The annual statement, December 31, 1893, discloses : The premium income of the company in 1893 was $1,989,302.51, and its total income, $2,120,968. The National has received in premiums since organization, $15,091,395, and has paid in losses $7,880,792. National Fire and Marine Insurance Company, Elizabeth, N. J. Organized 1865; capital, $100,000. A. Clark, president, E. N. Marsh, secretary. National Fire Insurance Company, Allegheny City, Pa. Organized 1866; capital, $100,000. H. M. Boyle, president, H. M. Schmitt, secretary. National Fraternal Congress. The seventh annual session of representatives of fraternal beneficiary associations of the United States was held at Cincinnati, O., November 21 to 23, 1893. M. G. Jeffries presided. The secretary presented tables showing the membership and transactions in the preceding year of forty-four fraternal associations. The total benefit membership, December 31, 1892, was 1,344,004; social membership, 18.873; benefits paid on deaths during the year, $27,195,275; total benefits paid, $27,774.283; total receipts, $29,410,166; total expenses, $1,476,624. [See Fraternal Beneficiary Societies, Membership of.] Officers for 1894 were elected as follows: N. S. Boynton of the Knights of the Maccabees, president; S. A. Will of the Heptasophs, vice-president; O. M. Shedd of the Order of United Friends, secretary and treasurer. It was voted to hold the eighth annual session at Buffalo, N. Y., Nov. 20, 1894. National Insurance Convention. The twenty-fourth annual convention of the state officials having supervision of insurance was held at Chicago, Ill., September 12 and 13, 1893. The first gathering of these state officials was in 1871, at the instance of George W. Miller, then superintendent of the New York state insurance department. He issued invitations to the officials of other states and territories, and they met at New York, May 24, 1871. Eighteen states were represented. Mr. Miller was chosen president, and Col. Henry S. Olcott, then a New York journalist, was chosen secretary. Mr. Miller, on taking the chair, stated that the object proposed in calling these officials together was to secure, if possible, uniformity of action in those matters which were discretionary with them in the supervision of in surance, and to promote, through their efforts, such legislation as was desirable to improve and protect the business. The title of the organization adopted was the "National Insurance Convention." The first session lasted nine days, and there was a second session held in October of the same year. A report of the proceedings, which were long and varied, was prepared by the secretary, Mr. Olcott, and published in two volumes of about 800 octavo pages. The following table gives the names of the officers of the convention elected at the close of each meeting since its organization, and the successive places of meeting: H. S. Olcott, N. Y. 11871 New York, 2 1871, New York, 31872 New York, 4 1873 Boston, 51874 Detroit, 6,1875 New York, 71876 Harrisburg, 81877 St. Paul, 9 1878 Providence, 10 1879 St. Louis, 11 1880 Chicago, 12 1881 Detroit, 13 1882 Niagara Falls, 14 1883 Columbus, 15 1884 Chicago, 16 1885 Chicago, 17 1886 St. Paul, 18 1887 Niagara Falls, 19 1888 Madison, Wis., 20.1889 Denver, 21 1890 Cleveland, 22 1891 St. Louis, 23 1892 St. Paul, 24 1893 Chicago, J. W. Foard, Cal. Geo. W. Miller, N. Y. L. Breese, Wis. H. S. Olcott, N. Y. These officers were elected at the close of the meetings held in the cities preceding their names, and they officiated at the next succeeding annual meetings. Actuary Aug. F. Harvey of Missouri is the only official still in office who was present at the first session of the convention. At the twenty-fourth annual session at Chicago, President Linehan was in the chair, and the following representatives of insurance departments were reported as present: Connecticut Burton Mansfield, commissioner, and J. H. Sprague, deputy com missioner. Illiniois - Bradford K. Durfee, superintendent and J. J. Brinkerhoff, dep. uty superintendent. Indiana - G. W. Duke, chief clerk. Kansas-S. K. Snider, su perintendent. Kentucky Henry F. Duncan, commissioner. Maine J. O. Smith commissioner, and William D. Whiting, actuary of the department. Maryland - T. B Townsend, deputy commissioner. Massachusetts- George S. Merrill, commissioner and W. S. Smith, deputy commissioner. Michigan-T. F. Giddings, commissioner, Minnesota-C. H. Smith, commissioner. Missouri - Aug. F. Harvey, actuary. Mon tana-A. B. Cook, auditor, New Hampshire-John C. Linehan, commissioner. New York Isaac Vanderpool, chief clerk of the department. Ohio-W. M. Hahn, superintendent. Pennsylvania- George B. Luper, commissioner, and S. W. McCulloch, deputy commissioner. Rhode Island - W. H. Brines and C. H. Arnold, clerks. Wisconsin W. M. Root, commissioner. There was also present ex-Commissioner Norman of Kentucky as a visitor. Superintendent Durfee welcomed the delegates to Illinois, and Commissioner Merrill responded on behalf of the convention. The president, Commissioner Linehan, in addressing the convention, said that among the unsettled questions to come before it were: First To secure a uniformity of blanks. Second-To secure, as far as possible, uniformity of legislation. Third To secure uniformity in the execution of insurance laws. There was another matter to which he would invite attention, that of the examination of companies of other states. Although a commissioner has a right to make an examination, such right ought to be exercised only under the most extreme necessity, and such a necessity could exist only when the insurance department in which the company is located neglects, if called upon, to make the examination. He would like to have some rule adopted, so that they could work together without placing an additional tax on the companies. And in the end it is the policy-holder, and not the company, that has to foot the bills. After the appointment of standing committees the convention adjourned to the following day. At the beginning of the second day's proceedings, Mr. Vanderpool, from the committee to which was referred, at the last convention, the paper read by Mr. D. P. Fackler, proposing the limitation of the business of life insurance companies, submitted a report, saying that the committee held a meeting in New York to discuss the question, and had also communicated with each of the life insurance companies asking an expression of the views of their officers. Responses were received from about half of the companies addressed (the three largest companies not being among them) and all were unfavorable to the action proposed. The committee said: It is the opinion of your committee that interference by legislation of the character suggested by Mr. Fackler is not such as they would care to report favorably to this convention. To initiate legislation in the direction proposed would be practically an impossibility. While this may be no argument against the propriety of endeavoring to pass laws in the various states that would prohibit companies from soliciting new business where their assets had reached the sum of $200,000,000, yet it is the belief of your committee that this convention, through its commissioners, could not with propriety suggest the enactment of statutes undertaking to deal with the question treated of in Mr. Fackler's paper in the manner he suggests for the correction of the alleged evil to which he refers. The committee therefore begged to be discharged from the further consideration of the subject. The report was signed by George B. Luper, George S. Merrill, and Isaac Vanderpool. On motion of Mr. Harvey the report was adopted by the convention and the committee discharged. From the committee on rates of interest and mortality, majority and minority reports were submitted. The majority report, signed by W. D. Whiting, George B. Luper, and Joseph H. Sprague, was as follows: After giving considerable attention to a study of the probable future rate for interest, and to the opinions of others thereon, the undersigned members of your committee on "Rates of Interest and Mortality," to which the subject was referred, have arrived at the following conclusions: The gross rate received as interest, dividends, and rent upon life insurance investments is economically divisible into three elements: a The net price paid for the use of the funds invested, or pure interest portion. The premium for insuring the return of the principal and payment of interest, which is equal to the loss to the lender from taxation, unavoidable accidents, unstable government and laws, peculation, and insolvency of borrower. c The cost of investing, keeping accounts and collecting, including loss of time in investing principal and interest. The net rate (a) is governed by supply and demand - by the amount of capital in the market and the needs of borrowers. It is always highest in new lands where there has been insufficient time for needy settlers to make much accumulation. As these accumulate wealth of their own according to their thrift and energy and the natural resources of the country, if new immigration or the excess of births over deaths be not more rapid than said accumulation, they will gradually pay off their loans from abroad and the net rate of interest will ultimately fall as low as that which obtains in old countries. If the population reaches a stationary, or nearly stationary point, or the people are unusually thrifty and intelligent, or their soil and climate is unusually good, the rate is likely to go lower than that abroad, and they will finally enter the ranks of creditor nations. As countries grow older and more settled, the laws and government tend to become more stable and the protection to property greater and cheaper. This tends to reduce the second element-b. In regard to the third (c), the cost of handling investments, it likewise tends to become less as countries grow, not alone because of the greater dissemination of banks, clearing houses, exchanges and other means of making cheap and quick collections and investments, but because of the greater size of institutions. One million dollars can be more cheaply handled, per dollar, than one hundred thousand. Thus it would appear that all the parts which go to make up the gross rate of interest tend to decrease with time in a new country as it becomes fully settled. The history of this nation not only offers no exception, but strikingly confirms this well recognized principle. Taking its census returns we find : The rate of increase in population during these decades, thirty years apart, has decreased 30 per cent., and the rate of interest has decreased 28 per cent., a concurrence truly remarkable. At this rate of decrease, the ratio of increase for population for 1940 would only be one per cent. per annum, which is about that of European nations. It is not unlikely that our rate of increase will drop off more rapidly than heretofore, as public sentiment is in favor of restricting immigration, and much of our unsettled territory in the far West is so barren that it may well be considered doubtful that a greater population than the 140,000,000, which would be attained in 1940 at present decreasing ratios, could be comfortably maintained. . . As a whole, taking the usual proportions in which life insurance investments are made, one per cent, on the principal for cost of handling and risk is a conservatively fair estimate, taken over a term of years which embraces both inflation and depression periods. Therefore the present five per cent. gross interest dividends and rents received only nets four per cent. gain, and the four per cent. gross rate which may be expected to prevail in the eastern and middle states thirty years hence would only yield about three per cent. net interest. The immediate question is how to adjust the reserves so as to meet this decline. The present large volume of business upon the companies' books is based on premiums and reserves calculated upon the assumption that four cent. net interest will be obtained from the date premiums are due, during the continuance of these contractssome of which will be outstanding for more than fifty years. If this business be put upon a three per cent. net basis the margin left in the office premium is hardly sufficient to pay current expenses and make a respectable dividend it is wholly insufficient on non-participating business. Likewise the immediate increase in reserve needed for the change would more than wipe out the surplus of some companies. A change to a three and one-half per cent. net basis might be at once made without too seriously impairing the margin and surpluses of the companies; and another drop be made again in fif teen years to a three per cent. net basis. The objection to this is that it creates twice as much disturbance of business and calculation of standards, and involves a double amount of legislation with less chance of concurrent action by the several states-a most important consideration in any fundamental change. It would seem best, and such appears to be the majority opinion of the companies themselves, to let the old business stand upon its four per cent. basis until it runs off the books by death, maturity, and lapse, and to put the new business only upon the lower rate of interest. If the new business is thus put upon a three per cent. net basis, it would gain on an average one-half per cent. during the thirty years through which the rate was falling from four to three per cent., and thus act as a set-off to the corresponding loss of one-half per cent, on the old business during this period. At the end of this thirty years the old business will have nearly disappeared, and practically all of the business will be upon a three per cent. standard, without having disturbed the original basis upon which the policy contracts were calculated. It may be objected that to use the interest gains on new business in order to make good the interest loss on old, is inequitable between members. This is not a question for state departments to consider, but a matter of internal adjustment by the companies in making up dividends, according to contribution among members. Much of this difficulty can be cured by charging old members for loss on interest against their mortality and margin gains; besides the present surplus (which belongs to old members), may be used as far as it will go as an offset. It should likewise be borne in mind that new business is scarcely ever charged with its due proportion of initial cost, and a slight contribution from its interest gains to the older members, who share their greater expense, would not be unjust. The matter of a new mortality table was likewise referred to your committee. Those in use for state standards are deficient in several particulars. They are above the present and prospective rate of American mortality for the insuring classes, and omit to give any figures for ages below ten, now in demand for industrial insurance. Again by reason of heavy lapsing at old ages and the few lives under observation, these tables terminate too early and are defective for computing annuities; a class of business rapidly increasing and constituting the chief use of the tables at advanced ages. The two tables, which avoid these defects and most recommend themselves for use, are those known as Farr's Healthy Districts for Males, and the HM table as graded and extended by the Institute of Actuaries from birth to 102 in its Text Book, part 2. Either of these tables is well calculated to answer the purpose and offers a distinct improvement upon the combined experience (seventeen offices) or the American table (Homans') now in use for state department purposes. Our preference, however, is for Dr. Farr's table, as it more nearly approximates the latest American experience (Meech) and is entirely free from the effects of either medical, lapsing, or other artificial selection. Some comments have been made upon using gross premiums' valuations, instead of net or some modification thereof, in adopting a future system. So long as many contracts, such as tontine and ten-payment whole life, guarantee surrender values equal to the full net reserve; and so long as nearly all contracts either by express terms or through the operation of non-forfeiture laws, require the companies upon surrender to give values equal to the full net reserve, less an amount which only slightly, if it at all, exceeds the loss by withdrawal; it would seem wholly impracticable to abandon the system of net premium valuations. In conclusion we would offer the following recommendations: That new business written on and after January 1, 1896, be valued upon Dr. Farr's table of mortality for males derived from healthy districts, with interest at three per cent. That the valuation be made upon the net premium method. The minority report was signed by Aug. F. Harvey and W. S. Smith, and was as follows: A. F. Harvey and W. S. Smith dissent from the recommendation of the report that the interest rate for premiums and reserves be reduced from the present standard. The report itself states that the decline from present rates of interest need not be expected to reach four per cent, within the next thirty years, and is, therefore, its own best authority that no present change is called for. While admitting that the reserves will continue to earn four per cent. for the next generation, the report claims that the reserve basis should be reduced to three per cent, in order to allow a margin of one per cent, for expenses and losses upon investiments- entirely ignoring the fact that these charges are specially provided for by the loading on the premiums and the surplus, so that there is no need at any time of taking any portion of the interest on the reserves for these purposes. The analogy does not hold to the affairs of saving banks and trust companies, where no separate provision is made for expenses and losses, and where these charges have to be met by interest earnings. We also dissent from the recommendation of the Farr or the Institute HM Table of Mortality, because its adoption would commit the convention to the absurdity of |