- =P- ~~x Ten Years of Rapid Growth. 205 of that year he was shot by an assassin in the city of Washington, and that after seventy-nine days of suffering patiently and heroically borne, he died on the nineteenth day of September,-these things are all written so large in his country's history that the NEW-YORK LIFE waived the usual proofs of death, and paid twenty-five thousand dollars upon President Garfield's life as soon as letters of administration were granted on his estate. The President's policy was taken in May preceding his death, and was on the Ten-Payment Life table, with Tontine period of fifteen years, and only one premium of $I,887.25 was paid thereon. As it was in favor of his estate, it could not be paid until an administrator was appointed, but on October twenty-seventh* President Franklin wrote Mrs. Garfield that it would be paid immediately after such proceedings had been taken. Payment was eventually made on November 4, I88I.t Mrs. JAMES A. GARFIELD. * October 27, i88i. Dear Madam: Your late husband was the holder of a life policy in this Company for $25,ooo, payable to his legal representatives. We are not at present advised as to the appointment of an administrator, but when so informed, together with certificate of such appointment, we will, without delay, forward a check for the amount due, without awaiting the expiration of the 60 days when the same becomes due and payable according to the terms of the policy. With great respect, I am, Very truly yours, MORRIS FRANKLIN. Mrs. JAMES A. GARFIELD. t November 4, i88I. Dear Madam: We notice in the "Times" of this morning that you have qualified as administratrix of the' estate of your late husband. We, therefore, without delay, waiving discount and the usual formality of proofs, enclose herewith a cheque to your order, as administratrix, for $25,000, proceeds of Policy 149,056, upon the life of our late President. Please sign and return to us the enclosed receipts, together with policy and certificate of appointment. I remain, with great respect, Yours very truly, MORRIS FRANKLIN. In the "Tribune Life of Garfield," written by Whitelaw Reid in I867, and published in "Ohio in the War," it is told how Garfield, when a young man, availed himself of the advantages of a life policy to secure a loan made by a friend to enable him to finish his course in college. Mr. Reid says: "He was now (I854) nearly twenty-three years old. The struggling, hard-working boy had developed into a self-reliant man. He was the neighborhood wonder for scholarship, and a general favorite for the hearty, genial ways that have never deserted him. He had saved from his schoolteaching and carpenter-work about half enough money to carry him through the two years in which he FROM PRESIDENT GARFIELD'S APPLICATION. 206 Ten Years of Rapid Growth. During the year I881 (June eighth) the limit of risk upon a single life was increased from thirty, to fifty, thousand dollars. On September fourteenth, the Trustees voted to contribute five hundred dollars to the relief fund raised for the benefit of the sufferers from the forest fires which ravaged several counties in Michigan. IN 1882 the Company's first regular Tontine policies upon the 1882. ten-year dividend period began to mature. The benefits under these policies have already been explained, both in connection with the adoption of the Tontine plan (see page I55), and in commenting on the results of Ten-Year Dividend Policies, which were allowed the same options in settlement. It will be of interest, however, to examine at this time the results as respects the proportion of lapses under the ordinary, and the Tontine, plans. The tables printed in the margin were furnished by the Company to the Committee appointed in 1885 by the Ohio Senate, to investigate Tontine insurance. thought he could finish the ordinary college course. He was growing old, and he determined that he must go that fall. How to procure the rest of the needed money was a mystery; but, at last, his good character, and the good will this brought him, solved the question. He was in vigorous, lusty health, and a life insurance policy was easily obtained. This he assigned to a gentleman, who thereupon loaned him what money was needed, knowing that if he lived he would pay it, and if he died the policy would secure it." TEN YEARS' TONTINE EXPERIENCE UPON THE ISSUES OF 1872 AND I873. TONTINES. Total of Insurances Total Remaining Lapsed-next Pre- Percentage Policy Year. for which Premiums Deaths. in Force at end of npad Lapses mium unpaid. of Lapses. were paid. Policy Year. ISt......... $17,889,ooo $114,0oo $17,775,000 $3,933,000 22.I 2d......... 13,842,000 70,000 13,772,000 I,031,000 7-4 3d......... 12,74I,000 76,000: 12,665,ooo 702,000 5-5 4th......... I,963,000 69,ooo0 I,894, 00 696,000 5.8 5th......... I,I98,000 68,ooo I,I30,000 467,000 4. 6th......... o0,663,ooo 70,000 I0,593,0oo 200,000. 9 7th......... Io,393,000ooo 22,000 IO,27I,ooo 84,000.8 8th......... 1,1 87,000 170,000 I0,07,000 3I,ooo00 3 9th......... 9,986,ooo00 2I,000 9,865,000.......... loth......... 9,865, ooo 66,ooo 9,799,00ooo...... $II8,727,ooo $946,0oo $117,78,0ooo $7,I44,000 6.i Av...., The amount remaining in force at the end of ten years, $9,865,000, is fifty-five per cent. of the amount originally in force. Ten. Years- of Rapid Growthk 207 It will be noted that the first table shows the actual course, year by year, of the Ten-Year Tontine policies issued in 1872 and i873; the second table shows the actual course, year by year, of non-Tontine policies issued in i872 and i873; while the third table shows the course, as to TEN YEARS' NON-TONTINE EXPERIENCE UPON THE ISSUES OF I872 AND 1873. NON-TONTINES. Policy Year. Total of Insurances for wbich Premiums were paid. Deaths. Total Remaining. in Force at end of Policy Year. Lapsed-next Pre- Percentage mium unpaid. of Lapses. I I I I ist..... 2d..... 3d..... 4th..... 5th..... 6th..... 7th..... 8th..... 9th..... iioth..... $19,748,ooo I4,785,000 12,442,000 IO,093.000 8,767,ooo 7,691,000 7,029,000 6,562,ooo 6,263,ooo 6,o64,ooo $229,000 111,000 141,000 174,000 93,000 77,000 82,ooo 89,ooo 75,000 i06,ooo $I9,5I9,003 14,674,000 12,30I,000 9919,9000 8,674,ooo 7,614,000 6,947,ooo 6,473,ooo 6,i88,cooo 5,958,000 $4,734,000 2,232,000 2,208,000 1,152,000 983,000 585,ooo 385,000 2I0,000 124,000 24.2 15.2 17.9 ii.6 11.3 7.6 5.-5 3.2 2.0 I I I I $99,444,000 $I,1I77,000 $98,267,000 $12,613,000 1i2.8 Av. I I I I The amount remaining in force at the end of ten years, $6,o64,ooo, is thirty-one per cent, of the amount originally in force. HYPOTHETICAL EXPERIENCE UPON TONTINES ASSUMING NON-TONTINE RATE OF LAPSE. Total of Insurances Total Remaining Lapsed-next Pre- Percentage Policy Year. for which Premiums Deaths. in Force at end of mimupd. oLas. were paid. Policy Year. mi m u p d. o Las. ist..... $17,889,ooo $II4,000 $I77j75,ooo $4,302,0oo 24.2 2d..1... 3,473,000 68,ooo I3,405.000 2,038,000 15.2 3113700 68,ooo I1,299,000 2,022,000 17.9 4th...... 9,277,000 53,000 9,224,000 I,070,000 ii[.6 5th...... 8, I54,ooo 49,000 8, io5,ooo, 916,000 11.3 6th...... 7,1i89,000o 47,000 7,1I42, 000 543,000 7.6 7th...... 6,599,ooo 77,000 6,522,000 359,000 5.5 8th...... 6, i63,ooo0 103,000 6,o60,000 184,000 3.2 9th...... 5,876,000 71,000 5,8o5,ooo ii6,ooo 2.0 ioth...... 5,689,000 38,000 5,651,000..... $9i,676,ooo $688,ooo $9o,988,ooo $II.55o,ooo 12. 8 Av. Actual totals for first, second and fourth columns (see ahove), $ii8,727,ooo; $946,ooo; $7,1144,ooo. Excess of insurance carried in consequence of the Tontine feature, $27,05I,ooo. Excess of losses paid in consequence of the Tontine feature, $258,ooo. Amount of lapses prevented hy the Tontine feature, $4,406,000. 208 Ten Years of Rapid Growth. lapses and deaths, which the Tontines would presumably have taken had they been upon the non-Tontine plan. The first notable difference is seen in the much lower rate of lapse among Tontine policies, or in other words, the greater persistency of the assured on this plan. It is to be noted, also, that the Tontine lapses are chiefly in the first years of the insurance, when no surrender value is allowed under any form of policy; hence the losses from forfeiture were not so much as is generally assumed by opponents of the Tontine plan.* The third table, taken in connection with the first, shows the larger benefits to the community of a certain amount of insurance on the Tontine plan, as compared with the same amount on the non-Tontine plan. At the end of a ten-year period the Tontine plan showed an excess of 29.5 per cent. of insurance carried one year, and an excess of 37.4 per cent. in the amount of death-claims paid. As the chief reason for the existence of Life Insurance is the payment of death-claims, and as the same amount of insurance on the Tontine plan results in the payment of a larger amount of death-claims, the plan, by this token, vindicates its right to be considered a valuable adjunct in providing for the * If the insurance were all taken at age 35 on the Ordinary Life table the forfeiture of reserves would be $182,062.89 on the Tontine plan, and $19I,944.68 on the non-Tontine plan. On other forms of policy the forfeitures would be less on the non-Tontine plan in most companies. TONTINES. NON-TONTINES. POLICY YEAR. Reserve Values t Insurance Lapsed Reserve Value. Insurance Lapsed. Reserve Value. Forfnde Law ________ _______________ of x879. Ist........ $3,933,000 $45,150.84 $4.302,ooo $49,386.96 $49,386.96 2d........ I,031,000 24,063.54 2,038,000 47,546.92 47,546.92 3d........ 702,000 24,984.18 2,022,000 7I,962.98 23,987.66 4th....... 696,ooo000 33,582.00,070,000 51,627.50 I7,209. I7 5th....... 467,000 28,645.78 916,000 56,187.44 18,729.15 6th....... 200,000 14,972.00 543,ooo 40,648.98 13,549.66 7th....... 84,000 7,462.56 359,ooo 3I,893.56 10,63I.19 8th....... 31.000 3,201.99 I84,000ooo 19,005.36 6,335.12 9th............... ii6,ooo 13,706.56 4,568.85 ioth........................... Totals.. $7,1 44,ooo $i82,062.89 $II,55o,ooo $38I,966.26 $I9I,944.68 t The law allows a forfeiture of the reserve value of the discontinued policy, during the first two years, and of one-third of such value after three years' premiums have been paid, as a surrender charge. Ten Years of Rapid Growth. 209 future of families bereft by death of their ordinary means of support. Nor do the benefits of the Tontine plan end here, as it will be seen from the tables that the actual amount of insurance in force at the end of the tenth year on the Io-year Tontine issues of 1872 and 1873 was $9,799,ooo, while had the same rate of lapse prevailed as in the non-Tn'rftirre class the amount in force would have been only $5,65 I,00oo. This shows a difference of over seventy-three per cent. in favor of the Tontine plan, in the amount of insurance then held by these policy-holders; and as this insurance had now a cash surrender value of the entire legal reserve, the Tontine plan is seen to have accomplished much more in saving the money of surviving and persistent policy-holders.* At the meeting of the Trustees held on May Io, 1882, the Officers of the Company were authorized thereafter to pay death-claims immediately upon the receipt of satisfactory proofs of death. At the December meeting of the Board, the Finance Committee presented a special report recommending the purchase of an office building in the city of Paris. The advantages of such a purchase in giving confidence to intending insurers were forcibly set forth and illustrated by references to the experience of other companies, and the estimated cost and income of the present property of the Company, at I6 Boulevard des Italiens, were stated. The Committee having had the matter under consideration during a period of about eighteen months, and the property having been personally examined by one of the members, and the opinions of experts taken, it was voted after full discussion, that the matter be referred back to the Committee with full power to act. In due course of time the purchase was made, and the Company entered into possessionrin March, 1884. This property now stands upon the Company's books at $750,000. Other property has since been acquired in Europe for office purposes, as follows: Ground was purchased in Amsterdam in August and September, I890, and a building erected thereon in I89I-2; the *The non-Tontine insurance lapsing after the second or third years would have had a small surrender value, but on the other hand that in force at the end of the tenth year could not in I882 and I883 have been surrendered for its full reserve value. I4 2IO Ten Years of Rapid Growth. property stands upon the Company's books at a valuation of $200,000. Lots were purchased in Berlin in April, 1884, and the erection of a building thereon was begun during the following year; this property stands on the Company's books at $425,000. In April, 1885, land was purchased in Vienna, and the building erected thereon was completed in July, 1887; the property stands on the Company's books at $375,000. The purchase of land for a building in Budapest was authorized January 7, I89I, and the building was completed October 25, 1894; the property stands on the Company's books at $565,000. The Committee submitted, as a part of its report, the following statement of premiums and annuity considerations received through the European Branch Office during the years 1876 to 1882, both inclusive. This statement does not include the business done in Great Britain and Ireland, that having been made a separate department under charge of Mr. J. Fisher Smith, reporting directly to the Home Office: STATEMENT OF BUSINESS OF EUROPEAN BRANCH OFFICE, H. S. HOMANS, DIRECTOR FOR EUROPE. ANNUITY CONSIDERAYEAR. PREMIUMS. ANNUIT NSIDERA-TOTAL. TIONS. 1876....... $I62,390.04 $2I 1,909.74 $374,299.78 I877....... 201,864.04 I63,347.89 365,2I.93 1878....... 263,778.51 350, I46.23 613,924.74 1879....... 350,313-35 5 6,803.84 867,1 7. 19 1880....... 424,670.05 882,605.97 1,307,276.02 1881....... 498,360.98 1,216, 187.65 1,714,548.63 I882....... 533,553.74 850,636.93 1,384,190.67 TOTAL... $2,434,930.71 $4, 91,638.25 $6,626,568.96 Early in 1882 the Superintendent of Insurance called upon the stockholders of the Western New York Life Insurance Company, of Batavia, N. Y., to make good an impairment of the capital stock of the company, which had been doing no new business since August 2I, I879. As policy-holders were fully protected the stockholders declined to put any more money into the company, which was notified in November that Ten Years of Rapid Growth. 211 application would be made for the appointment of a receiver. In noting this action, the Associated Press reporter shortened the name of the company at both ends, making it the "New York Life Insurance Company." THE NEW-YORK LIFE BUILDING, PARIS, FRANCE. This report coming to the notice of Hon. Charles G. Fairman, Superintendent of Insurance, he at once addressed the following letter to the Vice-President of the Company: 212 Ten Years of Rapid Growth. ALBANY, Nov. I6, I882. The assets of the NEW-YORK LIFE INSURANCE COMPANY, as shown by its last report to this Department, are $47,044,269.28, and its liabilities are $37,259,351.37, leaving a surplus of $9,784,917.9I. I do not hesitate to say that, in my judgment, it is one of the soundest and most reliable life companies in the world. The report prejudicial to its reputation arose entirely from a thoughtless and ignorant confounding of names on the part of some person sending a telegraph dispatch to the Associated Press. The dispatch referred to the Western New York Life, located at Batavia, N. Y. It seems just and fair under the circumstances, that this statement should be voluntarily and promptly made by this Department. CHARLES G. FAIRMAN, Superintendent. Attorney-General Russell added the following comment: "I concur entirely in the foregoing, and no proceedings against the NEW-YORK LIFE INSURANCE COMPANY have been commenced by me or even contemplated or suggested to me." The Company's annual report for December 31, 1882, showed another remarkable increase in new business-the business for 1882 being nearly double that of I880. It also showed $36,000 in contested claims, a ratio of one and eight-tenths per cent. of the total death-claims of the preceding year; the resisted claims of all companies doing business in the State were $577,854, a ratio of two and one-half per cent. of the total. As two of these claims against the NEW-YORK LIFE have become famous in insurance annals, a statement of the facts is here given as published in 1883, in reply to attacks upon the Company: To the AGENTS OF THE NEW-YORK LIFE INSURANCE COMPANY. Gentlemen: The report of the Company for the year ending 3Ist December, 1882, covers four claims, amounting to $36,ooo, which technically, under the form of returns made to the Insurance Department, are classed as "contested." As invidious comparisons have been made against the Company, and as these comparisons will doubtless be continued, the facts as to these four cases are given you herein, that you may be ready to meet any attacks on account of them. i. Wisner Murray, of Goshen, Orange County, N. Y., was insured by this Company on I3th June, 1872, in the amount of $5,000, and on 23d June, I874, in the amount of $i,ooo additional-both policies being in favor of his wife. Both policies provided that in case of Murray's death in or in consequence of the violation of law, the insurance should not be binding on the Company, that being a risk against which the Company does not insure. On I3th July, I876, Murray, then a man thirty-three years of age, went with his younger brother, Spencer Murray, to the Erie Railway Station at Goshen, armed with a revolver and with a rawhide tucked inside his coat, to await the arrival of the train from New York upon which Mr. R. H. Berdell, with whom he was Ten Years of Rapid Growth. 213 at variance, was in the habit of coming every afternoon. It was Mr. Berdell's custom, when arriving, to pass through the station house to his carriage at the rear platform. On the afternoon in question, Berdell, who was a gray-haired man of sixty to seventy years of age, alighted from the train, and started, as usual, to go through the station. -, x,, L,.. e. I II. - - A - ' I; Y. ". e I." s-, I, v X C, THE NEW-YORK LIFE BUILDING, AMSTERDAM, HOLLAND. house. About the middle of the room he found the two young Murrays standing in such position that he had to pass between them. As he attempted to do so, Spencer Murray, the younger brother, grasped both his arms from behind, put his knee in his back forcing him backward, and Wisner Murray, the insured, drawing his rawhide, rained a shower of blows on the upturned face of the old man, filling his eyes and cover 2I4 Ten Years of Rapid Growth. ing his clothing with blood and dangerously wounding him. Berdell had a pistol in his pocket, and as his arms were pulled toward it he drew it, and pointing it in the direction of Wisner Murray, fired, killing him. As soon as the smoke cleared away, Berdell was apprehended and held to await the coroner's inquest, and his numerous enemies in Orange County, with a very capable and powerful backing of legal talent, endeavored to have it so conducted that Berdell should be declared responsible for the death. They failed, and Berdell was at once set at liberty; and in spite of the efforts of these enemies, no Grand Jury has ever ventured to find any indictment against him. Under these circumstances, when claim was made for the insurance, the Company declined to recognize it, but offered, as a courtesy, to return an amount exceeding the total premiums paid, with interest, upon surrender of the policies. This was refused, and upon the trial the evidence showed that the time that elapsed between the first blow struck and the shot was not thirty seconds, and that at the time Berdell fired he was still being held, could not stand erect, and could not take any aim. On this evidence the jury found that the killing was the natural and immediate consequence of the malicious, wanton, cowardly, unlawful and murderous attack by Murray, a young man in the prime of life, upon an old man, and that by his own act he had voided the policies. 2. Walton Dwight, of Binghampton, N. Y., was insured by the Company on 26th Aug., 1878, in the amount of $io,ooo, premiums payable quarterly. Fourteen days after the policy was issued, and before the first quarterly premium had been received by the Company, it was learned that Dwight had misrepresented his physical history in his application. As no risk would have been taken on his life if the facts had been stated in his application, the return of the policy for cancellation was accordingly demanded. Dwight refused to surrender it and the Company's counsel was instructed to institute proceedings in Equity for its recovery, but the Court was not in session, and before it met Dwight was reported dead. Suit has been brought under the policy, but has not yet come to trial. At the outset, the Company offered to submit the case to any competent judge mutually agreed upon, and abide by his decision, but the offer was not accepted. This case is somewhat widely known from the facts that Dwight, at the time the Company's policy was issued, took out insurance amounting to some $250,00ooo in some twenty-one companies; that the premiums were all payable quarterly; that he was without means to pay the second quarterly premiums; that he was reported dead on the i 5th November, 1878, a few days before these second quarterly premiums became due; that the circumstances attending his reported death were such that it is charged that he either committed suicide or is still living, and that in either case the entire transaction was a deliberate conspiracy to defraud the insurance companies; that with few exceptions the companies interested refused to pay the insurance; that suits have been instituted against all of them, and that none have come to trial, although it is over four years since Dwight was reported dead. It is hardly necessary to say that the question of suicide does not concern the NEW-YORK LIFE, and that if there had been no other question the Company would have promptly paid the claim. The claim is resisted upon the ground that the policy was never properly in force, having been issued upon misrepresentations, and no premium having ever been received by the Company. 3. John W. Hillmon, of Lawrence, Kansas, was insured by the NEW-YORK LIFE under two policies, on 30th November and ioth December, 1878, each in the amount of $5,ooo000, premiums payable semi-annually. About the same time he took out $5,ooo000 Ten Years of Rapid Growth. 215 in the Connecticut Mutual Life, and $io,ooo in the Mutual Life of New York. On 27th March, I879, he was reported as having been accidentally shot dead, in Southern Kansas, by his partner, one J. H. Brown, while on their way to locate a cattle ranche. Simultaneously with the report of his death came a report that he was not dead, that THE NEW-YORK LIFE BUILDING, BERLIN, GERMANY. another body had been substituted for his, and that the affair was a conspiracy to defraud the insurance companies. An inquest had been held at Medicine Lodge, Kansas, near the place of reported death, a verdict given, upon the evidence of his partner, of accidental death by shooting, and the supposed remains buried, but they were disinterred and brought to Lawrence, Kansas, where a second inquest was held. From the evi 2i6 Ten Years of Rapid Growth. dence presented at this inquest, and from other information, including a confession made by the man Brown but subsequently retracted, the companies interested were satisfied that Hillmon and'6thers conspired to defraud the three companies; that the man whose remains were claimed to be Hillmon's was one F. A. Walters, of Fort Madison, Iowa, who had been murdered for that purpose, and that Hillmon was still living. A trial of the case, with all the evidence that could be brought by the claimant, failed to establish any claim, the jury disagreeing, and the presiding judge so plainly evincing his belief, upon the evidence, that Hillmon was not dead, that the claimant declines another trial before him upon the ground that he has prejudged the case. It therefore remains upon the docket awaiting further action on the part of the plaintiff. 4. C. S. Alford, of St. Louis, Mo., was insured by the Company on 22d December, 1877, in the amount of $Io,ooo. He died on 25th September, 1880. The proofs of death show that he died from diabetes, and that he had been treated for that disease before his application to the Company. That application stated he had never had kidney or any other serious disease; that he had never been sick, and had no family physician. Enquiry as to this disagreement elicited the facts that on the same day he applied to the NEW-YORK LIFE, he also made application to the Penn Mutual Life Insurance Company for insurance; that in his application to that company he acknowledged having had diabetes and having been treated for that disease. As this Company would not have insured Mr. Alford if his application had stated the facts, it offered to return the premiums paid, with interest, upon surrender of the policy for cancellation, and this offer not having been accepted, and suit having been brought, the Company declines to pay the claim until its liability has been judicially determined. Attention is called to the fact that when a claim is once disallowed it appears as resisted in every report thereafter until settled, and, consequently, as the same claims appear over and over again, the Company is unjustly credited with these claims as newly-contested every year they appear. Thus the Murray claim has been in every report for six years, the Dwight claim for four years, the Hillmon claim for three years, leaving the Alford claim of $Io,ooo as the only new claim resisted in 1882, while the Company's report shows $36,000 in claims resisted. As a matter of fact, during the five years ending 3ist December, 1882, it has disallowed claims amounting to $72,500, and so fair have been the reasons assigned therefor that not one of them has been decided against the Company, while during that time it has paid nearly nine millions of dollars ($8,957,746.52) in death-claims, without question. The Dwight case was in the courts, under a test suit brought against the Germania Life Insurance Company, until 1887, when the New York Court of Appeals decided in favor of the company.* The Hillmon case has been tried four times. On the first two trials the jury disagreed. On the third, a death in the Walters' family prevented the introduction of testimony respecting F. A. Walters; a letter of his, offered in evidence by the Company, was ruled out, and the verdict was for the plaintiff. The * Col. Walton Dwight has been seen in Chicago recently, according to the statement of Thomas Grannin, a commercial traveler. Grannin says that he knew Dwight well before his alleged death November 15, 1878, and cannot be mistaken.-The Weekly Underwriter, August ro, 1895. Ten Years of Rapid Growth. 217 Supreme Court of the State overruled this decision and ordered a fourth trial-in which the jury disagreed again. This case was examined by the Insurance Officials of seven States, in I894, and six of them pronounced it a fraud; the seventh declined to approve it.,,.-. lk, ~, w: -. -. - - -, - I - I v 1 -- THE NEW-YORK LIFE BUILDING, VIENNA, AUSTRIA. THE marked success of the Tontine plan, as shown by the set1883. tlement of matured Tontines in 1882, made the plan and the Company objects of attack both in the Legislature and in the courts. 218 Ten Years of Rapid Growth. Resolutions calling for an investigation of the companies doing a Tontine business were introduced in both houses at Albany early in 1883, and the information asked for was significant. The companies were to report all the details of their Tontine business, including a list of all Tontine policies issued, with the names of the insured, etc. It was openly charged that the resolution was drawn by a New York lawyer, who was thus fishing for clients among holders of lapsed policies. The resolutions never got further than the committee stage, because the Insurance Committee of the Assembly demanded that some one should give a reason why they should be adopted. They invited the advocates of the resolution and representatives of the companies to appear before them, but none of the former responded. The Committee therefore reported that no grievance had been shown calling for action on the part of the Legislature. The attacks in the courts were made to compel the return of premiums and for damages where policies had been allowed to lapse, on the ground that the Company had not carried out in good faith the plan as set forth in the prospectus. Two suits were brought under different policies by the same attorney-one in the Supreme Court of Brooklyn, and one in the Court of Common Pleas of New York. In the Brooklyn case* the court overruled the demurrer of the Company that the plaintiff, not having completed his part of the contract, had no cause of action, and this judgment was affirmed by the General Term in February, 1883, and the case sent to trial. Upon the trial, in January, 1885, the Company's books were produced, and Mr. Rufus W. Weeks, then mathematician of the Company, testified as to the method in which the Tontine accounts were kept. The judge thereupon dismissed the complaint with costs, stating that it was clear from the evidence and the books that the Company had complied with its contract in every particular. In the New York caset the demurrer of the Company was sustained, and the decision of the General Term affirmed the judgment of the lower court. The case was taken to the Court of Appeals, where the judgment was affirmed in Simons vs. NEW-YORK LIFE INS. Co. t Bogardus vs. NEW-YORK LIFE INS. CO. Ten Years of Rapid Growth. 219 January, I886. When the decision of the General Term of the Supreme Court was made, in February, I883, sending the case to trial, the opponents of the Tontine plan seem to have carefully laid their plans in ad A. 4a1'~ THE NEW-YORK LIFE BUILDING, BUDAPEST, HUNGARY. vance to have the report of the case appear in the newspapers as if it had already been tried on its merits and the averments of the complaint proved true. These reports, with flaming head-lines and misleading comments, 220 Ten Years of Rapid Growth. were reprinted in circular form and scattered far and wide. In order to give them the odor of respectability, some of them concluded by commending the policies of the Mutual Life Insurance Company, but that company promptly and indignantly disavowed their authorship. From the manner in which the attacks in court were coupled with the resolutions introduced in the Legislature, the public were justified in believing that they had a common origin.* A third casef was brought in the Court of Common Pleas of New York by a policy-holder who had completed his payment of premiums and was dissatisfied with the result of his policy; an accounting was demanded showing how the amount apportioned to his policy had been arrived at. Although the Company makes no secret of the method by which surplus is apportioned to Tontine policies, and has published a full account of it, yet to -do this in detail, with every policy-holder who demanded it, would involve a vast amount of labor to no purpose. This case was first tried before a judge, without a jury, and decided in favor of the plaintiff. The General Term reversed this decision, and the Court of Appeals affirmed the decision of the General Term. It was held that, in the absence of any evidence of a want of equity, the plaintiff was not entitled to an accounting. It is difficult to see how great corporations could do business at all if any other theory prevailed. A railroad, or a bank, or a telegraph or telephone company, could not permit its records to be ransacked and its apportionments of surplus to be questioned by every dissatisfied stockholder, without annoyance that would speedily prove intolerable. The Trustees of a purely mutual life company have every inducement to be fair and to make as large dividends as possible, and at the same time provide for the undoubted solvency of the company. At the meeting of the Trustees held on May 9, 1883, the Officers represented that by reason of the decline in interest rates capitalists were * The inevitable trouble in regard to Tontine life insurance has arrived, and the victims are appealing to the Legislature to investigate the system, and the Supreme Court has been called upon to see that justice be done to the victims.-Anonymous Circular. tUhlman vs. NEW-YORK LIFE. Ten Years of Rapid Growth. 221 becoming interested in Life Insurance as an investment, and that a sufficient number of large risks could probably be obtained to give a satisfactory average; also that a careful review of the total re-insurance effected by the Company from organization showed that it would have been perfectly safe in carrying its own risks; it was thereupon voted to increase the limit of risk upon a single life from fifty, to seventy-five, thousand dollars. In August, 1883, Dr. Charles Wright, the senior Medical Director of the Company, who had been in failing health for some months, was given a leave of absence for six months. He at once sailed for Europe, but the voyage only aggravated his condition, and he died of Bright's Disease on September second, a day or two after landing in London. Dr. Wright had been connected with the Company for over twenty years; since January I, 1866, he had been a member of the Medical Board; and since the death of Dr. Bogert, in I877, he had been the Chief Medical Director. He was also elected a Trustee during the same year. He was a man of good professional ability, of great energy and industry, and had a natural aptitude for the duties connected with his office. At the meeting of the Trustees held on September eleventh, resolutions were adopted expressive of the loss sustained by the Board and the Company. The great age of President Franklin and the rapidly-increasing business of the Company made necessary during this year an increase in the executive staff, and the Finance Committee, to whom the subject was referred in November, reported on December twelfth, recommending that the office of Second Vice-President be created, and nominating Dr. Henry Tuck for the position. The recommendation was adopted, and Dr. Tuck was elected. The death-claims paid in 1883, for the second year in the Company's history, exceeded two million dollars within twelve months. Among the six hundred and odd claims there were many that illustrated in a striking manner the value of Life Insurance to the family and to the estate of the insured; two cases will suffice as examples; the account of the first is taken from the "News-Letter" for August, 1883: 222 Ten Years of Rapid Growth. During the month of April -an acquaintance entered the office of the Editor of the "News-Letter" bearing a letter from a lady whose husband's name appears in the list of death-claims paid in April. The letter said that she was greatly in need of the insurance on her husband's life, as, among other heavy expenses, she would be obliged to pay two hundred dollars for a lot to bury him in —for the want of which he was then lying in the cemetery vault. Would her correspondent kindly see if anything could be done to expedite the payment of the policy? Upon investigation, it was found that the delay was caused by the failure of the family physician to complete and return to the Company proofs of death. Fortunately, these proofs arrived on the following day, and on the day after the check went to the widow. The other claim was that under the policies of Colonel Verling K. Hart, of Wyoming, the full significance of which did not transpire until several years later, when a member of the family wrote Mr. C. W. Moore, the Company's Manager at Detroit, through whom the insurance was originally effected, that the money paid on the NEW-YORK LIFE'S policies saved an estate which afterward proved to be worth over a million dollars. THE Company had now been settling matured Tontine policies 1884 for two years, with larger cash results than those attained by any other company on policies running through the same period of time, and with such other options in settlement as made its Tontines-to a large class of people-the most desirable policies issued. Although, as has been shown, the aggregate forfeitures under this plan were but little more than under the ordinary plan, owing to the greater persistency of holders of Tontine policies, yet there was opportunity for cases of individual hardship such as the general spirit and scope of Life Insurance seeks to mitigate or prevent. As the Tontine method of deferring dividends and compounding surplus and the options in settlement at the end of Tontine periods included the substance of the plan, it was now determined to issue a Limited-Tontine Policy with the same non-forfeiture conditions as policies on the non-Tontine plan. This policy was announced with the beginning of the year 1884.* * What peoplefear may happen, rather than what actually will happen, often properly determines their action, and the number of persons who have been deterred from taking Tontine policies from fear of forfeiture has probably been far greater than the number who have forfeited their policies from inability to pay the premiums. This caution is so entirely praiseworthy that, to meet the wishes of the large class who desire Tontine Benefits without the risk of forfeiting their policies, the NEW-YORK LIFE announces that it will begin, with 1884, the issue of a Non-forfeiting Limited-Tontine Policy. This Ten Years of Rapid Growth. 223 The correspondent of the "Spectator," writing from Albany under date of January 14, I884, said: "The Insurance Committees of both houses are more favorable to the important interest of insurance than usual. * * * They will be more likely to treat insurance, both life and fire, as one of the legitimate lines of business, rather than an interest to be preyed upon." Under date of February eleventh the same writer reported the introduction in the Senate of resolutions requiring the NEWYORK LIFE to report to the Committee on Insurance the investments made by the Company since January I, 1874, the amount of real estate owned, and the amount of judgments held for deficiencies, together with all details of persons, places, fees, etc., in connection therewith, and authorizing the Committee, if deemed proper, to examine the Company.* Under date of February twenty-fifth he wrote: "Senator Coggeshall on Thursday last introduced the annual resolution calling upon the Equitable and NEW-YORK LIFE companies for a particular detailed statement about Tontine policies, covering the entire period during which each company has issued such policies. As the resolution was being read, one of the senators turned to his colleague, and said: 'Do you hear the bell tinkle?'t The Senate, by a decisive vote, referred the resolution to the Insurance Committee as the best mode summarily to dispose of it." No action was taken on either of these subjects; reference is made to them here to show the hostility to which the Company and the Tontine plan were subjected. The death of Mr. William Barton, a member of the Board of Trustees, on September I, 1884, calls for something more than formal notice. Mr. Barton had been a Trustee since I849, was chairman of the committee which superintended the erection of the Company's present building, and for over twenty-one years was chairman of the Finance Committee. policy has the ordinary Tontine Options and Benefits, and is non-forfeiting according to the terms and conditions specified in the policy, which are the same as those of policies not Tontine.-Extract from Circular, January i, 1884. * It will be remembered the Company was examined by the Insurance Department in I877. t One of the fads of the day was a small bell in the shape of a chestnut worn on the watch chain, to be rung when a threadbare story was told. 224 Ten Years of Rapid Growth. To him was due much of the skill and success with which the Company's funds were handled during the Civil War and the trying times subsequent thereto. He was a gentleman of the old school, who felt the importance of his trusteeship, and labored unremittingly to discharge the duties growing out of so sacred a trust. On one occasion, a would-be borrower made to him a proposition which to Mr. Barton's mind seemed like an attempt to bribe him; although nearly eighty years of age, he was with difficulty restrained from committing a personal assault upon the offender. In December of this year the Officers represented to the Trustees that the experience of the NEW-YORK LIFE and of other companies fully demonstrated that insurances upon individual lives to the amount of one hundred thousand dollars were not only desirable as average risks, but that as a class such policies were more likely to be continued to the end of their respective terms than policies for smaller amounts. It was therefore voted to increase the limit of risk upon a single life to one hundred thousand dollars. Among the death-claims paid in 1884 were thirty-one policies that had been in force over thirty years, and sixty-seven policies that had been in force less than one year. The premiums, less dividends, on the older policies were $64,176, and the amount paid under them was $9I,I57. A case, illustrating several points, was thus described in the Company's publications of the time: In I866 a gentleman, then forty-nine years of age, insured in the Company for $20,000 on the Ten-payment Life plan-a plan, observe, upon which a man can soon pay up his policy. Two years later he took $I5,ooo additional with the Company, on the same plan. In I871 he took paid-up policies for both, his paid-up insurance being about $15,000, upon which he has since received annual dividends. During the past year he died. One week after his death the Company received notice thereof, and with the notice came an order from the widow, duly executed, empowering and directing the Company to pay over to the Tax Collector of the city wherein she lived oversix thousand dollars, his receipt therefor to be a full discharge in that amount of the Company's obligations to her under her husband's policies. Tax bills were inclosed, showing that the amount was due upon four pieces of real estate, the assessed value of which was nearly four hundred thousand dollars, and that the property was to be sold for taxes within four days. The Company was asked to give to the Tax Collector such assurance Ten Years of Rapid Growth. 225 of the validity of the claim as would secure the withdrawal of the property from sale. This the Company was able to do, and a few days later formal proofs of death were presented, the taxes were paid, and the balance paid to the widow. THE year I885 was destined to see the controversy between the 1885. Tontine, and non-Tontine, plans revived in another form, and to draw into the discussion the managers of the leading companies and the Legislatures of two great States. The President of the Connecticut Mutual Life Insurance Company, in his annual report for 1884, published in the New York "Tribune" of March 22, 1885, assailed the plan with great bitterness, denouncing Tontine policies as "gambling" contracts. Life Insurance was declared to have but "a single function-the distribution among the heads of families of the loss incurred by each family in the death of its head." These strictures were replied to by the officers of the NEW-YORK LIFE, of the Equitable and of the Mutual, the latter company having begun in 1884 the issue of a five-year distribution policy, with essentially the same features as the non-forfeiting Tontines. As the Vicar of Wakefield said of his discussion with his neighbor: "It was managed with proper spirit on both sides. He asserted that I was heterodox; I retorted the charge; he replied; and I rejoined." In neither case could the personal element be eliminated. Tontine insurance in its various forms had been before the public for fifteen years; the companies practicing it were the growing companies; the results of maturing classes, while not showing as large results as had been predicted, were yet better than on any other plan; and-most important of all-people would take Tontine policies when they would not insure at all on the ordinary plan, and would keep Tontine policies in force when other policies would be dropped.* For the president of a company that had not only fallen hopelessly short of the results attained by its competitors, but also of its own *It was charged that large amounts of Tontine insurance were written chiefly in order that it might lapse; but if this were true, the plan miscarried. The new insurance paid for in the NEW-YORK LIFE from I872 to 1883, both inclusive, was $274,706,944 (not all of which was Tontine), and the lapses from 1873 to I884, both inclusive, were $86,367,524, a ratio of 31.4 per cent. During the same period the paid-for issues of the Connecticut Mutual were $I42,00I,775, and the lapses were $54,877,295, a ratio of 38.6 per cent. 15 226 Ten Years of Rapid Growth. previous record,-to bring a railing accusation against Tontine policies at this late day, seemed too much like an afterthought to solace failure. The specific charge that the old form of Tontine policy was a gambling contract, had been expressly dissented from by the Supreme Court, in the Simons case already noted;* while the larger proportion of lapses under the ordinary plan and the larger amount of death-claims paid under the Tontine plan, showed the greater public benefits under the latter. The "single function" theory of Life Insurance was only an assumption, made to preclude the legitimacy of the benefits which the Tontine plan provided for policy-holders who survived certain periods. This theory would exclude all endowment policies-which the Connecticut Mutual had issued for many years-and was inconsistent with any cash surrender values on life policies, although a guarantee of such values had been introduced into the Connecticut Mutual's policies for the first time in the year the NEW-YORK LIFE'S Tontines began to mature (I882). Although President Green has renewed the assault upon all forms of long dividendperiod policies in several of his annual reports since 1885, the impression made upon the public mind and upon the progress of this plan of insurance seems to have been practically nil. Nearly all the life companies, except those organized under the laws of Massachusetts, now issue policies on this plan, and the companies adopting it do about eighty per cent. of the total business. The philippic of the Connecticut Mutual's President in I885 had, however, one result which he probably did not anticipate or desire, and for which he should not be held responsible. The New York Legislature being then in session, resolutions were introduced in the Assembly, March twenty-fifth, citing the statements made by President Green in the "Tribune," and providing for a Special Committee to ascertain the nature of the Tontine plan and to report what legislation, if any, was necessary in relation thereto. The Committee on Insurance was entirely ignored, and *It was claimed by the counsel for the appellant, on the argument, that this insurance contract was a gambling contract. * * i We cannot assent to this view.-Judge J. O. Dykman, re Simons vs. New-York Life. Ten Years of Rapid Growth. 227 a proposition to refer the matter to Superintendent McCall, of the Insurance Department, was voted down. The resolutions were passed and the Committee was ordered to report within ten days. They came to New York, called a few witnesses, and at the expiration of ten days asked the Assembly for an extension of time. The appointment of the Committee had been characterized from the first, by correspondents of the leading newspapers of the State who were on the spot, as "a strike of the lobby," "'a raid of the black horse cavalry," and "an alliance of the thieves and the noodles." It was found that one of its members and the "expert actuary" employed by it were agents of the Connecticut Mutual. The Tontine companies showed no fear of the investigation and no disposition to purchase immunity from it. The Assembly, which had been deaf to appeals to reason and propriety, was apparently susceptible to the keener shafts of ridicule, and the Committee's request for an extension of time was refused. Their report was published in full-evidently as paid matter-in the New York "Tribune" of May twenty-sixth. It was chiefly an effort to justify the Committee's appointment, and closed with a recommendation that the law of 1879, providing for a surrender value for life insurance policies, after the payment of three annual premiums, should be so amended as to prohibit all companies from issuing policies that did not provide for a surrender value. No action was taken on the recommendation. The non-forfeiting Tontines, already adopted by the companies, made such legislation unnecessary, and this form soon after came to be issued exclusively. An Investigating Committee was appointed by the Ohio Senate, on April 15, 1885, instigated, according to the preamble to the resolutions adopted, by complaints in Ohio against " the unjust plans and methods of the Tontine insurance business as conducted by such companies foreign to Ohio," and by the "startling exposures recently made by the leading journals of this and other States of such plans and methods." The Insurance Commissioner of the State was made a member of the Committee, and Mr. Sheppard Homans, of New York, was appointed special assistant. This Committee made a thorough investigation of the 228 Ten Years of Rapid Growth. plans and methods of all life companies doing business in Ohio on the Tontine plan, and were given every facility by the companies for formingan intelligent opinion as to its actual working and results. Their report -embracing the testimony taken and the Committee's conclusions-was made in August, 1885. "Every person in favor of, or opposed to, the Tontine plan, of whom knowledge was furnished the Committee, was examined, and whatever information was obtained in this direction will be found in the record." Comments upon the evidence by the three senators, and a resume of the same by Superintendent Reinmund and Actuary Homans, follow the testimony. The senators refused to condemn Tontine or serni-Tontine insurance, saying that insurance officials equally conscientious and competent differed on this point, and that it was a question for individuals, rather than the public, to determine. They expressed the opinion that the alleged misapplication of surplus Tontine funds had caused much of the controversy,* but declared that "no evidence was furnished the Committee of corrupt diversion of funds, or intentional covering up of anything of interest either to the policy-holder or the public." t The following extracts from the conclusions of Messrs. Reinmund and Homans, cover the essential points in dispute: (i) As regards the charge that Tontine insurance is a gambling scheme. —Gambling, as usually understood, is a scheme by which one gets something for nothingwhere no valuable consideration is given by the winner to the loser-where the gain to one is precisely offset by the loss to the other-and where the gain or loss depends, not on the will or power of either party, but rather upon mere chance or skill. It is usually condemned as a vice, as subversive of public morals, as wicked and unlawful. Nothing in the evidence obtained by the Committee shows, or even tends to show, that such grave charges can justly be brought against Tontine life insurance. On the contrary, the evidence clearly proves that Tontine companies derive solid advantages from Tontine contracts, and can safely promise, and in fact do give, great and solid benefits to Tontine *These allegations were made chiefly by anonymous circulars, and by sensational newspapers at the instigation of others than policy-holders. The NEW-YORK LIFE, in reply to a question on this point, made the following answer in writing: "We have, with great expenditure of labor, examined the papers in connection with the last thousand Tontine settlements, and find, in fifteen cases, expressions of disappointment with the results. In onlyfourof those cases is any charge made of bad faith. In none of them have legal proceedings been brought against the Company."-Report, page 65. t Report, page 202. Ten Years of Rapid Growth. 229 policy-holders. Statistics abundantly prove, for instance, that when applicants for insurance deliberately elect to pay larger premiums than are absolutely necessary, as Tontine policy-holders do when they elect to forbear the usual yearly dividends, they thereby give evidence, unconsciously perhaps, or by instinct, that they expect to live to enjoy the benefits promised in case of long life-in other words, they give evidence of superior vitality, which is more reliable in determining the value of the risk than the most skillful medical examination. It is clearly proven that the rates of mortality, and also the rates of lapses, or discontinuances, are far less among Tontine than among non-Tontine policy-holders. These constitute the solid advantages of Tontine contracts, and the companies can give, and in fact do give, in return ample and compensating advantages in the way of larger dividends, or surplus, and larger surrender values than can be safely promised or given under ordinary policies. (2) As regards the charge that Tontine contracts tend to deprive families of the protection which they would otherwise have obtained under ordinary policies.-The whole testimony obtained by the committee disproves this charge. The rates of discontinuances, except in the first two or three years when the conditions of the two contracts are similar, are far less among Tontine than among non-Tontine policies, and this is easily accounted for. The penalty in case of lapse, and the reward in case of persistence, are both greater. The definite promise to pay a large sum in cash at the end of the Tontine period, as surplus and guaranteed surrender value, furnishes a substantial collateral, available, if necessary, to borrow money to pay premiums, and would thus enable a Tontine policy-holder to keep up his insurance when an ordinary policy-holder would be compelled to lapse, or to accept (as a semi-Tontine policy-holder might also do) a small paid-up insurance. Human nature is so weak that it often neglects duties which are for our own interest or benefit, unless there is a penalty for the non-performance, or a reward for the performance of the same. (3) As regards the charge that expenses are greater in Tontine conmfanies.- Here, again, the evidence and statistical information disproves the charge. The heaviest expenses are generally those incurred at the time the policy is issued, and the greater the volume of new business the greater the apparent expenses. The Tontine companies issued seventy-four per cent. of the new insurances in 1884, but their expenses are actually smaller than those of the non-Tontine companies when compared to new business, or to insurances in force when properly classified. (4) As regards the methods of keeping accounts, and the proper aiilication of the funds.-No evidence of wrong-doing has been offered to the Committee, or that the funds properly belonging to Tontine policy-holders are not managed with fidelity and integrity, and are not held intact for the benefit of the proper beneficiaries. In fact, no charge or complaints of this nature have been made, or are known to the Committee as having been made against any company. In conclusion, the evidence obtained by the Committee demonstrates that the Tontine system of life insurance is lawful; that while the penalties enacted in case of discontinuance are greater than upon ordinary policies, the advantages in case of continuance are also greater. These penalties differ in degree, not in kind, and hence the term "gambling" is no more applicable to Tontine than to non-Tontine insurance, and in fact is applicable to neither. The fulfillment of the Tontine contract is encouraged rather than discouraged by these penalties, and the greater benefits given on these contracts. - e %; A e < >............... _...f~.{_i*A ':,:7- *s *' En; i, BULDN,! K A_ _ I _2 l,~$y _ _ __g:L _;- F` arc~ ~rr.gE~ THE NEW-YORK LIFE INSURANCE COMIPANY'S BUILDINGC. | Draped in Memory of Gen. U. S. Granl, Aug. 8, 1885. l 230 Ten Years of Rapid Growth. 231 In October, 1885, the Company began the issue of a Five-Year Dividend Policy. This was practically a non-forfeiting Tontine policy with successive Tontine periods of five years each. It contained, however, new privileges. After two years there were no restrictions as to residence and travel, and none with respect to occupation except military and naval service in time of war, the manufacture of explosives, dueling and violation of law. In case of death after two years while engaged in the occupations prohibited, the reserve value of the policies was to be paid. A mortuary-dividend, or premium-return of one-half of all premiums paid during the five-year period in which death should occur, was paid with the policy. At the end of each five years the regular Tontine options were allowed in settlement or continuance of the policy. The cash surrender value consisted of the full reserve and surplus, except at the end of the first period, when it was the surplus and eighty per cent. of the reserve. The guarantee of immediate payment of death-claims was first inserted in this policy, although that had been the custom of the Company under other policies for several years. The Premium-Return feature of the Five-Year Dividend Policy proved very attractive, and has since been added to the Company's policies issued for longer dividend periods, and the amount of the return made either one-half or all of the premiums paid, taken at the tabular annual rates. Under the larger guarantee the policy-holder dying within a dividend period of ten, fifteen, or twenty years, receives his insurance for the use of his money, the face amount of the policy, plus the annual premiums paid, being paid at his death. There came a day in October, I885, when the "good, gray head which all men knew," was seen no more at the office of the NEW-YORK LIFE INSURANCE COMPANY;-Morris Franklin, President of the Company for over thirty-seven years, was dead. The announcement was made to the Trustees by Mr. Beers, at a special meeting held October twenty-seventh, in substantially the following words: With a feeling of sadness it becomes my duty as Vice-President and Actuary of the Company to make official announcement of what is already known to each member of the Board;-Morris Franklin, our venerable and honored President, died at his home 232 Ten Years of Rapid Growth. in Flushing on the twenty-second instant. This event suggests a review of Mr. Franklin's connection with the Company, which has been so long, so pleasant to his associates, so full of honor to himself, and of growth and prosperity to the NEW-YORK LIFE. In all his life previous to his acceptance of the Presidency of this Company, in 1848, Mr. Franklin belonged to a past generation. He was born not far from this spot, when the business portion of the city was below Wall Street. He grew up as a contemporary of the founders of the older business houses of the metropolis. His early teacher, Goold Brown, and his kinsman, Lindley Murray, were authors of school-books which have been authorities for two generations of youth. Admitted to the bar soon after attaining his majority, he was a member, and for two years President, of the Board of Aldermen of this city, when such positions were sought by leading citizens, and when only such were considered competent to fill them. He was a member of the old Volunteer Fire Department, was for many years foreman of a company, and as such served with distinction at the great fire of 1835. He was four terms a member of the State Legislature, serving in both houses, before the anti-slavery agitation began. Having thus given his early life largely to the service of his native city and State, and having thereby gained valuable experience and the confidence of his fellow men, he became, in I848, the President of this Company. It had already had two Presidents within less than four years, but only a limited business. It had issued in all less than four thousand policies, and had less than $i65,000 in assets. Yet, considering the state of the business, this was a fairly creditable record. The theory of Life Insurance was new and crude; its methods were for the most part yet to be wrought out; prejudice was to be overcome and confidence inspired. It is not to be wondered at that progress was slow; it is honor enough that the Company survived this experimental period, and slowly grew in elements of strength and permanence. In spite of all hindrances, in I855 it passed the one million dollar mark in accumulated assets-of which about $400,000 was in premium notes. My own connection with the Company began in I85I, first as accountant and then as mathematician and cashier. While occupying these positions, I always found Mr. Franklin a most appreciative and considerate chief executive. I was made Actuary in I864, and Vice-President and Actuary in I868; and, with Mr. Franklin's hearty concurrence, the active management of the Company was from the latter date largely committed to my hands, while he, already past his three-score years, devoted himself more particularly to office and supervisory work. But with this partial retirement from the more active duties of the Presidency, Mr. Franklin did not abate anything of his interest in the work and prosperity of the Company, and for seventeen years we have been harmonious co-laborers in making the NEW-YORK LIFE INSURANCE COMPANY what it is to-day. This relation was maintained until the last; and, as many of you can bear witness, it was never disturbed or marred by the infirmities of disposition which age so often brings. To the last Mr. Franklin was the same genial, kindly man, interested in the success of the Company, appreciative of the work, and considerate of the feelings and happiness, of his associates. He lived beyond the time allotted to most men, and, with nothing wanting to his happiness, either in official or private life, he at last laid down life's burdens as cheerfully as he had borne them. After a life full of labors and full of honor, at the ripe age of eighty-four years, he has entered into rest. Resolutions expressive of the high esteem in which Mr. Franklin was held by his associates were adopted. PRESIDENT NEW-YORK LIFE INSURANCE COMPANY, OCTOBER 27, 1885-FEBRUARY 10, 1892. i i' 1!~ I i~ i~ (~ i 1 r Ir j i: F i. a ~~ ~~ i;~ r r Ten Years of Rapid Growth. 233 There was no doubt as to who should succeed Mr. Franklin. Mr. Beers had long been recognized as the inspiring force in the Company's management, and his election to the Presidency was by the unanimous vote of the Trustees present. The subject of the election of a VicePresident and Actuary was referred to a special Committee consisting of Messrs. Welch, Appleton and Booth, who were to report at the next meeting. Dr. Tuck was made Actuary, pro tern. On November eleventh the Committee reported, recommending that the office of VicePresident and that of Actuary be made distinct, and nominating Dr. Henry Tuck as Vice-President, and he was so elected. Mr. Rufus W. Weeks, the mathematician of the Company, was recommended by the Committee for Actuary, and was duly elected. In the matter of Second Vice-President the Committee, through its Chairman, Mr. Welch, asked for more time, whereupon Mr. Booth said that without the knowledge or consent of the Chairman of the Committee, he presented the name of Mr. Welch. The ballot was taken, and Mr. Welch was declared elected. IN January, I886, the Company began the issue of a Nonforfeit88 ing-Tontine Limited-Endowment Policy which presented several new features. It was payable as an endowment in either ten, fifteen or twenty years, the amount of the endowment for each thousand dollars' insurance being three hundred dollars on a ten-year endowment, four hundred dollars on a fifteen-year endowment, and five hundred dollars on a twenty-year endowment. It served the purposes of an endowment policy, in providing a definite sum to those who survived certain periods, at much lower premium rates than the full endowment policy. It also gave more insurance for the same premium paid than the regular endowment, and thus obviated the objection sometimes made to the latter-that during the last years of such a policy there is very little insurance under it, the funds for its payment having been nearly all contributed by the policy-holder. The dividend periods of this policy corresponded with its endowment periods. The Premium-Return feature, first introduced in connection with the Five-Year Dividend Policy, in 1885, was incorporated in the new contract in two forms, and provided 234 Ten Years of Rapid Growth. for the return either of half or all the premiums paid, in case of death while the policy was in force. The non-forfeiture provisions were new, and provided that, in case of lapse after three years' premiums had been paid, the legal reserve on the policy would, on request within six months, be applied to extend the insurance for its full amount for as long a time (within the endowment period) as such value would carry it, according to the Company's single premium rates for temporary insurance; and if such value were more than sufficient to continue the insurance to the end of the endowment period, such excess would be applied to the purchase of a pure endowment, payable at the end of the period if the insured were then living. This was the first introduction'of the feature of extended insurance into the Company's policies. A fac-simile of the first Non forfeiting-Tontine Limited-Endowment Policy is given following this page. While the Tontine discussion was going on, in 1885, Superintendent McCall, of the New York Insurance Department, without making any ado about it, directed the Actuary of the Department, Mr. John S. Patterson, to make an examination of the Tontine accounts of the NEW-YORK LIFE and Equitable. This was done, and Mr. Patterson's report was made early in 1886. Regarding the methods of the companies in keeping their accounts, Mr. Patterson said: Practical accuracy is undoubtedly secured by these methods, and absolute accuracy is as nearly secured as is feasible in the calculation of large accounts of a complicated kind, and as is considered practicable in the apportionment of surplus on either ordinary or Tontine policies. On other points raised in the discussion, Mr. Patterson said: I am at a loss to see how any extraordinary or improper expenditures could be charged against the Tontine funds, with any greater safety to the officer so wrongly charging them, than if charged to the general fund of the company. The introduction of the semi, or non-forfeiting, Tontine does away with that which, in the minds of some, is another (if not chief) ground of complaint; though the actual cases of hardship chargeable to the absolute forfeiture of the old style, full Tontine policies, are surprisingly small. As to the charge that these policy contracts are gambling ones, it is, I think, hardly worth serious consideration. See decision of the General Term New York Supreme Court, second department, lately handed down.* * Quoted on page 226. (\~ dl It 'der al s an d tvamnlics ittedt 'i Mt oust IH~le OU OTof 1 ltteaMM8, 8floemen18, repreonialioii'irrn nic to rittiBUs Kmfr at Itt blow Ric, intit dill of lewn - l orf in lRe written Ipprication for tnis oicy, wRich are herhg referred to and made a part of tiis dontract, and, in fudfer consideration of the sum aof.-l.- ^.........<......................_o_...._........__ ents, to them in hand paid, at tue fffice of the (Eompann, in tfIe Uit of i-le-VoG. and of the....f_......_............ pymt o..-....ol_ Mars _ and.......... _ f c nts, to Be made at said offie on. or before the _ of-............................................_..._ fnanual:Prmiuml, _..........-.-............. -....... _......._ _, in eoerq gear during the continuance of itis Vof imcg, until.......<>....__filft years premiums shnff uaoe been paid, /yog.._,ot6 Xnsure tfie rf. o.......... __...__ of__..^it r<........... _, o2..ir f..................... e -.. ---State of.._w- -. _ —_ (fierinuftrr raffed tne insured), in tfie amount o feli..... for the term of-....__y ears, commencing oil rbe-gj <...dag ofa..e ' 1y^ ^ 88 t t noon. And the said Crompan g dot fl erely }roumise andd - e to pug de amount of tne gaid s surance, at its 0ffee il t tbe i I of am -ol, t or........... --- —------- ----—........................................................... _. _..............................................................................................................................................~... ---.........................-.................-... --- — --.. — ___ e cutors, Administrators otr. Isigns, upon receipt and lpprooDf at said ffice of proofs, as herinnfter required, of Ifie dratn, dllring te continuance of lis f ohiq, of tne said insured, deduclting terefrom off idetledlless t thfie fompang, together mitfi Ong Moornnce of the gears premium remaining unpaid-, or, if tne said insured shnffe SlriDe said term of r7 -_ears' from and after tfe date o-oe mentioned for tfe commencement of tnis 1nsurance, an amount equaP to....... T-e?^^...... entS of tne sum alooe insured sfRaff tfen Be paid, at the Office of te dfompany, in tle Uit of e-oR tog_ _ _ __. _................................................. ----- --------....................... -..............- —.......... -.................-..................................................................... l iS po li is issued and accepted upon the following express fonditions and agreeminots. first fiat-if lte premiums are not paid, as lereinafter prooided. on or befor ie 1Ing dys nc i due, then this Voficg soff Become void, and af paUMents preriousJg made sfiaft Be foreited to -tie lompany, except tflat (as proDided 6y Act of Alag 21, 1879, riap. 347,' aios of 1879 of tne State. of leto-orE) if tnis loricy, after being in force tfree fulf gears, shfaf fapse or Becone foreited for tne non-pagmenit of Ollng prniumlll, n paid-ip ofic Ioiff Be issued, onl deman.d mule roitfiin six rj montfs after sucf FOpse oitfi surrender of lis Voficy, under tfie same conditions as tfIlis Poficy, except as to paymelt of premiums, But toitfout participation in profits, s extending tfe insurance for the amount of tfiis VIoficy for so fong a term as the Aeseroe on tfis oNicg, at tfie time of fapse, cafOcuated according to tne nmerican (bexperience 'Bn e of flortufitg and iwit6 interest at the rate of four and a haff per cent. per annunm (after dedurtii ng n indektedness to tfie ompany), appfied as a;, singfe premium for temporary insurance of tfie said amount, oiff pay for at tfe present puwfished rates of tfe (ompauy, at tfie age of the insured at tfie time of rnpse t ~ prooided, thnt if tfe $eseroe, nppfied as nforesnid as a singfe premium of tenporary insurance, Be more tfian suffcient to contimie tfe insurance to tfie end of tfe ^ dandooment terml namned in tfis Moticy, tfie excess suaff Be appPied to tfe purcfiase.of pure bndotmment Insurance, payate at tfie cud of suc term if tfie insured is tfen fioing, under tfe conditions of tfie ndooment cfause of. tfis )oficy as anooe, and noff rgfit, cfaim or inierest arising under statute, or otfierroise, to or in Ony otfer paid-up )oficg or surrender oafue, wfietfiecr reluired or propided for Bu tfe statute of any $tate or not, is hiereg expressg wnaioed and refinquisfied. Second That tfie provisions, requirements and benefits, printed. or written tg te fompang, ulpon tfie nafext page of lIis pofic, are a part of tfiis ontract, as luff tamined, ns if Ileg werc recitfd at fngth over tfie signaturls fereto nffixed..n. 3..it nC8ss 1ihseroM tie said?alm - ri RifeC 3nsurance 0inpanU U ias8 6 its |rsidelul tald Bice-8resideut or Acilnarg, signed nd defivend tnis fontractl, tfis................of.........__.._.l o....................... one 1 thousand eigit dred and eigRt.................................. General Policyn Non-forfeitingg Tontine LimitedEndowment. [ /U 6 /At/.............. — esidlt...86..8. /.....-...-.....-... —....... so-so. I Ten Years of Rapid Growth. 235 On April i6, i886, President Beers reached his sixtieth birthday. In order to celebrate it in the manner that would please him best, the general agents passed the word around, about ten days before, that as many applications for insurance as possible should be procured for presentation at the Home Office on that day. The day came, and with it applications for insurance to the amount of over three million dollars. It was specially significant of the growth of the Company's business that a similar effort on the part of the agency staff three years before had produced applications to the amount of but little over one and one-half millions. But the time was coming when even the larger achievement would be similarly surpassed by the Company's agency force under the inspiration of new methods and a better policy contract. With the increasing age and business of the Company, its list of policies maturing by death presented remarkable illustrations of the value of insurance either for a short time or a long time. In i886, for example, policies were paid upon the lives of sixty-one persons who died within less than one year after insuring, and twenty-four policies were paid that had been in force over thirty years. The distribution through the year of the deaths under the first class, no less than the fact that so many died so soon after passing a careful medical examination, illustrates how deeply seated is the law of mortality. Eleven of the sixty-one lived less than three months, thirty-two less than six months, and forty-nine less than nine months, after their policies were issued. Compared with the number of new policies in force, the mortality rate was about five per thousand, showing no lack of care in selection. The largest insurance on a single life was fifty thousand dollars, and the insured, Mr. Robert F. Hurlburt, of Minneapolis, Minn., with two friends, was drowned in Lake Minnetonka, during a severe storm. The twenty-four policies in force over thirty years were upon the lives of twenty-two persons. The total premiums, less dividends, were $37,010.28, and the total return was $55,927.22. The total cash dividends used in reduction of premiums were $20,895.24. Among other notable claims paid in 1886 were those upon the lives of ex-President Arthur, John B. Gough, Senator John F. Miller, of Cali 236 Ten Years of Rapid Growth. fornia, ex-Senator George W. Morrill, of Vermont, Dr. John P. Gray, Medical Superintendent of the Utica Insane Asylum, Hon. Edwin G. Halbert, the Company's General Manager for Minnesota and Dakota, and George W. Perkins, General Manager for Ohio. President Arthur's insurance was taken in April, 1863, on the Ten-Payment Life plan, and the policy then issued was exchanged for a paid-up policy in favor of his wife, in February, I875.* His wife's death occurred prior to his own, and the policy was paid to his two children, one of whom was still a minor. Mr. Gough's policy was taken in December, I865, in favor of his wife, and was on the Ten-Payment Life plan.t At that time Mr. Gough was lecturing five nights in a week from October to May, at from fifty, to two hundred and fifty, dollars per night-a valuable life, surely, and one that ought to have been insured. Mr. Gough's place of birth is given in his application as Sandgate, England, and his occupation as "lecturer"; then follow the statements that he was forty-nine years of age, married, and "temperate for the last twenty years." Every one who has heard Mr. Gough's affecting description of his early struggles with the appetite for drink will appreciate in some degree how much those six words meant to him, and will feel more fully the force of the closing words of his last lecture, delivered the night before his death:-"Young men, keep your record clean!" In the deaths of Messrs. Halbert and Perkins the Company suffered not only an ordinary money loss, but the loss of two valuable general managers. Mr. Halbert was a member of the New York Legislature in I88I, from the Binghamton district, and entered the service of the NEWYORK LIFE in 1885. On April 14, I886, Benton County, Minnesota, was swept by a cyclone that completely destroyed the village of Sauk FROM PRESIDENT ARTHURS APPLICATION. FROM MR. GOGHS APPLICATION. FROM PRESIDENT ARTHUR'S APPLICATION. FROM MR. GOUGH'S APPLICATION. Ten Years of Rapid Growth. 237 Rapids, and did great damage at St. Cloud and Rice's Station. About sixty persons were killed, over one hundred wounded, and several hundred thousand dollars' worth of property was destroyed. Mr. Halbert had gone to Sauk Rapids on business with Mr. Edgar Hull, President of the German-American National Bank of St. Cloud, and they were walking along the street together when the cyclone reached the town. Both were killed. Mr. Hull had made application for a policy that day and was to have been examined on the day following. Mr. Perkins first entered the service of the Company in i 872, having previously been Superintendent of the first Reform School in Chicago. He was associated for several years with Mr. 0. P. Curran, under the firm name Curran & Perkins, Managers of the Northwestern Branch of the Company, with head-quarters at Chicago. Mr. Perkins was afterward made Assistant-Superintendent of Agencies, and spent most of his time in the field; later still, he was made Manager of the Ohio Agency, with headquarters at Cleveland, and he held this position at the time of his death. He was succeeded as Manager for Ohio by his son, George W. Perkins, now Third Vice-President of the Company. Upon the latter's election to his present position Hon. John A. Finch, formerly Chairman of Insurance Commission of the State of Indiana, sent a message of congratulation, saying he knew not which to congratulate most-the son of such a father or the father of such a son. EARLY in 1887 the Company made preparations to erect office 1887. buildings in Kansas City, Omaha, St. Paul, and Montreal. The ground for the first three was purchased in December, 1886, and for the latter in February, 1887. All the buildings were begun in 1887 and completed in 1889. The Kansas City Building is situated at the corner of Ninth and Wall Streets and covers a lot 120 x i 6o feet; the property, together with four other lots and buildings adjoining, since acquired, stands on the Company's books at a valuation of $1,535,o000oo. The Omaha Building is situated at the corner of Farnam and Seventeenth Streets and covers a lot 132 feet square; it stands on the Company's books at a valuation of $950,oo000. The St. Paul Building is situated at the corner of Sixth and 238 Ten Years of Rapid Growth. Minnesota Streets and is IOO feet square, with additional lots considerably larger; the whole property stands on the Company's books at a valuation of $725,000. The Montreal Building is situated at the corner of THE NEW-YORK LIFE BUILDING, KANSAS CITY, Mo. Place d'Armes and St. James Street and covers a lot 72 x 116 feet; it stands on the Company's books at a valuation of $475,000. The latter is eight stories in height; all the others are ten stories; all are solidly Ten Years of Rapid Growth. 239 built of the very best material, and are fire-proof. Lots were purchased in Minneapolis in July, 1888, and a similar building erected there in I888-I890; this property comprises a ten-story office building 99 x 150 and an additional lot 99 x I80 feet, and stands on the Company's books rVe*...... - 1, - -- THE NEW-YORK LIFE BUILDING, OMAHA, NEB. at a valuation of $925,000. These valuations were placed upon these properties by a committee of the Insurance Officers of seven States during the examination made of the Company's condition and securities, in I894. 240 Ten Years of Rapid Growth. Reference has already been made to Chapter 534, Laws of i88o, imposing a tax of "one per cent. upon the gross amount of premiums, interest and other income received by life companies during the year THE NEW-YORK LIFE BUILDING, ST. PAUL, MINN. from persons residing in this State, or from investments represented by or based upon property situated in this State." In February, i887, Comptroller Chapin sent a communication to the Legislature stating that reports Ten Years of Rapid Growth. 241 were received under the law in I880 from fifteen companies; that several of the reports were made under formal protest, accompanied by a refusal to pay the tax, on the ground of the unconstitutionality of the law. Less N. - ".;'...:.....-.:.:..~ - S.', -... -.-. THE NEW-YORK LIFE BUILDING, MONTREAL, CA. than six thousand dollars had been received, and a part of this had been returned by previous Comptrollers who, being convinced that the law was not valid because it did not state the object to which the tax should be i6 242 Ten Years of Rapid Growth. applied, had made no attempt to enforce it. The clause in the Constitution to which reference was had certainly seemed plain and positive; but a decision of the Court of Appeals, affirming the constitutionality of the collateral inheritance law, where the same question was raised and the 1HE NEW-YORK LIFE BUILDING, MINNEAPOLIS, MINN. same clause relied upon, left no doubt as to the construction that would be placed upon the insurance tax law. The clause in the Constitution and the decision of the Court, were as follows: Ten Years of Rapid Growth. 243 Every law which imposes, continues, or revives a tax shall distinctly state the tax and the object to which it is to be applied, and it shall not be sufficient to refer to any other law to fix such tax or object.-Constitution, Act 3, Section 20. We do not think that the policy embodied in the section had any reference to special taxes, and which may be collected in a variety of ways under general laws, such as auction duties, excise duties, taxes on business or particular trades, avocations or special classes of property.-Court of Appeals, State vs. Mary McPherson. The Comptroller recommended that a special Act be passed remitting the taxes for the years I88o to i883 upon the payment of those for the years i884 to i886; taxes thereafter to be paid annually as imposed by the law. Three bills were introduced-one to carry out the suggestions of the Comptroller, one to collect the taxes as recommended and to repeal the law, and one to remit the taxes and repeal the law. The latter was passed June 25, I887. While the subject was in Committee, Hon. John A. McCall, ex-Superintendent of the Insurance Department, who had become Comptroller of the Equitable Life Assurance Society, addressed the Committee in favor of the law as passed. Referring to the authority exercised over the companies by the State with respect to investments, and to the requirements imposed as to the earning power of investments in order to secure solvency, Mr. McCall said: Wisely or not, the State has curtailed the kind of securities that the companies of this State could invest in, in a way that has interfered with their operations when compared with the liberal actions of other States. Until lately, without regard to where the premium receipts came from, this State has required the money to be invested within its borders or in the States adjoining. When you consider that the policies issued to residents of New York are not one.-fifth of the total policies in force, it will be conceded that in competition with companies of other States they have been placed at a disadvantage. The Chinese wall that was erected around them has been quoted time and time again by the agents of foreign companies as an example of the selfish use by Eastern people of Western money, and by authority and direction of New York's Legislature. It has resulted generally in the taxation of the receipts in each State, and then when we get them here and convert them into securities, as compelled by law, you tax them again. Not only that, but to-day you tax the capital and interest and dividends of the corporations and institutions that issue the securities in which we find rest for our money, and by this Act you tax us for receiving said earnings, which the moment they were declared were taxed to the respective corporations by another enactment. So it is true of the premiums. You say, in order to pay your claims you must set aside a sum from your premiums and add to it every year from the same source, so that when the time arrives for the payment of the claim - and nothing is surer than death except New York taxes -you will have in hand the sum due. But in order to keep this amount safe and 244 Ten Years of Rapid Growth. unimpaired in your hands, we will enact - paradoxical reasoning - to take away one per cent. of the sum each year until the claim matures, and then if you do not hold, which, of course, you cannot, the full one hundred per cent. at maturity, we will take away your life for the consequence of our act. During this year the first of the Company's Fifteen-Year Tontines matured. The results were proportionally larger than under policies running through shorter periods, and gave a correspondingly greater impetus to the business of the Company. From the time the Company's Tontines began to mature, agents found in the results and options under them the most convincing arguments for level premium insurance, as opposed to insurance on the co-operative, or assessment, plan. The latter plan had done this, at least, for the average man-it had taught him that protection, the promise of money in case of death, was worth something and cost something to the man who lived. That point being conceded, it was easy to show that, deducting a fair price for this protection from the annual premium charged by the NEW-YORK LIFE, the cash value of its maturing Tontines was equal to the balance of the premiums paid, increased at a high rate of interest. The Tontine plan was seen, therefore, to do two things, and to do them well, namely, it kept men insured, and so protected the families of those who died; and it saved and returned, with large interest, the investment portion of the premiums. The value of the Premium-Return feature, first introduced in I885, was illustrated during this year in the payment of thirty-four policies which became death-claims. Eighteen of these were written with guarantee of a return of one-half, and sixteen with guarantee of all, premiums paid in addition to the face of the policy in case of death during a specified period. The total amount of premiums paid on these policies was $I4,517.57, the total amount of the policies was $204,737, and the total premium-return was $11,472.33, making a total to beneficiaries thereunder of $2 T 6,209.33. Among the policies paid as death-claims during 1887, were four upon the life of Mr. J. B. Cornell, of New York, aggregating $46,144.6I; two on the life of Mr. Seymour L. Husted, of Brooklyn, aggregating $I5,435.37; and one, for $5,ooo, upon the life of Professor Spencer F. Baird, Ten Years of Rapid Growth. 245 Secretary of the Smithsonian Institution at Washington. Mr. Husted's policies were for $5,oo000 each and were taken, one at age fifty-seven and the other at age sixty. Additions to these policies by dividends in reversion were over fifty per cent. of the original insurance, and they returned $15,435.37 at a cash cost of $7,788.35. Another claim upon the life of a man unknown to fame was thus described in the " Burlington (Vt.) Free Press" of April 20, 1 887: The "Free Press" contains a card from the attorneys of Mrs. Jane Allen, of Burlington, widow of Noah Allen, acknowledging the prompt payment of a $io,000ooo policy, on the life of Mr. Allen, by the NEW-YORK LIFE. Mr. Allen was at one time a leading merchant of Burlington, and reputed to be worth $50,000 or $75,000oo. In the days of his prosperity, some twenty years or more ago, he effected an insurance upon his life, as already indicated. Misfortunes came upon him in a body, and his estate was swept away, all except this. His creditors pressed him hard, and squeezed him most unmercifully for the amount laid away in the policy, but it was not surrendered. The policy alone has survived the wreck, and it is the staff upon which the widow now leans. The attorneys of Mrs. Allen, in acknowledging payment of the policy, said: "We are requested by Mrs. Allen, the beneficiary of the policy, to express to you her sincere appreciation of the prompt adjustment of her claim, and we are happy to add the assurance of our own admiration of the generous treatment which Mrs. Allen has received from your Company in its waiver of certain apparent errors in the application which would have materially reduced the amount coming to her if the Company had insisted upon its legal rights." At the meeting of the Board of Trustees held on October 12, 1887, the President called attention to a letter, copies of which had been placed in their hands by the cashier of the Company, which contained serious charges against the management of the Company and against the President personally. He asked that an investigation be made. After a full discussion, on motion of Mr. Strong, a committee of five Trustees, of which Mr. Potts was Chairman, was appointed to nominate a special Investigating Committee. The Committee, as reported later, consisted of Messrs. Wm. L. Strong, Benj. H. Bristow,* John Claflin, * Mr. Bristow was unable to serve on the Committee, owing to important engagements, but approved its findings, and upon his motion all papers connected therewith were placed in the personal custody of the President. 246 Ten Years of Rapid Growth. Richard Miiser, John N. Stearns, and C. C. Baldwin. This Committee reported in February, 1888; and, while virtually admitting "slight shortcomings," they exonerated the Officers from any bad faith or fraudulent dealing, and commended their ability, zeal and disinterestedness.* The conclusions of the Committee were submitted to the cashier, who thereupon addressed a letter to the Chairman, saying that he should leave the *Your Committee, after careful investigation of the affairs of this Company by every means in their power, have satisfied themselves that the Officers of the Company have honestly endeavored to administer the affairs of the Company with a single eye to the good of the Company. No instance has been brought to our attention where any pecuniary advantage of a personal kind has been brought home to the Officers in any act on their part. Your Committee, therefore, without hesitation, report that there is no evidence whatever of bad faith or fraudulent dealing on the part of the Officers, but, on the contrary, there is evidence of the utmost good faith and zeal on their part for the welfare of the interests committed to their charge. The success or failure of a company must be judged not by isolated transactions, but by the whole course of the business of the company, and when we remember that under the present management the increase of the business is almost without parallel, while its assets have steadily increased and its surplus has been maintained and increased, and when we remember that the Company has passed through very severe financial crises without serious loss, we feel that it would be most ungracious in the Trustees of this Company to set over against these merits any slight shortcomings which, in the judgment of your Committee or of individual members of the Committee, may have from time to time been committed. We consider ourselves exceedingly fortunate in the character, ability, zeal, and disinterestedness of the present Officers, and we think that no company can point to a better record than ours in its business management. It is the opinion of this Committee that this Company has been managed with marked ability and integrity, and throughout the close investigation which we have made, every detail, so far as we are able to judge from the examination of every record and paper which we saw fit to call for, and with which the Officers willingly furnished us, has tended in every instance firmly to establish our former belief and confidence in the Company as to its stability, character, and responsibility. Having so thoroughly satisfied ourselves regarding the able management of the Company and the excellence and value of its assets, we regret that we cannot go further and ourselves estimate the amount of reserve for insurance obligations which ought to be counted as a liability. This, it is evident, can be done only by an expert in actuarial calculations. We have not the slightest reason to doubt the accuracy of the calculations of the Actuary of this Company. On the contrary, we are fully convinced that his figures are correct, but it seems to us the present time is especially opportune for an examination of the insurance accounts by an expert not connected with the Company, to the end that the investigation of your Committee may be so supplemented and completed that a full exhibit of this Company's affairs will have been made by persons in no wise obligated to the Officers of this Company. We suggested to Mr. Banta that we thought it desirable that the Insurance Department of this State should be asked to make a careful and exhaustive computation of the liabilities of this Company. Mr. Banta replied to the effect that the Insurance Department of this State might not make a fair examination, and that the Insurance Department of Massachusetts could alone be relied upon for accuracy. It is evidently impracticable for this Company, a corporation of the State of New York, to call upon the State of Massachusetts for assistance in determining its liabilities, but (Mr. Banta not adducing any sufficient reason for his doubts as to the reliability of the Albany officials) we would suggest the Ten Years of Rapid Growth. 247 issue in the hands of the Trustees, and should abide by their action in good faith.* IN January, i888, the Company announced an "Insurance Bond 1888. with Guaranteed Interest," which contained desirable investment features. These bonds were paid up by either fifteen or twenty annual instalments, and after all payments were completed bore interest on their cash cost (taken at the tabular annual rate) at the rate of four per cent. per annum during the life-time of the bondholder, the face value being payable at his death. In case of death during the instalment-paying period, the face of the bond was paid immediately; and in case the instalments paid at death, together with compound interest at four per cent. per annum, exceeded the face of the bond, such excess was to be paid with the claim, as a mortuary-dividend. A non-forfeiture clause provided that in case of discontinuance after three annual instalments had been paid, a paid-up bond would be given for as many fifteenths or twentieths of-the original bond as there had been annual instalments paid. advisability of the Insurance Department of this State making a complete and exhaustive estimate on a four per cent. basis of all reserves which ought to be counted as liabilities by this Company. Finally, your Committee express their gratification that these charges have brought about this investigation, the result of which has strengthened in the minds of your Committee the confidence which we have heretofore felt in the management and in the good faith and ability of the Officers. W. L. STRONG, RICHARD MIYSER, JOHN CLAFLIN, C. C. BALDWIN. JOHN N. STEARNS, The Committee's report was accepted and unanimously adopted by the Board of Trustees. The President stated that a valuation of all policy liabilities was being made by the Albany officials, and that he hoped to be able to present it to the Board when submitting the annual report. This was afterward duly submitted to the Board of Trustees. I44 ST. JAMES PLACE, BROOKLYN, N. Y., Jan. 3I, i888. WILLIAM L. STRONG, Esq. Dear Sir: I have consulted with my counsel, the Hon. D. H. Chamberlain, in reference to my interview with you and Mr. Welch on Saturday last, and have received from him a letter, copy of which I enclose. You will see that he admits the force of the considerations you presented to me that a public scrutiny of these affairs, no matter in what conclusion it might terminate, would be fraught with peril to the Company, to individual policy-holders, and possibly to other interests which might be involved, and that he advises me that I am absolved from any duty to further prosecute this investigation. I beg to say, therefore, that I shall leave the issue of this matter to the Board of Trustees, and shall abide in good faith by such action as they may deem their responsibility calls upon them to take. Yours. respectfully, THEO. M. BANTA. 248 Ten Years of Rapid Growth. Surplus was accumulated during the instalment-paying period, and cash and annuity options were provided at the end of the period, in lieu of the interest-bearing bond, if preferred. During the instalment-paying period, the restrictions were the same as under the Free Tontine Policy noticed below; after the bond was paid for, there were no restrictions whatever. In March, i888, the Company began the issue of a "Non-forfeiting Free Tontine Policy" which was distinguished from the Non-forfeiting Limited Tontine by a slightly higher premium rate, and by greater freedom of action on the part of the insured with respect to occupation, residence and travel. After two years no restrictions were placed upon policy-holders except as to dueling, violations of law and service in war, in which cases, if death occurred, the reserve value of the policy was to be paid. During the year the Company paid two claims for over one hundred thousand dollars each-one on the life of Royal M. Pulsifer, of Boston, for $I02,794, and one on the life of David Hostetter, of Pittsburg, Pa., the well-known manufacturer of patent medicines. Mr. Pulsifer was for many years the publisher of the Boston "Herald," and at the time of his death was insured in fourteen companies, for an aggregate of over two hundred thousand dollars. He held four policies of twenty-five thousand dollars each in the NEW-YORK LIFE, to which additions had been made by dividends. In acknowledging receipt of payment the executors of Mr. Pulsifer wrote the Company's Boston Manager: " You were the first representative of the numerous companies in which he was interested to call on us as to the settlement of the claim, and everything that could have been done by the Company or yourself to facilitate matters, has been done." Dr. Hostetter's policies were among the first written by the Company with premium-return, and he had paid the Company $52,648 in premiums on two policies of $50,000 each. The policies and returnpremiums amounted to $126,324. Dr. Hostetter, besides being one of the earliest and most successful manufacturers of patent medicines, was largely interested in railroads and in natural gas companies. He died from the effect of an operation for calculus. Ten Years of Rapid Growth. 249 Other claims paid to which unusual interest attaches were those of Hon. Daniel Manning, ex-Secretary of the Treasury, Mr. John Ogilvie, of Montreal, and Mr. Edward B. Paul, of Boston. Mr. Manning is on record as commending life insurance as an investment, and his practice was consistent therewith. He held three policies in the Company at the time of his death, the first having been taken in 1863, the second in I868, and the third in I877. Mr. Ogilvie was one of the best-known millers and grain dealers in Canada and was a brother of Senator Ogilvie. Mr. Ogilvie held four policies in the Company at the time of his death, amounting to.$5 2418.80, two of which, being taken when American currency was at a discount, both premiums and policies were made payable in gold. This was a case in which the Company profited by the extreme caution of the policy-holder. The policy of Mr. Paul was taken eighteen years before, in favor of a then infant daughter, and would have matured as a Tontine in two years more. Evidently it was intended as an investment for the child, to mature when she reached womanhood. Living or dying, it was sure to provide for her. It was paid to her guardian in December, 1888. Among the matured Tontine policies settled in 1888 was one on the life of Hon. William F. Parrett, Circuit Judge of the First Judicial District of Indiana. Judge Parrett not only expressed his entire satisfaction with the results of his policy, but added the following commendation of the Company's Tontine plan and policy contracts generally: "From past experience as a Judge and a member of the legal profession, I prefer your Company's policy contract and its valuable Tontine policy to any other." THE annual report for i888 was presented to the Trustees on 1889. February 14, I889, and called forth many expressions of commendation for the ability with which the Company was managed. In replying to these expressions the President spoke of the fierce and increasing competition in the life insurance business, referring to the great advance in commissions, and to the excessive rebates given the insured by agents, and advising that he be authorized to make the Company's policies incontestable. The Trustees thereupon adopted a resolution au 250 Ten Years of Rapid Growth. thorizing the President to make all policies-issued and to be issuedincontestable, and to take such further measures as he should consider best from time to time to protect and advance the business of the Company. An incontestable clause was inserted in the principal policies of the Company in June, and was in the following form: If this policy shall become a claim by death after having been in force two full years, the Company will not contest its payment on account of any incorrect statement in the application or in the accompanying declarations to the Medical Examiner (except in case of fraud), provided, however, that if the age of the insured is understated the amount of insurance payable shall be such proportion of the amount of the policy as the premium paid bears to the required premium at the true age. The practice of rebating a part of the first premium to the insured, already noticed by Mr. Beers in his annual report to the Trustees, had for some time been recognized by agents and managers alike as a great evil. Its effect was to increase the cost of business and to introduce inequality among the insured. The Life Underwriters Association of New York, at its annual meeting held in May, 1888, adopted a memorial to the companies, with a view to securing concerted action for the suppression of the practice. In pursuance thereof, a meeting was called of representatives of the various companies in July of that year, and a plan was formulated by which each company was to forbid the giving of rebates by its agents. Some of the companies, however, refused to sign the agreement, and the whole plan fell through. Meanwhile, efforts were made to secure the passage of a law forbidding the giving of rebates. Several bills were introduced, and one drafted by ex-Superintendent John A. McCall became a law on May I4, 1889. It provides that no life company doing business in the State shall make any discrimination between persons of the same class or expectation of life, either in the premium charged or in dividends or other advantages; and that no life company or agent thereof shall pay or allow, or offer to pay or allow, as an inducement to any person to insure, any rebate of premium, or other special favor or advantage, not specified in the policy. Every agent is required to procure from the Insurance Department a certificate of authority to do business; violation of the law is a misdemeanor; and it is made the duty of the Superintendent Ten Years of Rapid Growth. 251 to revoke the certificate of any person convicted of its violation, and no certificate may be issued to the offender within the three years following his conviction. The month of June, I889, was marked by one of the most appalling disasters that ever happened in this country. A dam on the North Fork of the Connemaugh River in western Pennsylvania overflowed and was washed away, and the flood of waters thus let loose swept down the narrow valley carrying death and destruction in their path. Seven or eight villages were destroyed, involving a loss of millions of dollars' worth of property and of several thousand lives. The life insurance companies paid in all about three hundred thousand dollars, and subscribed liberally to the relief fund raised for the sufferers. The NEW-YORK LIFE had about seventy-five policy-holders in Johnstown and vicinity, fifteen of which, insuring $43,600.49, became claims by death. The local agent of the Company, Mr. John McDermott, had a narrow escape, saving his immediate family but losing fifteen relatives. Owing to the peculiar circumstances-whole families lost, papers lost, etc.,-the Company sent a special agent* to the scene of the disaster, in order to facilitate the proving of claims under its policies. Six policies, amounting to $I7,573, were paid on June twenty-sixth, and these were the first policies paid in Johnstown. Other payments followed as soon as the loss papers could be completed. A policy for $I,ooo, upon the life of Mr. Charles A. Kies, was found three miles below Mr. Kies' residence in a heap of debris, covered with sand and badly water-stained. Both Mr. Kies and his wife were drowned, and the Company gave notice of its readiness to pay the policy to his legal representatives upon proof of right to inherit. Mr. Kies had been married but a short time and left no family; the parents of both himself and wife were living, however, and the question arose whether he or his wife was drowned first-as the parents of the last to die would inherit under the policy. The Company paid the policy to the administrator, and it was understood that the * Mr. Charles Langmuir, now Agency Director for Europe. 25 2 Ten Years of Rapid Growth. 253 parents of the couple agreed to share the proceeds. A representation of Mr. Kies' policy is given on page 252. Another of the Company's policyholders, Mr. John Fenn, insured for $5,000, floated down stream on a house-top until another building struck him and knocked him into the water, from which he never rose. His wife, seven children and a servant girl, were imprisoned in their own house by the water and carried away. As the house rose and fell and swayed to and fro upon the current, one after another the inmates were all drowned, except Mrs. Fenn. Finally, the house was crushed and an opening made through which she escaped. Her husband's policy was all that remained of former prosperity. In June, 1889, the Company began the issue of a "Distribution Policy." This policy provided for the accumulation of surplus during periods of fifteen or twenty years, as elected by the applicant, as under the Tontine plan, and provided the usual Tontine options in settlement for policy-holders who survived and kept their policies in force. It differed from other policies of the Company in the following respects: (I) The premiums for the first two years were paid in one sum, when the policy was issued, and were considerably less than two annual premiums on the ordinary policy; -subsequent premiums were slightly higher than the annual premiums on the ordinary policy.* (2) Paid-up insurance was given after the payment of premiums for four years' insurance (three premiums) instead of after the payment of premiums for three years. (3) After the payment of premiums for a specified number of years,t the Company agreed to loan the policy-holder the amount of any subsequent premium during the distribution period, such loan to be used to keep the policy in force. (4) If death occurred.. during the period in which the premium-loan was available, a premium-return feature provided for the return of all premiums paid during that period; thus, if the loan were * At age 40 the insured paid $49.70 per $I,ooo in one sum for the first two years' insurance, and $35.60 per year thereafter. Under the Free Tontine Policy he paid $32.20 each year, or $64.40 for the first two years. t Ten years on a I5-year policy, unless the insured was over age 60 at time of insuring; ten years on a 20-year policy, unless the insured was over age 45; at ages above 45 the number gradually increased to 15 at age 59. 254 Ten Years of Rapid Growth. availed of and death occurred, the return-premium would cancel the loan and leave the face amount of the policy intact for the insured's family or estate. As this policy became the subject of fierce debate early in the following year, particular attention is called to its advantages. The great bane of Life Insurance then was the rebating practice of agents, which resulted in immense amounts of insurance being allowed to lapse after being in force one year. This policy allowed and required payment for two years' insurance when issued, at a rate somewhat more than the term rate for two years and considerably less than the full annual rate.* The man who paid a single premium got two years' insurance at least, and having paid more than the first premium on an ordinary policy, was more likely to continue. The premium-loan feature enabled the insured to keep his policy in force when it might otherwise be impossible, and the premium-return feature paid the loan in case of death. This loan feature was entirely different from the old premium-note plan, which created a debt against the policy from its inception and made no provision for payment of the debt except such as was afforded by annual dividends. The new feature was designed to be available in case of emergency after the insured had paid sufficient premiums to acquire a valuable equity in the policy. In such case, the policy-holder would not be at the trouble of assigning his policy to a creditor, nor be at the mercy of money-lenders. The loan was to be made by the Company at six per cent. interest, and to be a lien against the policy until paid. Early in the year the Company prepared and forwarded to the Paris Exposition certain exhibits showing the Company's business for the preceding year, the total receipts and expenditures from organization, and the benefits under its Free Tontine Policy with Premium-Return. These were entered, together with pictures of the Company's buildings in the United States and Europe, in the Department of Social Economy, and * The annual premium for $I,ooo on a Twenty-Year Term Policy, at age 40, is $21.08; the first premium, covering two years' insurance, on a Twenty-Year Distribution Policy for $i,ooo, taken at same age, is $49.70. See also note on page 253. -~. ---.,~ -z;t r Ac e GE / / 6 - - t, _ _ _ _ _ _ _ _ _ ac,>_ a se.2 A;_ e A ~ C - 2 5 256 Ten Years of Rapid Growth. attracted much attention. Upon these exhibits the Company was awarded, on September 29, 1889, a Diploma and a Silver Medal. The correspondent of the "Insurance Post," of London, said concerning the award: A Silver Medal has been awarded the NEW-YORK LIFE, which it may be proud of, considering that no company has won a Gold Medal in connection with insurances and annuities for the public, and that the committee of the four French life companies, which had the management of the section, and the Caza Nazionale di Associazione, of Milan, which is a semi-State accident insurance association, alone secured each a grand prize. Gold Medals, however, were awarded to certain native insurance companies in respect of pension and annuity schemes for their clerks, and to four of the officers of French companies who acted as "collaborateurs," etc. Reduced fac-similes of the principal exhibits and the Diploma, and full size representations of the Medal, are given on the following pages. The Company paid in I889 two losses for one hundred thousand dollars and upwards, one upon the life of Mr. E. P. Allis, of Milwaukee, and one upon the life of Mr. John H. Maginnis, of New Orleans. Mr. Allis was proprietor of the Reliance Iron Works, an establishment employing about twelve hundred men and having an annual output valued at about three million dollars. He was a representative of the best type of American manufacturers, a man who had made his way in the world by virtue of talent and industry, whose shops were models of their kind, and who found his chief happiness in his home and family and in efforts to improve the condition of his workmen. An entire floor in one of the buildings was set apart for their use, as a dining-room, reading-room, and hall for social and literary meetings. Mr. Allis failed in business at one time, and ever after had a wholesome skepticism concerning the certainty of business ventures. He left an estate estimated at about two million dollars, with an indebtedness of about two hundred thousand. He carried in all $36I,OOO in life insurance, making his claim the largest ever paid in this country. He came of a long-lived family, but died at the age of 65 from a gall-stone. Mr. Maginnis was President of the Maginnis Cotton Mill and of the Maginnis Oil and Soap Works, and was prominent in various social and commercial organizations. His first policy was taken in I869 at the age of 24, and was for $Io,ooo. He gradually added to this amount, until at his death he was insured for $127,464. Io-all but NEW-YORK LIFE -.~ INSURANCE COMPANY. WILLIAM H. BEERS, President INCREASE IN ASSETS 1845-1888. The part of the square printed in black represents the Surplus of the Company, by the present standard of the State of New York. _ ASSETS JANUARY 1, 1850, S2U1802.52 ASSETS JANUARY 1. 1855, $902,062.70 ASSETS JANUARYT 1, 1860, SL,769,133.24 ASSETS ASSETS ASSETS JANUARY 1, 1865, 3,741.078.48 JANUAbTY 11870, S13,327,924.63 JANUARY 1. 1875. S27,348,667.08 7 257 258 Ten Years of Rapid Growth. $20,000 of which was in the NEW-YORK LIFE. His death was due to a cause that no family record, good habits, or healthful surroundings could insure against;-during a violent storm, he was struck by lightning and instantly killed. Several losses for smaller amounts invite comment. Professor C. H. McCay, of Baltimore, was a writer upon actuarial subjects before the NEW-YORK LIFE was organized. He was insured in the Company in 1853, at which time he was Professor of Mathematics and Astronomy in the University of Georgia. He was at one time Actuary of the Southern Mutual Life Insurance Company. He was a contributor to insurance, and scientific, journals until the close of his life. His policy in the NEWYORK LIFE was for $IO,OOO, and was in force over thirty-five years. The cash dividends paid were equal to over one-third of the whole premiums, and $384 was added to the policy in reversion. John F. Hartranft, of Pennsylvania, who was insured in the Company for $Io,ooo, had been Colonel, Brigadier-General, Major-General, Auditor and Governor, holding each of the last two offices during two terms. He distinguished himself on many battle fields during the Civil War, and received a medal -e Gh Up oq t- aO &tb.-, 0 00 00 o 0 c ^ooo o 0 0000 00 a1o a00 r., c o o3 Q ISjc 0O C>@ a Rf cVI - To 4 t w n' C1A 00 ". COM - - oe co ra X S^.0 I oq 00 "a0 LO rf,34am 0 259 26o Ten Years of Rapid Growth. from Congress for distinguished bravery; but, after passing through so many dangers unscathed, he died, at the age of 58, of Bright's Disease. Another man, unknown to fame, deserves mention here because of the peculiar circumstances under which his policy was paid. Under date of April I 7, I 889, Mr. J. J. Pierce, Administrator of the estate of Mr. John T. Gardner, wrote from Wilmington, Del., to Mr. C. A. Wray, State Agent, as follows: "I desire to thank you and the Company for your kindness and unusual haste in the payment of this claim, the proofs of death being in the New York office of the Company but twenty-eight hours before I received the check. I stated to you that, if I did not receive the money within two days it would cause a loss to the estate, as there were payments to be made within that time. You and the Company have complied with my request, and, in addition to the benefits of the life insurance, the estate is saved this loss by your promptness, which certainly has my heartiest commendation." Early in the year the Company suffered the loss by death of its European Manager, Mr. H. S. Homans, who died in Paris, January 12, i889, of cerebral congestion, after an illness of only a fewv hours. Mr. Homans came of a distinguished family, his grandfather, Benjamin Homans, having acted as Assistant Secretary of the Navy under Presidents Madison,* Monroe, and Adams, and his father was a distinguished naval officer. The following extract from " Galigani's Messenger " of January I 5, I 889, indicates the esteem in which Mr. Homans was held in Europe: H. S. Homans was specially gifted with the faculty of organization, and when, in i870, the NEW-YORK LIFE decided upon the extension of its business to Europe, he was intrusted with the execution of this project. No better choice could have been made. We cannot now recall the manifold difficulties which confronted the enterprise in its earlier stages; suffice it to say they were formidable enough to dismay any ordinary pioneer, and that, on more than one occasion, even the staunchest believers in Mr. Homans advised him to desist. His energy, however, was indomitable, and now, after a lapse of twenty years-a short space of time for so arduous an undertaking-the NEW-YORK LIFE is recognized by every government of Europe as the foremost representative of American assurance, and, what is still better, has by its competition and its '.Washington was captured and the public buildings burned by the British, August 24, I814, and early in that day Mr. Homans sent two wagon loads of public documents up the Potomac on a canal boat and hid them in the woods. See Philadelphia " Ledger," August 5, i895. NEW-YORK LIFE ~INSURANCE COMPANY. F,UNITD STATM. WILLIAM H. BEERS. President. FRNC. ESTABLISHED 1845. PURELY MUTUAL. THIS COMPANY HAS BRANCH OFFICES IN ALL CIVILIZED COUNTRIES. DIAGRAMS ILLUSTRATING 1-New Insurance Written in 1888. 2-Sources of Income in 1888. 3-Disposition of Income in 1888. ( SWITZCRLAND r SOURCES I qqPdin! d~ da A q^%m ~FLDrubDALLUZU OF INCOME IN 1888. OF INCOME IN 1888. m $19,617,946.82 m $ 1,509,643.93 * $ 4,273,692.08 $25,401,282.83 m $10,973,070.05 * $ 4,516,193.76 E $ 9,912,019.02 $25,401.282.83 O 34: OIAN FYO F C S A. 346 & 348 BROADWAY, NEW YORK, U. S. A. 26I 262 Ten Years of Rapid Growth. better methods contributed greatly to the general progress of life assurance on the continent. Mr. Homans was the main factor in this good work, and the high distinctions conferred upon him by four European governments, attest that his merits were not allowed to remain unrecognized.* The annual report for I889 was presented to the Board of Trustees on February I8, I890. Mr. William H. Appleton, Chairman, presented the report of the Finance Committee, calling attention to the fact that the last year had been marked by greater advances than those of any previous year in the Company's history, and that the assets exceeded one hundred million dollars. The report was, in part, as follows: It is with feelings of no ordinary satisfaction that the Finance Committee reports to the Board to-day at its Forty-fifth Annual Meeting, that the assets of the NEW-YORK LIFE INSURANCE COMPANY now exceed $104,000,000. In announcing this gratifying fact, we desire to lay particular emphasis upon the further fact that the Company has already paid to policy-holders over $129,000,000. We emphasize this second fact because it is easy to accumulate money if you do not pay it out. But in the history of the NEW-YORK LIFE INSURANCE COMPANY its benefits to policy-holders have gone handin-hand, nay, have kept in advance of its accumulations for their security and future benefit. It is interesting to look over the history of the accumulation of this vast fund. By reference to the figures of the Company it is found that there has been an increase in every year of its history, the smallest increase being in the first year, $17,496, while the largest increase was in the last year, $II,573,414. In the second year the total amount paid policy-holders was less than $7,000; during the last year over $12,000,000 were paid to policy-holders. It required eleven years to accumulate the first million dollars; during the last year the accumulations were over eleven million dollars, showing an increase one hundred and twenty-one times the average of the first eleven years. We beg leave also to refer briefly to the investment record of the Company, because, when a company has one hundred million dollars in its keeping, it ought to be able to show that it is worthy of the trust. A reference to the books of the Company shows that the net amount of gains already realized in the profit and loss account is over $700,000; while the present market value of securities over cost value on the Company's books is $4,000,000. Certainly this is a remarkable record, running over a period during which the country has passed through several commercial crises-through two wars-and in which Life Insurance has grown from practically nothing to be one of the greatest financial institutions of the country. The total receipts of the Company from interest, rents, and profits on investments have been over $52,000,000, exceeding death losses by over $2,000,000, and exceeding total expenses of all kinds, including taxes, by over $8,000,000. ' Mr. Homans was Officer of the Legion of Honor of France, Chevalier of the Crown of Italy, Commander of the Order of Isabella the Catholic, and Chevalier of the Order of Christ of Portugal,which distinctions were conferred upon him for services in the cause of Life Insurance. NEW-YORK LIFE X V INSURANCE COMPANY, WILLIAM H. BEERS, President ESTABLISHED 1845. PURELY MUTUAL. PREMIUMS RECEIVED IN 1888 $21.127,590.75 BENEFITS TO POLICY-HOLDERS IN 973070 510,973,070.05 BELGIUM. HOLLAND. 263 264 Ten Years of Rapid Growth. The total dividends paid by the Company have been over $37,000,000; and the total surplus accumulated for dividends is now over $I5,000,000, making a total of over $52,000,000 saved to policy-holders from the table rates. This is an average of about twenty-five per cent. on all premiums received for insurance; and twenty-five per cent. is about the present average of surplus gained each year in proportion to the insurance premiums received. It seemed fitting that this report, which shows the assets of the Company to have passed the one hundred million dollar mark, should be introduced by this resume of the Company's history. It is a history of which every one now connected with the Company and its management may well be proud, and it reflects the greatest credit upon all who have been instrumental in bringing about so grand a consummation. Turning to the report which is presented to the Board to-day, and comparing it with that of last year, which we thought at the time was the greatest report ever presented, we find that the figures for I889 show the following remarkable increases over I888; Increase in interest, $303,653; increase in payments to policy-holders, $1,148,051; increase in surplus, $1,716,849; increase in premiums, $3,458,330; increase in total income, $3,761,983; increase in total assets, $II,573,414; increase in new insurance, $26,099,357; increase in insurance in force, $75,715,465. The ratio of death-claims paid to average insurance in force shows a decrease during 1889 as compared with I888, the ratios being I.09 per cent. in 1889 against I.13 per cent. in I888. It is gratifying to note that the interest receipts of the Company were 4.8 per cent. on the average net assets for the year, and 4.9 per cent. on the average invested assets. It is proper to make this distinction, because a part of the net assets consists of quarterly and semi-annual premiums due subsequent to January i, I89o, and of accrued interest on investments, neither of which items the Company has yet had opportunity to invest, although it makes itself whole as regards the deferred premiums by a larger premium charged for the same amount of insurance. To sum up the strong points of the report, we have only to note the immense revenue of the Company, now nearly thirty million dollars per year; the character of its securities, as shown by the market value over cost; the magnificent sum of its total assets; its strong financial position, as shown by its large surplus; and the immense volume of its current business, amounting during 1889 to over $151,000,000 of new insurance. The amount at risk is now nearly $500,000,000, and the growth of the Company during the last five years has been so rapid that I think we hazard nothing in saying that the day is not far distant when the Company will have one thousand millions of insurance on its books. Mr. Loomis L. White, of the Finance Committee, following Mr. Appleton, said that this was an era in the history of the NEW-YORK LIFE INSURANCE COMPANY. "The Finance Committee," he said, "best appreciates, perhaps, the vast work which has been accomplished during the past year, and for the last ten days we have been wading ankle-deep in figures that are so immense and colossal in their proportions as to I 4 WILLIA H. BEERS, President DIAGRAMS ILLUSTRATING THCE NE W-YORK LIEINSURANCE COMPANY'S NON-FORFEITING FREE TONTINE POLICY, WITH MORT UARY-DIVIDEND EQUAL TO AL PREMUMSPAID, IN CASE OFIDEATH WITHIN TWENTY YEARS. ar Age of Insured, 35 years. Amount of Policy, $100,000. Annual Premium, $4,101. teface of the Policy; the portion printed in black represents __________ the Mortuary-Dividend equal to all Premiums paid. Bothtogether represent the Amount Payable in case of death in any year of the Tontine period. 1t ~ Y~year. Yer 4hYer t~ibYa. - a 7th Yea. 8 V-Year. hi 4 t ~ e0p a Ye!... I_ 12th - I ANUA PREMUM.2 34 PID-P PLIC PAID IN200YEAR A~t~U&LPREMIU. 1 2A PA4IPAIDUPPPOLIC WITH OF THE VALUE OF THE ANNUAL DIVIDENDS. POLICY AND SURPLUS, PA'YABLE ATTHE PAID-UP POLICY. $1o010c0 DEATH OF INSURED. The amounts represented by those parts of the circles printed in parallel lines are guaranteed; those represented by the parts printed in dots are estimated additions from Surplus. 265 266 Ten Years of Rapid Growth. excite the admiration of all interested in great financial interests. These results have been attained only by the constant and untiring vigilance and energy of the Officers of the Company." Mr. John Claflin, of the Finance Committee, followed Mr. White, endorsing fully all that had been said by the Chairman of the Committee and by Mr. White, and adding that in commercial circles the wonderful ability that marked the management of this institution would be recognized in a more emphatic manner than it was by the Board of Trustees. A review of the ten years fully justifies the encomiums of the Committee. Comparing the figures of 1889 with those of 1879, the new business is seen to be nearly nine times as much, the income and insurance in force are more than three times as much, the amount paid policy-holders is two and one-half times as much, and assets and surplus are each nearly three times as much. The substance of two companies, each greater in some respects than the NEW-YORK LIFE in 1879, had been added in the brief space of ten years. BUSINESS OF 1879 AND OF 1889. ITEMS. I879. 1889. New Insurance Written................... $17,098,173 $I5I,II9,088 Income................................. 7,887,126 28,830,123 Paid Policy-holders..................... 4,821,490 12,12I,122 Assets, December 31.................... 38,858,831 104,415,322 Surplus, December 31.................... 5,374,403 I5,654,263 Insurance in Force, December 31......... 127,417,762 495,60I,970 TOTAL IN TEN YEARS, I880-I889. New Insurance W ritten............................. $746,737,754 Total Income..................................... I67,720,585 Paid Policy-holders........................... 77 I74,873 " Increase in Assets............................ 65,556,49I '" ' " Surplus........................... I0,279,860 " " " Insurance in Force................. 368, 184,208 i fl. -- -II..7 " j l llllll~ M | ll.l( rsd. '. I II i:""-1 I I "k i Z I `-1,;,-" " I Z,,AZ.,, -!I I ",, .r '-: I t I. t, Ur " T., -11 . Z I 1..-4,, -", c, i I - / I,-' ~J~gS --------- - - - ------- --—: --- E6 FRNC;A.,,,S I-;i l~:1-~~2 ~:l -~1 "" a^^^- S!^ ^ / I: I;i j rU-. 11 ^Or i ',f~p~Gi F' PF ^'iW II 1 I J \ LJ^w il^~ L'L 1'J ^ -1 I ii UVljll...j1 y'^ I^^.1v i =.;.; y. ^ ~ y ^ y ^ ~ ~. ^. ^.,. F- 7 1 -. -. ^ ^, T <-.. ^ A -^ * i - ^ F f? - ^ ' ~ % ^ "..^c1.;' ^,L-=. —^':A: ^^ FA.^ -= r'N b w T 0? C )9 -NIi -kf "'A IIr FR LM i i *,,' -— me I 'N^ GROUPE DTE 1C&Ok0M ";-t, ANCE II RIE SOCIALR - SECTION VII LE nTAR'U2E,'A' *tn" COffi<"SEIL t I i: f i f i I i i i I i uI' —.1 -,^ ^ / j ' '. P *t 1'' ^ iiii~ii~|," ' ' pA~S, 29 S~PTEM8RE tW8 F - -^, __y -17, N W - -,-. It,,? < ^1 I V i *1 /- **. 1 1 ~.. - ^ Ten Years of Rapid Growth. 267 TABLE SHOWING THE CONDITION OF THE LIFE COMPANIES DOING BUSINESS IN NEW YORK, DECEMBER 31, I889, THEIR BUSINESS FOR THE YEAR, THE YORK LIFE, AND THE NEW-YORK LIFE'S SHARE OF ALL: SAME ITEMS FOR THE NEW THIRTY NEW-YORK N.-Y. L's ITEMS.PANIES. LIFE. SHARE. COMPANIES. LIFE. SHARE. A ssets................................. Premium Notes and Loans in Assets...... Surplus................................ Liabilities............................. Surplus to Liabilities, Per cent............ Insurance in Force...................... New Insurance Written................ Total Income........................... Premium Notes and Loans in Income...... Death-Claims Paid..................... Death-Claims per $I,000 Insured......... Total Paid Policy-holders................ Expenses and Taxes..................... Per cent. to Income................... $696,943,721 19,028,751 86,745,026 6Io0,98,695 14.2 3,I44,677,311 786,096,741 168,184,699 978,977 42,668,529 $15.45 79,273,667 34,898, 68 20.7 $104,415,322 367,394 I5,654,263 88,76I,059 17.6 495,60I,970 I51,II9,o88 28,830,123 68,869 5,032,466 $I0. 15 12,121,122 5,754,828 19.9 I5.0 I.9 i8.o 14.5.... I5.8 I9.2 17.1 7.0 ii.8 15.3 I6.5..... XI. A PERIOD OF CHANGE. 1890-1895. THIS period, though brief in time, was destined to be big with events. It was to be a time of trial and of triumph-a time in which all the forces of official criticism, of anonymous spite, and of the open hostility of former friends were to be directed against the Company, by which its history and its records were to be held up to "the fierce light that beats upon the throne." It was to see the Company come forth from the struggle with but few blemishes, strong in the devotion of its friends, strong in resources and strong in recuperative power. Under the inspiration of a new management it was destined, in a brief space, to regain all it had lost; and, by enlarging the scope of its contracts and making their benefits more definite and certain, it was to spring forward in a new career of popularity and usefulness to which the annals of Life Insurance furnish no parallel. By openness of method and truthfulness of statement it compelled the attention and approval of those to whom the people have committed the oversight of insurance matters, in such manner that the whole business of Life Insurance is now presented to the public in a truer light than ever before-a light which must eventually compel retrenchment and reform. Under the influence of these salutary changes the name of the Company has become a synonym for fair-dealing, for mutuality, and for helpfulness to the insured; and, under the conditions thus created, the security furnished by its policies has become the nearest perfection ever attained in a life insurance contract. No other five years of the Company's history have been so crowded with stirring events in its management, and in no other period has so much been done to 268 A Period of Change. 269 make it "a Company of the policy-holders, by the policy-holders, and for the policy-holders." THE beginning of the year 1890 brought with it a controversy 89 between the Company and the Massachusetts Insurance Commissioner, that disrupted for a time the cordial relations so long maintained with the people and the authorities of that Commonwealth. The controversy arose over the Company's "Ordinary Life Distribution Policy," which, the Commissioner claimed, violated the anti-rebate law of Massachusetts, and was a combination of assessmentism and regular life insurance. The Commissioner communicated to the Company, under date of December 28, 1889, his objections to the policy, and notified the President to discontinue its issue while the Company was authorized to transact business in Massachusetts. A note was added, saying: "As it is not impossible that other companies may have been impelled to consider similar questionable expedients in order to meet the competition of this policy, this letter is made open for their information and guidance." The letter appeared in the Boston papers on the day of its receipt by the Company. In most controversies of this kind there is a point where misunderstanding begins, to which may be attributed much of the divergence of view which follows. This misunderstanding is often never discovered, or if it is, matters have gone so far, and so much bitterness has been awakened, that pride prevents a rectification of the error and an amicable settlement. Happily, there was to be no such lamentable outcome to this controversy, which, though stoutly maintained on both sides for some time, yet, when all the facts were disclosed, was seen to be rather a misunderstanding of motives and terms, than a real difference of opinion upon essential points. The Commissioner, in his annual report of I890, which contains his account of the controversy after a settlement had been reached, refers to a correspondence had by the Company with his predecessor concerning the anti-rebate law, to the defiance of that law by some of the Company's agents from other States, and to the statement of one of its managers that a policy would be devised to evade the law. All these things seemed to the Commissioner parts of a deliberate purpose on 270 A Period of Change. the part of the Company. When the Distribution Policy was first issued, in June, 1889, no copy was sent to the Massachusetts Commissioner because, owing to the ill-feeling which had been engendered by the conduct of some of its agents as above noted, the Company did not intend to issue the policy in Massachusetts. When the descriptive lists for the first half of the year were sent to the Commissioner, a copy of the policy and formulas for premiums and reserves were requested and furnished. The Commissioner says: "The policy thus obtained occasioned no surprise, and was recognized as the issue that had been foreshadowed and threatened." After an examination of the policy and its reference to the Attorney-General of the State, he notified the Company to discontinue its issue, as before stated. The Company replied to the Commissioner, under date of December 31, 1889, recounting its compliance with his requests for information, and claiming that it should have had an opportunity to remove objections before an arbitrary judgment was pronounced and scattered broadcast throughout the country. It also claimed that the letter misrepresented both the policy and the Company. On January 5, 1890, the policy was published in full in both the New York and Boston papers. Shortly afterward the question of its legality under the Massachusetts statute was referred to Hon. John D. Long, ex-Governor of Massachusetts, and Hon. A. E. Pillsbury, of Boston. The actuarial questions involved were submitted to Mr. David Parks Fackler, Consulting Actuary, of New York. These authorities sustained the Company on all points; it also appeared that another New York company, doing business in Massachusetts, had for years issued a policy which was open to the same criticism as the policy in question. The Company then withdrew from the State and petitioned the Legislature for a law authorizing the Supreme Court to pass upon the question. While the matter was before the Insurance Committee a compromise was agreed to between the Commissioner and counsel for the Company, and the latter withdrew its request for legislation.* *Such a law as was asked for by the Company was, however, enacted, and was signed by the Governor on May 20, i89o. A Period of Change. 27I The compromise consisted in a change in the name of the policy to "Combination Term and Life Distribution Policy," and in the addition of twenty-six explanatory words. The premium rates were left unchanged. In the copy of the policy given on the following page, the additional words are in italic, and the words which were stricken out are placed in brackets. While there was thus "peace with honor," between the Company and the Massachusetts Commissioner, there was another phase of the controversy that deserves notice-and that is the use sought to be made of the discussion by the agents of other companies. This will perhaps be best understood by reference to the following extracts from a memorandum statement of the case, which appeared in the Boston "Daily Traveller," of May 20, I890: January o1, I890.-An anonymous letter in the New York "World," attacking the NEW-YORK LIFE, was the subject of a despatch sent out by General Manager Smith of the Associated Press, who asked all papers to take the matter up editorially. January 25, I890.-Hon. Charles A. Dana [President of the Association] repudiates the action of Smith, and promises that it shall not occur again. March I, I89o.-A two-column paid advertisement appeared in the Boston papers, attacking the NEW-YORK LIFE and its policy, intended for a memorial to the Legislature. The memorial was signed by fifty odd agents of other companies. Between this date and the next several companies withdrew from the remonstrance, claiming to have been deceived by the man who originated it. Agents of other companies seem to have been deeply interested in the controversy, and, as the Commissioner's objections to the original policy form continued to be circulated long after the revised form had received his approval, it is fair to presume that they were not pleased with the outcome. At the November meeting of the Trustees a letter was read from Mr. Edward N. Gibbs, one of their number, and now Treasurer of the Company, giving an account of a recent trip to Europe. Regarding the business and agencies of the Company there, Mr. Gibbs said: "I cannot close my letter without allusion to the gentlemen connected with the Company whom I met on the other side; every one of them is evidence of the discriminating care with which they have been chosen for their 272 A Period of Change. No. 00,000o. (SPECIMEN COPY.) $20,000. THE NEW-YORK LIFE INSURANCE COMPANY, BY THIS POLICY OF INSURANCE, AGE, IN CONSIDERATION of the agreements, statements, representations and warranties submitted to its Officers at the Home Office, in the City of New York, in the written Appli40. cation for this Policy, which are hereby referred to and made a part of this Contract, and in further consideration of the sum of Nine hundred and ninety-four Dollars and Cents, to them in hand paid, at the Office of the Company, in the City of New York (being the [first] premium for two years' term insurance), and of the annual ANNUAL [premium] payment of Seven hundred and twelve Dollars and - Cents (being the life premium), to be paid at said Office on or before the Thirteenth day of December, in $712.oo. every year during the continuance of this Policy, commencing on the Thirteenth day of December, 189I, DOTH INSURE the life of John Doe, of -, in the County of -, State of, (hereinafter called the insured), in the amount of Twenty thousand Dollars, commencing on the Thirteenth day of December, I889, at noon. ^ AND THE SAID COMPANY DOTH HEREBY PROMISE AND AGREE to pay the amount of - x: the said Insurance, at its Office in the City of New York, to Mary,, wife of the insured;: B. or, in the event of her prior death, to the insured's Executors, Administrators or As-, | i a; signs, upon receipt and approval of proofs, as hereinafter required, of the death, during t 8 ' B the continuance of this Policy, of the said insured, deducting therefrom all indebtedness.. - k > to the Company, together with any balance of the year's premium remaining unpaid. THIS POLICY is issued and accepted upon the following express Conditions and Agreements: b First: If this Policy shall become a claim by death after having been in force 6 x, two full years, the Company will not contest its payment on account of the incorrectness ~.. $' of any statement in the application, or in the accompanying declarations to the Medical t z Examiner (except in case of fraud), provided, however, that if the age of the insured is ( > understated the amount of insurance payable shall be such proportion of the amount of.. t the Policy as the premium paid bears to the required premium at the true age. 0, ~ s Second: That if the premiums are not paid, as hereinafter provided, on or before the days when due, then this Policy shall become void, and all payments previously > A made shall remain the property of the Company, except that if this Policy shall lapse or become forfeited for the non-payment of any premium, after there have been paid thereon three full premiums as above specified (that is to say, the premiums for four EXAMINED, years of insurance), a paid-up Policy will be issued, on demand made within six months after such lapse with surrender of this Policy, under the same conditions as this Policy, except as to payment of premiums, but without participation in profits-and without Mortuary Dividend-for such an amount as the net Reserve on this Policy at the time of lapse, computed by the American Table of Mortality and interest at four and oneCombination Term half per cent., after deducting all indebtedness to the Company, will purchase as a and Life. single premium at the present published rates of the Company, at the age of the insured [Ordinary at the time of lapse; and all right to any other paid-up Policy or surrender value, proLife.] vided for by the statute of any State or country, is hereby waived. D b- Third: That the provisions, requirements and benefits, printed or written by the Distribution Policy. Company, upon the next page of this Policy, are a part of this Contract, as fully as if - they were recited at length over the signatures hereto affixed. Mortuary IN WITNESS WHEREOF, the said NEW-YORK LIFE INSURANCE COMPANY has, by its Dividend. President and Vice-President or Actuary, signed and delivered this Contract, this Thirteenth day of December, one thousand eight hundred and eighty-nine. A Period of Change. 273 positions, and each of them is fitted to stand for the Company with credit in their respective localities. Without doubt the NEW-YORK LIFE leads all American companies in the confidence of the European public, as it should, for reasons we need not look far to discover. The loyalty of all its men whom I saw, to the Company and its executive officers, was a matter of personal pleasure." At the request of the officers of the Company Mr. Gibbs visited Budapest, in order that he might advise the Board, after a personal examination of the city and the business of the Company in Hungary, upon.the subject of erecting an office building there. He recommended that the matter have "favorable consideration." The subject was accordingly referred to the Finance Committee with full power. Land was acquired in I89I and work upon the building was finished in October, 1894. When the building was opened, in I894, Mr. Gibbs was present, and made an address upon Life Insurance in the United States, and the condition and methods of the NEW-YORK LIFE. In no year of the Company's history has it paid so many death-claims illustrating the benefits of Life Insurance in a variety of circumstances and the value of the special features of its own policies, as in 1890. There were forty-two claims paid for $20,000 or upwards, the aggregate amount thereunder being $I,271,64I. Among the well-known names in this list were Viscount Cantelupe, of England, John H. Draper, the famous auctioneer, of New York, James Montieth, the geographer, Adam Forepaugh, the showman, Joseph G. Ditman and F. B. Gowan, of Philadelphia. Others who were insured for smaller amounts, whose names are familiar to many, are Amzi S. Dodd, founder of Dodd's Express, Thomas Cornell, owner of the Cornell Steamboat Co., William H. Wells, editor of "Insurance News," Professor R. H. Mather, of Amherst College, General Clinton B. Fisk, General W. W. Belknap, Captain Ebenezer Morgan, and Rev. Dr. Reuben Jeffery. Mr. Gowan was a well-known railroad man, and shot himself through the head with a pistol. There seems to have been no doubt that it was intentional-but, whether he was "sane or insane," who shall say? Happily the NEW-YORK LIFE'S policies do I8 274 A Period of Change. not raise the question. Mr. Gowan insured five years before; he had violated no condition of his policy; he was dead; that was enough; the Company paid $74,267 on his life within four weeks of his death. Mr. Ditman was a well-known Philadelphia banker, and mysteriously disappeared. His horse and buggy were found in Fairmount Park, and several days later his body was recovered from the Schuylkill River. The question was widely mooted whether or not he was in his right mind or whether or not the drowning was accidental. Again the Company's policies did not raise the question; he was dead; and the Company paid his executors $57,415.85 under three policies. The executors wrote: "We cannot too highly commend the prompt and satisfactory manner in which this payment has been made, your Company being the first to make settlement of the insurance on the life of the deceased. The proofs reached your New York Office on Saturday, February eighth, and check was drawn on Monday, February tenth."* Experience is the best teacher, and results under the Company's policies are the best answers to objections to Life Insurance. "Suppose I live long," says the objector: the Company answers with twenty-nine policies paid in 1890, each of which had been in force over thirty-five years, and the average return after protection for a whole active life-time, was $125 for each $I00 paid out. "There is no hurry, I am in good health," says the laggard: the Company shows one hundred and fiftythree policies which became death-claims within less than twelve months after the insured were examined and found "in good health." The regularity with which these men died was something startling to the uninsured, and something re-assuring to those who put faith in the law of mortality; thirty-seven died in the first quarter-year, thirty-six in the second, thirty-nine in the third, and forty-one in the fourth. " My wife does not believe in insurance," says the man who is willing to hide behind his wife's skirts: the Company shows a letter from a widow in California, * This should not be interpreted to mean that the Company does not make careful examination of death-claims; but it is easier to do this at once, when a death is reported, than after the claim is made and a considerable time has elapsed. A Period of Change. 275 which says, "My husband was insured, much against my wish, on April I9, 1890, and received his policy only five days before his death." There is nothing about "blood-money," it is "love-money" now, and the letter overflows with thankfulness. "The insured gets no dividend under a Tontine policy unless he lives a long time," says the anti-Tontine agent: the Company shows a list of two hundred and sixteen policies which became claims by death during I890, and which returned either half or all the premiums paid during the dividend period in which they matured, in addition to the face of the policies. One feature of the Company's Tontines already noted is, the month's grace in the payment of premiums (now granted under all its policies); this feature saved the $Io,ooo policy of Mr. Isaac M. Jordan, of Cincinnati, from forfeiture when there was no opportunity for re-instatement. Mr. Jordan's premium fell due November fourth, and remained unpaid; December third he fell down an elevator shaft and was instantly killed. General and Senator John M. Palmer, of Illinois, settled a matured Tontine in August of this year, and wrote to the Company's managers at Springfield concerning it: "No other Ordinary Life Policy is so advantageous or profitable as this, and the results are such as prove the judicious and efficient management of the great Company you represent." Mr. James R. Nairn, of Burlington, Iowa, being then 66 years of age, wrote concerning his maturing Tontine: "This is the second policy I have carried to maturity in the NEW-YORK LIFE, and I can heartily recommend the Company and its plans to any one wishing reliable indemnity and a good investment of funds." The significance of a few seconds of time was illustrated in the death-claim of Mr. Edward P. Johnson, who, with his wife and infant son, were killed in the railroad accident on the Old Colony Railroad at Quincy, Mass., August I9, I890. It was necessary to decide who died last, in order to know whose estate the claim was payable to. Dr. J. H. Gilbert, of Quincy, who had charge, as medical examiner, of the examination into the disaster, gave his opinion under oath, that the parents were crushed by the accident and killed instantly, while the child, being killed by steam, "survived his parents for several 276 A Period of Change. seconds, at least." The policy was therefore paid to the administrator of the child. One more claim, which does such honor to human nature and so shames the man who wishes to put off insuring his life as long as possible, must find record and remembrance here. On November 29, I889, a gentleman, aged 33, made application to the Company for a policy payable, in case of his death, to a lady whose relation to him was put down in the application as "fiancee." He died in the spring of 1890, being yet unmarried, and his policy was paid in April. ON June 12, I89I, there was published in the New York "Times" an account of the defalcation of Mlr. Julio Merzbacher, one of the firm of Sanchez & Merzbacher, Managers of the Company's SpanishAmerican Department, which defalcation had occurred in the latter part of I890. It was announced, on the authority of the officers of the Company, that Mr. Sanchez had assumed the amount of the indebtedness and that the Company would lose nothing, being amply secured by the interest of the firm in the business of the department. The next day the amount of the defalcation was announced by the same authority to be $372,000. President Beers was at this time in Europe, and Mr. Sanchez was on his way to Barcelona, Spain, where the new head-quarters of the department were about to be established. These things were made matters of suspicion by the daily press, and soon many wild stories were afloat. Other defalcations were alleged, which, it was stated, would, with that of Mr. Merzbacher, exceed a million dollars. Reference was also made to the charges made by the cashier in I887. The newspapers were soon in full cry after the Company, and every one who had a grudge or a grievance was allowed opportunity to tell his story, to the Company's disparagement.* In view of the public excitement thus created, the Finance Committee met on June sixteenth and * Since the first publication last week of the Merzbacher defalcation, every daily paper in the city has had reporters detailed to work up in sensational form every item of either news or gossip they could obtain. There have not been lacking men in the life insurance business who were glad to furnish vague rumors and stale gossip regarding the Managers of the NEW-YORK LIFE INSURANCE COMPANY, and who chuckled with delight when they saw the importance given to such gossip by the daily papers.-The Spectator, June I8, 8g9r. A Period of Change. 277 voted that, they were satisfied there would be no loss to the Company by reason of the defalcation, and in order that the public might be equally satisfied, that the Superintendent of the Insurance Department be invited to make a thorough examination of the Company. This request was communicated to the Superintendent on the same day, who promptly announced his compliance, and the examination was begun on June twentysecond. On June eighteenth the Committee published a statement to the effect that the net deficiency in the accounts of the Spanish-American Department had been charged as a disbursement prior to December 31, I890, and that the Company's report of that date was correct. On June nineteenth a full statement was laid before the Trustees, which, in substance, was as follows: The business of the Spanish-American Department had grown very rapidly under the management of Messrs. Sanchez & Merzbacher, and in 189I the total amount of premiums passing through their hands was about $2,750,000. In view of the large extent of territory covered by the department, and the lack of means of rapid communication, half a million dollars in premiums in transit and in course of collection was considered to be, within reasonable limits. It appeared, however, that during the absence of Mr. Sanchez from the head-quarters of the department in New York, Mr. Merzbacher had used the funds of the Company in speculation. This was discovered by Mr. Sanchez on his return, to whom Mr. Merzbacher made a full confession, and turned over such property as he had, amounting to about $47,ooo.* The renewal interest of the firm in the business was more than sufficient to cover the deficit to the Company, and Mr. Sanchez-a man of ample fortuneat once assumed the indebtedness (as he was bound to do under his contract) and took entire charge of the business. The amount was immediately charged in,the accounts of the Company to the expense account and to agency balances, and did not appear as assets or surplus in the annual report of the Company for the year I890. Upon these representations the Trustees approved the action of the Committee, and The actual amount as ascertained by the Superintendent's investigation, was $52,4I2.35. 278 A Period of Change. passed resolutions declaring their undiminished confidence in the Officers of the Company and in its financial condition, and welcoming the fullest and most searching investigation by the authorities of the State. President Beers cabled from Europe his cordial approval of the action of the Company in inviting investigation. The action of the Officers and Trustees had thus been prompt and decisive, and the whole matter was now in the hands of the authorities for investigation. The public press, with a few exceptions, recognized the fact that all had been done that could be done by the Company, and suspended judgment until the facts should be officially ascertained. To re-assure policy-holders, and to show the public that, judged by the severest test-results,-the Company had enjoyed more than an average degree of prosperity during Mr. Beers' Presidency, a circular was issued in December reviewing the business of the NEW-YORK LIFE in comparison with the two other largest companies, and with all the remaining companies combined.* "A FIVE YEARS' REVIEW. COMPILED FROM THE REPORTS OF THE NEW YORK INSURANCE DEPARTMENT. How shall one ascertain whether a life insurance company is well-managed or not? Manifestly, by the results obtained. But what shall be our standard of comparison? We consider a man tall or short, heavy or light, according as he compares with other men. Results, therefore, considered in themselves, and considered in comparison with the results attained by other companies, must be our guide in determining whether a life company has been well, or ill, managed. As in judging of the character of a man, or of a mountain, we need to see them from several points of view; so in judging a life company, results should be looked at from several different standpoints in order to get a true estimate of them. We propose to apply these tests to the NEW-YORK LIFE INSURANCE COMPANY, during a period of five years ending December 3I, 1890. In order to make our comparisons as fair, and as significant, as possible, we propose to make them (I) between the NEW-YORK LIFE and the two other companies which are nearest to it in size and in the kind and amount of business done; and (2) between the NEWYORK LIFE and all other companies doing business in New York State, except the two already indicated. The two companies with which comparisons will be made singly are the Equitable and the Mutual Life. These two companies, with the NEW-YORK LIFE, have more assets, and more insurance on their books, and have done more business during the last five years,-than all the other companies combined. Their methods of business are also more nearly alike. All issue policies, for the most part, upon deferred dividend plans, and have done so during the whole period in question. They have also made greater efforts for new business than other companies-efforts which, as we shall see, have been amply rewarded. We have divided the comparisons to be made into groups according to subject matter. The first relates to A Period of Change. 279 Meanwhile, in order to enable the agency force to meet wild rumors and unfounded criticism, a system of weekly bulletins, giving the encouraging features of the situation, and urging the agents to renewed activity, was inaugurated by Mr. George W. Perkins, Inspector of Agencies at Chicago. These bulletins did more than to defend the Company, they gave valuable helps and hints to the solicitor and awakened his enthusiasm in his work. The publicity given to the Company's affairs made an opportunity which was used to press home the substantial results of forty-five years' work, and the duty of every man to insure his life. The year which was thus closed had been one of the most remarkable and trying in the Company's history. Yet, notwithstanding these adverse conditions, the new insurance issued, less the amount "not taken" during the year was $I 13,529,918, as compared with $I26,681,9o0 during the previous year. It was a splendid tribute, not only to the loyalty and energy of the agency force, but to the confidence of the public in the strength of the Company and in the integrity of its management. INSURANCE. NEW-YORK MUTUAL ALL OTHER CO'S ITEMS OF BUSINESS COMPARED. EQUITABLE. LIFE. LIFE. COMBINED. I.-Insurance in Force Dec. 31, I885...... $259,674,500 $357,338,246 $368,952,337 $1,037,552,405 2.-New Insurance Paid for, 1886-1890.... 503,900,650 634,782,458 452,686,792 I,I47,545,I79 Ratio of New Insurance to Amount in) I94. I I77.6 22.7 iio.6 Force December 31, 1885........... Per Cent. Per Cent. Per Cent. Per Cent. 3.-Total of Old and New Insurance...... $763,575,150 $992,120,704 $821,639,I29 $2,185,097,584 4.-Insurance in Force Dec. 31, i89o...... 569,338,726 720,662,473 638,04I,I80 1,614,913,372 Ratio of Insurance in Force Dec. 31, I5 74-56 72.64 77-65 73-9I 1 I890, to above Total................ Per Cent. Per Cent. Per Cent. Per Cent. 5.-Gain in Insurance in Force, in Five ' ($309,664,226 $363,324,227 $2690,88,843 $577,360,967 Years, 886-89.................... II9.3 PerCt. 101.7 Per Ct. 72.9 Per Ct. 55.6 Per Ct. Ratio of Amount Gained to Amount 6i.45 57-24 59-44 50.31 Of New Insurance Paid for.......... Per Cent. Per Cent. Per Cent. Per Cent. * Does not include policies " not taken." The significance of these comparisons is obvious. The companies had certain amounts of insurance on their books at the beginning of the period; they secured other amounts; the natural inquiry isI. What relation does the new business bear to the old? Business helps to make business, and a company with $Ioo,ooo,ooo of insurance on its books can write new business much more easily than a company with only $Io,ooo,ooo. 2. Having had certain amounts of insurance and having obtained certain other amounts, -what has become of it? How much of it has been retained?-what proportion of both old and new business 280 A Period of Change. WITH the beginning of the new year the Company announced 892. that its first twenty-year Tontines were maturing with the following results: Ordinary Life Policies, if surrendered for their cash value, were returning from thirteen to forty-eight per cent. in excess of their cash cost; Twenty-year Endowment Policies were returning from fiftytwo to fifty-nine per cent. in excess of their cash cost; and LimitedPayment Life Policies were returning from thirty-five to one hundred and thirty-four per cent. of their cash cost. The dividends on LimitedPayment Life Policies, if continued, were from sixty-one, to one hundred and fifty-nine, per cent. of all premiums that had been paid. The report of the Superintendent, embodying the results of his examination which had occupied six months, was furnished to the news is now on the books? If a company's business has been poor in quality-if it has been put on the books simply to make a show-the ratio of present business to both old and new business will show it. 3. Having had certain amounts of insurance and gained other amounts,-what relation exists betweeen the amounts gained and the amounts formerly held?-in short, how rapidly are the companies growing? 4. A certain amount of new business having been put on the books and a certain gain made of the insurance in force, -what relation does the gain bear to the new business? What proportion of the new business has been retained after all losses have been made good? These ratios are not specious; they are founded on the logical relations of the various items, and they establish beyond question the superior character and relative volume of the new business of the NEW-YORK LIFE. ASSETS. I I ITEMS OF BUSINESS COMPARED. NEW-YORK LIFE. I I.-Admitted Assets December 3I, I885.... 2.-Income in Five Years, I886-I890....... 3.-Total to be accounted for.............. 4.-Admitted Assets December 31, I890.... Ratio of Assets December 31, 1890, to above Total....................... 5.-Gain in Admitted Assets, in Five Years, 1886-1890................... Per Cent. of Income Added to Assets, in Five Years, I886-1890........... 6.-Paid Policy-holders, including DeathClaims, in Five Years, 1886-1890.... Per Cent. of Income Paid Policv-hold- ) ers, including Death-Claims, 886-1890 Per Cent. of Income Paid Policy-holders and Added to Assets............. $66,515,406 125,607,602 $192,123,008 II5,093,966 59-9I t Per Cent. s $48,578,560 73.0 Per Ct. 38.68 l Per Cent. $53,536,177 42.62 e Per Cent. S 8i.30 I Per Cent. EQUITABLE. $65,547,594 I35,503,53I $201,051,125 116,887,786 58.14 Per Cent. $51,340,192 78.3 Per Cent. 37.89 Per Cent. $55,383,105 40.87 Per Cent. 78.76 Per Cent. I MUTUAL LIFE. $108,431,779 I36,570,83I $245,002,6Io I46,494, i8o 59-79 Per Cent. $38,o62,4o1 35.1 Per Ct. 27.87 Per Cent. $74, I58,886 54.30 Per Cent. 82.17 Per Cent. I ALL OTHER CO'S COMBINED. $283,169,899 352,570,966 $635,740,865 374,752,827 58.95 Per Cent. I $91,582,928 32.3 Per Ct. S 25.98 Per Cent. f $186,053,811 52.77 f Per Cent. t 78.75 Per Cent. f I I A Period of Change. 28i papers on January 22, 1892, and to the Company about noon of the next day. It criticised the agency management; the publication of two books for advertising purposes; the purchase and sale of securities through the firm of Loomis L. White & Co.-Mr. White being a Trustee of the Company; the payment of money to suppress the publication of articles attacking the Company; and the Company's real-estate investments.* Reductions were made in the book values of the Company's property as given in its annual'report last preceding, as follows: On real estate owned,... $I,612,060.6I On other securities,..... 243,636.99 Total reductions,.... $1,855,697.60 Here substantially the same method is followed. The companies are made to account for what they had five years ago and what they have since received. What per cent. of both have they now on hand? and what per cent. of their five years' income did they pay to policy-holders or accumulate for their benefit? These are fair questions, and the fact that the ratios are so nearly equal in many cases precludes the supposition that they are accidental. Their significance for the NEW-YORK LIFE lies in the fact that it accounts for its income, as either paid to policy-holders or accumulated for them, at such a high ratio, while at the same time having the highest ratios as regards insurance. DEATH-CLAIMS. NEW-YORK MUTUAL ALL OTHER CO'S ITEMS OF BUSINESS COMPARED. EQUITABLE. LIFE. LIFE. COMBINED. I.-Death-Claims Paid, I886-1890......... $22,2I7,857 $3I,210,487 $36,0I2,767 $105,902,566 2.-Total Amount at Risk, One Year...... I,993,304,I64 2,614,04I,8II 2,372,746,257 6,406,3I8,995 Annual Death-Claims per $I,ooo of $1.I5 $11.94 $I5.8 $I6.53 Insurance at Risk................... Per $I,000. Per $1,000. Per $I,ooo. Per $i,ooo. 3.-Total Premiums Received for Insur-) ance, 886-89 $..................... $752256 $ 29577 $266249393 Ratio of Death-Claims Paid to Insur- I 22.93 28.44 35-56 39-78 ance Premiums..................... Per Cent. Per Cent. Per Cent. Per Cent. 4.-Total Income, 1886-1890.............. $I25,607,602 $I35,503,531 $136,570,83I $352,570,966 Ratio of Death-Claims Paid to Total I7.69 23.03 26.37 30.04 Income, i886-1890................. s Per Cent. Per Cent. Per Cent. Per Cent. It is a credit to a life company to pay all the death-claims it has, provided, of course, that they are not fraudulent, but it may have too many to be a credit to its management. It is no small commendation of the NEW-YORK LIFE that, although doing business in countries where the death-rate is higher than in the United States, and where an extra premium is charged, nevertheless its ratios of death-claims to the three most closely related items are so low. To make the comparison fair, as between the NEW-YORK LIFE and companies doing no tropical business, the extra premiums received on this business should be deducted from death-claims paid. -I *As these criticisms are referred to more fully in Mr. Beers' reply, they are not dwelt upon at length here. 282 A Period of Change. Increased valuations were allowed as follows: On real estate,......... $344,722.8 On other securities sold,.. 84,843.22 Total increase,..... $429,565.40 Total net reductions,...... $I,426,I32.20 The assets of the Company were given as of June 30, I890, after these re-adjustments, at $I20,7o1,690.64, and the surplus at $I4,708,675.83. EXPENSES. I ITEMS OF BUSINESS COMPARED. NEW-YORK LIFE. EQUITABLE. I I — - I- - -- - I.-Actual Expenses and Taxes, 1886-1890.. Ratio of Actual Expenses and Taxes to Total Income, I886-I890.......... 2.-Actual Expenses and Death-Claims combined, 1886-I890................ Ratio of Actual Expenses and DeathClaims combined, to Total Income.. i $24,326,978 S I9-37, Per Cent. ) $46,544,835 37.o6 I Per Cent. $26,093,442 19.25 Per Cent. $57,303,929 42.28 Per Cent. MUTUAL LIFE. $25,359,548 I8.57 Per Cent. $61,372,315 44.94 Per Cent. ALL OTHER Co's COMBINED. $75,380,47I 21.38 Per Cent. 1 $181,283,037 5I.42 I Per Cent. Having seen that the NEW-YORK LIFE'S ratios of new insurance are higher, and its ratios of death-claims lower, than others', we might fairly expect it to " give odds " on expense ratios, but here too, upon the whole, the Company stands at the head. A large proportion of new business naturally causes (I) a high expense ratio, and (2) a low death-loss ratio. By combining the two, we get an average that shows how much one offsets the other. The NEW-YORK LIFE has a larger proportion of its income left after making these necessary payments, than its competitors, as above. SURPLUS AND DIVIDENDS. NEW-YORK MUTUAL ALL OTHER CO S ITEMS OF BUSINESS COMPARED. NEW EQUITABLE.L LL O E LIFE. LIFE. COMBINED. I. —Dividends to Policy-holders, in Five $323 Years, I886-189o0..................7.. 26 $9,705,029 $I2,557,737 $37,032,437 2.-Increase in 4% Surplus................ 5,269,87I * 8,659,113 *2,926,858 (*) 3.-Total Profits Earned.................. 6,593,597 I8,364,142 15,484,595 (*) 4.-Insurance Premiums Received........ 96,893,277 109,752,256 IOI,295,7I 7 266,249,393 Ratio of Dividends Paid to Insurance I II.69 8.84 12.40 I3.9I Premiums Received................. Per Cent. Per Cent. Per Cent. Per Cent. Ratio of Total Profits Earned to In- i 17.13 16.74 I5.29 ( surance Premiums Received......... Per Cent. Per Cent. Per Cent. ( Average Annual Dividend to $I,ooo $ $6.I6 $399 $5.6I $6.05 Insurance in force over one year..... Per $I,oo0. Per $I,ooo. Per $I,ooo. Per $I,ooo. Average Annual Surplus Earned to $9.03 $7-55 $6.92 $I,ooo Ins. in force over one year.... Per $I,ooo. Per $,ooo. Per $I,ooo. ( * Massachusetts valuation, Actuaries' Table of Mortality with four per cent. interest in 1885, and New York valuation, same standard, for 1890. As not all companies doing business in New York did business in Massachusetts in 1885, the increase in four per cent. surplus for all cannot be ascertained. A Period of Change. 283 On the day following the publication of the report, the Company published a card in the daily papers, saying, "The severe language of the criticisms is not justified by the facts as found," and announcing that the report would be submitted to the Trustees the next day. It was so submitted, and a Committee of five members of the Board was appointed to consider, what action should be taken. Messrs. William L. Strong (now Mayor of New York City), C. C. Baldwin, John Claflin, Walter H. Lewis and Edward N. Gibbs, were the Committee. The Board adjourned until February first, at which time the Committee asked for further time, and it was voted that they be requested to report on February fourth; on the fourth a second adjournment was had to February eighth. At the meeting of February first the President spoke of the bitterness and personal character of the attack upon himself, as well as upon the Trustees, that had been carried on for so many months, and said he felt the Trustees should be no longer subjected to such attacks on his account. He felt no doubt as to the final result, either on his own account or that of the Company, and of his complete vindication, and that the grand results of a life-time of hard and earnest and honest work upon his part would be fully approved by the The sources of surplus are (I) a death-rate lower than the table-rate, (2) an interest-rate higher than that established by law as necessary to solvency (now 4 per cent.), (3) an expense-rate lower than the allowance made in the premium for expenses, and (4) miscellaneous profits, such as lapses, and gains on securities. Dividends are paid from surplus, but the amount of dividends paid during any given period will be significant only when considered in connection with the amount of surplus gained (or lost) during the same period. The amount of surplus paid out in dividends, plus the amount gained, will show the actual amount earned by the Company. The higher dividend ratio of the'companies which do, for the most part, an annual dividend business, is accounted for by the fact that they have paid out larger proportions of their surplus earned, but as no insurance reports show the surplus of all these companies in 1885 and in I890 on the same basis, their actual surplus earnings, with corresponding ratios, cannot be shown. A CRUCIAL TEST. The ratios of surplus earned sum up and show the significance of all the others. The death-rate, the expense-rate, the interest-rate, the lapse-rate, and every other rate that grows out of the character and amount of business done and affects its profitableness, enter into the rate of surplus earned. This rate combines all the others and shows the final net result of all. The favorable ratios of the NEW-YORK LIFE in so many of the previous comparisons justified the expectation that the final result would show the superior character of the NEW-YORK LIFE'S business and management, as a whole. That expectation is not disappointed, and this comparative study of the business of all the life companies is commended to our members and to intending insurers. 284 A Period of Change. calm and final judgment of all interested. He offered for the attention of the Board numerous letters and telegrams from agents and leading policy-holders in all parts of the country, urging him to stand fast and maintain the warfare to the end, and assuring him of their earnest support. He said the report of the Superintendent had fully vindicated his own personal integrity, and he proposed to issue a statement reviewing its conclusions on certain other points. On February second Mr. Beers issued an address to the policyholders of the Company, replying to some of the severer criticisms contained in the Superintendent's report.* This was published in the * The following extracts from Mr. Beers' letter of February second cover the points upon which exceptions were taken to the Superintendent's report: The Department's criticisms cover several phases of management, especially investments in real estate and agency work. The criticisms of real estate matters call attention to losses which may be divided into losses actual, which I admit, and losses theoretical, which arise from difference of opinion. I admit certain losses, which I will point out specifically, with the attendant circumstances, and I raise the question of difference of opinion as to the remainder. PLAZA HOTEL. The report alleges a loss on this property of $283,994. The Superintendent of Insurance uses this language in connection: " In property of this character and of such great value, the opinions of real estate experts of equal ability and integrity often differ, and other able and conscientious appraisers might value this property at higher figures, and even beyond its cost." The gentleman who, by direction of the Superintendent of Insurance, valued this property at $2,500oo,ooo, is a man eminently qualified to give an opinion on such a question. But it is also a fact that another gentleman of equal ability and character, within a few weeks, testified before the Supreme Court of the State of New York that, in his judgment, the property at the present time is worth $3,ooo,ooo. From your point of view, then, is it not fair to conclude that the alleged loss may after all exist only as a matter of opinion? But the case will bear one more comment. This property is as finely located as any on Manhattan Island for hotel purposes, and perhaps as finely as any hotel property in the United States. It is in the line of increasing values and, in my judgment, will ultimately yield the Company a large return on the original investment. [NOTE.-These estimates of the value of this property have been confirmed by offers since received by the Company.-J. M. H.] HOME OFFICE BUILDING. The report alleges a loss on this property of $364,295. Its book value is $I,914,295, and it enters the Superintendent's report at $I,550,ooo. To illustrate again how opinions vary as to the value of real estate, let us make a parallel between this and property of a similar character in New York, and draw a conclusion. Take the value placed upon our home office building for the purposes of taxation, and place it beside the same value of the Equitable Life Assurance Society's home office building. The official valuation for purposes of taxation of our home office building is $i,o5o,ooo; of the Equitable home office building, $3,800,000. A statement of the figures at which each property was entered in the assets of its respective company December 31, I89o, is as follows: The home office building of the NEW-YORK LIFE, $I,914,000; home office of the Equitable, $I5,I4o,ooo. The Department's estimate of the value of our property is approximately eighty per cent., while the assessor's figures for the purpose of taxation are a little more than fifty per cent. of its book value. As the gentleman who appraised A Period of Change. 285 principal journals of the country on February third. When the Trustees assembled on February eighth Mr. Beers presented his resignation.* It was laid on the table until the reading of the report of the Committee. This report was in substance as follows: There was nothing in the report of the Superintendent which showed corrupt or dishonest use of the Company's funds for the private gain of any officer of the Company. Its financial condition, its enormous increase in assets and business showed that, to produce such results the management must have been, upon the whole, intelligent and honest. The business of the Company had, however, outgrown the methods and checks then in use; our home office building has never made an appraisal of the value of the Equitable's home office building, we can hardly draw a conclusion from that basis, but figuring from the value placed upon it by the assessor, its total value would be approximately $7,600,000, if the book value of our home office were accepted at par. I cite these figures as strongly bringing out the truth of my suggestion concerning opinions as to real estate values. Every one is familiar with the eminent success of the Equitable Life Assurance Society, and no one would be so absurdly unjust to that company as to allege a loss on this one parcel of real estate of $7,500,000, or indeed any loss at all, from the policy-holder's view. Therefore is it not worthy of your consideration that in this case, as in the matter of the Plaza Hotel, the loss alleged is, after all, perhaps a matter of opinion? In fact, I could cite you good authority on real estate values in New York who will place our home office building to-day at a valuation in excess of its cost. There are many reasons why this estimate would be conservative. In the first place, the real estate was purchased in I869 and is exceptionally well located. Any one who knows anything about the history of real estate values in New York for twenty years will agree that there has been during that period a heavy advance in this and all property similarly situated. The building has not been allowed to deteriorate in any particular, and it would seem that our statement of actual cost, $I,914,ooo, was a very conservative figure. HOLBROOK HAIL, NOW CALLED THE YOSEMITE. On this item a loss has been made. Briefly, the facts are these: In 1882 we made a loan on this property when in course of construction, and after the man to whom the loan had been made had spent not only his own means (a considerable sum), but the money loaned him as well, he failed, and we were obliged to foreclose. The cost of this property to us after foreclosing was very little more than the amount of the loan. The work of completing the structure was then placed in the hands of an eminent constructing engineer. He supplemented his own knowledge by employing an architect, and the build*NEW YORK, Feb. 8, I892. To the BOARD OF TRUSTEES OF THE NEW-YORK LIFE INSURANCE COMPANY. Gentlemen: As you all know, I have nothing at heart but the continued welfare and prosperity of this Company, to which I have devoted the best years of my life. I have no personal ends to serve, but at my advanced age and in my present state of health, I require relief from the very onerous labors of the Presidency, and but for the long-continued and persistent assaults upon the Company, which have been chiefly directed against me personally, I should long ago have asked you to lighten my labors. I also recognize the fact that such assaults, however unjust, may in the end prove detrimental to the Company's interest. I therefore hereby tender my resignation of the office of President, to take effect Wednesday, February io, I892. Yours truly, WILLIAM H. BEERS, President. 286 A Period of Change. and the Committee recommended (I) a division of duties of the executive officers, by the appointment of an Auditor who should report direct to the Trustees; (2) the adoption of a By-Law that no salaried employe of the Company, other than the President and Vice-President, should be eligible as a member of the Board of Trustees; (3) that a committee of five be appointed to make nominations to fill vacancies in the Board; (4) that the committees be reorganized and the work of the Board distributed among them; (5) that a committee be appointed to revise the By-Laws so as to carry out these recommendations, and to add to the efficiency of the Board. The Committee further stated that, as the Presiing was finished. It was filled with a desirable class of tenants, and would have paid a fair return on its cost but for two errors, which could not have been foreseen and which do not justly subject the Finance Committee to the charge of making a bad investment of money. In carrying out a theory of fire-proof construction the architect made the same error precisely that the architect of Vice-President Morton's hotel, "The Shoreham," at Washington, made, and both buildings had to be reconstructed for substantially the same reason. The mistake of the architect in each case was in creating such a condition that dry-rot speedily destroyed the timbers, and the buildings had to be vacated at once. It was then discovered that, in addition, the foundations of Holbrook Hall, put in by the man who first obtained the loan, were insecure, and as a final result the whole structure had to come down. It was then rebuilt under the supervision of McKim, Mead & White, on the most approved lines, and there is not a finer structure of its class in this country to-day. The absolute loss to us, therefore, was approximately the cost of the first building. This we charged off, and we entered the property in our annual statement at the cost of the present building and ground. The figures, $729,066, the appraiser of the Insurance Department refused to accept; $480,000 was named instead, and entered in the Insurance Department's findings. It is proper to add that on our present basis of rental this property will yield, when fully rented, a net income of six and a half per cent. on the value placed upon it by the Insurance Department, and would yield a little more than four per cent. on our valuation, $729,066. THE PARIS PROPERTY. This property was purchased some years ago under the supervision of the Chairman of our Finance Committee, who was on the ground at the time. His investigations as to the value of the property were most searching, and the purchase was made with all due care. That the rental value of the property has since depreciated is true, and that there is an apparent loss is true; but if the Superintendent had not only secured an appraisal of the value of the property as it now stands, but also had investigated the value of the property when it was purchased, he could have fully satisfied his duty as an examiner, and at the same time could have given you a satisfactory reason for the original price paid. But no such investigation was made. And as his findings seem to do us an injustice, not only as above cited, but also in the value placed upon the property now, the matter will bear a word more in explanation. It was brought to my notice during the Superintendent's investigation that the figures supplied by the Department of Taxation of the French Government, on his request, represented values fixed solely for its particular purposes. Our manager at Paris with great difficulty succeeded in getting the CrIdit Foncier, the largest institution of its kind in France, and a society the reputation of which is wellknown throughout Europe, to have a valuation made of our property. This valuation was made with the greatest care by two of its most competent and experienced Inspectors, and their findings, properly attested, were submitted to the Superintendent of Insurance. He preferred, however, inasmuch as we could not procure in the limited time at our disposal an admission from the French Government that its A Period of Change. 287 dent had notified them of his intention to retire from the active direction of the Company at this meeting, they recommended that he be employed thereafter, in an advisory capacity, at an annual salary of $25,000, during the remainder of his life. Mr. Appleton presented resolutions accepting Mr. Beers' resignation, commending his services to the Company and authorizing his employment as recommended by the special Committee, but at an annual salary of $37,500. The resolutions were adopted unanimously, except as to the increase of Mr. Beers' compensation; on this point the Committee adhered to their former views. The special Committee was continued until February tenth, and a motion was adopted that on that date the Board proceed to vote for President. figures represented taxable value only, to reject the figures offered in this way. The estimate of the Inspectors exceeds'the figures of the French Government by $163,000, and their estimate of its prospective value, based on improvements certain to be made by the city of Paris, exceeds the figures adopted by the Superintendent by $393,600. OUR WESTERN BUILDINGS. The report of the Superintendent of Insurance values the office buildings recently erected by us in Minneapolis, St. Paul, Kansas City and Omaha at their cost to the Company, but as his opinion of the wisdom of the investment seems to be uncertain, as this language indicates: " There is no immediate prospect that they (the buildings) will prove as profitable as the investments of life insurance companies should," I desire to offer a word in that connection. There are two reasons why the immediate income from these properties is smaller than we may fairly expect to receive in the future. First, the buildings were begun under normal conditions, but were completed in the midst of a period of business depression in the four cities mentioned, and, accordingly, we have had fewer tenants and lower rents than we may reasonably expect hereafter. Second, the buildings were located with a view to future development of their respective cities. Any one who has observed the rapid growth of the West will appreciate the necessity of considering the future, even more than the present, in the location of an office building. Present revenue was, therefore, not so much of a consideration as that the building should be so located that the future may tend constantly to increase, and not to decrease, the rent-producing power and value of the properties. You will understand, of course, that investments of this character are valuable, because the element of risk in re-investment is practically eliminated. The money expended in this way is a fixed item for a very long period of years. The full wisdom or folly of such a transaction is developed only by time. You will be interested to know, however, that one of these buildings is already yielding us a'fair return on the money invested, and I am further advised by competent authority that since the date of our purchase of the real estate on which these buildings are situated there has been a net appreciation in its selling value of $500,000, as shown by appraisals made at the close of I89o, and by purchase of adjoining property since made by other people. In -entering these properties on our books, and in submitting our estimate of their value to the Superintendent, which he accepted, we did not take this evident increase into account. As evidence that the erection of this chain of Western buildings was well considered, I point you to the fact that the investment was entered upon after discussion and approval by the Board of Trustees. It is my theory that it is only fair to the members of a company like this, the nature of whose business makes large accumulations of money necessary, that the money to be invested should go, as far as is practicable, to those sections of the country whence it emanates. In this case, a part of the money received was invested amongst the people who paid it. 288. A Period of Change. The Board met on February tenth, adopted the report of the special Committee upon the re-organization of the Company, and heard a further report from the same Committee upon a nomination for President. The Committee had determined to recommend some one who was thoroughly conversant with the business of life insurance, and after considering several names, had sought a conference with Hon. John A. McCall, in whom they found certain requisites that would make him more useful as President of the Company than any other man in the world could possibly be. His whole business life had been devoted to Life Insurance, first in the Insurance Department and afterward as an officer of the Equitable The only theory on which these buildings can be rated as bad, or even doubtful, investments, is one which discredits the future growth of the Western States. The report notices that "As advertisements of the Company, they (the buildings) no doubt have a considerable value." This is eminently true. The territory in which these buildings serve especially to advertise the Company includes the States of Minnesota, North and South Dakota, Montana, Iowa, Nebraska, Kansas, Missouri, Texas, and Indian Territory. The people of these States have constant business and social intercourse with one or more of the cities in which the buildings have been placed. The buildings have therefore become widely known, for, as the Superintendent's report says, "each of them forms one of the attractions of the city in which it is located." The influence of these buildings upon the Company's business is extremely important. In I886, the year before the buildings were begun, the aggregate new insurance written by the Company in the territory in question was $8,o47,200. This aggregate has steadily increased until, for the year I89I, it amounted to $28,869,950, which is the largest business that was secured in that field during that year by any life insurance company. And not only was the quantity of the business remarkable, but its quality was such as to make it most desirable in every way. Without the buildings, it is safe to say that such results could not have been obtained. AGENCY MANAGEMENT. Under the head of Agency Management, the Superintendent of Insurance says that " Funds of the Company to the extent of hundreds of thousands of dollars have been advanced to these agents, without interest and upon insufficient security." To persons unfamiliar with the life insurance business, this statement would seem to indicate the worst possible management of our Agency Department; the facts ought, therefore, to be fully explained. The general system upon which advances have been made to agents by this Company and by other life companies, may be illustrated as follows (the figures used being merely illustrations and not the terms of any actual existing contract): The Company, we will say, enters into a contract with Brown, who is the general agent or manager for a State, that he shall receive a commission of twenty-five per cent. of the first year's premium on all policies placed by him, and a renewal commission of five per cent. on each renewal premium paid on such policies. Brown, of course, finds it necessary to employ Jones and others as sub-agents, and he ordinarily pays them the twenty-five per cent. commission allowed him by the Company on first year's premiums. Brown relies upon his renewal commissions for his own compensation, but while he continues in active service he is frequently allowed to draw a fixed amount against commissions for his living expenses, such amount being regulated by the circumstances of the case. As competition increases, Brown finds that in order to retain sub-agent Jones he will be obliged to pay more than twenty-five per cent. commission. To do this, Brown is obliged to make a new arrangement with the Company. Instead of increasing Brown's first year's commission, the Company agrees to advance to him a sum equal to two renewals (or ten per cent.) on business secured by Jones, PRESIDENT NEW-YORK LIFE INSURANCE COMPANY, FEBRUARY 12, 1892 - i Ii II A Period of Change. 289 Life Assurance Society; he had made two or three examinations of the Company; he understood its methods and accounts; and his views were conservative. His relations to the two other great companies were friendly, and he would be able to harmonize animosities resulting from competition, and so effect a saving of expenses in the conduct of the business. They had asked Mr. McCall for authority to present his name, and he had consented, provided he was not made a competitor with any other candidate. The Board then adjourned until February twelfth. The Board met on the twelfth and immediately proceeded to ballot for President, and Mr. McCall was unanimously elected. A committee and to hold all of Brown's future renewal commissions under the contract as security for the advance. Brown is now able to pay Jones thirty-five per cent. commission, and so retain his services. But at the end of the year, Brown is apparently in debt to the Company in an amount equal to ten per cent. of all first year premiums secured by Jones, and the larger the business the larger the apparent debt. This will continue until such time as the old business kept on the books greatly exceeds the amount of new business annually done. In a rapidly increasing business, this result will not be reached for several years, but, if the total amount paid to Brown has not exceeded what the business was actually worth, the time will come when the commissions accruing under his contract will exceed the total cost of the year's business. Brown's business from this time forth will require a less expenditure on the part of the Company in proportion to its volume than heretofore, and his so-called indebtedness as it appears under his contract will disappear more rapidly than it accumulated, at which time Brown will realize the profit for which he has worked. You will notice that this so-called debt does not represent money which Brown has squandered, or retained for his own uses. He has simply used the money to carry on the Company's business. If it should ever happen that Brown's renewal commissions fail to cancel the debt, the business has simply cost the Company what it cost Brown, and the Company has taken good care that the total amount of commissions and advance received by Brown should never be a sum greater than the new business secured by him was worth. The Company having already paid for this business in large part, will have a lower expense ratio to this extent in the future, and its surplus will be correspondingly increased. L. C. VANUXEM & CO. The Superintendent criticises the agency of Messrs. L. C. Vanuxem & Co., at Philadelphia, Pa., and alleges a debt to the Company on account of what he terms " extravagant allowances," of several hundred thousand dollars. Referring to the illustration above of the method on which a general agent's business is conducted, and the manner in which an apparent debt might be contracted, when., state that from 1887 to I89I, inclusive, this firm wrote business aggregating one hundred and thirty-two million dollars, a clear explanation is afforded you of how, under the above practice, a large debt might appear to exist. In this particular agency, the advance contemplated in our illustration took on various forms under various contracts (which, however, were always subject to our approval); against the commissions earned and to be earned the members of this firm drew advances for living expenses, as before referred to, and advances on account were made to some sub-agents, but at no time has the amount of money advanced to L. C. Vanuxem & Co. exceeded the value of their entire business. Under this system of organization it has been possible for a single firm to handle a large territory, and by creating a renewal interest (in this case of very large proportions) we have avoided frequent changes in general agents, and have largely escaped the danger of having our business carried to other companies by an agent whose interest in any given policy ceased with the first year of its existence. In this way Messrs. L. C. Vanuxem & Co. have done for years a larger business than the entire new business of several 19 290 A Period of Change. was appointed to wait on the new President and escort him to the room. He was welcomed by the Vice-President and by the counsel of the Company. Mr. McCall said, in accepting the office of President, he meant to be a NEW-YORK LIFE man with all which that implied. His personal relations with those he had left were, however, very dear, and there could be no change in his respect for them. Mr. Beers had always been his personal friend and he thought none the less of him now; the NEW-YORK LIFE was indebted to him for its great progress. Some changes would be inevitable, and he had a proposition to make for which he asked the support of the Trustees. "The agents of this Company," he continued, of the smaller life insurance companies, and the largest business of any single agency in the United States. It has been done at a not unreasonable expense, and the cost of its procurement has been included each year in the disbursements of the Company. The whole theory of this organization, and the purpose of the advance, is first, to produce a large business, and second, to create an incentive for the general agent or manager to procure business at the lowest possible cost, in order that, after a period of years, he may begin to realize a return commensurate with the work done. As the cost of the business is charged off each year, it becomes necessary to keep with the manager a blotter, or subledger, and the items are all brought forward from time to time. Of course, this, under the illustration, would show for an office doing twenty millions of new business in a year, and for a series of years, a large apparent debt, and the Superintendent of Insurance, instead of viewing the business as we have done, as simply business paid for, decided to go into this sub-ledger and spread before you the apparent debt. It is of first importance that you understand clearly that this money is not due from L. C. Vanuxem & Co. in the ordinary acceptance of the word " debt." It is due under the terms of their contract at such times as the commissions earned on the business done will liquidate the money advanced from time to time for the conduct of the business. It has not been squandered by them, nor retained by them. It has not benefited them personally, and never can, until, as stated, the earnings of their business have liquidated all moneys drawn for every purpose under the contract, including advances and agency expenses of every kind. And here let me call your attention to an extremely important fact, which applies to all discussion of agency matters by the Superintendent, and which he forgot to mention, namely, that these advances, in every case, were charged to expenses in the Company's books when the advances were made, and that the Company has never counted them as a part of its assets or surplus. The Superintendent, therefore, instead of unearthing, with great difficulty, something the Company desired to conceal, as he states, practically sets up an arbitrary standard of what he thought our business ought to cost in any given year, and charged up as a debt the difference between his opinion and ours. It would be scarcely less unjust to the Company had he alleged, in any given year, that the aggregate amount paid for the procurement of the business of that year was one or two millions too large, and in his report had set this up as a sum due from the men to whom it was paid. Right here I desire to state, and I state it with all due respect for the opinion of the official with whose conclusions I differ, that in matters of this character the conclusions of men who have had thirty years' experience in this business, as to the propriety of paying a given sum for a given volume of business (they alone being conversant with all the surrounding circumstances and contingencies), are as likely to be correct, and in the interests of policy-holders, as the opinion of a gentleman who, while eminently qualified for the duties of his office, cannot be credited with special knowledge in the particular interests now under discussion. [NOTE.-At the present date, October io, 1895, such progress has been made in the liquidation of the advances made to this firm that there is no longer any doubt but that the accruing commissions A Period of Change. 291 "are the most marvelous set of men I ever saw. Throughout this struggle these men have stood by you in the most wonderful way. They come here now impressed with the fact that I am from a rival company. I wish to take some action that will remove the feeling on this account from their minds. The attachment of the agents to Mr. Beers has been the success of this Company, and for the future success of the Company I wish to bring the agents to feel the same attachment for me. There is one of these men of pre-eminent ability and worth, whom I wish to bring to this office and make one of the officers of the Company. This is Mr. George W. Perkins, and I want to make him my right-hand man in the on their business will cancel all advances and leave a handsome surplus, in addition to the amounts drawn for " living expenses."-J. M. H.] SPANISH-AMERICAN DEPARTMENT. The Superintendent naturally treats at some length the affairs of the Spanish-American Department. The invitation extended to him by our Board of Trustees to examine the condition of this Company was called out chiefly by an incorrect and misleading statement relative to an alleged defalcation by one of its managers, for which the Company, it was stated, alone must suffer. I shall refer principally in the matters discussed by the Superintendent under this head, to this central, and to you most important, question. It is a fact that Mr. J. Merzbacher, one of the managers, at that time, of the Spanish-American Department, became a defaulter for a large amount. The statement as originally published, that Mr. Merzbacher defaulted direct to the Company, was an error. Under the contract which we had with the two managers of the Spanish-American Department, each became responsible for the actions of both, and Mr. Sanchez, the other general manager at that time, and the manager of the Spanish-American Department at the present time, accepted under the terms of his contract full responsibility for the Merzbacher shortage. This shortage consisted of two parts; a direct theft by Mr. Merzbacher from Mr. Sanchez of $419,822.92, and $II9,059.I0, which was an over-payment by Mr. Merzbacher to the former general manager of the Spanish-American Department. Since the date on which the accounts were made up and the shortage definitely determined, the item of $II9,059.10 has been considerably reduced on the books of the Company by accrued renewal commissions, retained by Mr. Sanchez and by him turned over to the Company in cash. The larger item, representing the money appropriated for his personal use by Mr. Merzbacher, has been reduced since December 31, I89o, by $166,671.89, leaving a balance due January I, I892, of $253,I51.03. The actual net profits for the year 1891 to this Department have not yet been fully determined, but its balance sheet shows that they will not fall short of $Ioo,ooo. This leaves the balance due the Company on this account on this date a sum but little in excess of $50o,ooo, for which the Company also holds abundant security. The Superintendent closes his review of the Spanish-American Department with these words: "From the foregoing facts, we must conclude that Sanchez and Merzbacher were treated with a degree of liberality inconsistent with the best interests of the Company." That conclusion is not correct. The Department has always been eminently successful, and its business has been obtained at a normal cost. [NOTE.-Mr. Sanchez agreed to make good the deficiency caused by Mr. Merzbacher's defalcation, on or before December 31, 1892; he paid over the last dollar of it on May 30, I892, anticipating the final date by seven months.-J. M. H.] MR. LOOMIS L. WHITE. The Superintendent of Insurance discusses at some length the relations which have existed for about sixteen years between the NEW-YORK LIFE INSURANCE COMPANY and Mr. Loomis L. White, 292 A Period of Change. agency business. I would like the assurance of the Trustees that they will support me in this action." The Trustees gave their informal approval of the President's proposal, and upon the adjournment of the Board he asked them to meet, with him, the principal agents and managers of the Company who were assembled in another room of the building. To this assemblage he spoke as follows: MEMBERS OF THE BOARD OF TRUSTEES, AGENTS, AND MANAGERS: We are on the threshold of a new administration. That fact does not necessarily imply great and radical changes in the workings of this magnificent Company, but whenever it shall appear to me, intrusted with the management and responsible for its results, that it is wise to depart from the road over which we have been travelling, I shall not be slow to ask your co-operation in making a new path. This is neither the time nor place for references to the causes that make me your presiding officer. I would speak of the future. We are called together as the representatives of a purely mutual Company, and in that capacity we cannot be personal except as a directing force. We are bound in a member of the Board of Trustees and of its Finance Committee; and two questions are raised. First, as to whether or not a firm, a member of which was a member of the Company's Board of Trustees and of its Finance Committee, could act for it as brokers, without having the opinions of such Trustee as to the value of securities colored by the probable commission which the firm would receive on such transactions; second, whether or not the Company had the right to purchase securities through such a firm of brokers. The first question may be briefly disposed of without discussion by a simple statement of the results. In the years covered by Mr. White's connection with the NEW-YORK LIFE INSURANCE COMPANY, about $65,ooo,ooo of securities have been purchased by the Company's Finance Committee, a considerable proportion of them through the firm of which Mr. White is a member, Messrs. Loomis L. White & Co., and on the thirtieth of June last the Superintendent, after valuing these securities at a time of depression, found them worth to the Company something more than $3,ooo,ooo above the cost value at which they are carried on the Company's books. Such a result is the best answer to all questions as to the wisdom of the Finance Committee's action, and, in so far as Mr. White's action influenced it, is an evidence of the value to the Company of this connection. The second question is one on which opinions of counsel differ. I have now reviewed with you the graver criticisms contained in the Superintendent's report. I shall stop here. I realize that there are other criticisms which I have not referred to, and I do not deem it necessary to do so. I have tried to present to you fairly the facts concerning those of most importance, and I believe I have shown you that, while there have been errors in the management of this Company, there has been no betrayal of trust. A full criticism of errors, with an equally full statement of management deserving commendation, would have been only fair to you and perfectly satisfactory to me, however severe those criticisms might have been; but the Superintendent of Insurance, who was invited to examine the condition of this Company, while properly criticising whatever he deemed criticisable, omitted to state the other side of the case, and in addition, unfortunately, so stated his criticisms as to make it probable that you may have misunderstood them and overrated their importance. I desire to reiterate my disclaimer of infallibility, and repeat the message sent from Europe last summer, A Period of Change. 293 honor to exert ourselves solely and absolutely in the interests of the policy-holders. Let there be no mistake about that conception of our duty. So far' as in me lies, that shall be the controlling motive of my administration. I am conscious of the need of your support. It may be that in the recommendations that I shall from time to time present for your consideration, a discussion of them will show that some are crude or unwise to adopt. In such cases-few, I trust, in number-you will never find me so set in my opinion that I cannot be convinced that my judgment is not always the best. On the other hand, if there is any of our number that believes that there is no opportunity for changes and improvements, he owes it to the others that he shall not remain to hamper and retard our work. I am sincerely of the opinion that I will have the support and assistance of each and every Trustee. If not, I shall not hesitate to make the issue. I stand here unpledged to any man or set of men in the slightest particular. No person, high or low, has exacted, nor would he receive it if asked, any pledge of place, power, or emolument under my administration. So much for my platform. We are members of a vast organization, the power for good in which is not solely in its great amount of resources or its surplus of fifteen millions of dollars. Since its organization, in I845, it has dispensed to policy-holders about $I60,000,ooo. No mind, however gigantic, can conceive or fancy the good that has been accomplished by the payment of that amount. We have a membership of 175,000 scattered all over the world. To them this Company is as important in the consideration of protection to their families as is their own ability to shield them in time of need. Is it to be wondered at, then, that there are watchful eyes on our guardianthat "in business of our magnitude mistakes are inevitable, and we compare favorably with others, but my integrity of purpose cannot be shaken. General net results are the touch-stones in every business." We need not go far to find confirmation of this. Errors have been made, perhaps, in the management of every company doing business, but as there are some of common notoriety, I may refer to them without seeming to attack the companies themselves. In addition, I will say that to the best of my knowledge and belief, all of these cases are natural experiences incident to the fact that no one is infallible. The Connecticut Mutual Life Insurance Co. lost outright $44o,ooo through the defalcation of its financial correspondent at Indianapolis in 1888. The Mutual Benefit Life Insurance Co., a company eminently conservative in all things, lost about the same amount on Elizabeth, N. J., bonds. It is a well-known fact that the Equitable Life Assurance Society marked off in I889 and 1890 almost $I,ooo,ooo on real estate, and that it carries nearly $2,ooo,ooo in its published statement of assets and surplus as " agency balances," "commuted commissions," etc., which is practically another form of expressing what the Superintendent calls "debt" in the case of L. C. Vanuxem & Co. In the report of the Department examination of the Mutual Life Insurance Company, made in I880, it was stated that $989,701.43 had been charged off to profit and loss on account of its office buildings. After naming these cases (and others might be referred to) we have simply recited a list of average errors, which, in proportion to the interests at stake, represent less loss than the experience of any business of which I have knowledge, and with which the management of the NEW-YORK LIFE INSURANCE COMPANY invites comparison. In conclusion, let me say: When my official relations with the NEW-YORK LIFE INSURANCE COMPANY began, twenty-nine years ago, its assets, after eighteen years of existence, were less than two and one-half million dollars, and its surplus less than two hundred thousand dollars; its history since, its officially determined assets, June thirtieth last, of one hundred and twenty million dollars, its fifteen millions surplus, and its annual income of over thirty million dollars, I submit to your impartial judgment as the achievements of my associates and myself during the administration of our trust. I remain, Yours faithfully, WILLIAM H. BEERS, President. 294 A Period of Change. ship, or that a failure to meet, to the utmost, every demand for a rigorous performance of duty will be visited by condemnation? We must act together in their interests. No diversion from that rule will prevail. A word to the men who gather the funds that we hold in trust. I refer to the agents and managers who are joined in this meeting at my solicitation. I doubt not that the Trustees understand our responsibility to them. They, above all others, are vitally interested in honest management. To me it is marvellous, when we consider the unparalleled trouble through which the Company has passed, that they have been able to accomplish so much. Just think of it! $I50,000,000 of new business in a year, when during one-half the time they were devoted, perforce, to a defence of the Company. No other set of men would be equal to it. They have the admiration and respect of the profession everywhere. Nay, more than that. We must show our appreciation of it in no uncertain way. I propose, and would ask you to support me at the earliest possible moment in its adoption, to select from their number as one of the Vice-Presidents of this Company a man who is conspicuous among them all for ability and integrity, in whose territory during 1891 his agency placed on the Company's books $46,000,000 in new business, and when the year closed he had no money in his possession that he was not entitled to by his work and contract. No announcement that will emanate from us of changes in our official staff will meet with a heartier response from the men who bear the heat and sustain the trials of the business than that of the election of Mr. George W. Perkins, of Chicago, as a Vice-President. A word, and I will close. In answering a congratulatory telegram from my friend, the Superintendent of the Insurance Department of this State, the warning of Burke in. his reflections on the French Revolution recurred to my mind with striking emphasis: "All persons possessing any portion of power ought to be strongly and awfully impressed with an idea that they act in trust to the one great Master, Author, and Founder of society." The new President took office with the hearty approval and sincere good wishes of all interested in the Company's welfare and in the progress of Life Insurance. All his previous training had fitted him for the high position to which he had been called. Born in Albany in 1849; educated in her public schools, which rank with the best in the country; from the age of seventeen he had been conversant with the business of insurance, first in a general agency, and afterward for sixteen years in the Insurance Department, where he rose by the force of his own ability and industry from the position of clerk to that of head of the Department.* He was " In an interview with Mr. McCall, published in the " Morning Press" of February II, 1892, he made this statement concerning one feature of his early career. "When I first entered the insurance business at Albany, I determined to become familiar with all the old records of insurance cases in the office. I used to work nights at this. Whatever success I have had in the business dates from those extra hours I put in." A Period of Change. 295 Deputy Superintendent and Chief Examiner for the Department during the period when so many rotten companies were exposed and their officers punished upon the evidence which his examinations furnished. He had gained the confidence of every honest manager and incurred the displeasure of others by his fearless exposures of official malfeasance, and under his superintendency the New York Department became the terror of evil-doers and the sure support and defence of those who did well. During the six years preceding his election as President of the NEWYORK LIFE Mr. McCall had been the Comptroller of the Equitable Life Assurance Society, where he had had opportunity to observe the practical working of a great company and to apply, so far as they were applicable to the business of his department, the conservative rules which he had advocated as the representative of the State, charged with the protection of the best interests of policy-holders and companies alike. On February twenty-fourth, Mr. McCall issued the following address to policy-holders: To THE POLICY-HOLDERS OF THE NEW-YORK LIFE INSURANCE COMPANY: On the twelfth instant I was unanimously chosen by your Board of Trustees to the position of chief executive officer of this Company. I take the earliest opportunity to address you personally, in order to give in a few words my conception of the task I have undertaken, of my responsibility to you, and of your responsibility to me. First of all, I believe in a frequent and full accounting, on the part of the officers in charge of such a company as this, to its constituent members. "Even-handed justice " should actuate the administration of every public, or semi-public, institution, and it should be absolutely dominant in the affairs of a mutual life insurance company. There should be no privileges, no favors, no discriminations in such a company. To this idea I am fully pledged. I adopt the thought of Lincoln, and shall aim to conduct an administration "of the policy-holders, by the policy-holders, and for the policyholders." I accept the power of administration, delegated by you through the Board of Trustees, with full recognition of whence that power emanates, and to whom an accounting must finally be made. I have accepted the Presidency of the NEW-YORK LIFE under almost ideal circumstances. I am not pledged to any man, or body of men, and in this dedication of my undivided effort to your service, lies the only promise I have made which can affect your interests. Moreover, the recent examination of the Company has given both policy-holders and myself a complete knowledge of its affairs, showing not only its strong financial condition, but also enabling us to judge intelligently as to the results of certain methods, and to apply the proper remedy wherever one is needed. 296 A Period of Change. The Presidency of this great Company, as has been said, may well be considered as constituting "the greatest business opportunity of the age." But that expression, while it stirs the pulse, does not satisfy us. It is not "a business opportunity " in the ordinary acceptance of those words; it is that, but it is vastly more. This Company is not a philanthropic organization, but it is, in the highest sense, a beneficent organization, and from the conduct of its affairs we must eliminate a great deal that is accepted as good business methods, but which aim at personal, and not at general, benefits. Life Insurance has worked a wonderful change in the minds and characters of men within ten years. Its spirit and purposes have been so closely in sympathy with all that elevates society, that its increasing prominence during that time may be taken as an index of the growth of prudence, unselfishness and better living amongst the people generally. But it seems to me that the larger opportunity won by the phenomenal growth of Life Insurance has been, in some degree, lost sight of by managers who have done most to achieve it. The effort to secure a large business, and thus increase the benefits of Life Insurance, has gradually become an effort to secure the largest business, without that regard for the highest interests of all, which should be the controlling motive in a business of this character. I wish to say unequivocally, that.while this Company ought, from the nature of the case, to write a very large business, I have no ambition to achieve mere bigness. I shall not depart from what seems to me the line of wisdom and of perfect safety, merely to write a few millions more than some other company. If there was ever any virtue in mere volume of new business, of assets, and of surplus, surely this Company is already richly dowered, and we can afford hereafter to take what seems to be a wider view, conscious that there are better ambitions for the future, however good this may have been in its time. I do not mean by this to imply that the day of large achievement is over. By no means. Life Insurance is only beginning to touch the homes and lives of the people. Its horizon is still expanding. We have only begun to realize how much of a factor it is to become in the economy of that better civilization into which we are daily growing. I would have its growth in harmony with the great principles upon which it is founded, and with the noble ends it is designed to serve. This opens a field of thought into which I cannot now enter, but it serves to emphasize to you the sense of overwhelming responsibility that rests upon me. If we view the Company as it is to-day, we are compelled to admit that, while men have frequently been called to accept similar trusts, no man was ever called to accept a greater trust of this character. If we view it as it promises to become under capable, honest and wise guidance, we must be mutually impressed with the immeasurable possibilities for good which lie in the opportunity before us. If there is any one feeling predominant in my thoughts at this time, it is that of humility-of my utter inability, unaided, to make the most of the Company's future. Beyond a dedication of my own efforts, I place your cordial sympathy and support; and above both I recognize the designs of an overruling Providence, which seems to have given us the conduct of what should become a most powerful factor in the amelioration of human life. I can say but little more at this time. As rapidly as is consistent with safety, and to such extent as my judgment dictates, I shall from time to time make such changes in ~ IC ~- ~~ " " L~* it II; YiTTE PP"Sr...-. ~l"s-~ *I 1 488888888 1 V \ ' I sDsliB8 8f'd rX l - - I - a A Period of Change. 297 the methods of conducting the business of this Company as may be necessary to make it conform to the principles herein set forth. But I particularly desire to have it understood that I invite from all policy-holders the fullest and freest intercourse with this office and myself that the demands of such a business will permit. And, in so far as due regard for the rights of all will allow, I shall be pleased to see that matters in interest in each particular case have prompt and careful consideration. Your obedient servant, JOHN A. MCCALL, President. The Company's annual report for I89I was submitted to the Trustees on February 24, I892. It was too soon after the new President came into power to make the report entirely in accordance with his views, but some changes were significant. The amount reported as new premiums did not include any sums paid as dividends in reversion, nor the reserve values of old policies exchanged for paid-up insurance; these items were given separately in disbursements, and in one sum by itself in income. Payments to policy-holders were given in detail-there was no lumping together of such unrelated items as death-losses and endowments. The conservatism of the report was noticeable; over nine hundred thousand dollars, in addition t9 the reductions recommended by the Superintendent's report, was charged off in reduction of the book value of office buildings, and the reserve for annuitants was increased nearly a million dollars in excess of the requirements of the State. At this meeting of the Trustees, in accordance with the recommendation of the President, Mr. George W. Perkins was elected Third VicePresident, and Mr. Charles C. Whitney was elected Secretary. Mr. Perkins' recent achievements in Life Insurance have already been referred to by Mr. McCall; his first experience was in the office of Curran & Perkins, General Agents of the Company at Chicago, in 1877; he was afterward Cashier of the Company's Cleveland Ageficy, and in 1887 entered the field as a solicitor. Two years later he was made Inspector of Agencies for the Western Department. Mr. Whitney entered the Company's office in 1876 as private secretary to President Beers, having previously been Manager of the Western Union Telegraph Office at Indianapolis, Ind., and Assistant Secretary of the Franklin Life Insurance Company of Indianapolis. 298 A Period of Change. Prompt and energetic measures were taken to bring the agency force into sympathy and touch with the purposes and methods of the new management. On March first Ion. D. P. Kingsley was appointed Assistant Superintendent of Agencies. Mr. Kingsley had been the Company's Associate Manager at Boston since January, I889, and was previously Auditor and ex-officio Superintendent of Insurance for the State of Colorado. On March ninth and tenth a Convention of representative agents of the Western Department assembled in Chicago, in accordance with a programme arranged in the previous October. This Convention was attended by President McCall, who used the opportunity to outline his future policy and to point out the encouraging features of the situation in reference to the Company. The following extracts indicate the general scope and spirit of the President's address: f came to Chicago in a very busy time, at some inconvenience, but with great willingness, to pay my tribute of respect to the first division of the agency corps. You were entitled by your record in the late contest to the front of the line, and you held the position before and after it. You did not stop to inquire the strength of the opposition, but the place where it could be found, and at no period did you show that you were ready to succumb or change your front. Peace brought honor and recognition of your services. The action of the Board of Trustees in selecting your leader as one of the Company's Vice-Presidents has brought me more comfort and the Company greater credit than aught else that has occurred during my brief administration. * * * * Now that the trouble has passed away, what are the lessons of the conflict? The principal one is that the policy-holders' interests are paramount to all others. No administration of such a trust as ours is, no matter how powerful or well-intrenched we may believe ourselves to be, will be successful if the confidence of our members is withheld. An indifferent acquiescence is of no avail. They must be made to feel that they have as much interest in their Company's progress and welfare as any of the officers or agents. That interest can only be secured by their belief in the honesty and fair dealing of the managers. In bringing this result about power must concur with prudence to beget faith, and wealth with honor to produce respect. Given the support of our members under the conditions stated, we can defy the machinations of any opposition, no matter from whence it springs. So much as a preface. No other business has been subjected to the same trials as Life Insurance. No other financial interest founded on public confidence could have withstood the assaults that have been made, and prospered as it has. I do not refer, of course, entirely to the attack made on the NEW-YORK LIFE. I have in mind the history of the business, which has been an open book for a third of a century. There is much to marvel at in that record. Through the experimental period of I859 to I869, down through the time of mushroom organizations, when an inflated currency created its like in fictitious organi A Period of Change. 299 zations, no other class of corporations suffered so much odium from failures and mismanagement as that which we stand here to-night, not to defend, but to eulogize. The record of the companies that stood these tests has no parallel. No other business could have prospered under like circumstances or maintained its position in the business world. The honor belongs to those who have kept the faith by energy and integrity, and who compelled in others respect for them and their companies. I want right here to read from an address made by a Trustee of this Company to its newly-elected President: "Unwilling as you seemed to be from the first to assume the high responsibilities of this office and enter upon the discharge of its duties, you have at length yielded to our united request; and now I ask that I may be permitted to say in behalf of this Board, that they look to you with great confidence for a united devotion of time, talents and industry to this work. You have important interests in your hands. We have placed in your immediate keeping the sacred interests of this institution. The widow and the fatherless will look to you for a faithful account of your stewardship, and in a measure the honor of your Board of Trustees is under your protection. In all these respects we look to you for such results as will reflect credit on all concerned." You will probably be surprised when I say that the address from which I have quoted was made before I was born, namely, on May 15, 1847, to the second President of the Company, Aaron M. Merchant. What was said forty-five years ago is true at this time, and not a word that I have read could not be uttered with equal truth to-day, and with far more importance, considering the magnitude of the Company as it now stands. As a token of the loyalty of the agents to the new administration, they placed in the hands of the President applications for over four million dollars of insurance which had been written during the preceding ten days (and nights), and upon a large part of which the first premium had been paid with the application. The re-organization of the Board of Trustees proceeded on the lines recommended by the special Committee on February fourth. Messrs. Collins, Martin and Actuary Weeks, being in the employ of the Company, resigned as Trustees on February twelfth; Mr. Weeks was elected Secretary of the Board on the same date. The vacancies thus created in the Board were filled on March ninth by the election of Messrs. William C. Whitney, Edmund D. Randolph and Woodbury Langdon; on the same date Hon. Charles S. Fairchild was elected in place of Mr. Alexander Studwell, deceased. In place of Mr. Loomis L. White, resigned, the Board elected, on March twenty-third, Mr. A. G. Paine. On April thir 300 A Period of Change. teenth Hon. Hiram R. Steele was elected a Trustee vice Mr. John N. Stearns, resigned, and Hon. Wm. R. Grace was elected vice Mr. Beers, whose term of office then expired. At a meeting held on March twenty-third the Trustees adopted the new By-Laws recommended by the Committee on revision. The revised By-Laws created the office of Comptroller, and to this office the Board elected Hon. Hugh S. Thompson. Mr. Thompson, when elected, was a member of the United States, Civil Service Commission, having previously been Superintendent of Education, and Governor, of the State of South Carolina, and Assistant Secretary of the Treasury, of the United States. A re-organization of the Home Office force was effected, which did not involve a change of duties so much as a recognition of service rendered, by giving corresponding rank and authority. Mr. H. C. Richardson, who had been in the Actuary's Department since 1869, was made Assistant Actuary on February twenty-fourth. Mr. Dwight Burdge, who had been in charge of the death-claims since the death of President Franklin, was made Superintendent of the Department of Policy-Claims; and Mr. H. P. Stamford, who had been for several years chief accountant, was made Supervisory Accountant. Mr. James A. Brown, formerly of the Equitable Life Assurance Society, was appointed Auditor, March twenty-second. Later in the year other changes in, and additions to, the official staff were made. The office of Treasurer was created, August twenty-second, and Mr. Edward N. Gibbs, who had been a Trustee since 1889, was elected to the position. Meanwhile the work of encouraging and directing the field force suffered no abatement. A weekly "Bulletin" was established at the Home Office and issued under the supervision of the Agency Department. The recent troubles of the Company were turned to its advantage. The searching examination by the Insurance Department was everywhere quoted as evidence that people knew all about the NEW-YORK LIFE, and that it had endured the severest tests to which a company could be subjected. With respect to the agents' work, large results were not so much emphasized as constant results; every agent was urged to become "a WI): om ~.lgo, oi~ i:I L~ f.:~::: '~ i~: B! ~~ r I; A Period of Change. 30I steady producer," and to work as many hours in a day and as many days in a week in soliciting insurance as he would in any other business. In order to encourage steady work, frequent competitions were arranged under which agents who obtained one or more applications per week for a certain number of weeks in succession, were rewarded with some token of honor; sometimes it was a small sum of money, sometimes a blue ribbon, sometimes it was hondrable mention in the weekly "Bulletin." The habit of persistent work thus secured and the enthusiasm thus awakened soon became powerful factors in the production of business. While the re-organization and encouragement of the agency force was in progress, the Company suffered the loss of one of its most valued managers. Mr. J. Fisher Smith, for over seventeen years its efficient Manager for Great Britain and Ireland, died on April thirtieth. He was succeeded by Mr. John A. Ferguson, who had been previously General Agent for Wisconsin, and, during the five years immediately preceding his appointment, Agency Director of the Mountain Department, embracing the States of Colorado and Wyoming, and the Territories of New Mexico and Utah. On May thirtieth a Convention of representative Canadian agents was held in Montreal, at which President McCall was present and delivered an address. He dwelt upon the evils of misrepresentation, and of rebates, and indicated that there was no place among agents of the Company for those who could not sell life insurance upon its merits and at the full table rate. The following extracts indicate the drift of his discourse upon these points: You can do more by truthful representations to place the business on a higher plane than all the Officers and Trustees combined. It is mainly, if not solely, by your efforts that the insurance is procured; and if, for the sake of a temporary advantage, you cause the contract to be entered upon by deception and misrepresentation, the injury is not confined to the disappointed policy-holder. Almost as bad, in many of its effects upon the business at large, is the offer to share your commissions, or in the language of the day, to rebate them. * * * It has been flippantly said in excuse that, a man can do as he pleases with his own, and that is about the only argument that has been advanced for the miserable and disgraceful system that robs a whole class of men of their just dues. It is the precursor of more evils in the management of the business than all else besides. The ruinous and extravagant contracts and the bonus allotments, 302 A Period of Change. that are now so thoroughly and properly condemned, are the fruit thereof, and are directly traceable to it. The ridiculous efforts for supremacy, indicating an absence of intelligence and integrity, find in misrepresentations and in rebates their most efficient allies. In establishing rules for our own guidance, let the avoidance of both these evils be the fundamental principle. If we observe such a course and write but one-half the amount that we could otherwise obtain, take my word for it, the Company, its management and its agents will have a better standing in the community than if by rebating and misrepresenting it had exceeded the highest anticipations of the most " progressive manager." I trust that I have made plain some of the motives that will control my administration. We are not concerned about those who thrive on coaxing. He who is not with us shall not be of us, and on that issue we are prepared to be combative. * * * We have an agency corps that has been tried in war and that has shown no disloyalty. Its members did not desert when the banner trailed. I believe that the enunciation of our course for the future will discover no laggards in their ranks; and if it does, their intention to remain in the rear cannot be too soon proclaimed. We have no room for doubters or idlers. They may find shelter in other tents than ours, and if they seek it there will be no remonstrance or whining about their departure. Let us then proceed to the tasks that have been assigned us, with a feeling of earnestness and devotion. In behalf of the Executive Officers and the Board of Trustees I pledge that your efforts will be sustained at the Home Office, by affording you every opportunity to transact an honorable and conservative business. The days of extravagant commissions, bonuses, and guarantees have passed away, so far as the NEW-YORK LIFE is concerned. * * * We will seek by liberal treatment, in the terms and in the construction of policy contracts, to win our way in the esteem of our members. In policy contracts, and in all matters pertaining thereto, the policy-holders will be given the preference. Ours is a Mutual Company, and the advantages in its operations belong to the membership. The skillful and technical verbiage that confiscates reserves, and forfeits "non-forfeitable" policies, will be missing from future contracts, and thus fortified, the close of the year will find us unassailed and unassailable. From the time of Mr. Beers' resignation, in February, there had been occasional protests on the part of policy-holders against the contract then made for his employment in an advisory capacity during the remainder of life. As the authority of the Trustees to make such a contract was also questioned, Mr. Hornblower represented to the Trustees on June eighth that an agreed state of facts had been made between counsel for Mr. Beers and counsel for the Company, for submission to the General Term of the Supreme Court of the State, for a decision as to the validity of the contract. This action was approved by the Trustees, and the Court decided (in November) that the contract was void. As there was a possibility that this decision might be overruled by the Court of Appeals, A Period of Change. 303 a compromise was agreed to under which, until the agreement should be terminated by one of the parties thereto, Mr. Beers was to receive an annual salary of one-half the amount granted under the contract. This was continued until his death, which took place on November I6, I893. With this adjustment of Mr. Beers' contract, the last stumblingblock was removed from the pathway of the new management, which could now devote its whole attention to the work of building up the Company. The closing sentence of the new President's Montreal address was an intimation of one of the measures already resolved upon. On June eleventh the Company made the following announcement: The NEW-YORK LIFE INSURANCE COMPANY, which, in I86o, originated and introduced the first Non-forfeitable Policy, now makes another radical departure in favor of the insured. Life insurance is safe or possible only on the principle that life is more precious than money; but no life company has heretofore fully accepted this principle. The NEW-YORK LIFE, believing from its experience that the time has come when this principle should be fully accepted, now announces that, the physical conditions, habits, etc., of an applicant being satisfactory, it will insure him without future limitations. The Company's new contract, the Accumulation Policy, contains no restrictions whatever respecting occupation, residence, travel, habits of life, or manner of death. The only condition of the policy is that the premiums be paid as agreed. If the insured pays the premiums, the Company will pay the policy. The new policy thus announced retained all the desirable features of the Non-forfeiting Free Tontine Policy, but differed from it (I) in removing all restrictions upon the insured; (2) in making the non-forfeiture provisions self-acting, so that the paid-up value of the policy cannot be lost by neglect; (3) in allowing loans on the policy for specified amounts, at stated times after five years, at five per cent. interest; and (4) in making the policy incontestable for any cause after one year provided the premiums are duly paid. The first policy with the new conditions and privileges was issued June seventeenth, upon the life of one of the Trustees of the Company. A fac-simile, slightly reduced, will be found following page 304. The issue of the Accumulation Policy marks an era, not only in the history of the NEW-YORK LIFE, but in the history of American Life Insurance. The controversy over the restrictions which should be placed 304 A Period of Change. upon the insured had been a long one, although the first life policy of which there is any record was without restrictions.* The early policies in this country contained restrictions with respect to occupation, residence, travel, suicide, dueling, violations of law, and the use of intoxicants and narcotics, and more or less of these have been continued until the present time. There was much more occasion for these restrictions fifty years ago than now, because of the ruder condition of society, the less attention paid to hygienic conditions, and the lack of statistics respecting mortality under given conditions. The history of Life Insurance has shown a constant tendency to relax and eliminate the conditions which were formerly considered necessary for safety. The NEW-YORK LIFE eliminated the suicide clause from its policies in I850, and when the Accumulation Policy was issued nearly every American company had either relaxed its former conditions on this subject or omitted them altogether. With respect to other restrictions, progress had been made in spots, so to speak; that is to say, there was no restriction which some company had not eliminated, as no longer of value, yet every company still retained some of the old-time barriers to absolute insurance. The situation had become absurd; it remained for the NEW-YORK LIFE to end it. The other new features of the Accumulation Policy were not new in an absolute sense, but they had never before been combined in a single policy on so favorable terms. The non-forfeiture provisions adopted provide that, in case of default in the payment of any premium after the policy has been in force three years, the insurance will be extended, without request,j for its full amount during a period shown by a table in the *The first life insurance policy on record is the one issued at Florence, Italy, in the year I6IO, in favor of Giovanni Ballesta on the life of Ser Brother Ferdinand, for the sum of three thousand scudi, the term extending from the August Festival at Piacenza of that year to the Feast of Epiphany in I6II, the premium being 34 per cent. of the amount underwritten. The policy was written in medieval Latin. The old Florentine policy marks the limit of historical life insurance as a transaction. The policy is incontestable and indisputable. It is agreed in the event of the death of Ser Ferdinand the assurers shall make full payment. It covers natural or accidental death. It gives free residence and travel anywhere in the world, by land or water; it is good at issue, and the claim is to be payable three days after the notice of death.-Insurance Record (London). t The Massachusetts Insurance Commissioner, in his report of I895, after referring to the legislation had and attempted in his own State on the subject of non-forfeiture and to the very general practice of other-State companies in requiring notification and surrender of their policies in order to secure 5! DOTH PROMISE AND AGREE at its Office in the City of New York, t ^,y a Executors, Administrators or Assigns, immediately upon receipt and approval of proofs of the death during the continuance-, of this Policy of --—. l -- L. ___ -of - 2?t - in the County of -lf.^ t. E-,.State of__ L \ Annual Premiumn, (herein called the insured).. This Contract is made in Consideration of the written application for this Policy, and of. the agreements, statements and warranties thereof, which are hereby made a part of this Contract, and in further consideration of the sum of -o Dollars iann^ Cents, to be paid in advance, and of the payment of a like sum on the —i day (I-_e -) ----— / ir every year thereafter * during the.continuance of this Policy, until J ^ -full years' premiums shall have been paid. To r-i 0 INCONTESTABILITY. After this Policy shall have been in force one full year, if it shall become a claim by 0 GO death, the Company will not contest its payment, provided the conditions of the Policy as to payment of premiums have been observed. Examined, / The benefits and provisions placed by-the Company on the next page are a part of this Contract, as fully-as lf recited over the signatures hereto affixed. In Witness Whereof, the said NEW-YORK LIFE INSURANCE COMPANY has, by its duly authorized Officers, signed and delivered this Contract, thiss / AAA day of --- onon e thousand eight hundred and ninety-two. An Limited-Payment / Accumulation y 7 92-17..ee h.........................Secretary, -..-.. --- — — X —. President. A Period of Change. 305 policy. On the other hand, if ordinary paid-up insurance is desired, it may be obtained on request within six months, and the amount of such paid-up insurance is likewise shown by a table in the policy. Similar conditions are contained in the policies of some other companies, but nearly always with the condition that, in case of death within a certain time after the insurance is extended, the regular annual premiums will be deducted with interest. That is to say, if you live, the reserve value of your policy is eaten up in paying for term insurance; but if you die, your insurance is not term insurance at all, you must pay regular rates for your protection. The loan feature of the Accumulation Policy was the first fruits under the new "Insurance Law" of 1892, which allows life companies organized under the laws of this State to loan money upon the security of their own policies. Life companies declare that their policies are representatives of value, good collateral security for a loan, &c., and yet, strange to say, some of them will not loan their own funds on their own paper, and in this State they had no authority to do so until the passage of the law above mentioned. Now that New York companies have such authority, some of them refuse to use it-refuse to accommodate their own members on the plea that it is not a good thing for the policy-holder to borrow money on his policy. The insured under such policies is, therefore, often compelled either to surrender his policy at a loss, or to borrow of those who are ready to take advantage of his necessities. In order that the new policy might have the widest possible publicity at once, the following proposition was made: Every agent who secured ten applications for at least $I,000 each, on ten different lives, prior to August fifteenth, was to receive a beautifully engraved certificate, certifyany benefit from their non-forfeiture provisions, says: "The Commissioner very strongly urges the introduction of a provision of law which shall apply to all companies, making, in case of lapse after two or three annual payments, the feature of extended insurance or a paid-up policy automatic. The holder of such a policy has confessedly contributed a certain amount of his premiums to the reserve. This belongs absolutely and unqualifiedly to such policy-holder, and his right to a use of the same in some form ought not to be permitted for one moment to depend on any action or notification on his part. * * Some self-acting principle in regard to the reserve ought to be enforced upon every company." Massachusetts Report, I895, page vi. 20 306 A Period of Change. ing to his "zealous and intelligent service in introducing to the public the Accumulation Policy." Every agent who secured twenty applications during the same period was to receive, in addition to the certificate, a handsome NEW-YORK LIFE badge. The names of both classes were to form a " Roll of Honor." These prizes were of no great value, but they stimulated every agent to do his best in order to secure the recognition and honor which it was the aim of the management to accord to every faithful worker. A fac-simile of the certificate, reduced about one-third, is given on opposite page. The " Roll of Honor," as finally published, contained three hundred and forty-one names, two hundred and twenty-eight men having won certificates and one hundred and thirteen having won both certificates and badges. As soon as the terms of the Accumulation Policy were made known, inquiries began to pour into the Home Office, asking if its privileges would be extended to other policy-holders. The Company replied publicly, in order to save a burdensome correspondence, that the NEW-YORK LIFE was "a mutual Company, with no privileges to any policy-holder not accorded to every other holding a policy in the same class or of similar character." It therefore announced that it would "extend all the benefits of the Accumulation Policy to existing Non-Forfeiting Free Tontine Policies "-these being the only contracts under which the same premium was paid for the same risk. All other policies which had been in force five years were made free as regards occupation, residence and travel. In pursuance of a purpose to inspect personally the workings of the Company in its most important fields, President McCall sailed for Europe on August twenty-fourth. The Agency Department at once set to work to make the next two months memorable in the history of the Company. It was arranged to have thirty-five men come to New York to welcome the President home in November, and the selection of names was made upon the following plan: The agents were divided into four classes, according to their previous achievements. From each of the first three classes the five men were to be invited who wrote and settled the most 2~ 2. P~`L ~:i:~ ~x~ , ** 307 308 A Period of Change. new business between September first and October twenty-ninth; from the fourth class, which included all not in the first three, were to be invited the five men who wrote and settled the largest number of applications, and the five men who wrote and settled the largest amounts of new business. When the record was made up it was found that the winners had written and settled over six millions of new business in sixty days. Mr. Gilbert A. Smith, of Sioux City, Iowa, then Manager for Iowa, northern Nebraska and South Dakota, now Manager of the Western Department, headed the list with a score of $I,768,000 of settled business. Two men in one class tied, and both were invited; and Mr. Wm. L. Hill, Manager for Missouri and Texas, was invited in recognition of his service to the whole agency force in the preparation of a very helpful circular setting forth the merits of the Accumulation Policy. The "Surprise Party," as it was called, came off during the week beginning November seventh. While considerable time was given to sight-seeing, the opportunity was improved to visit the various departments of the Home Office and become familiar with the manner in which the business of the Company is transacted; and one day was given up to a " Big Talk " on " How we got here," in which each guest gave helpful hints from his own experience. At the banquet with which the "Surprise Party" ended, on November eleventh, the President gave a brief description of his European trip and set forth some features of the ideal management toward which he was striving. He said, in part: We have in Europe a very large business. It has been honestly and carefully administered-since the death of Mr. Homans, by Mr. W. E. Ingersoll. Accompanied by him I visited our agencies in Switzerland, Italy, Hungary, Austria, Germany, Holland and Belgium. In Paris and Berlin I met the representatives of France, Denmark, Sweden, Norway, Turkey and Spain, so that before my departure for home I had the great gratification of taking by the hand every manager of importance in Europe, and of hearing from his own lips the history of his agency and the prospect in his territory. Never was a company represented by better managers. All of them are men of high standing in their own country, with a sense of honor that was very refreshing to observe and which made me proud indeed. Other managers may do more business than some of our men, but no other company has men of higher motive or cleaner records. This without exception. With pardonable pride I make this statement, and the satisfaction A Period of Change. 309 afforded me in doing so I know will be shared by you all. I parted from them fully conscious that by no act of theirs would blame be brought to the Company's doors.* The last nine months form no unimportant part of the almost half a century that makes up the Company's corporate life. But one ambition possesses me, and that is, that we shall continue to.the end in furthering all that is commendable in management, and in discarding the methods that bring contumely. Our house is set upon a hill to-day. Let us keep the approaches to it inviting and free from pitfalls. We have been given in official language a certificate of regenerated birth, and it behooves you and me, and all of us, that by no act of ours shall the record be tarnished. We are all equally interested that the magnificent position we hold shall be maintained, and we should never be tempted, by an ill-judged expediency, to depart from the course where honor leads. Each one here, in his own way, can do something for the common good of all in jealously guarding, by word and action, the Company's fair name. Example is better than all else. The Company is now, and will be hereafter, known as the one which is not dependent on any one man for its prosperity and success. I intend, so long as I am intrusted with direction and power, to make room at the top for those whose zeal and probity are conspicuous. No plan or program that argues well for the Company's good will be lightly thought of because it did not have its origin with me, and merit and intelligence will move on apace within our ranks. Years will count in counsel, but not in action, and there is no place in all our ranks that is not open to the aspiration of the lowliest lad in our employ who serves and learns. The " President's Trophy," presented to Mr. Smith, was a handsome gold watch and chain, the insignia of the Company being in relief upon the case.t Mr. Smith's reply showed the spirit in which he had labored. He said, in part: I long ago learned, or thought I learned, the lesson of the value of time in this business, but when I sat down about September first to figure out what my time must be worth in the next two months, if I did what I decided I must do, I was convinced that my own ideas were not anywhere near correct. I accordingly put everything aside but life insurance; I thought of nothing else; I talked nothing else. If my man who *In his report to the Trustees on the foreign business of the Company the President said, if the question of doing business in foreign countries had come to him as an original proposition he might not have favored it, but in view of our present organization abroad it was wise to continue our foreign business, and that he hoped so to stimulate it by some changes to be made -in the conduct of it that there would be a very large increase in it with little or no increase in expense. As regards the condition and working of the Company so far as he had seen it, the President said that, while the late President had his faults, as all men have, he felt no hesitation in saying that should his own connection with the Company be as long continued as that of Mr. Beers, he should be more than satisfied if no more serious faults could be found in his record than he had found in that of his predecessor. t The President also presented to each agent a scarf-pin showing the figures " 35 " set with diamonds. 3Io A Period of Change. has charge of my farms wanted to see me, I was not visible; if any one wanted to talk politics I tried to get him off of that subject, or looked for another man. I didn't read a daily paper for sixty days, and confined the little reading I did to life insurance literature. My plan was to write an application every day before 7.30 in the morning; if I failed I counted my chances so much less for that day, and the later in the day the less the chance. I sent a good many telegrams and a great many letters to secure appointments at that hour, and, as a rule, my business was written early in the day. I wrote $2, 1oo00, in applications in this way, in September and October, reporting the premiums on over $1,700,000 of it. * * * * * * During the time I was writing this business I got another view of this truth which would apply perhaps as well to other professions as to ours, and which made such an impression on my mind that I wish to speak of it here. I met a man in middle life who had, perhaps, used his opportunities as well as the average man does, and who, when he suddenly learned that it was only a question of a few days when the light would failwhen he would become totally blind-felt that he had squandered and wasted the best gifts that nature had bestowed upon him. He found himself suddenly with only a few hours in which to make good years of neglect-not neglect by the ordinary standard, but neglect by the standard with which he was suddenly compelled to measure himself. He talked to me until it seemed as though I could go out into the street and preach from this text to the whole world. The old proverb, "Physician heal thyself," applies, it seems to me, with particular force to life insurance soliciting. Our standard arguments are based on the duty of insuring; on the dangers of delay; on the responsibilities of life; yet the men we talk to are not, as a rule, as dilatory as we are ourselves. They don't neglect as many opportunities and they don't miss such abundant success, simply because they are not in a line of work where possibilities are so numerous. As the year I892 drew near its end the Company's books showed it to be the banner year of its history for new business; the year had opened with clouds of doubt and uncertainty, it was coming to a close under brighter skies than ever before. The Company had the confidence of the public; it was never so well organized, and the field force was never so enthusiastic as now. It was natural that the management should indulge in retrospect, and voice the general sentiment of gratitude and joy. With the last "Bulletin" for the year there went to every agent an autograph "Christmas Greeting " from the President of the Company. [See next page.] In summing up the triumphs of the year the management gave first place to "The Discovery of the Principle of Steady Production." It was said: "At the beginning of 1892, the NEW-YORK LIFE had in the United States and Canada only about twenty men who had at any time 11 LI (ristmas G(reetirq. PRESIDENT'S. OFFICE, 346 BROADWAY. I; /; v / / JZ X / 1~~~~- 0S -I4/v-g~ //Pd //L^ ^/ d- ^ ^ o /a A ~^4it Z-IH~L/ 2>~ c 7/2b^X~64 6Pr ^ 6~e C ^^^^ 4^c^a ^.^^^ ^T C^^ ^1^ie *^z^^~~f' ^T ^~ ^t^^ y ^y J^ /-^^>^t~ut^ --^a~^ i C^t^^~r~,^r^ <^ ^^ L-^ c. 6uCrcwH. 3I' 312 A Period of Change. written so much as one application a week for six consecutive weeks. At the beginning of I893 we find on our books about seven hundred men who have written business for eight and ten weeks consecutively during the year, and more than seventy men have written business every week straight through the year. You discovered during the year I892 a principle in Life Insurance which will become as important as some wellknown discoveries are in the world of science. It did wonderful things in 1892; it will do still more wonderful things in I893. The most remarkable thing of all is its effect on the individual man. It elevates his work; it dignifies his profession; and it is creating an esprit de corps in our ranks which strengthens our lines like the elbow-touch on the field of battle." No time was wasted, however, in congratulations. All who held the Company's commission had been called on early in December to show that they were "alive," by writing at least two applications for at least $I,ooo each during the month; and this was made a condition of entrance into a ten weeks' competition which was to begin with the new year. When the month ended, twelve hundred and nine men had thus qualified; it was a token of the greater work to be accomplished in 1893. The Company's books were closed for the year I892 on December thirty-first, and the accounts made up as they stood on that date, without waiting for belated returns.* The annual report was submitted to the Trustees on January I4, I893, and the certificate of the Superintendent of Insurance, certifying to the Company's assets and sur*The Superintendent of the Missouri Insurance Department in his report for 1892 thus commented on the contrary custom: " The Statutes (Sections 5839, 5846, 5869, 5890 and 5892) specifically require that the companies asking for authority to transact insurance business in this State, shall file annual statements of their condition and affairs on the 3ist day of December, ' on the first day of January, or within thirty days thereafter.' Many of them, in fact some of the largest and some having complicated accounts, do file their statements within the stated limit of time. But others, and some small ones, with comparatively brief and simple reports to make, are in default from thirty to sixty days, to the annoyance of the clerical force and. disorder of the business of this Department. It is not a compliance with the law which fixes December 3ist, or the last business day of the calendar year, as the day on which the condition of a company is to be ascertained and its affairs to be reported to this office, to permit books to be kept open and accounts to be made up afterwards, so as to show a possibly more favorable condition of things on the statutory day of closing. * * * If books are kept open for the purpose of making any better or different showing than an actual transcript, made just after the office is closed on December 3Ist, would show, then the practice becomes a fraudulent one. A Period of Change. 313 plus, was dated January nineteenth. The report was made according to the methods advocated by President McCall when he was Superintendent of the Insurance Department. In order to understand just what the change signified, it is necessary to refer to the old method which, as a State official, he had criticised. Under this method-which is still in use by most companies-when a dividend was declared it was immediately entered in the journal as paid to policy-holders, and received back again as a single premium in payment of reversionary additions (paid-up insurance) to the policies. If all policy-holders used their dividends in this manner, these entries would represent the actual facts; but as it is optional with annual dividend policy-holders in most companies to receive their dividends either in cash or in reversionary additions, whenever a dividend was paid in cash, another journal entry must be made to the effect that, the paid-up insurance purchased by the dividend when declared had been sold to the company for cash and the cash paid for surrendered insurance. To the extent in which dividends were taken in cash they appeared twice in disbursements-once as paid in dividends and once as paid for surrendered insurance; and in receipts they appeared as a first premium. By the new method the report showed the final result without any circumlocution or fictitious increase of income or disbursements. Dividends are entered in receipts and disbursements exactly as used, and no part of them is included in first premiums.* Under the old method, when a running policy was exchanged for a paid-up policy, journal entries showed the original policy sold for its reserve value, this amount paid to the policy-holder, and again received *The report contained the following note on Income: " The income reported represents cash paid to the Company, and nothing else. There are no items of journal entries where dividends are fictitiously treated as premiums to buy additional insurance, and there is no addition to the income by calling the reserve on surrendered policies the premium for new (paid-up) insurance." The Massachusetts Insurance Commissioner, in his report of I895, while criticising "marking up real estate values through income," says: "As if the income account had not been sufficiently imposed upon and stultified by making it an omnibus for masses of hypothetical new ' cash' premiums in the shape of ' dividends declared and applied to payment for reversionary additions,' ' lapsed reserves used to purchase paid-up insurance,' etc.; in each case the money simply taken from one pocket (in the mind of the book-keeper) and put into the other, without the least pretence of an outgo or income as between the money drawer and the outside of the office." —,iMass. Report, z895, pages viii. and ix. 314 A Period of Change. from him as a first premium on the paid-up policy. Here again both receipts and disbursements were increased without a dollar changing hands. The policy account was also swelled by like entries, the old policy being placed in "terminations" as "insurance surrendered," and the paid-up policy counted as "new insurance issued." Under the new method the only entry necessary is "old policies decreased," by the amount of the difference between the old policy and the new. There is just enough basis of fact in the old method to save it from being false, but not enough to prevent it from making a deceptive showing. The object of classifying premiums is because new premiums on new risks require a much larger expenditure in commissions, while dividends and the reserve values of policies exchanged for paid-up insurance cause no expenditure to agents whatever. The old method, therefore, by an apparent increase in new premiums, payments to policy-holders, and new insurance, provides the basis for deceptive ratios of expenses to both income and insurance. The Company's report also contained this note on assets and surplus: The assets of this Company are advertised at the sums allowed by the Insurance Department, and do not include any items disallowed by the laws of the State or the ruling of the Department. If at any time the commissions of agents are purchased or commuted, or advances are made to agents, such purchases and advances are at once charged as an expense and are not called an asset. The surplus published in the documents and advertisements of the Company agrees with the surplus shown by the Superintendent's report. This method of treating money paid to agents had always been followed by the NEW-YORK LIFE, and the contrary was thus criticised by Superintendent Barnes in his report for I866: Such advances do not, in the opinion of the Superintendent, constitute actual assets or legal investments under the statute, and all attempts to throw expenses already incurred and paid upon future years are irregular, deceptive and dangerous. Such payments should be returned only under the head of expenditures. Our statute does not allow any loans or advances to agents except upon the regular bond and mortgage or stock securities. Carlyle says of the father of Frederick the Great that, "he went about strangling imbroglios of coiled nonsense" and "turning deceptions inside A Period of Change. 3I5 out"; that in transacting the business of the Government he had "daylight introduced into the very bottom of the business, fair and square observed as the rule of it, and the shortest road adopted for doing it." The result was, according to Carlyle, "Fact made to stand firm on its feet, with the world rocks under it, looking free to all the winds and all the stars." Something of this sort President McCall did in the matter of report-making; and while his action gave the "ratio-maker" new opportunities for comparisons unfavorable to the NEW-YORK LIFE, it so commended itself to insurance officials that the Massachusetts Commissioner required all reports for the next year to show just how the income account was made up, and the Annual Convention of Insurance Commissioners and Superintendents, held in 1894, adopted a new blank making the same requirement. When the Company erected the Home Office building in I868-70, it acquired about one-half of the block bounded by Broadway, Leonard Street, Elm Street and Catharine Lane. Subsequently, as other parts of the plot came into the market, they were purchased by the Company, until the whole block was secured. In order to give a Broadway frontage to the whole property and thus make it as valuable as possible, it was determined, early in I893, to build a twelve-story building on the rear of the lot, connecting with the present structure in a way that would make it an extension of the latter. A Building Committee was appointed, February seventh, consisting of William L. Strong, C. C. Baldwin, Augustus G. Paine, Woodbury Langdon and Richard Miiser, with the Second Vice-President and Treasurer as advisory members, and the Auditor as Secretary. Mr. S. D. Hatch was selected as the architect, and the building was under his supervision until his death, in August, I894, when it was placed in charge of McKim, Meade and White, who were the architects of two of the Company's office buildings in the West. The building is already well advanced, and will probably be ready for occupancy early in the spring of I896. The offices of the Company will occupy about five floors and the remainder will be for rental. The old building will be rebuilt to correspond with the new, and the completed 3i6 A Period of Change. structure will be 6o' x 395' 7" x 84' 4" x 396' 4" and open to the light and air on all sides.* During the year President McCall visited all the agency departments of the Company in the United States east of the Rocky Mountains, and in his addresses to agents special emphasis was laid upon the value (I) of the recent examination, (2) of the new features of the Accumulation Policy, and (3) of the new method of making the annual report. The following extract is made from his address at Chicago on April seventeenth: We have filed with every official in every State or Territory of the Union complete schedules of all our investments in detail. Every piece of real estate owned or on which we hold a mortgage has been listed by town, city, county and state, and the book and page of record stated by letter and number. The dimensions of the land and buildings, the street numbers of the property and the amount of insurance held as collateral, are all exhibited, item by item, so that every official can readily verify the valuations of the property, no matter where located, without great effort. We own eleven office buildings and ninety-seven pieces of foreclosed property. They are placed in our report at the appraised value of the Insurance Superintendent-$12,531,OI6.75 -and not at their cost value. Our mortgages amount to $24,236,785.5I, and at the date of our statement there was but $9,ooo interest thereon due and unpaid. Our United States and other stocks and bonds were valued at $86,680, 177, and in but three cases out of several hundred different kinds of securities was there default in the payment of either interest or dividend. A complete schedule of every stock or bond owned, with the cost, par and market value, was made a part of our statement. The same also as to our collateral loans on stocks and bonds. The interest on every loan was paid in full, and the values * In October, i895, a large number of agents and managers were called to the Home Office to consider plans for a NEW-YORK LIFE Agents' Association. The President's address before this body contained the following suggestive references to the original building, and also to a further change in the manner of making the annual report, which will appear in the statement of the Company's business of 1895: "This is the first opportunity I have had of greeting so many of our men under our own roof. The agents of the Company who, at one time or another, either here or elsewhere, numerous though they are, that I have not had the pleasure of meeting are few in number. This will probably be the last gathering of agents within these walls. Time and energy-and more of the latter than the formerhave made it necessary for us to have more commodious quarters, and the safe guarding of $60o,ooo,ooo in assets calls for more protection than this building affords. And yet, it seems but a short time ago that this structure was erected, for its praises as a model building are seemingly within our hearing. In i869, when the building was constructed, it doubtless appeared to those in charge that they had builded for all time and to meet all demands. If you will permit me to review the growth of the Company since, then it will be seen that no foresight then could have outlined the needs of the Company in the next quarter of a century now at an end. Twenty-five years ago the insured numbered 33,000, and the total of their policies was $io2,ooo,ooo. The assets were $I3,500,ooo, and the income $6,ooo,ooo. Compare these with the 277,000 policy-holders now constituting our membership and with $813,000,000 representing the sum insured; with assets of $i62,ooo,ooo, and income of $36,500,000. Whose is the A Period of Change. 317 of the securities- $5,059,690o-exceeded the loans thereon by $I,200,000. In short, if any policy-holder or agent is doubtful about any item of our securities, he can have a duplicate of the official report by asking for it, as we have had many hundreds of them printed for circulation among our managers and insurance journals-an innovation that has met with much commendation. In closing, permit me to respond to a question that was asked me to-day by one of our prominent agents. He said: "Mr. President, you have given us (i) an honest statement, without regard to any injury we may suffer by unfair comparisons with reports not made up on the same basis; (2) the Accumulation Policy, which is the most liberal to the insured that was ever issued; and (3) an Official Certificate of the Insurance Superintendent, showing that our advertised assets and surplus do not differ in amount from the same items as reported under oath to him. Now, what more can we expect from you that is equally helpful to our work?" Well, I can but promise that we shall continue on the lines laid down herein. It will be of no moment to us if our truthful report is measured to our temporary disadvantage against inflated income or decimated expenses, or if our strength is compared with decoy assets, stunted liabilities and paper surplus. We shall not be tempted from holding to the right course by the angles and short cuts that look immensely pleasing, but which are in reality pitfalls for the unwary. No! to my mind there is much more to be gained by insurance officials in reforming the methods of making their reports than in endeavoring to make progress by the use of "book-keeping figures" and fictitious ratios, that are remarkable only because they are misleading. We shall endeavor to study the insurance situation as we find it in our own experience, but we will not be negligent of the fact that we can also learn from others. When we can add to the comfort and advantage of those who have entrusted the custody of their funds to us, by adopting methods which are fruitful in bringing such conditions about, we will not be lax, even though the suggestion of the improvement had not its origin with ourselves. In other words, all that makes or stands for fair treatment of policy-holders we shall strive to originate, but if others are the discoverers of desirable vision that beholds what the next twenty-five years has in store for us. If I had prophetic capacity I would picture my friend, the Third Vice-President, standing in my position in the halls that will replace these, surrounded by the then silver-haired, his adjutants of to-day, as he with 'ghoulish glee' tells how insignificant are the figures that now fill us with awe compared with the returns of his administration. "How easily all this leads up to the subject-matter of your gathering, namely, your own identification with the Company for all time to come. I sincerely believe that of all the companies, our own is generally regarded to-day as possessing more agents beyond temptation of leaving than any other. I can understand how at times the offers of other institutions are hard to resist, and that your remuneration by us is not by any means the largest that prevails. Will you also allow me to add that our day for ' fireworks' has passed. I believe you are all imbued with the idea that economy and conservatism are to-day of more importance to the Company's future than aught else. It is for you to aid in carrying out the platform. The organization of your ' Nylic Association' must be productive of great good. Every tie that binds the agent to the Company in good fellowship and for their common welfare makes rebating and eighty per cent. brokerage impossible. We have led lately in the reforms that are so well-nigh universally approved. We have not come in with the mourners as a death-bed penitent. " There is still work to do, and when I review the efforts of the past four years I say frankly that the announcement I made formally on June first of this year that, hereafter only paid-for business would be published in our advertisements and Department Reports, gives me more comfort than any other of our proclamations. Its effect on your work has been extremely good, as our books show, while the im 3I8 A Period of Change. changes we will not put out our lights and sit in the gloom while the procession advances. The European agencies of the Company were visited early in the year by the Third Vice-President and the Actuary. At the close of a tour of inspection and instruction on the continent, a convention of the Company's representatives in Great Britain and Ireland was held in London, on May eighth and ninth. A convention is said to be peculiarly an American institution, but, judging from the able papers read, and the discussions had at this gathering, the insurance convention bears transplantinge remarkably well. From the addresses made at the convention, the following extracts will be found of interest. From Mr. Perkins' address: I am sure no one realizes more keenly than President McCall the possibilities there are for the NEW-YORK LIFE in the future. Whatever Mr. McCall may be; whether he prove to be a remarkable General in the securing of new business; or whatever his record may be in comparison with others, there is one thing we know-whatever policy it may be necessary for the NEW-YORK LIFE to pursue, that policy will be, first of all, to protect the interests of policy-holders. You will not go wrong at all if you state, without the slightest hesitation at any time, that whatever the NEW-YORK LIFE does will be on an honest basis. From Mr. Weeks' address: I could not respond with any enthusiasm to this sentiment of "Success to our European Business," except that I feel that we do not hurt any one else by our own -- pression on others of our sincerity in the maintaining of needed reforms has added to our already enviable reputation on this and the other side of the Atlantic. In my conferences with the several Executive Officers we have considered the effect of this change. It will appear at the end of the year as though our business had fallen off, because our statement for I894 showed in force all policies issued during the year, less cancellations, whether said policies were paid for or not. About forty millions in insurance was thus carried over. The I895 statement will not contain a policy or a figure in assets, income or outstanding insurance that does not represent contracts on which the Company itself has received the cash. All policies not paid for to the Company will be regarded as not issued and will not be claimed, advertised or found in the Company's report. " So that you may understand this fully, I want to impress on you that a policy not paid for to the Company will not eyen be published as an issued policy. The only business that we shall advertise as written in 1895 will be that for which we have the cash in our Home Office. I am thus emphatic, as you may be called on to explain our position. You will not have to defend it; it is self-defending when explained, and mark me, every other company will be compelled by public opinion to do in this case what they have done so often of late -follow our example. "The action lately taken by the Massachusetts Insurance Commissioner is so recently in your minds that I need not go into the details. The combined work of our Third Vice-President and of the Third Vice-President of the Equitable in bringing about the agreement so generally signed, is deserving of great praise. [An agreement to discharge any agent convicted of rebating, and not to employ agents A Period of Change. 319 success. In former times it has been the idea among men that the only kind of success which was worth having was that taken from some one else, and to stand with your foot on your prostrate enemy was thought to be a most glorious triumph; but I think the world is reaching a little higher point in that respect, and that really the time is coming-it is almost here-when men of generous natures would not care to have any success that depends on the failure or the suffering of other men. We may feel quite certain that the success of a great mutual life insurance company does not injure any one; it is beneficial and only beneficial to all whom it touches, and that is an encouraging feeling for us all to have. It is very often the case that a man, in the occupation in which he has been led to spend his life, does not feel sure that his work is a benefit in every respect. I want to say that one in this business ought not to have that feeling, as from first to last our work is good, and nothing but good. We feel that we are only upon the threshold of the vast possibilities of life insurance; that it has a great and magnificent work to do for the world, hardly guessed at as yet, and the field being so undeveloped, the success of one company does not hinder the success of others, it rather stirs the ground for them. The competition of life insurance companies is not like competition in trade or commerce. Or, take the matter of stock speculation-there, if one man makes money it is only because another man loses it. That is not the case in life insurance, we are glad to say. Of course, there are individual instances where one company wins the case and another company loses it; but taken in the aggregate, success in one company does not involve loss of business in another. * * * * Of course, ours is a great Company, and, incidentally, we are proud of it; but, gentlemen, let us not care so much about its being one of the largest companies in the world, but let us be proud rather of its exact and fine adaptation to the ends for which it exists. Let us be proud particularly that it is an absolutely sound and secure Company; that it will carry out all its promises in the future as it has done in the past. discharged by other companies for rebating.] Our position in the premises was neither new nor uncertain, and in answering promptly and energetically the call of Major Merrill, the Company's previous utterances and action were forcibly ratified. "Just before I came into the room, the Third Vice-President outlined to me in a brief way the proposition that you have discussed this morning, which carries with it a desire on your part to have at this office an Agents' Representative-one who, if there are delays in the issuing of, or reporting on, new policies, would be able at once by reason of his location at the Home Office to appeal immediately to those in charge of the several bureaus for a facilitation of your work. I am willing, within reason, to oblige the agents of the Company, and I do not think unfavorably of this proposition, but I want a little time to turn it over in my mind. Before you leave the city, you shall have my decision in the matter. (Applause.) Please remember that even if this concession is granted, there will still continue to be complaints —there must be-because the Company is managed by human beings, and consequently you cannot have things absolutely perfect. You have the privilege of complaining, with the assurance that you will be listened to by those in authority. Now, this morning I received a letter advising me of the death of a person on whose life a large risk had lately been declined by us-a risk that the agent thought ought to have been accepted because other companies did not turn it down. In mentioning the matter to-day to the Manager of the Southern Department, in whose territory the agent was located, he laughingly replied: ' There are a number of other such cases where we thought the Home Office was wrong, but where you proved to be right.' I cite this case to prove that the agents' judgment about the taking of risks is somewhat apt to be a prejudiced one. "And now, in bidding you to be at home and at your ease among us, be assured that in all your discussions, and in all that relates to you and your business with us, I have an abiding interest." 320 A Period of Change. And let us all join in the endeavor to attain better and better methods of meeting the exact needs of the community, and of bringing the community to share in the benefits we provide. Among the educational features of the Columbian Exposition of 1893 were the world-famous Congresses for the discussion of all manner of subjects by the greatest living authorities in every department of human knowledge. The NEW-YORK LIFE'S contribution to these discussions was an address by President McCall before the Life and Accident Insurance Congress, on the " History of American Life Insurance," delivered on the evening of June twenty-third. The speaker traced the growth of the system from the organization of what is now the Presbyterian Ministers' Fund, in 1759, to the magnificent proportions it has since achieved. Referring to the features calling for special mention during the period 188I to 1892, he dwelt upon these three: the great increase of the business, the rise of industrial insurance, and the greater liberality of the policy contract. Upon the latter point, he said: The ease with which claims might be disputed under the old policy contract has already been referred to, but during the past twelve years there has been a general disposition among the companies to liberalize the conditions of the contract and to construe it liberally when it became a claim. The clauses of the policy under which contests usually arise are those warranting the answers of the insured in his application to be full, complete and true, and those relating to residence and travel, occupation, habits of life and manner of death. In I879 the Equitable adopted an "incontestable clause" providing that after three years its policies would not be contested for incorrect answers given in the application. The feature was soon taken up by other companies, its application enlarged, and the period of contestability shortened. It is impossible to follow the practice of different companies upon the various points mentioned-it must suffice to state in a general way what the present practice is, from which it will be seen that the goal of complete and immediate protection under life policies is not far off. Four companies issue policies that are incontestable for any cause after one year; eighteen companies make the period of probation two years; seven companies make it three years; while others still require the warrantees of the insured to run with the policy. As to residence and travel-seven companies place no restrictions upon either; three companies limit the insured for one year only; seventeen companies limit the insured for two years only; three limit the insured for three years only. As to military service-five companies make no restrictions; seven make restrictions for two years only. Others agree to take such risks at an extra premium to be charged against the policy; others still agree to pay the reserve as a cash surrender value in such cases. As to occupation other than military service-three companies make no restrictions; A Period of Change. 321 three make restrictions for one year only; seventeen for two years only; two for three years only. With respect to duels and other violations of law-seventeen companies make no restrictions; three companies make no restrictions after one year; five companies make no restrictions after two years; four companies make none after three years. Six companies issue policies without any reference to suicide; in eighteen companies suicide does not invalidate the policy after two years; in six companies the claim is good if the policy has been three years in force. Restrictions as to narcotics and intoxicants have been eliminated from the policies of most companies. One company issues policies with no other condition than the payment of premiums, and with no restrictions whatever. Lite Insurance is safe or possible only on the supposition that, to the average man life is more precious than money -that the insured has a greater interest in his own life than the company has-and that he may be trusted to take care of it. Doubtless men might live longer than they do-but life insurance is based upon actual, and not upon ideal, conditions. Its reason of being is that there are risks which the individual cannot safely bear, but which the company, as an aggregation of individuals, may safely undertake in consideration of certain sums of money paid. The company is free to decline any risk offered; but when it accepts a man's money it should take his risk also, without hedging and without whining. The history of Life Insurance has shown that its foes are those of its own household. Mortality tables have never betrayed it -managers have. As it casts the beam out of its own eye it sees more clearly and acts more wisely. * Meanwhile the agency force in the United States and Canada was preparing for a " Columbian Convention," the action of which was destined to have a far-reaching effect upon an evil practice with which underwriters' associations and insurance officials had long grappled in vain. * Life Insurance yesterday observed its festival and contributed to the success of the World's Fair by holding a congress at Chicago, the chief feature of which was an address by our former townsman, the Hon. John A. McCall, President of the NEW-YORK LIFE INSURANCE COMPANY. Mr. McCall was peculiarly qualified for the honor bestowed upon him of making the presentation to the country of the facts which constitute Life Insurance's exhibit. All his life he has been identified with it in positions which have given him the most comprehensive views of the subject, and his present honorable post places him at the head of the business in this country. Mr. McCall is familiar with Life Insurance from the point of view of government and from the point of view of the insurance companies; has seen its evil days as well as the days of its prosperity, its mismanagement, and its development into one of the most secure and conservative forms of investment in the world. The address is not only a splendid demonstration of the capacity, trustworthiness and enterprise shown in the management of the companies; it also discloses the provident character and prosperity of the American people, and it is this second phase of it which renders the address one of the exhibits which the whole country understands, in which it takes pride, and which it is eager to show to the nations of the world. The great palaces of the companies are but one material form of Life Insurance. The humble homes of workingmen and women to be found in every village and town in the land, created and preserved through this instrumentality by the prudent, self-sacrificing father, husband or son, even more truly show what Life Insurance is to American life. Mr. McCall is to be congratulated upon an address which has set forth so admirably in all its phases so important a feature of our national growth. -Editorial in Albany Argus, June 24, 1893. 2 I 322 A Period of Change. Representatives to the Convention were selected on substantially the same basis as to the "Surprise Party" of 1892, by so classifying the agency force that men competed with their equals as business getters in the past.* The competition extended from April third to June tenth, and the number invited was about one hundred and thirty, together with twenty-two General Agents and Managers. It was the most thoroughly representative body of men ever assembled under the auspices of the Company, and was intended so to be, in order that the action taken might represent the best thought of the agency corps, and so be made the standard for all. While valuable discussions were had upon other topics, the chief interest in the Convention centered in its action on the question of rebates. After long and earnest discussion the subject was referred to a committee consisting of Messrs. D. P. Kingsley, Superintendent of Agencies; Robert E. Whitney, Manager, Seaboard Department; Gilbert A. Smith, Manager, Western Department; Alex. G. Hawes, Manager, Pacific Coast; Livingston Mims, Manager, Southern Department; J. G. Morgan, Manager, Winnipeg; Daniel Boone, State Agent, Missouri. The next day the committee presented a report condemning the practice, requesting President McCall to exercise every power at his command to exterminate it among the Company's agency force, and pledging the Convention individually and collectively to his support in so doing. The report was adopted by the Convention unanimously. The President, in reply, said, in part: It has been said that language was made to conceal thought. That cannot be said of this preamble and these resolutions, and I want to emphasize my own position regarding them in no uncertain way. * * I doubt not, from the unanimous rising vote which was given in affirmation of the resolutions, that every man is as sincere about the principle involved as is your President. And let there be no mistake about this, for come what may, the NEW-YORK LIFE will issue its policies and will expect its agents to deliver its contracts without the payment of a single penny of rebate. I know that in all controversies there are many sides, and there may be differing opinions, but not conFour prizes were offered; they were won by the following named gentlemen, on records of the amounts of settled business given: H. H. Kerr, Chicago, $i,o64,ooo; R. M. Kerr, Chicago, $602,000, E. S. Smith, Iowa, $383,000; J. C. Stock, Pennsylvania, $206,000. A fourth prize was awarded to the family of Major Hamp Boon, of Texas, who wrote a very large amount of business, but died before the opening of the Convention. A Period of Change. 323 tradictory ones; and I know that many of us here have certain views and that they have a right to be heard, whether or not they seem to be in consonance or in harmony with those of the majority; and I promise due and full respect to everything that may be offered as to when this condition of affairs shall be brought about; but let me say, the sooner it can be done the better it will be for all of us. On the evening of July fourteenth President McCall gave a dinner to the members of the Convention and others, in the Banquet Hall of the New York State Building, on the Exposition grounds. The address of the President on this occasion referred to the Company's purpose in the several conventions that had been held, reviewed the work since his election, and restated the principles upon which the Company would be managed in the future. He said, in part: Let us review together the work we have accomplished, and cast a horoscope of what is before us. The year I892 had many peculiar features. It was quite doubtful if the reaction we had hoped for would be at all manifest at the end; and, speaking with the knowledge of the judgment of leaders in the business not connected with us, it was a mooted question whether the Company would quite recover from the blows which it had received both from without and within. The superior financial position it was found to hold after all these attacks proved both its own inherent strength and the strength of the system of which it is a conspicuous representative. With the advantage of demonstrated financial soundness, any proposition that involved our sitting at the gate in lamentation over the past was not to be considered for a moment. So we offered ourselves, not in shackles, but in an armor that defied attack from any source. There was consternation in the very suggestion that we were really alive in any sense, and we were warned to the confines of restful spirits; but, ungracious though it seemed, we were bent on a pernicious activity altogether unseemly and unbecoming in a corpse that had been duly and deeply interred. When, within three weeks after the closing of the year, our Annual Report appeared, complete in every particular, approved and endorsed in writing as to every item by the Superintendent, who, less than twelve months before, had stood as our accuser, then every one of us, proud of the old Company in spite of its difficulties, knew that the day of rejoicing in all its fullness was at hand. We had thrown aside all the old methods that had done and are, unfortunately, still doing so much to bring contumely on the administration of the business. Our reported income was cash receipts, not book-keeping devices to make a large divisor to diminish the ratio of expenses to income. Our books were not kept open for two months or more to add to the receipts for the self-same reason. Our statement of assets was not inflated by disallowed items, thus differing from the Insurance Department reports by millions of dollars. Our advertisements of the Company's condition did not contain one dollar disallowed or disapproved by the experts of the Insurance Department. And yet, regardless of whatever untruthful and, of course, unfair comparisons that might be made, we did not hesitate boldly to inaugurate the rule of showing all our transactions in the 324 A Period of Change. most open manner, giving every policy-holder full knowledge of our condition, on the day fixed by the law of the State for making our annual statement. Let me say here, and now, that there will be no divergence hereafter fiom the principles thus laid down, and permit me also to prophesy that the example we have set in this respect will be followed by others. There is more room for reform in this matter of making annual reports without padding them than in all the rebate and limitationof-business propositions that are offered for discussion. It is well known that the expenses of procuring business are altogether too high. But so long as State insurance officials (I) permit reports to be filed that bear no relation to the date; (2) admit items of income that are in no sense receipts; and (3) allow in the category of assets commuted commissions, agents' balances and other items that are really disbursements in the profit and loss account, so long high commissions and rebate practices will continue. If every company was compelled to report every item in its proper place, and was punished for advertising assets and surplus that exist only in imagination, then the reforms that are so loudly demanded would follow. There is a greater opportunity for the betterment of the business by bringing about a change in the methods of making reports than in any other particular, and I am better satisfied that we have chosen to lead in this than I would have been had we been compelled to follow an example set first by others, or to yield reluctant obedience to a legal mandate. * * * * Our own statements are now, and will hereafter be, truthful. We will not deceive ourselves or others by padded reports of income or skeleton expense accounts. Our advertised assets and surplus will not shrink in the washing, nor differ by millions of dollars when compared with our sworn statements. We will call disbursements by the right name as expenditures, and not parade them as "etcetera" in assets. Our reserve will be based on net premiums with interest at four per cent. per annum, and we will have no recourse to, or use for, a law that makes the yard-stick of our liabilities the wavering measure of our necessities. The President also indicated that the suppression of rebates was a necessary part of his policy in the management of the Company. On this point, he said: "In conclusion, let me say a word with respect to putting into force and effect the resolutions of our Convention on the subject of rebates. You have delegated to me the duty of saying when this reform shall be made obligatory upon all agents of the Company; but I assume that, so far as your personal example and influence are concerned, the reform will begin at once. I know that with many of you it has scarcely had an existence, and the personal and public testimony of the most successful of our agents that rebates are unnecessary to the writing of a large business will have a most helpful influence on others, and so render my task in dealing with persistent rebaters comparatively easy. Thus working together, we shall not fail to realize the high ideal which we have inscribed upon our banners-' No sham statements; no shady subterfuges; no rebates; no rebaters; one policy; one price.'" A Period of Change. 325 "The sooner it can be done, the better it will be for all of us." These were the significant words with which President McCall accepted the resolutions of the Convention on the subject of rebate. Sixteen days later-on July twenty-ninth-the following circular-letter was sent to each agent by the President, in the Agents' "Bulletin": My Dear Sir: You have been advised through these columns of the resolutions unanimously adopted at Chicago, on the thirteenth inst., under which our agents have referred to me the question of " Rebate " and have asked me to take any necessary steps to eliminate this practice from our ranks. I do not need to recite to you the evils which result from it. The resolutions already referred to do this sufficiently. And, as I have yet to meet the first man who does not agree that the results of rebating are altogether to be deplored, I take it that such is your opinion. If you happen to live in a State where legislation has been had on this subject, I am sure you have been observing the law, and in so far, this letter does not apply to you. But, be that as it may, I want to say to you, together with all NEW-YORK LIFE field men, that henceforth Rebate in any form must cease. If anything can be added to the language of the resolutions referred to, it would be this: Rebate- is a manifest inequity to some one, since agents representing the same company offer the same policy at different prices. This touches (first) the policy-holder and the principles of mutuality upon which our Company is built; and (second) it interests you in that you are forced, either directly or indirectly, into a conflict within your own household. Rebate defeats its own purpose, since it does not bring you in the end the thing you seek, even though you may be indifferent to the question- of equity. Therefore, Rebating is: first, Unlawful; second, Inequitable; third, Unnecessary. On the first point I do not need to dwell. On the second, I can only say that you have certain advantages which more than offset any condition you may meet. You have (first) a Company which the world knows all about; which has been tried and not found wanting; which has been indorsed as none of its competitors have been. You have (second) a policy which has more benefits and fewer conditions, at the same price, than the policies offered against it. To the objection that these advantages (which no insurance man denies) will not always bring you the business against the methods which may be employed by competitors, I can only say (conceding the truth of this, because, unfortunately, it is true) you must let some business go. It will take considerable moral courage to lose a risk, or a number of risks; but if you do it once, standing squarely on the doctrine that your goods are not offered at what you can get, but at what they are worth, you will probably never have to do it a second time, and you may never lose a single risk. There is something in courage which appeals even to the man who is looking only for a discount, and with the average citizen a frank, direct business statement will always prevail. By adhering to this, you will be constantly moving into a better stratum of society, securing a more intelligent and desirable class of applicants, and thereby not only putting money into your pocket, but materially advancing the general interests of the Company itself. 326 A Period of Change. I am not writing this letter to tell you at this time of any particular penalty to be enforced if you should give a rebate. I am sure I shall never need to write any of our representatives in that way. I believe in the loyalty of our men and their willingness to carry out, without flinching, the Company's wishes in this behalf; but for the benefit of any who may be weak, or who do not respond to these sentiments, I will say: I trust you just as our forefathers trusted in God at Bunker Hill-they did not, at the same time, neglect to keep their powder dry. While this is a general letter, it is also directly personal, and I, therefore, ask every field man to address me at once, acknowledging its receipt and expressing frankly his position. These letters in reply will be filed as a part of the Company's records on this subject. With renewed assurances of my interest in each man personally; with earnest thanks for the cordial support you have hitherto extended in the reforms undertaken by the NEW-YORK LIFE, and the firm belief that you will join in eradicating this great evil, I remain, Yours truly, JOHN A. MCCALL, President. Responses from the field indicated that the new rule thus promulgated was accepted in good faith by the agency force; but a rule never is fully appreciated until it is enforced against an offender. The occasion soon came which was to show whether or not the Company was in earnest in forbidding the giving of rebates. In a publication of the Mutual Life Insurance Company, of October eleventh, appeared a letter from a NEWYORK LIFE agent (Mr. C. M. Ward), saying he was "a rebater pure and simple, not only on business principle but from religious belief," and citing the parable of the unjust steward as authority for his faith and practice. It was rather an unfortunate reference, seeing the original rebater "had wasted his lord's goods," and was put out of his stewardship. The latter fate also befell Mr. Ward. With a promptness and decision that left no doubt as to the course the President intended to pursue with persistent rebaters, Mr. Ward was notified that he could no longer represent the Company.* ' EXECUTIVE DEPARTMENT OF THE NEW-YORK LIFE INSURANCE CO. John A. McCall, President. 346 and 348 Broadway, New York, October 14, I893. C. M. WARD, Esq., General Agent, 115 Broadway, New York City. My Dear Sir. I have, to-day, read your lately published letter stating your adherence to, and belief in, the system of rebating. The management's views and your own are widely different; and, of course, you cannot continue to represent the Company. I regret that we are at variance, (I) because you have been a most successful agent, as your record of over $I,ooo,ooo in new business written during A Period of Change. 327 The summer of 1893 will long be remembered as the occasion of a financial crisis of an unusual kind. The Baring Brothers' failure, in I890, had caused a large amount of American securities to be sent home for sale and remittance, and the decline in the price of silver had induced the fear that the United States might not be able to continue the redemption of its demand obligations in gold. The result was a heavy decline in the price of all securities, a decline in bank deposits (between December 9, 1892 and October 3, I893) of three hundred and thirteen million dollars, and a decline in loans and discounts of three hundred and twenty-three millions. During June and July, 1893, the situation was described as a "currency famine." Over three hundred million dollars in Clearing-House certificates were issued by the associated banks of New York, Philadelphia, Boston, Baltimore and Pittsburgh between June twenty-first and August eleventh. The value of Life Insurance and of the NEW-YORK LIFE'S contracts were aptly illustrated by the operations of the three months, July, August and September. The following cash payments were made: For death-claims, $2,I20,690; for endowments, $296,399; for dividends, $328,055; for annuities, $367,341; for purchased policies, $582,979;-total in three months, $3,695,464. The death-claims numbered over five hundred and fifty, and averaged nearly four thousand dollars each. The dividends were cash dividends on actual settlements of maturing Tontine policies, annual dividend and other policies, and not reversionary additions to policies. Purchased policies were only those surrendered for cash-not those exchanged for paid-up policies. There was altogether over one and one-half million dollars paid on the policies of living men. These figures-large as they are-do not tell half the 1893 to date conclusively shows; and (2) because our personal relations have been to me, at least, extremely pleasant. But, like yourself, I must be consistent, even though it deprives us of your valuable aid. It may be that there are others in our ranks holding your views, who are more timid and less boastful in making them known. Permit me, for their benefit, to make this a Bulletin" letter, in order that I may advise such agents, if we have any, that yours is by far the manliest course to follow, as it enables us to relieve our ranks of those who are not in accord with the views expressed in the Columbian Convention and elsewhere by nine-tenths of our agents, and publicly and promptly ratified by the executive officers of the Company. Yours truly, JOHN A. MCCALL, President. 328 A Period of Change. story of the helpfulness of the provisions of the NEW-YORK LIFE'S policies during these memorable three months. The Company's renewal premiums were about twenty million dollars per year; about one-fourth of this amount fell due in these three months-and upon most of it there was a month's grace. Policy-holders were thus allowed a loan to the amount of their premiums, at five per cent., without the asking. Add to this nearly one million dollars loaned on Free Tontine policies over five years in force, and we have a grand aggregate of about nine million dollars at the disposal of NEW-YORK LIFE policy-holders during the months of July, August and September. Early in the year application was made to the authorities of the Columbian Exposition for space for an Exhibit of the Company, which was put in place in the Manufacturers and Liberal Arts Building early in May. The following description of the exhibit is from a circular of the time: This exhibit sets forth and illustrates the theoretical, historical and practical aspects of Life Insurance, as follows: (i) The Need and the Basis of Life Insurance; (2) The Application of the Theory of Life Insurance by Level Premiums; (3) The Growth of Life Insurance in the United States, 1845-1892; (4) The Growth of the NEW-YORK LIFE INSURANCE COMPANY, 1845-1892; (5) The Development of the Life Insurance Contract; (6) An Object Lesson in Gold Values. This is done by means of figures, diagrams and policy contracts, in the following manner: 1. The Need and the Basis of Life Insurance-(See illustration on page 331). This Need and B3asis are found in the Mortality Table. The Need of Insurance is shown by the regularity with which men of every age die, notwithstanding good previous health, long-lived ancestry and favorable surroundings. The safe Basis of Life Insurance is shown by the survival of a practically definite percentage of the living at each age. The Risk of Death and the Probability of Life, and the corresponding Cost of Insurance and Loss in case of Death, are illustrated by age-lines of equal length divided into two parts by different colors, one color representing the Risk of Death, the other the Probability of Life, from age 35 to age 99. This Exhibit is called "The Equation of Life Insurance," and the equations and deductions drawn from the diagram are as follows: (a) Risk of Death equals Cost of Insurance; (b) Probability of Life Equals Loss in case of Death; (c) When the Risk of Death is Small the Loss in case of Death is Large; (d) Life Insurance discounts Probability and gives Certainty. 2. A#lication of the Theory of Life Insurance by Level Premiums-(See illustration on page 332). The diagram and accompanying table show that a certain amount, GENERAL VIEW OF COLUMBIAN EXHIBIT. 329 330 A Period of Change. known as the "Net Annual Premium," is exactly sufficient, with four per cent. interest on accumulations, to pay all death-claims, according to the Actuaries' Table of Mortality, and that Large Accumulations are necessary. The table begins with 82,58I persons aged 35, who are supposed to be insured for $I,ooo each. Each pays the Net Premium (usually $19.87, sometimes a little more and sometimes a little less, to avoid the long decimal.8666427 +) in advance; and interest is computed on accumulations at 4 per cent. per annum. One thousand dollars is deducted at the end of each year for each death, according to the Actuaries' Table of Mortality-the legal table for the valuation of policies in the State of New York. This process is continued until the table shows the death of the last man and the payment of his claim-when nothing remains. The number 82,581 is chosen because that is the number surviving at age 35 in the Mortality Table used. The different columns of figures show (i) Premiums, (2) Interest, (3) Total Income, (4) Death-Claims, and (5) Reserve Fund, for each year. The latter amount is that which the law of the State of New York requires a company to have on hand for like policies. The diagram illustrates the progress of the table by lines and spaces. Space from left to right represents years; space from the bottom upward represents amount of money. There are lines for Premiums, for Total Income, for Death-Claims, and for Reserve Fund, and these all meet at zero at age 99, having shown in their course the income and disbursements of each year and the amount of the Reserve Fund at the end of each year. Although the largest amount required for Death-Claims in any single year is only $2,362,ooo00 the Reserve Fund at one time reaches the sum of $22,732,417.23 -or nearly ten times as much, yet it is all required to pay the claims of all. If there were lapses and each lapsing member received his share of the Reserve Fund, either in cash or paid-up insurance, the result would be the same. No allowance is made in the table or diagram for expenses. 3. Growth of Life Insurance in the United States, as shown by Income and Disbursements, I845-I892- (See illustration on page 336). This is illustrated by a diagram based upon the figures of companies doing business in New York State. Each year's business is represented by a column of colors. (In the illustrations and description the original references to colors are retained.) The scale of amounts was necessarily determined by the height to which the columns could go, and one millimetre (about ~5 of an inch) represents $200,000. Sources of income are shown on the left hand side of the yearly columns-premiums blue (bottom), interest green (top). Disposition of Income is shown on the right hand side of the yearly columns —Payments to Policy-holders red (bottom), Expenses and Taxes purple (middle), Income Accumulated yellow (top). The diagram brings out forcibly the rapid growth of the business after the adoption of Non-forfeitable Policies in I86o, the decline which followed the financial crisis of 1873, and the rapid growth which again took place after the resumption of specie payments in I879. In 1845 four companies had Income $220,361, Assets $283,383, Insurance $7,8I1,544. In 1892 thirty-one companies report Income $223,024,998, Assets $903,734,537.04, Surplus $114,012,912.64, Insurance in force $4, 199,444,397.* 4. Growth of the New- York Life Insurance Company, as shown by Income and Disbursements, z845-1892-(See illustration on page 337). In this exhibit the same * Industrial insurance not included. THE EQUATION OF LIFE INSURANCE. RISK OF DEATH = COST OF INSURANCE. PROBABILITY OF LIFE = LOSS IN CASE OF DEATH. WHEN RISK OF DEATH IS SMALL, LOSS IN CASE OF DEATH IS LARGE. ACE. ACE. ACE _4 0 $5. - 45 ~r - -----— '.,,._, --- —-— _ _S Q a of 60 -0- W: 95. 9 _ __ _ _ _.7s 9~~e = a 831; f LIFE INSURANCE DISCOUNTS PROBABILITY AND CIVES CERTAINTY. a 94 VW Ca -a 4 tc * ---- I I 6!,, -1. I 0 41 o I I['i,r _ 0 I; I I I<.0) 4 I o I -- I I I. - I I I 31111 -12:-2 -il zimizil.-ilio- -2. 22' 3!93333!!3 ri iii i4 I I.I3! 9.3IiCi!!!3 3 3~I!l Eih 353119t i!3~3I33i:1;.33153II g~~111P g-' -flilf ji333333 13i35~r 5 33333 3!if i!33 i3333 33~8~f35 33.!13j i553R3' JJ x =i ir fit lS~f 33 3 sI,~-? C li ll nT T mftgo;!fPffft ill,;;2 i mp-Ij' "ig" It Xt CST: " "'" z M-Mg-3-;~l ~(\ moni ~mm-vnrm!sC. mn 't'mf lign-111 ngm-ni~Ji fr5!~5X~l munm"'" asfa~ve x —gz;ig4331;:x et I I I t3 I I I t ''SI 113 m i S! I a B~xa.;Eii1.3. 3 I 11 I., -T I e,_?. _,i -M R ' F + p -z I. I IrrC I _ 0 sr 012 a. (P ab dim4 o C t O n d I3 8 a g a t 2 a a e [ h 1 a n r _ SL S _ I f9v!.r m Ia I I I I I wa A I A I I i -T -mw -m 01 I I- I I 1 1 1 I I I 1 1-Ta Y-43 - I, I I ma Ag r V5.. EJ 4 S 10 s n r# >b o,L 9. |=S aS ~0 %Z In m1 qi C a %ft -4vo " V o v 4 @4 " 332 TABLE OF EXHIBIT SHOWN ON PAGE 332. LL I - Number Number of Reserve Fund Age. Number Number of Premiums. Interest. Total Income. Death-Claims. Reserve Fund Surviving. Deaths. End of Each Year. I 35 36 37 38 39 40 41 42 43 44 46 46 47 48 49 50 51 62 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 -I I I I — I r,, 82,581 81,814 81,038 80,253 79,458 78,653 77,838 77,012 76,173 75,316 74,435 73,526 72,582 71,601 70,580 69,517 68,409 67,253 66,046 64,785 63,469 62,094 60,658 59,161 57,600 556973 54,275 52,505 60,661 48,744 46,754 44,693 42,565 40,374 38,128 35,837 33,510 31,159 28,797 26,439 24,100 21,797 19,548 17,369 15,277 13,290 11,424 9,694 8,112 6,685 5,417 4,306 3,348 2,537 1,864 1,319 892 670 339 184 89 37 13 4 1 767 776 785 795 805 815 826 839 857 881 909 944 981 1,021 1,063 1,108 1,156 1,207 1,261 1,316 1,375 1,436 1,497 1,561 1,627 1,698 1,770 1,844 1,917 1,990 2,061 2,128 2,191 2,246 2,291 2,327 2,351 2,362 2,358 2,339 2,303 2,249 2,179 2,092 1,987 1,866 1,730 1,682 1,427 1,268.1,111 958 811 673 646 427 322 231 165 95 62 24 9 3 1 $1,640,884.47 1,624,826.04 1,610,225.06.1,594,627.11 1,578,830.46 1,562,048.58 1,546,641.06 1,530,228.44 1,512,795.78 1,496,628.92 1,479,023.45 1,460,226.36 1,442,204.34 1,421,995.86 1,402,424.60 1,380,607.62 1,359,286.83 1,336,317.11 1,311,673.56 1,287,277.95 1,261,129.03 1,233,186.84 1,205,274.46 1,175,529.07 1,144,512.00 1,111,623.78 1,078,444.25 1,043,274.35 1,006,127.46 968,543.28 929,235.75 887,379.51 845,340.90 802,231.38 757,603.36 711,902.00 665,843.70 618,817.74 572,196.39 525,078.54 478,867.00 433,106.39 388,418.56 344,948.34 303,553.99 264,072.30 226,880.64 192,619.78 161,104.32 132,897.80 107,581.62 85,560.22 66,474.54 50,410.19 37,056.32 26,182.15 17,724.04 11,325.90 6,732.54 3,657.92 1,767.09 735.37 258.21 79.47 19.86 $65,635.38 102,573.84 140,045.79 178,032.71 216,507.23 255,449.47 294,933.08 334,899.55 375,247.36 415,838.41 456,392.89 496,697.66 536,493.74 575,593.32 613,874.04 651,133.30 687,230.11 721,932.00 754,996.22 786,247.19 815,502.24 842,449.80 866,918.77 888,736.68 907,626.63 923,316.65 935,467.08 943,816.74 948,054.51 948,038.42 943,529.39 934,325.74 920,392.41 901,657.36 878,187.79 850,151.38 817,711.18 781,132.34 740,785.50 697,100.05 650,578.73 601,806.14 551,455.13 500,151.27 448,619.48 897,647.15 347,988.26 300,412.58 255,593.36 214,052.90 176,198.28 142,228.62 112,256.75 86,323.43 64,338.62 46,159.45 31,634.79 20,473.22 12,321.45 6,760.62 3,301.73 1,383.21 488.87 151.60 38.46 $1,706,519.85 1,727,399.88 1,750,270.85 1,772,659.82 1,795,337.69 1,817,498.05 1,841,574.14 1,865,127.99 1,888,043.14 1,912,367.33 1,935,416.34 1,956,924.02 1,978,698.08 1,997,589.18 2,016,298.64 2,031,740.92 2,046,516.94 2,058,249.11 2,066,669.78 2,073,525.14 2,076,631.27 2,075,636.64 2,072,193.23 2,064,265.75 2,052,138.63 2,034,940.43 12,013,911.33 1,987,091.09 1,954,181.97 1,916,581.70 1,872,765.14 1,821,705.25 1,765,733.31 1,703,888.74 1,635,791.15 1,562,053.38 1,483,554.88 1,399,950.08 1,312,981.89 1,222.178.59 1,129,445.73 1,034,912,53 939,873.69 845,099.61 752,173.47 661,719.45 574,868.90 493,032.36 416,697.68 346,950.70 283,779.90 227,788.84 178,731.29 136,733.62 101,394.94 72,341.60 49,358.83 31,799.12 19,053.99 10,418.54 5,068.82 2,118.58 747.08 231.07 58.32 $767,000 776,000 785,000 795,000 805,000 815,000 826,000 839,000 857,000 881,000 909,000 944,000 981,000 1,021,000 1,063,000 1,108,000 1,156,000 1,207,000 1,261,000 1,316,000 1,375,000 1,436,000 1,497,000 1,661,000 1,627,000 1,698,000 1,770,000 1,844,000 1,917,000 1,990,000 2,061,000 2,128,000 2,191,000 2,246,000 2,291,000 2,327,000 2,351,000 2,362,000 2,358,000 2,339,000 2,303,000 2,249,000 2,179,000 2,092,000 1,987,000 1,866,000 1,730,000 1,582,000 1,427,000 1,268.000 1,111,000 958,000 811,000 673,000 545,000 427,000 322,000 231,000 155,000 95,000 62,000 24,000 9,000 3,000 1,000 $939,519.85 1,890,919.73 2,856,190.58 3,833,850.40 4,824,188.09 5,826,686.14 6,842,260.28 7,868,388.27 8,899,431.41 9,930,798.74 10,957,215.08 11,970,139.10 12,967,837.18 13,944,426.36 14,897,725.00 15,821,465.92 16,711,982.86 17,563,231.97 18,368,901.75 19,126,426.89 19,828,058.16 20,467,694.80 21,042,888.03 21,546,153.78 21,971,292.41 22,308,232.84 22,552,144.17 22,695,235.26 22,732,417.$3 22,658,998.93 22,470,764.07 22,164,469.32 21,739,202.63 21,197,091.37 20,541,882.52 19,776,935.90 18,909,490.78 17,947,440.86 16,902,422.75 15,785,601.34 14,612,047.07 13,397,959.60 12,158,833.29 10,911,932.90 9,677,106.37 8,472,825.82 7,317,694.72 6,228,727.08 5,218,424.76 4,297,375.46 3,470,155.36 2,739,944.20 2,107,675.49 1,571,409.11 1,127,804.05 773,145.65 500,504.48 301,303.60 165,357.59 80,776.13 33,844.95 11,963.53 3,710.61 941.68 Nothing I I I I i I ii i i i i I i I ii i I I i i.1 I i i I I I i = i 333 334 A Period of Change. plan is followed as in the preceding diagram, except that the same perpendicular space represents only one-seventh as much money. A comparison of the two, therefore, shows how nearly the NEW-YORK LIFE has done one-seventh of all the business. It will be noted also that the NEW-YORK LIFE'S business continued about stationary after i873, instead of falling off, as was the case with the business as a whole. The condition of the NEW-YORK LIFE at January I, i893, by the report of the Superintendent of the New York Insurance Department,was -Assets $137,499, I98.99, Surplus $I6,804,948. IO, Insurance in force $689,248,629. 5. Develop5ment of the Life Insurance Contract. The Increase in Benefits and the Decrease in Restrictions, under the policy contract, are illustrated by four policies issued at different dates by the NEW-YORK LIFE INSURANCE COMPANY, with a statement of the Benefits and Restrictions of each. (I) See pages 340-341. The first policy shown is Policy No. 2, issued April I7, i845 -the first policy in force in the Company. This policy promised but one benefit -the insurance payable at death. On the other hand, it was liable to become null and void and of no value by reason of no less than nine different acts or omissions of the insured. (2) See pages 344-345. The second policy shown is Policy No. 14,415, issued August I3, I86o, which was the first Non-forfeitable Policy issued by any company doing a general business. The issue of this policy marked an era in Life Insurance. This policy also omitted the suicide clause, but retained numerous restrictions as to residence, travel, habits of life and manner of death.: (3) See pages 348-349. The third policy shown is Policy No. 217,822, issued January 27, i886. This was a Limited-Endowment Policy, on the Tontine plan, and provided for insurance during twenty years and a definite cash value at the end of this period, if the insured survived. It was non-forfeitable after three years' premiums had been paid, the insurance being extended for the full amount of the policy as long as the reserve thereon would carry it. It also allowed one month's grace in payment of premiums, and contained no restrictions upon residence or travel after two years. In case the policy became null and void by reason of the death of the insured while engaged in certain hazardous occupations named, the reserve value was paid. (4) See pages 352-353. The fourth policy shown is Policy No. 458,967, issued June 17, I892, and was the first "Accumulation Policy"-a policy without any restrictions whatever, and with but one condition, namely, the payment of premiums. This policy provides for insurance during a period of twenty years, and six options in settlement at the end of the period, when the insured may either continue the insurance, accept the cash value of the policy, or take part or all of its value in an annuity. The policy allows a month's grace in the payment of premiums, re-instatement within six months after default, if the insured is in good health, and cash loans on the policy at five per cent. interest after it has been five years in force. It is non-forfeitable after three years' premiums have been paid, either extended insurance or ordinary paid-up insurance being granted, the first without request-so that its paid-up value cannot be lost by neglect. 6. An Object Lesson in Gold Values- (See illustration on page 329). As a means of attracting attention and of giving some idea of the immense resources of the NEW A Period of Change. 335 YORK LIFE, a Pyramid and Globe show the bulk of pure gold required to equal the assets of the Company. The Pyramid is 7 feet square at the base, io feet in height (above- the pedestal), and 4 feet 51 inches across one side of the top. The Globe is of the same diameter as the last-named measurement. Both Pyramid and Globe are covered with gold-leaf, two colors being used on the latter to represent land and water. The Globe revolves once every twenty-four hours. The meridian of Chicago is 'indicated by a line from pole to pole, and upon the upper band which surrounds the Globe at the latitude of Chicago the hours of the day and night are marked, so that the meridian shows Chicago time. The weight of $I37,499, 198.99 in pure gold would be 228 tons, 104 pounds, 3,400 grains. It would make one hundred good loads for a two-horse team over an ordinary road. The Manufacturers' Building is 787 x 1,687 feet, inclosing 30o acres. Reduced to square inches it is I9I,I84,336. The NEW-YORK LIFE'S assets would therefore suffice to lay a gold dollar on seven out of every ten square inches of the main floor of this immense building. Such is the provision the Company has made for discharging its obligations to upwards of two hundred thousand policy-holders. For this Exhibit the Company was awarded a Medal and Diplo//ma, and the designer was awarded ' / a Diploma of Honorable Mention by the Board of Lady Managers. / At the close of the Exposition the /~ Exhibit was sent to the San Francisco Midwinter Exposition, where it was awarded a Gold Medal and Dipl6ma. The Chairman of the Committee of Awards of the Columbian Exposition, Hon. John ' Boyd Thacher, in notifying the Company of the award, said: "The award consists of a Medal with the name of the NEW-YoRK LIFE INSURANCE COMPANY upon it, and the Medal is accompanied by a Diploma on which are duly inscribed the reasons for granting ollars.of INCOME AND DISBURSEMENTS OF C 210. I '' -MERIK 205. 200, DOINC t 190; 185. 184 176. 175. 170. 166. 160. 140.OF 135. 110. ARE SHOWN ISO. 125. Y 120. 1. -PREMI o. 2 2- INTEF 106. 100 9g. 90. 86. 65-. - -------- 76. Dtf 6r 6 OF 60. 13 SHOWN 0 40. 1- PAYMENI 356. 15. _ zo. 2 -2EXPENSEc 10. 5. a85ARS 4(.wsWA,4,C n,5 [ COHDITION Jl )URCES ASSETS --:INCOME SURPLUS ON LEfT HAND SIDE OF INSURANCE —4 RLY COLUMN. UMS - BLUE. REST - GREEN-, ~p =~$TA RNUARY1.1893. 903. 73 537. 04 114012.912.64.401.650. 204.00 CAN LIFE INSURANCE COMPANIES BUSINESS IN STATE OF NEW YORK - 1845-1892 -_ _ Millions of Dollars. -220. 216. 210. 20S. 200 195. 190. 180. 175. 170. _65. 160. 150. 145. 140. 130. 12S. 720. 110. 105. 100 95. 90. 65. 60. 7& 70. 65. 6Q. So. $0. 45. 40. '5. 30. 25. 20. 15. 10. S. [SEE EXPLANATION OF COLOR REFERENCES, PAGE 330.] t~i wJ Millions of' Dollars. 15 5 YEAR~S U4 INCOME ANIIIUtSMN~O,1E. NEW YORK LIFE INSURANCE COY Millions of Dollars. 30 25 -20 15 t0 5 (SEE ExPLANATION OF COLOR REFERENCES, PAGE 330.] 338 A Period of Change. the same, signed by the judges and proper authorities. Congratulating you upon the magnificent exhibit you made, I remain," etc. By direction of Congress the work of preparing and delivering the Medals and Diplomas was intrusted to the Secretary of the Treasury; but the unfortunate controversy over the design of the Medal has caused such a delay in the delivery of both these tokens as to render them practically valueless for the purposes for which they were bestowed. The field work of the year closed with a three months' competition between the Western Department and the Central-Eastern-Southern Department. The dividing line was the western boundaries of Ohio, Kentucky, Tennessee, Arkansas and Louisiana. A purse of $Io,ooo was made up by managers, agents and the Company, to be presented to the subdivision of the winning department which should contribute most to the victory. The score was remarkably close; the East secured the more business, but the West made the better settlements and so won the prize -a result which completely reversed some popular opinions concerning confidence and cash. While this contest was at its height, the man who had for so many years been the architect of the Company's fortunes lay a-dying. Mr. Beers had a very severe illness in I890, and was never a well man thereafter. He was a man capable of an immense amount of work, and he did not spare himself. The Company, under his management, outgrew its methods of business, but he still kept the reins of every department in his own hands. When he succeeded to the Presidency, Mr. O'Dell, for fourteen years the Superintendent of Agencies, resigned; no successor was appointed; thenceforth the President was the director of the agency force, as well as the administrative head of the Company. He had borne up under the attacks of enemies with unfaltering courage, and was both surprised and pained that, on the showing of facts developed by the investigation of the Insurance Department, he should be so harshly judged. He resigned because continuance in office under the circumstances would only injure the institution to which he had devoted his life; and when he could no longer work as of old, life had lost its keenest zest and its chief A Period of Change. 339 reward. His last days and the character of his work were thus described by the "Insurance Age" for November, 1893: The closing months of his life were peculiarly sad. He knew that his days were numbered. One day in early September he rather pressed his physician for a change of treatment, as the results were not satisfactory to him. " I have done for you, Mr. Beers, all that medical skill can do," said his friend-doctor, sadly. " I do not like what you say, doctor," queried the patient, looking searchingly into the physician's face. " The great nerve-centre has been attacked," was the response. Mr. Beers understood the great significance of the few words, withdrew almost in silence, walked home, never again leaving his house in life, dying two months later, November sixteenth, of nervous prostration. He was seventy years old-but until the last year or so, with the vitality and bearing of a healthy man of fifty-five. He was not only one of the ablest insurance presidents that America has produced, but he was a financier of unsurpassed skill; for it must be remembered that of the NEW-YORK LIFE'S $I27,000,000, not a $I,ooo investment could be made without the approval of Mr. Beers. Again, when it is recalled that his direct management extended over the whole range of the Company's affairs, the herculean task marked out and successfully accomplished must command for Mr. Beers' life-work the admiration of competitors, of co-workers, and of the business and financial world. Announcement of his death was made by President McCall in a "Special Bulletin," as follows: NEW YORK, November I6, I893. To THE MANAGERS AND AGENTS OF THE NEW-YORK LIFE INSURANCE COMPANY. The late President of this Company, Mr. William H. Beers, departed this life this morning, after an illness of several months, during which time he was a patient sufferer. To the Executive Staff and the Agency Corps, naught that I can say will do more than to emphasize their oft-expressed opinions of his valuable services and the unremitting attention he gave to the administration of the Company's affairs. He was by inclination and choice an active official, and no detail of management, however insignificant, escaped his notice. He understood the business of life insurance in all its ramifications, and he was the peer of the best manager in the selection and control of men, and in his conclusions as to their value and efficiency. He had qualities of mind that commanded the respect of other life insurance officials, and the Company-under his guidance solely-reached and maintained its magnificent position as one of the leading financial institutions of the world. The credit for its great success is his, and his alone. Nothing less could be truthfully said of him; nothing less should be accounted the record of his life. His place in the history of Life Insurance will be well-defined, and the mature and unbiased judgment of the historian will accord to him a foremost position in intelligent, efficient and successful leadership. My own acquaintance with Mr. Beers dates back for nearly a quarter of a century, and while there was no association that involved personal intimacy, yet it was often a great pleasure to me,- as a State official, to-discuss with him the progress, methods and The First Policy in Force IN THE NAUTILUS INSURANCE COMPANY, NAME CHANGED TO New-Vork Life Insurance Co. APRIL 5, 1849. POLICY NO. 2. ISSUED APRIL 17, 1845. THE ONLY BENEFIT Provided under this Policy was the INSURANCE PAYABLE AT DEATH. THE POLICY BECAME NULL AND VOID AND ALL PAYMENTS THEREON WERE FORFEITED TO THE COMPANY from any of the following causes: 1. Any untrue statement in the application; 2. The non-payment of any premium; 3. Death upon the high seas; 4. Death by the insured's own hand; 5. Death in consequence of a duel; 6. Death by the hands of Justice; 7. Death in the known violation of any law of the United States, or of any State or Province wherein residence and travel was permitted; 8. Residence or travel south of the southern boundaries of Virginia and Kentucky, between July 1st and November 1st, or at any time beyond the settled limits of the United States and the British Provinces of Canada, Nova Scotia and New Brunswick; 9. Military or naval service, the militia not in actual service excepted. 340 - THE NAUTILUS (MUTUAL LIFE5 INSURANCE COMPANY OF NEW YORK, rW~fiU VIjjOU& of 'foa agtWITNESSETh, Y~d THE NAUTILUS (MUTUAL LIFE). INSURANcE, COM.PANY OF NEW YORK, i c'eondedaletalebn ANNUAL PREMUMS d us~/c~s/4.~.n4 /o,, r,,,......~...,./_............. / O / 2,/J P1 /^. O 4^ z ss 4 bazm ei = = - _ 4 '~,/, fi a/ z or'm do.etI: promise a11g ree, ~' aend o 6to. o,iV t ex dean, ~ ' dO{m.- to I. /- d l ~4 g. / d. $ hbF of //Zc M/, ~cea/ lcuc/^ ^^/^%^.^W^ J/c.-t jST^^ a^^^ w _ &- A ZQ' L 7-) I 07 C; tezle WI:' a.7 ^W /,C @ 0. o 44d. ' dozyo~m 5400 re nn q^c rP,;' f y urce or a4IM ayai aa7 coo a,4 a/w 4e nowke and 4 1uoo/o/~4e de'do/~4 54oMaod(VlO2; - Q.0 daoa -idoat / ro ibcb almwps, and e. ze. ac 4,cdto 4, /a Cu. Z,, Cd / C^^ ^1 wsae <^9 %t( a ~f/in em c xte^ oEndc / towM, ca! {n cad~ ^~ aa. d /^ ^. —42, M 27Gd^ ta ) 44 4 t ooi.oat if / condosent ofd 'fw0"507yo.t /e aezdcc oao;e/a, and' n c u/, nd me on ltA y, 4 d. /4,yondf. e fv elt^etz1tsa o/. / Cd e 4? l wd ( ~ A29ao eadl o/i/e fo G ownot/avntd. e o f(ro/de~ ont0 6o d /id 0 a'il a 'o / 6e 0 4 Iti60^ f 2 Co t /6 f e tw ana/iaw, G4ova $(o0A;, ot Q G4.-so i oa(/J 00 < o K wi atu dao /fewocm b conoent Ado endom6o, vtmot o0t toonh cn (dode /iao/o o/, Q2 1oe cn9te& aG4o C do to of/ o do outoeton nta'atoea a of/h 2a/d of r a nd' to/Uoy, 6 etowen 2o6e /.t, > and fal ~4,^ o ~/Gove,4oz daow Woe/ht 00 < N d /voetcr cod nootsent odad endoofe, en/es enfto am nui'a~.. N 0 > O~ 0 4..tb o $ 14 15. 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 3'1 0.72 0.77 0. 84 0. 86 0. 89 0.90o 0.91 0. 92 0.94 0.97 0.99 1.00 1.07 1.1I2 1.20 1.28 1.31 1.32 o. 86 o. 88 0.90 0.91I 0.92 0.94 0.95 0.97 0.99 1.03 1.07 1.12 1. 17 1.23 I. 28 I.35 1.36 1.42 1.53 I.5 1. 62 1. 69 1.73 1.77 1.i82 i. 88 1.93 1. 98 2.04 2. I I 2.17 2.24 2.31 2.36 2.43 32 33 34 35 36 37 38 39 40 4' 42 43 44 45 46 47 48 49 1.33 1.34 I.35 1.36 1.39 1.43 1.48 1.57 1. 69 1.78 1.89. 1.91o 1.92 1.93 1.94 1.95 1.46 1.48 1.50 1.53 1.57 1. 63 1.70 I.76 1.831 1. 88 i. 89 1.92 1.94 1. 96 1. 98 1.99 2.02 2.04 2.50 2.57 2.64 2.75 2.81i 2.90 3.05 3. 11 3.20 3.31 3.40 3.51 3.63 3.73 3.87 4.01 4.17 4.49 50 SI1 52 53 54 55 57 59 6o 6i 62 63 64 66 67 1.96 1.97 2.02 2.10 2.18 2.32 2.47 2.70 3. 14 3.67 i4.35 4.53 4.1 4.90 5.09 5.34 5.59 5.90 2.09 2.20 2.37 2.59 2.89 3.21 3.56 4.20 4.31 4.63 4.91I 5. o8 5.29 5.50 5.71I 5.99 6.27 6.62 4. 6o 4.75 4.90 5.24 5.49 5.78 6.05 6.27 6.50 6.75 7.00 7.25 7.55 7. 85 8.5 5 8.95 9.45 I I I. I I I I; I I -- - I I Appendix. 39I CLASSIFICATION OF DEATHS. TABLE SHOWING THE CAUSES OF DEATH, AND THE NUMBER OF DEATHS FROM EACH CAUSE, AMONG PERSONS INSURED IN THE NEW-YORK LIFE INSURANCE COMPANY, I845-I894. CAUSES OF DEATH. Eo MoCAUSES OF DEATH. S o z v u ^0^ rQ4c Abscesses (various).............. Accidents...................... Addison's disease.............. Age.......................... Alcoholism.................... Anaemia and leucoythaemia...... Apoplexy...................... Appendicitis.................... Asthma........................ Beri-beri...................... Brain disease.................. Bright's disease (acute and chronic) Bronchitis (acute and chronic).... Cancer........................ Carbuncle...................... Cholera........................ Cholera morbus................ Consumption.................. Convulsions.................... Diabetes...................... Diphtheria.................... Dysentery...................... Embolism...................... Epilepsy...................... Erysipelas...................... Gangrene...................... General debility................ Heart diseases (various forms).... Hypertrophy of prostate and cystitis Influenza.................... Insanity........................ Insolation...................... Killed in battle................ Laryngitis.................... Liver diseases (various forms).... 69 1,148 6 1,919 62 62 1,710 83 29 17 715 1,219 205 803 49 103 60 3,I92 7 I85 45 276 17 41 152 53 48 1,889 167 253 210 40 52 12 733 11 I Locomotor ataxia.............. Lymphadenitis................. Lymphangitis.................. Lupus........................ Malarial fevers................ Malignant pustule.............. Measles........................ Mumps........................ Murdered...................... Nasal haemorrhage.............. Necrosis of bone................ Obstruction of the bowels........ Oedema of the glottis.......... Oedema of the lungs............ Paralysis...................... Peritonitis...................... Pleurisy..................... Pneumonia.................... Purpura haemorraghica.......... Pulmonary apoplexy............ Pyemia and septicaemia (various causes) Rheumatism.................. Scarlet fever.................. Spinal diseases (various)........ Smallpox...................... Strangulated hernia............ Suicide....................... Syphilis...................... Tetanus...................... Typhoid fever.................. Typhus fever.................. Ulcer of the stomach............ Yellow fever.................... TOTAL.................. 67 I I I 618 I Io 3 I83 I I3 103 I8 22 287 i8i 58 1,852 19 235 o09 130 26 93 68 29 608 20 26 i,oi8 41 103 147 21,723 I 392 Appendix. TRUSTEES OF THE NEW-YORK LIFE INSURANCE CO., 1845-1895. NAME. ENTERED. CEASED. REMARKS. ANDREWS, LORING.......... ANTHONY, CHARLES L....... APPLETON, WILLIAM H...... ASPINWALL, WILLIAM -H..... BALDWIN, C. C.............. BARTON, WILLIAM........... BATTELLE, LEWIS F.......... BEACH, JOHN C............ BEERS, WILLIAM H......... BENEDICT, SPENCER S....... BOGERT, CORNELIUS R., M. D. BOGERT, HENRY K......... BOKEE, DAVID A............ BOOTH, WILLIAM A.......... BOWERS, HENRY........... BRISTOW, BENJAMIN H....... BROWN, JAMES.............. BUCKLEY, WILLIAM F........ BUSHNELL, ORSAMUS........ BUSSING, JOHN S............ CARMAN, RICHARD F..... CENTER, EDWARD C......... CLAFLIN, HORACE B......... CLAFLIN, JOHN.............. COBB, SANFORD............ COLEMAN, ROBERT B........ COLLINS, ROBERT B.......... COMSTOCK, DAVID A........ CRYDER, JOHN.............. CURTISS, CYRUS............. DART, RUSSELL............. DODGE, SAMUEL N.......... DOWS, DAVID.............. DUSENBURY, WILLIAM C..... FAIRCHILD, CHARLES S..... FAIRCHILD, ROBERT G....... FISHER, SELIG S...'......... FRANKLIN, MORRIS......... FREEMAN, ALFRED, M. D..... 1845 1865 I852 1845 1884 1849 1868 I849 I869 1845 1870 I845 1848 1863 i866 1885 1845 1887 1846 1847 I846 1845 I868 1885 1865 1846 I860 1845 1845 I849 I852 1848 I856 I849 1892 I850 1878 1847 1847 I848 1874 I847 1884 I870 1856 I892 1851 1877 1848 1859 I891 1889 I847 1864 1864 1846 1846 1885 1876 1849 1892 1847 1847 1852 I865 1849 1885 1867 I852 1884 1885 I86i Died January 22, I875. Died May, 1874. Active in I895. Died January, 1875. Active in I895. Died September, 1884. Died March I, 1870. Died July 27, 1856. Died November I6, 1893. Resigned: living in I895. Died November II, 1877. Died August 30, 1875. Died March, I859. Active in 1895. Died February 12, 189I. Resigned: living in I895. Died November I, I877. Active in I895. Died August II, 1868. Died June I, 1864. Died July 13, 1867. Died November 6, I860. Died November 14, 1885. Active in I895. Died May 22, 1876. Died October 31, I882. Died January 6, I894. Died November 26, I855. Died 1868. Died June 25, I879. Died September 13, 1865. Died April, 1865. Died March 30, 1890. Died February, I867. Active in I895. Died February 9, I877. Died January, 1884. Died October 27, 1885. Died February 8, I86I. *1 II I Appendix. 393 TRUSTEES - Continued. NAME. ENTERED. CEASED. REMARKS. I FREEMAN, PLINY............ FULLER, DUDLEY B.......... FURMAN, JOHN M.......... GIBBS, EDWARD N........... GRACE, WILLIAM R.......... GRANT, RICHARD S.......... GREER, GEORGE............. HARPER, JAMES............. HERRICK, JACOB B........... HICKS, HENRY W........... HIGGINS, ELIAS S........... HONE, PHILIP............... HORNBLOWER, WILLIAM B... HOYT, EDWIN............... HUTCHINSON, RICHARD J.... IRVIN, RICHARD............. KENDALL, ISAAC C......... KING, JAMES G., Jr.......... LANGDON, WOODBURY...... LEWIS, WALTER H......... LINDSLEY, CALEB F........ LIVINGSTON, SCHUYLER...... LUDLOW, THOMAS W........ MAIRS, JOHN................ MARTIN, CHARLES J......... MARTIN, EDWARD........... MERCHANT, AARON M....... MCCALL, JOHN A............ MILLER, DANIEL S.......... MORRIS, ROBERT H.......... MORRISON, GEORGE AUSTIN.. MORTIMER, HENRY C........ MUSER, RICHARD........... NELSON, HENRY A........ NEVINS, DAVID.............. NIXON, JOHN M............. NORRIE, ADAM............ OSGOOD, GEORGE A.......... PAINE, AUGUSTUS G......... PATRICK, WILLIAM.......... 1848 1863 1875 1889 1892 1880 I851 1845 1847 1845 1885 1848 I890 1867 1847 1845 1849 I865 I892 1885 1846 1845 1845 1852 1855 1867 1846 1892 1849 1846 1894 1889 1885 1847 1894 1846 1845 1865 1892 1852 1864 i868 1884 1887 I862 1848 1851 1846 1889 I850 1874 1849 1847 1878 1867 1849 1846 1847 1885 i860 I892 1848 1877 1847 ooeI893 1852 I869 1847 I882 1863 - 1 I Died May, 1879. Died March I8, i868. Died December 1I, 1884. Active in I895. Active in I895. Declined reelection. Died July I, 1870. Died I869. Died January 2, I864. Died September 24, 1867. Died August 18, 1889. Died 1851. Active in 1895. Died May, 1874. Died August 2, 1869. Died June 27, i888. Died August 18, 1878. Died June, I867. Active in 1895. Active in I895. Died February 28, i868. Died September, 1863. Died 1878. Died December 7, 1885. Died i888. Resigned: living in I895. Died January 8, I852. Active in 1895. Died April 9, 1878. Died October 23, I855. Active in 1895, Active in 1895. Died August o1, I893. Died December 13, i86r. Active in 1895. Died February 12, 1869. Died June 6, 1882. Died November 13, 1882. Active in I895. Died September 8, I875. L I I I 394 Appendix. TRUSTEES - Continued. NAME. ENTERED. CEASED. REMARKS.. ---. - PAXSON, SAMUEL C......... PERKINS, GEORGE W........ POTTS, GEORGE H........... PURDY, RICHARD E.......... RANDOLPH, EDMUND D..... READING, RICHARD A....... REED, ALMET............... REYBURN, JAMES.......... RICE, JOHN................. RICHARDS, THOMAS B....... ROBERTS, MARSHALL 0)...... ROGERS, JOHN L........... SANDERSON, EDWARD F...... SEAMAN, HENRY I........... SEYMOUR, JOHN F........... SEYMOUR, WILLIAM N....... SMULL, THOMAS............ STEARNS, JOHN N........... STEELE, HIRAM R........... STRAUS, OSCAR S............ STRONG, WILLIAM L......... STUDWELL, ALEXANDER..... SUAREZ, LEONARDO S........ SUYDAM, HENRY, Jr.......... TAYLOR, ROBERT L......... TUCK, HENRY, M. D......... VALENTINE, JOHN J......... VANDERVOORT, PETER H..... WADSWORTH, JULIUS........ WARDWELL, JEREMIAH M.... WEEKS, RUFUS W........... WELCH, ARCHIBALD H....... WELLS, DAVID A............ WETMORE, PROSPER M...... WHITE, LOOMIS L........... WHITNEY, WILLIAM C....... WHITTEMORE, EDWARD A... WILLIAMS, JOHN E.......... WOODHULL, ALBERT........ WRIGHT, CHARLES, M. D.... 1847 1893 1884 1846 I892 1846 1845 1845 1852 1845 1846 I85I 1845 1849 1870 1847 1863 1885 1892 1894 1884 1879 1845 1855 1845 1878 1894 1851 1852 1847 1891 1882 1894 1845 1875 1892 1877 I858 1846 1877 I852 I888 1849 1848 1845 1846 1856 1846 1849 1869 1845 i86i 1879 1851 1866 I892 1891 1847 1858 1846 1854 I855 1851 I892 1847 1892 I893 i88i 1868 1847 1883 Died July, 1860. Active in 1895. Died i888. Died January 14, 1849. Active in 1895. Died June 7, 1871. Died March i, 1880. Died 1849. Died September IO, 1856. Died April i, 1848. Died September ii, I880. Died December 2, I869. Died September 26, I866. Died May, i86i. Died July 3, I879. Died June 5, i88i. Died December, 1866. Resigned: died April, I895. Active in 1895. Active in I895. Active in I895. Died October 5, I891. Died 1874. Died April 26, 1858. Died February o1, 1878. Active in I895. Active in I895. Died February 13, 1876. Died May 28, 1887. Died December 20, 1881. Resigned: living in I895. Active in I895. Active in I895. Died March 18, I876. Resigned: living in I895. Resigned: living in I895. Died April 15, I88I. Died September, I877. Died August 31, i86o. Died September 2, 1883. I I ERRATA.-Page 394. Mr. John N. Stearns, formerly a Trustee of the Company, is not dead. The error arose from the announcement of the death of another well-known gentleman bearing the same name. Appendix. 395 [From "Fisher's National Magazine," June, 1845.] THE CURRENCY OF THE UNITED STATES. By JAMES DE PEYSTER OGDEN. [NOTE.-This article is printed as an interesting reminiscence of the first President of the Company, and as an illustration of the fact that important questions still remain unsettled that were agitating the public mind fifty years ago. Undreamed of progress has been made in many things, but the currency and tariff questions are still with us. It will be noted that Mr. Ogden's plan of a national currency based on United States bonds was practically that of the present time, without the currency issued directly by the Government, which is considered by many to be at the bottom of our present currency troubles. The number of State banks in 1845 was 707, with a total circulation of $89,608,7II. The circulation under State banks reached its highest point in 1857, when it was $2I4,778,822; then came the great financial crash, and the next year it dropped to $155,208,344.] A STABLE currency is an essential element in the prosperity of a country. As a medium of exchange it becomes the representative of all property, and is, therefore, called not only the representative, but the measure as well as the standard of value. When defining the terms " money " and " currency," it is sometimes contended that money can only consist of coined gold and silver, and is not currency; while currency is said to be a contract to pay money; that not being the product of labor, it has no intrinsic value, being merely a representative of value-and both money and currency are alike deemed articles of commerce. These, however, can hardly be called definitions, nor, indeed, are they strictly correct as such. Some nations have nothing but gold and silver as a general medium of exchange. Do not the precious metals then constitute their currency? Bank notes can hardly be called an article of commerce, but gold and silver coin will pay a debt or purchase commodities in any civilized country. Again, it is quite true that bank notes are only a representative of value. Still, a value has been given for them, and value can again be obtained for them, and if they will purchase as much of any commodity as the amount of specie they represent would purchase, they answer the end for which they were designed, and constitute a currency, which in the ordinary acceptation of the term is called money. The United States have always had a paper currency, issued by banks chartered by the National or State Governments. An ordinance of Congress, during the war of the Revolution, established the Bank of North America in I781, and after the adoption of the Constitution, the first United States Bank was chartered in February, 179I, and expired in 1811. The second, chartered in I816, ceased to be the fiscal agent of Government in I833, and its charter expired in I836. Gold and silver alone, however, are a legal tender, and, accordingly, so far as laws can accomplish the object, our paper currency has always been redeemable in specie. There have been, nevertheless, three periods of suspension of specie payments by our banks: two partial, and one general. During the last war the banks throughout the Union, excepting in New England, suspended their payments. During the commercial and financial crisis of I837 the suspension was general, but the banks in New York resumed payment in I838; and in I839, when the large State Bank of Pennsylvania, which had assumed the name of United States Bank, failed for the second time, and the banks South and West accompanied its fall, the banks in New York did not follow its example. All these departures from the specie standard of value took place when no United States Bank was in operation. During nearly forty years of our existence as a nation we had a National Bank acting as the fiscal agent of Government, 396 Appendix. exercising a controlling influence over the general currency of the country, and maintaining, at all times, the specie standard of value. The friends of such an institution have now no hope of its restoration, its opponents entertain no fear of its finding successful advocates, at the same time it is well to bear in mind that both the great political parties of the country have been at times alike the advocates and opponents of a National Bank. The first bank was passed during the administration of Washington, and was opposed by Mr. Jefferson, and the party of which he was the head. But when in power himself, Mr. Jefferson quietly acquiesced in the opinion that the institution was convenient and useful, and by approving certain laws establishing branches, etc., he even seemed to think that a bank might not be unconstitutional. Still his party refused to renew the charter in I8I I. But in I8I6 the same party, under Mr. Madison's administration, brought forward and carried the bill establishing the second National Bank, against the opposition of the party that had created the first establishment. We thus find that the political founders of the first bank opposed the establishment of the second, while the opponents of the first became the creators of the last. The late bank was indebted for its fall more to its friends than its foes. It is not impossible that the next institution may owe its existence to those who at present claim to be its enemies, or at least its opponents; opinions may alter, and policy or necessity may produce the change. We have now been ten years without a National Bank or a National Currency. The first experiment intended to furnish the better currency, was the State bank system, when the various institutions of the respective States became the creators and conservatives of the general currency. During its rapid course the greatest portion of the stock of those States that are now unable to pay their interest, was created, and prices of all commodities, and of everything that represented value, partook of the spirit of the wide-spread inflation. The better currency, as it was promised to be, was admitted by its authors to have proved a disastrous failure, long after the people, who had suffered from its operation, had come to the same conclusion. An attempt at a still better currency, therefore, became necessary; and as one extreme is sure to beget another, the specie Sub-Treasury system became the next experiment. The idea, however, of making specie alone the currency of the Union, was found to be somewhat too Spartan to find favor with the country, and accordingly the plan was never carried out in the spirit in which it was conceived, for checks and certificates of deposit and bank notes, continued to be employed in its operation, until, having been condemned by the people in i840, the Act was repealed in 1841. The next and last experiment proposed, was the Exchequer of Mr. Tyler's Cabinet; but the leading feature of Executive control, which gave it the character of a Government Bank of the worst description, destroyed its chance of success with Congress, and the Exchequer hardly found friends enough to usher it into notice. Since the crisis of I837, more than three hundred millions of State, bank and other stocks, have been stricken out of existence; and now, under altered circumstances, indeed, but with lessened capital, diminished resources, with but the shadow of our former credit abroad, and a want of confidence at home, we are -as we were, when the national deposits were intrusted in I833 to the State banks-without a system of currency. In almost every State of the Union the banking capital has been seriously impaired; very few, if any, of our Western or South-Western States can be said to have any currency at Appendix. 397 all. New England being essentially a manufacturing people, has escaped with less loss, and maintained the standard of her currency with less difficulty than any other portion of the Union. New York, however, maintained the integrity of her position, during the trying period of I839, with equal credit and success, and has since well preserved the character of her currency. The want of a sound and uniform and sufficient currency for the whole country was never greater than at present; but every State is left to its own resources to accomplish, in the best way it can, what we have always been led to consider an object of national concern. A few of the States have become enamoured of the free banking plan, as it is termed, of our State, requiring bank issuesto be based on special security. The security was allowed at first to consist of real estate and all State stocks. It is now confined to stock of our own State, and of the United States. The plan, however, is but another expedient, that may have a conservative tendency for a time, but it is likely to prove fruitful of error hereafter, for, like all expedients of this nature, it is certain to change with circumstances. During a period of restriction and want of confidence, as at present, the system tends to contract the available means of the banks, by withdrawing so much of their capital. In times of confident speculation and advancing prices, a temptation would be held out to the States to create stocks on which their own banks could issue notes, and they might thus supply the necessities of the States and uphold the general spirit of speculation. Without concert of action or unity of design, without power to create an union of strength or the means of forming any efficient co-operation, strong in one section of the Union and weak in the other, as unable to afford relief, as unwilling to share responsibility, without the power to regulate the inland or to control the foreign exchanges of the country,- the various local institutions of the different States now constitute the only source of power, not only to furnish a circulating medium, and a representative of value, but to resuscitate and preserve the currency and credit system of our extended republic. We cannot so far forget the maxims of prudence or the lessons of experience, as to suppose that a stable currency can be formed out of such materials as these, nor can we consent to surrender our previous convictions and subscribe to that change of opinion, in reference to the system, hitherto so successful, as to admit the necessity of the "odor of nationality" to-day, and describe it as an "obsolete idea" to-morrow. We believe, on the contrary, with Mr. Madison, who, in i8i6, in his message to Congress, said: "But for the interests of the community at large, as well as for the purposes of the Treasury, it is essential that the nation should possess a currency of equal value, credit, and use, wherever it may circulate. The Constitution has intrusted Congress exclusively with the power of creating and regulating a currency of that description." In the absence, however, of any effort or any intention to change the present system, our attention should be directed to such measures as are likely to accomplish the important objects of affording aid to our credit system, and maintaining the value of our currency. The system of protection to domestic industry against the efforts of foreign rivalry, whereby to prevent excessive importations, and avoid to any injurious extent an export of specie, arising from an unfavorable state of trade, is among the most effectual means to maintain the stability of the currency. And, on the other hand, an efficient aid from the general Government, in support of State credit, would not only completely restore 398 Appendix. our national credit, but immediately add a large amount of active and convertible capital to the productive means of the country. The establishment of manufactures in a country possessing the natural advantages essential to success, tends directly to stimulate industry of the most useful as well as the most productive kind. Science is encouraged to lend its aid to the arts; improvements in machinery tend to abridge labor, and reduce the cost of production. The inventive genius of the country becomes stimulated and rewarded, and we thus facilitate the progress and accelerate the accumulation of wealth. Trade being an exchange of commodities or, as it is usually termed, of equivalents, it is plain that the nation whose labor is so directed as to produce the greatest value exchanges with others to the greatest advantage, and accordingly the country which gives its raw materials in exchange for manufactures labors to a disadvantage; the power of machinery and the complicated works of art being arrayed against the labor of man and the simple operations of nature. The encouragement of manufactures in the United States, by means of protective duties, renders us independent of foreign nations for those supplies required for the consumption of the great bulk of the people, and in this way, aided by the facilities of international communication, each one supplies the other on the cheapest terms, with the various products of their respective industry and skill. As a general rule, applied to products of general consumption, home competition, when stimulated and encouraged by protection, is certain, in its turn, to protect the consumer against permanent high prices. The agriculturist therefore purchases his goods at little or no greater cost than if they had been made by the poorly fed and cheaply paid labor of Europe; while he sells his surplus produce higher in consequence of the home demand, which but for the employment of manufacturing industry would not have existed, at the same time he finds a steady and a certain market. Our grain finds no sale in Europe.* Occasional scarcity furnishes only an incidental demand, and should England open her ports to-morrow to the admission of bread-stuffs, at a moderate duty, the Baltic and Black Seas could supply her wants cheaper than we could. It is plain, therefore, that if the agriculturist finds no purchasers abroad he must depend upon the home market for the sale of his produce, and it is equally evident that he can only find purchasers among those who are consumers and not producers, and they can find the means of purchasing what he raises only as manufacturers; and accordingly it follows that, were it not for the home market the agriculturist would be unable to obtain his required supplies of manufactured articles. The planter of cotton, however, insists that he is injured by a protective tariff. For, as Great Britain requires his cotton, he could obtain directly, in return, her cheap manufactures, were it not for the protection afforded to home industry. But he forgets that our tariff secures for him another purchaser, while it opens another and a nearer market for his cotton, that increased means beget increased con* The Walker tariff bill was passed in July, 1846, and went into effect the following December. The British tariff, enacted in March, 1845, removed the duties from cotton and lumber, and the repeal of the "corn laws" in June, I846, reduced the duty on grain and provided for its entire removal at the end of three years. Schouler says of the Walker tariff: "Great Britain gained no advantage under it for which a full equivalent was not given in return. * * * Hitherto American wheat and grain had been excluded from the ports of every nation in Europe; and of flour, England, in I844, imported more than twice as much from her American colonies as from the United States."-Vol. iv.,pp. 516-5z7. Appendix. 399 sumption, while competition ensures a moderate price for the supplies he requires of the manufactured article. If no cotton was manufactured in the United States, there would be an increased supply sent to Great Britain, equal to between one-third and one-fourth of her consumption of American cotton. This additional supply would necessarily reduce the price, while an increased demand from our increasing population would have no tendency to reduce the price of her manufactures in a market of which she would then have entire control. If we estimate the present value of cotton consumed in the United States at twelve millions of dollars, the manufactured product is between three and four times that sum. Here, then, are between two and three additional values beyond the cost of the cotton, retained at home as wages of labor, and interest or profits on capital. And, in order to advance the interests of the industry thus rewarded' and of the capital thus employed, railroads and canals are constructed with a view to extend the markets for the manufactured products, and reduce the cost of transportation on the bulky articles of agricultural products, as well as of the raw material required by the manufacturers. By these means, the interest of all classes is promoted, and capital, seeking employment, becomes distributed through all the varied channels of circulation. It is not easy, therefore, to perceive how the cotton planter would be benefited by having Great Britain as the purchaser of the cotton now consumed in the United States, and the sole source of supply for the cotton goods he might require, for not only would all the advantage be on her side, but he himself would be a serious loser, for by encouraging and rewarding home industry, all parts of the Union, whether furnishing producers of cotton or of grain, or manufacturers, and therefore consumers of each, are equally and mutually benefited. The planter has an additional market and an increased number of consumers; the agriculturist is certain of a sale for his produce. Commerce profits by the increased and accumulating means of the country, augmenting both the imports and the exports, and becomes possessed of new and varied products, with which to prosecute her voyages to distant parts of the world. The capitalist becomes confident in his investment, and industry feels sure of its reward; excessive importations are prevented-the duties remain as a security on our hands, and are not exported in specie, as part of the cost of the imported article; an unfavorable balance of trade is thus avoided, and the means of the people are increased, instead of the country becoming impoverished. But a tariff of incidental or accidental protection, which looks to revenue, and nothing else, which may be high to-day and low to-morrow, as chance or necessity may determine; which is fixed and steady neither in principle nor practice; which is governed by no maxims of public policy, and designed to promote no end or object connected with the public good; -would be certain to depress the industry, destroy the confidence, and blight the prosperity of the country. We allude not to the present tariff, as a model of perfection. It seems to have been matured and prepared without sufficient reflection or the requisite information; many articles are charged unnecessarily high. Railroad iron, cheap as it was in England, when the tariff was imposed, might have been admitted at a moderate duty for a limited period. A warehousing bill should have been engrafted upon the tariff policy, as a system required by the operation of a protective tariff, and essential to the interests of commerce.* But the principle of protection is what we contend for-it is identified *The warehousing system was established by the Congress which was in session when this article was printed. 400 Appendix. with all interests, and with the prosperity of the whole country, and is absolutely required to maintain the stability of the currency. The necessity of restoring the credit of the non-paying States of the Union, on the ground of private interest and public policy, of individual character and national fame, is among the most urgent and pressing of our wants. One hundred and twenty-three millions of State stock, that appears abroad nearly in the light of the public debt of the United States, is either greatly depreciated or almost without value in the money markets of Europe. When any stock of our paying States now becomes due, it is remitted and not reinvested, while such of them as are salable here gradually find their way to this market for "sale and returns." There was a time when confidence in our State stocks abounded; for when apprehension was entertained for the financial and political state of Europe, the stocks of this country were looked to as a security beyond the reach of accident or disaster. It was then said, There I can invest, and rest secure. There have I placed a portion of my fortune. There have I secured a part of the property of my wife and children, and there, when I shall have left them, they can look with confidence for principal and interest. These were once the consoling reflections of many of the capitalists and annuitants of England and the Continent. Such was once the proud and enviable opinion entertained of us and of our country. But during 1836 and a part of 1837, that period of inflation, the States issued their stocks to create banks and construct canals and railroads, the interest on which, since the destruction of bank capital and the suspension of the public works, they are unable to pay; and the principal of which, however honest may be their intentions, however sincere their efforts, we fear they will never be able to discharge in full; for, after the long delay that has occurred, the unaided resources of those States, with the continual increase of debt caused by the accumulation of arrears of interest, will hardly be sufficient to discharge their heavy indebtedness. Are the States, then, without resources? Is there no common fund from which they could obtain relief? Has the general Government no power or right to apply that fund, or anticipate, by its own credit, the necessary means to pay the interest and secure the principal? It is quite true that the public lands present an available resource, constituting for the future an inexhaustible revenue. It is also true that we have a Federal Government, required by the Constitution to provide for the general welfare. But it is deemed improper to pledge the public lands, although they belong to the States; it is deemed unconstitutional to aid the States, because the Constitution has nowhere, in express terms, authorized the Federal Government to do so. It is true that just after the adoption of that instrument, the debts of the States were assumed by the general Government. As these debts, however, were incurred for the common defence, during the war of the Revolution, the claim of the States may have been stronger; but the right on the part of the Government under the Constitution is still the same. Then, however, the debts were actually assumed and paid — now the Government is only asked to retain, in its own hands, the security belonging to the States, to exchange its own obligation for that of the States, and pay itself, should the States still prove unable or unwilling to comply with their engagements. If an Act were passed authorizing the issue of three per cent. stock of the United States, by commissioners appointed for the purpose, in exchange for the stock of any State that should appoint commissioners to receive the proceeds of their public works, and of a moderate but certain tax, to be appropriated to the payment of the interest of the debts, pledging Appendix. 401 also to the general Government their quota of the sales of the public lands, national and State legislation would unite for the public good. The national credit would be granted until the resources of the States should render it unnecessary. The public creditor would be satisfied, the faith of the States would be redeemed, and the credit of the Union restored. The plan is simple, the means would be effectual, and the result would prove an incalculable blessing, while the existence of the national debt thus created would be known and felt only by the benefits it conferred. Yet no politician is bold enough to bring forward the measure, no senator moves in its favor, no party espouses the cause of the country. A public writer in France has said: "America could easily replenish the public coffers and pay her debts by submitting to moderate taxation. There are not in her public councils men of sufficient moral courage and patriotic spirit to brave the unpopularity of the true measures, and teach the Democracy its true interests. Therefore is the United States in a condition unworthy a free people." Yet there are statesmen among us who contend that we require no other system of currency than the one we now possess; that a protective policy is unnecessary; that the indebted States require no aid from the general Government, and if they did, that it would be unconstitutional to grant it. In the meantime it is to be feared that the debts of Texas, with its uncounted and uncertain millions, will be paid out of the public treasury or recognized as a public debt, before that of Illinois or Maryland, part and parcel of ourselves, shall be provided for or cared for, although they have the means, by a pledge of their portion of the public domain, to provide ample security for the final payment of their debts.* The sentiment of love towards our country, and of pride in her institutions, has its origin in the best feelings of our nature. But it requires to be strengthened by experience, and sanctioned by our understanding. Our early affections, sustained by the consciousness of the diffusion of the benefits and advantages conferred by equal laws and liberal institutions, strike their roots broad and deep, as we become convinced that all feel the influence and share in the blessings of a well-administered Government. An enlightened constituency, whose dearest rights and interests are at stake, are entitled to expect not only good intentions, but a reasonable share of intelligence also, on the part of their representatives in the national councils. But where is our hope, when we find that the prostration of State credit is treated with indifference? That no effort is made to redeem our character, while our name is becoming a by-word and reproach among the nations of the earth? Is there no fear that at last, as a people's confidence is shaken, their attachment may become weakened, when they find that no measure is proposed, none likely to be adopted, to retrieve the sinking honor of the States? Must we become still more and more convinced, by sad and dear bought experience, that this cruel neglect, this willful indifference, has not only prostrated the credit of the nation, and injured the character of the people, but that it must tend inevitably to tarnish the fame and undermine the foundations upon which are to rest the future happiness and prosperity of our country. *Texas was finally paid $Io,ooo,ooo to relinquish her claims to territory beyond her present boundaries. 26 11 - -.- I -- -.1 ------- --- --- - - -1. I I I i i i i I I i 'a Rd. UNIVERSITY OF MICHIGAN 3 9015 02327 6911 a" S U:' 'El U: m.t gpg 6-U $ I m