Leader (1850-1860), 29th October 1859, Edition 2 of 2, Page 21, No. 501. Oct. 29, 1859.] THE LEADER. 120...

~ l — i- ^ mo ™ o « WwPPn themselves bat also rela- missioners have taken matter into their own hands , and vrita tne luture aione . a nave now betorc me reports by of P ° X- ll ffL *? d 5 r «^^? i : e Gomnany The Commis- deducted a margin future expenses , wbich is equivalent those leading : Actuaries of the day who are in the largest tiontothe 8 h » r ^^ 8 ^ *^ nd t ^ e 8 ? mDlfe fact of ascer- to a loading on the original premiums of 49-25 per cent , practice , in all of which the gross premiums are valued and sionershaveno right to go beyond taesimDiew ^ w , TnJ 8 is aproceeding- which , IbeUeve . it is Impossible to get treated as contingent assets . The Commissioners are not , tainmg whether there are silent lunas ^ ano ^ prop ^ ^ authority in the kingdom to sanction , anS is besides a therefore , safe in assuming as a matter of course that their belonging to ^ Compw -to meefr itt fffifigggffio every larger rati o than they tfiemselves argue in favour of . If it valuati on canjbe justly , and with the uniform sanction of the pubhc-that is ^ P ^ H" * £ _!; weffiers in some is to bo distinctly kept in view that the valuation relates to authority , made on tlie new premiums only . . one attending to suchmattersthat . W ™ um ^ lt acquired business only , and does not in any way affect the While ott this part of the subject . it ^ may be as well to © four most respectably conducted ° 5 ^ na ^ J | t a ^ ' Dut the new or future business , it will at once appear ' that refer to a Question of great practical importance to a Life flee a large portion ¦ & £ &¦** £ ? * £ * do icv ^ olders were a small portion only of fte expense annually incurred Office , and which , in a most material degree affects the engagements entered into witn tne P ° ' J " x ' J ~ r 0 ,. " - „„ i fifi * Office is ^ Bftrnsinncd hv nursins- the prosperity and success of the best conducted Companies , stiOorupuIously kept . ' Jteylsk of U ^ ahar ^ Merfl losing by a * gf , ^>»^ ls S * OTet ) There is an ^ xcelf and thatTs the profit derived from lapsed and discontinued ' their capital is undertaken by them with their eyes ppen , »> reaay ^ S . " , ¦ u wr * at ion of the expenses actually policies . This question is fully treated in pp . 193—7 of the and is weU understood when they engage m the ventu , e ent Practical ^ tration of ^ thc ^ expenses actuary ^ . EdIt ^ .. ^ ^ StaVMn whloh lt ta . BtowhtI « tln Let us now reconstruct the balance-sheet iB » se 6 . witti of the various Indian Funds , the Fensions of the principal London Offices reported on by the Committee oi the corrected materials supplied in Table A .. ^^ < £ * " £ ¦ which are paid in England to the exten t of nearly h alf-a- Actuaries , the amount of prcmiuins . received onthose first line ofresults in the table at top of pa ^ e 5 , and leaving mi ] lion ate ? , ing yearly . To superintend the payment of policies which were discontinued from other causes than by all the other figures in the latter Table undisturbed . h pensionsVere is needed a much greater " amount of death , was equal to sixty-nine per ceniL of ^ he whole sums ¦ ¦ „ „ , f na time , care , and attention than is necessary for the collection paid for claims by death m the same Offices . Some , Ofthe Invested capital on the 30 th Nov . last , as _ of renewal premiums by a Life Office , and yet the London more modern Offices have paid the whole of their death willhereafterappearCseealsonote , page 5 ) .. £ 102 , 397 . 692 ^ ents of these Funds are content to do all that is required claims arising over ten or a dozen of years by the receipts Reserve necessary to meet claims under for an allowance of 1 per cent , on the disbursements , from lapsed policies within the _ sameperiod . . policies , as per partially corrected results ¦ 4 fi Q . Beyond its expenses at head quarters a Life Office has of It is obvious that the sixty-nine per cent , just mentioned in Table top of page 4 58 , 468 040 £ > y » to riieet the commission on such of the renewals is not all profit to a Company ; still those practically £ 113 928-7 ^ as pass through the hands of agents , but making all allow- acquainted with such matters are fully awarei of fts forming Difference or surplus ; fcl 33 - 9 ~ 8 75 ~ ances it is impossible to make ^ e tax for expenses on the a very important source of gain , and is one of the causes ol This result , although as ;^^ ^^^^& ASSS ^&&^^ the aspect of the Society in the best light , js still widely Jheir ratio of 49 ^ 5 per cent . Any such deduction as that on , that one of the highest authorities in such matters haa differeSt from that of the ^ Commiss . oners , who convert the ** € « ** £ * *»* 5 jrer cent fg * ^ emium 8 for ex _ recently felt himself ftistified to advising one of the . most surplus into a deficit of £ 222 , 236-456 . senses would b £ an act of gross injustice to existing policy nourishing Offices of the day that they may fairly , hi the Tt may also be here mentioned that I have calculated the holders , and have the effect of admitting future entrants calculations of their eontingen ^ sets , ^ delude as a conasse ™ and liabilities of the policies set forth in Table A , into the Society on easier terms thanthrir predecessors . Btantly accruing yearly increment ,, at certain ratio of the accordin g to the Table of Mortality which is most exten- The admission of new assurers into all Companies costs receipt *! from lapses , as determined by the experience of aively used by Life Offices in this country , namely , the more than the margin on their firs * year ' s premium , and preceding years . -ama ~ t # « , « - „„„ CarlfsleTablefand find the results by it to Exhibit a diffe- mu 8 t be therefore repaid out of the margin on future /^ aye- ofltagd these ° h ™™ tio ™ ™ * % * £ ?& ^ n ^| rence in favour of the Society over that adopted by the premiums . as the most fitting reply to the very unoflicial language Sv ^ S / £ 2 Z ^ 52 ' ^ ne detaUed calculations are % he C 0 mmi 88 ioners apparently wished in their calcula- " ^& SK $ ZS _^ given in Table B . _ . tiyng ^ determine the value of the net premiums * although ofadetailed valuation of the assets and liabilities of your ^ We shall now endeavour to . explain the ¦ causeof J ; he they have not succeeded in doing so . Let us , however , cansi- society as on the 30 th t > f November last , and in doing so disparity between the results set forth m the last column of de / whether a valuation of net premiums is really that which wm append the calculations themselves , so that the process the Table in page 4 of the Commissioners' report , aad those in ju 8 tice ^ as required , or which is sanctioned by practice . by " vh ° ch theJresults are obtained may be fully understood , arrived at in Table A ; already described . Calculations intended for the public security do not require and the means afforded of checking any of the Bteps in It has been pointed out that the Commissioners make to be made in the analytical forms which maybe needed for detail in order to thoroughly satisfy yourselves and others the reserve under the first line in the Table at tne top of the regulations of many of the internal affairs of a Com- ofthe ! sufficiency of all the conclusions arrived at . page 4 , £ 289 , 311-22 more than that determined by Table A , pany ; but still it is Avell known that many orour wealthiest , j n makino-these calculations I have adopted a Table of naoror exactly a difference of 32 per cent . In page 14 of their largest , and undoubtedly best established Offices , even for taijty whicB I believe to be a better exponent of the mortality report , the Commissioners say : — the adjustment of their own interests as among- the mem- to wnich the Society will be subject than any other , "A provision is made for expenses and dividends , by bers themselvesas well as with the public , have always namely , the rate of mortality as experienced by male lives addlrijy to the mathematical premium what is called a valued the gross premiums , and still continue to do so . It in _ < yian ( i and Wales , and giyen in pp . 2—6 of " Cont . Tit . loading , which ; in the case of the International , is 33 per is held that the whole of the premium is as completely and stat . ' -cent when the policy holder participates in profits , and as entirely the property of the Society as a part ot it , and Th } s Table has the additional recommendation of assimi-20 per cent , when he does not . " there is as much right to calculate on receiving the one as the lating closely with that irom which , I understand , thepre-JT .. . ¦ . ¦ ... ,. > . ¦ -+ 1 , + t , — . crtfo r . f other . A few years ago two able papers ^ were read before mimS 8 m use by yonr Society have been deduced , as-well as This statement viewed in connection with the results of tne rnstitute of Actuaries by one of its leading members , t ^ ^ ni cn your own valuations are from time I to time made , Table A , and the Commissioners' figures m page 4 makes j nsi 3 ting on a valuation of the gross premiums as being the n imelv an adjustment of the Carhsle Table , ' so as to avoid itevident that they hayein their calculations deducted irom correct wav of proceeding ; and that any other is merely tne 'rf vrnawn irregularities by wliich the curve of that the present value of the future premiums payable , somewhere dealin" -with a fiction , and not with facts ^ It is quite true Table is marked ° ' about 32 or 33 per cent . But granting to the Commissioners , that t % r 80 me purposes of a Life Office there are also The rate of interest employed throughout the-Whole of the for the sake of illustration , that they are entitled to deduct Actuaries who employ net premiums , when they are called eaiCutetions is 4 » er cent the full margin of the loading on t ^ e premiums , it does ^ upon to adjust past transactions , as in assigning a bonus . The calculations ' are given in Tables I . to IX . infollow that because the loading is 33 per cent , there should - for example , wliich may have accrued from the profits of ciu « iVe and the follo-winff is a condensed summary of the fall to be deducted from the present value of the premiums former ye ^ rg . but the Commissioners * figures avowedly deal r iauu !' . !! i ° "cn ™ n & is a conuenaeu Humiuary oi tiie also 33 per cent . ** " The full loadiug- of 33 per cent . on the original or mathe- ¦ :. SUMMAKY . matical 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 origiual premium before loading , and Number Atnnimf . Present Value Annual Present Value yet the Commissioners , evidently blind to this simple prin- Class . of Assured of Amount Premiums . of Annual ciple , have actually deducted 33 per cent ., and thus violated Policies . Assured . Assured . XI """" Premiums , 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 is a deliberate state- A 2 , 410 £ 1 , 202 , 332 ^ 535 , 85823 £ 38 , 597-631 ^ 6512 , 708-52 mentithat because the loadingis 20 per ^ cent ., or one-fifth , a .... 1 , 226 568 , 037 231 , 15891 19 , 710-154 280 , 209-34 so also must the deduction be one-fifth ; whereas the true < j 720 292 , 707 132 , 25709 9 , 468-626 119 , 726-53 deduction to restore the original premium should be only D ( Keversionary bonus ) — 39 , 451 19 , 53007 — , r " ^ «« one-sixth part of the cross premiums . It is certainly to be Joint lives 50 10 , 440 9 , 21321 814-283 10 , 452 f » 0 lamented that men , evidently unacquainted with tlio mere Longest of two lives -.. 19 10 , 040 2 , 94043 144058 ?* 5 ? 't 5 elementary principles , should be permitted to preside over Contingent assurances 13 7 , 995 1 , 330-24 160-650 1 > JS ' 2 S those interests entrusted to the Massachusetts Commission . Endowments at 20 and 21 7 811050 62379 22017 I * Seeing that the data necessary to check the results given in Kndowments or sooner 14 4 , 050 2 , 22172 211-921 2 , 203-87 their report are withheld , and that they misapply the ¦ short terms 143 63 , 55-1 518-G 4 1 , 037-275 — simplest laws of numbers , it is impossible to have any immediate annuities 4 per cent . 172 ao . 114-700 44 , 292-87 — — faith in their opinions , or in the results of their calcula- Two joint and survivors 4 per cent .... 4 ri 87000 74282 — — tions . - Deferred annuities at 50 38 | 542-825 4 , 27187 165-238 1 , 201-69 The Commissioners have evidently deducted 33 per cent . „ „ 55 50 | %£ W' HISW ?«&»» ' i'li 9 < M from the gross premiums , in order to arrive at the figures „ „ 00 42 o 1 , 031 -321 5 , 29644 1 » 5 8 W 1 ^ 17 0 * so often roferrca to in page 4 . Lot us oxaminq the real „ „ 65 16 ^ 3 S « 1 ' *™* S 3 ?^ 9 * g 2 g BPSl ^& £ i £ && 'i 2 urttR' ? L Kcva , ic » A » nU , ty !? :::::::::::::: I " \ ' » 88 ? ^ at 20 per cent ., ft will yield an avorago loading of oxnotly Less re-assurancos — 33 , 200 ^ 000 17 , 43675 1 , 270-204 _^ 14 , 48772 ' bVftCdStToVs ^^^^^ ^^ 8 " ~ i 2 Ti ^ ii ^ ^ 980 , 306-81 - TmS ^ W 1 ^ 8 , 697 ^ Commissioners ls equivalent to an original loadingof no less I ; ¦ than 49-25 por cent ,, ho that they have actually deducted " ~~ " 68-77 per cent , more as loading than according to their own investments on the 30 th November , 1858 , no por annual stutement 102 , 397-CD principle they wore entitled to do . ——— TUo loading- being , according- to thoir own Admission . ^ Han" ^ . ™ 31-02 por cwt ., it ls obvious that a deduction of ii 3 C 8 por . Liabilities . , « gw , « wo w cent , from tho gross premiums will reproduco tho original . ¦ innn / 5 iw . «« premiums i and if the Commlasionors had understood thoir Surplus , tfiJW . ouaBu own principle , this is all they should have deducted , — from tno proaent gross value of tho futuro premiums payable ~*~ . : ________ — . SKS ^ JfilSaiiiif W £ & 7 ^ 3 tt ^™& . * L 088 * **• od - roducod PremI »^ 9 - : 8 O ' . cent , and 23-08 per cont . of tho gross value of the prerotumn _<] i > . 528 ' 449 is no less than _ S 4 , 242-71 » .. Thla largo amount of indebted- ; ^ neso is , by the ltcport of tho Commiaslonore , flxoq on your -.- «„„„ * « - . ua Society In diroot vlolaUon of their own prinoiplos , and tho An examination of tho results given in , the preceding- vlow that tho flcrorea represent simply the present ; or _ disreputation and credit of tho institution made to B «« T « r by a nummary shows that tho " proaont value of tho ourplus of tho counted value of tho surplus , and not its ultimate magnitude , blunder which any ordinary clerk would havo boon careful groes naaota of the Society ovor He liabilities Is . # 130 , 008-80 . „„ - „« % , i nYnminntlon of these flcuros must satisfy ovory S £ SKr J ^^ W ^ ff &^^&^ JSi ^ Ther . Ifl one circumstance connected with these results on £ ^ iS _ % WAJw ^ cfv 25 in naou 4 of tha roiort ^ vou ^ v n ^ rhana conBidor " i w » io " cannot fn \\ to bo satisfactory , particularly after tho ABsuranoe Hoolety lms ftmplo flniwotol roavniraeB ^ Ithta a _^® _^ _ Ss _& ff __ lH 5 £ ^ = r ^_«^ other atiofltlonfl rni _ edi in the ronort complete ignorance of tho results of a similar valuation by o ittto the vnluo of crrontftna unequalled mathematical talent , oinor q » o 8 « ono raised in tne report . » e Aotuary , Mr . Woolhouao , yet the two florlos of ft js au to uiVneooBsary to say one word in support of a ffon-It la stated in page a that "the further probable prenil mnn , ofti 0 Ulatlon 8 agree in a aomowhat romnrfcablo manner . tloman no much admired wid roapootod ae Mr . Woolhonap for S »! _ 35 I _ 3 KS 3 _ S _ H _ _ w _» jk ^ - _ m ! m __ p __? j ^ oosfcludffoH ancuEo moBt oomnetont to docYdo iinon It ? o ? however Hald that the Sooloty does In fact , roallso five por thoir own dlffnlty nor fflvc wolffht to their report . with tho practical management of your affaire , * nnd whose jjolnff bo . It wmld nroduoo a dlflnnpoiioo In t )» o Sooloty a Your most obedient Servant , meann anS property arc reaponfllblo for tho ( ilmiinoHt of favour . In present valuo , of at loasfc ^ flO . OOO , , „ .,, . f 1859 F G P NBiflOlf . the Society ' s ongaffomonta ? As already utated , the Com- In looking at those rosultH , It eliould bo aistlnotly kept In 18 th Oot ,, loow . * . w . a . ««» nww .

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No. 501. Oct. 29, 1859.] The Leader. 120...