On this page
- Adverts (1)
-
Text (1)
-
Untitled Article
Note: This text has been automatically extracted via Optical Character Recognition (OCR) software. The text has not been manually corrected and should not be relied on to be an accurate representation of the item.
-
-
Transcript
-
Note: This text has been automatically extracted via Optical Character Recognition (OCR) software. The text has not been manually corrected and should not be relied on to be an accurate representation of the item.
Additionally, when viewing full transcripts, extracted text may not be in the same order as the original document.
Untitled Ad
of liolicy-holders as between themselves , but alsain relation to fee shareholders in the Company . The Commissioners have no right to go beyond the simple fact of ascertaining whether there W sufficient funos and property belonging to the Company to meet its engagements with the public ,-that is the policy-holders . It fs patent to every one attending to such matters that the shareholders m some of our most respectably conducted offices have had to sacrifice a large portion or the whole of their capital , ' but the engagements entered into with the policy-holders ^ were atm scrupulously kept . The risk of the shareholders losing their capital is undertaken by them with their eyes open , and is well understood when they engage in the venture . Let us now reconstruct the balance-sheet in page S j With the corrected materials supplied in Table A , relative to the first line of results in the Table at top of page 5 , and leaving all the other figures in the latter Table undisturbed . Invested capital on the 30 th Nov . last , as _ will hereafter appear ( see also note . nage 5 ) . . £ 192 , 397 . 0 J ~ Reserve necessary to : meet claims under policies , as per partially corrected results In Table top of page 4 58 , 408-940 Difference or surplus • • • £ 133 , 928-752 This result , although as will hereafter appear not placing the aspect of the Society in the best light , is still widely different from that of the Commissioners , who convert the surplus into a deficit of £ 222 , 236-456 . It may also be here mentioned that I have calculated the assets and liabilities of the policies set forth in Table A , according to the Table of Mortality which is most extensively used by Life Offices in this country , namely , the Carlisle Table , and find the results by it to exhibit a difference in favour of the Society over that adopted by the Commissioners of £ 22 , 821-52 . The detailed calculations are given in Table B . .., / . We shall now endeavour to explain the cauBe of the disparity between the results set forth in the last column of the Table in page 4 of the Commissioners' report , and those arrived at in Table A , already described . It has been pointed out that the Commissioners make the reserve under the first line in the Table at the top of page 4 , £ 289 , 311 -22 more than that determined by Table A , or exactly a difference of 32 percent . In page 14 of their report , the Commissioners say :- ^ "A provision is made for expenses and dividends , by adding to the mathematical premium what is called . a loading , which , in the Case of the International , is 33 per cent , when the policy holder participates in . profits , and 20 percent , when he does not . " - ' ¦ •' This statement viewed in connection with , the results of Table A , arid the Commissioners' figures in page 4 , make * itevident that they have in their calculations deducted frona the present value of the future premiums payable , somewhere about 32 or 33 per cent . But granting to the Commissioners , for the sake of illustration , that they are entitled to deduct the full margin of the loading on the premiums , it does not follow that because the loading is 33 per cent , there should fall to be deducted from the present value of the premiums also 33 per cent . The full loading of 33 per cent , on the original or mathematical premiums , as they term it , will only form a margin to be deducted from the gross premium of 24-8 per cent . In order to replace the original premium before loading , and yet the Commissioners , evidently blind to this simple principle , have actually deducted 33 per cent ., and thus viomtcd their own principle of valuing only net premiums . That you may have no misgiving as to this fact . it is only necessary to read the six lines in continuance of the last quotation from page 14 of their report , which ifl a deliberate statement that because the loading is 20 per cent ., or one-fifth ,-so also must the deduction be one-fifth ; whereas the true deduction to restore the original premium should be only one-sixth part of the gross premiums . It is certainly to be lamented that men , evidently unacquainted with the mere elementary principles , should bo permitted to preside over those interests entrusted to the Massachusetts Commission . Seeing that the data necessary to check the results given in their report arc withhold , and that they misapply the simplest laws of numbers , it is impossible to have any faith in their opinions , or in the results of their calculations . The Commissioners have evidently deducted 33 per cent , from the gross premiums , in order to arrive at the figures bo often referred to in page 4 . Let us examine the real practical effect of this , and adopting their own theory of not anticipating any portion of the loading , it will bo found that according to their own showing , of taking the loading on the profit policies at 33 per cent ., and the others at 20 per cent ,, ft will yield an average loading of exactly 31 ' 02 per cent , on the whole life policies in the aggrogato : but the deductions of 33 per cent , actually made by the Commissioners is equivalent to nn original loading of nolens than 49 25 per cent ., so that they have actually deducted 6877 per cent , moro as loading than according to their own principle they wore entitled to do . The loading being , according 1 to their own admission 31 * 02 nor ceut ., It is obvious that a deduction of 23-08 per cent , from tlio gross premiums will reproduce the original premiums , ana if tlio Commissioners had understood their « wn principle , ' this is all they should havo deducted from tlto present gross value of the future premiums payable under the policies . If wo refer now to the last column of Table A we shn . ll find that the difference between 33 per cent , and 23-08 por cent , of the gross valuo of the prcmiuma ia no loss than £ 84 , 242-710 . This hirgo amount of Indebtedness is , by tho Report of the Commissioners , fixed on your Society in direct violation of their own principles , and tho reputation and credit of tho Institution made to suffer by n blunder which any ordinary clerk would havo boon . careful to avoid . After the disclosure of tho preceding error to tho extent of £ 84 , 2431210 In tho first Item only of tholr valuation , given in page 4 ortho report , you may , perhaps , consider it unnecessary that I should extend my observations on their report any further , and that I should proceed at onco with my own valuation of tho aasotB and llabilitioa of your Society . It Is , however , importaut to ulhulo to one or two other questions raised in tlio report . It In stated inpagoS that •« tho further probabla premiums , discounted at 4-por cent ,., with a proper allowance for futuro expenses and contingencies , will bo Inauiuoiont to moot all tup payments near and far on the various contracts , " Thin raises tho Important question what is a proper amount of allowance for expenses ? and are the * Commissioners tho host Judges , and tho moat competent to decide upon It . ? or should it bo loft to tho decision of thoao actually entrusted with the praotioal management of your affairs , and whoso moans ana property are responsible for the fulfilment of tho Society ' s oiitmffomonta ? As . already stated , tho Com-
Untitled Article
TS ^ iibl . Oct . 29 , 1859 . 1 THE LEADER . 1209
-
-
Citation
-
Leader (1850-1860), Oct. 29, 1859, page 1209, in the Nineteenth-Century Serials Edition (2008; 2018) ncse.ac.uk/periodicals/l/issues/vm2-ncseproduct2318/page/21/
-