usai i4 - w j Sir" i --"J?r '". .1, THE PITTSBTTRG DISPATCH, WEDNESDAY, . FEBRUAET S, 1892. THE HEW YORK LIFE. A Voluminous Letter From President Beers to Policy Holders, FULL OF IKTKRESTIKG DETAILS. A Complete Review of the Submission of the Company's Attain to the Insurance Department or the State of New York Flattering Financial statement From the Book of the Concern Inside Workings at Important as Interestlnc How Figures and Appearances Slay He linproperlj Construed An Apparent Indebtedness at One Time, and llow Easily the Facts Wiped It Oat The Large Territories Cor ered and an Immense Amount of Busi ness The Spanish-American Agency Trouble and How Obviated Eoormotu Transactions of the Vannzem Agencies Justification of the Agency lanagement. New Vokic, February, 2, 1S92. 'To the roller Udders of the ew York Life In surance Compsnx : On the lGth day of June, 1S91, the follow ing communication was transmitted to the Insurance Department of the State of New York: Xiw Yore, Juno 1G, ltOL Hon. J. K. fierce, bupciintemlcnt insurance De partment, Albany. X. Y.: Deau Sib The charges that have been made against the company and its manage ment in the public press, growing out of matters connected with its Spanish American department baring been cabled to our President in London, Tie are in receipt ' of a cablegram from him in response sug- I gestin that the Insurance department be ' invited in the public interests to make an examination or the company for tho satis t faction of any policy holders who might be disturbed by these charges and criticisms; : and in accordance with his suggestion the ' Finance Committee of the company at its ! regular meeting held this date adopted the ; lollowing preamble and resolution: The In estimation Asked For. "At a meeting of the Finance Committee l of the New York Life Insurance Company ; held this date the following proceedings j. were had. "Whmieas, Certain charges and criticisms i have been made against this company in the vf public press crowing out of certain matters connected ltn the Spanish-American De- partment; and, ( "Wheieas, The Finance Committee of the i . Board of Trustees is satisfied from thb state ments of the officers that there n ill be no loss to this company by reason of the mat ters refened to, yet is desirous that the public sbould be equally satisfied; there fore. Resolved. That to that end the Superin tendent of Insurance of this State bo in vited to make a thorough examination of this company." In accordance with the foregoing the com pany villi be pleased to have this examina tion made nt your earliest convenience. Yours truly, A. H. Welch, Second Vice President. The Insurance Department In Charge. "n accordance with the above on the 22d day of June, 1891. the insurance department was placed In charge of the books, records, etcetera, of this company, and remained in charge until the 4th day of January, 1S9Z. There are many reason whv it seems not only proper but necesary to review with von the insurance department's Undines. First, no corresponding test has ever been applied to the life insurance business, and the results ought to be presented to you, not only without prejudice, but from the company's point of view, and to me it seems clear that the only way to achieve this is by a personal statement. I do not mean by this to reflect in any wav on your bources of information hitherto. I say that no cor responding test has ever been applied to tho business ot life insurance. By this I mean no investigation by a State insurance de partment has ever been made of a company whose assets and general business leached corresponding proportions. Since any test has been applied to the con duct of this business, results have been achieved which, a few yeais ago, seemed impossible. The horizon expanded, and duties and responsibilities have fallen upon me and the executive officers of this com pany and of nearly all other life companies, which, ff not new in kind, are so much greater in degree as to constitute almost A Stir TVorld of Experience in our business. The investigation Just closed, therefore, has been remarkable for this as well as for other reasons, and beyond question, in addition to Its proportions, has been the most searching and merciless in quiry ever made of the executive officers of a life Insurance company. The central fact in any such investigation is and must be tho Integrity of the asets of the company. The figures of the inquiry were brought down to June 30, 1391, and the insurance depart ment's general statement Is as follows: Aoset. $120,710,630 . Liabilities, (106,002,. OK 61. Gros ui plus on policy holders' ac count, 14,703,575 83 The Superintendent of Insurance well said. In commenting on the above: "Those interested mar be assured that this con clusion is correct and trustworthy." These words will bear reading a second time. They mean something different from a casual statement of financial responsi bility in the business world. They could be used only after our assets bad beeu sub jected to a test which might seem from many point' of view unnecessarily severe but which, from the nature of our business and the sacred character of its trust, is un questionably wise. The Superintendent, therefore, means that all doubtful items were eliminated: that our opinions were necessarily ignored; that Disinterested Opinion Was the Standard, and that we were obliged to plead before a bar where mitigating circumstances were ruled out of evidence. After such a test I may be allow ed to offer my congratulations to our membership on the result, and to state that the other executive officers of the company, as well as myself, share with you in the satisfaction of so great an achieve ment. I desire personally to emphasize my con gratulations on this particular and most im portant view of the report. It would have been unnatural, I think, if the ideas of my self and associates of the aggregate value of the assets of this company, as expressed in our last annual statement, had differed to a considerable degree from the ideas of the gentlemen who fixed the values expressed in the insurance depaitment's statement. Differences could arise only in certain losses of investments. A large portion of the assets of such an institution as this are of such a character that there could be no ariety of opinion as to its value on any given date, but it U equally true that a con siderable portion of the assets ot this, as of eery similar company, is of such a nature that its alue at any given time must neces sarily be expressed in different totals by equally capable and responsible men. The variation would express No Actual Fluctuation in Value, but simply a difference in opinion. Which opinion might be, for your purpose, most nearly correct, is again a matter of opinion ana while 1 concede the wisdom In such in vestigations of a conservative view, and tinder the pecnliarcircmustancessurrouning ourrequest fortius examination the wisdom pnd necessity ofan ultra conservative view, I cannot avoid the conclnsion that in these particular Items the opinion of the men who have planned and directed the erection of the great company, while they maybe accepted as the utterance' of special plead ers, are worthy at least of consideration by you. I accept the aggregate financial findings of the Insurance Department as constituting an indorsement ot the management of this company, at once satisfactory to you and creditable to me and my associates. It is posdble that in snite of the necnllar char. actcr of this investigation you would not have expected any word from me had the matter rested there; but the Superintendent of Insurance lias een fit, after announcing not only the solvency, Dut the great pros perity of the company, as evidenced in its gross surplus, of nearly (15 000,000 to take tip , f and discuss certain items and in doing so , has criticized the management or the com- f". puny in these details very severely. This i constitutes an added, and by its belief a kt Mifflcient reason, why I should go with you rSP over the sronnd traversed bv the lnsnrnnra department, in order that your attention maye rolled to many related faots which do not appear in tho report. The department's criticisms cover s everal phases of management, especially Invest ments in leal estate and agents' work. Tho criticisms or real estate matters call atten tion to looses, which may bo divided into actual losses which I admit, and losses theoretical, which arise from differences of opinion. I admit certain losses, which I will point out specifically, with the attendant circum stances, and I raise the question of differ ence, of opinion as to the remainder. Be- fore entering on the discussion of any ot iucHiu,iiiuuua w aiiiniuoabum7 that investments are made only with the approval or the Finance Committee, con sisting of five members, and of which I Am a member ex-oftlcio. " t'laza Hotel. The report alleges a loss on this property of (283,994. TheSuperintendentof Insurance Uses this language tu connection: "In prop erty 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 or the Superintendent of Insurance valued this property at (2,500, 000 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 ills judgment, the prop erty at the present time Is worth (3,000,000. From your point of view, then, is it not fair 'to conclude that the alleged loss may, after all, exist on,ly as a matter or 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 in creasing values; and, in my judgment, will ultimately yield tho company a large return on the original Investment. Home Office Building. The report alleges a loss on this property of $361,293. Its book value is $1,914,293. and it enters the Superintendent's report at (1,550,- tr-O. 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 upoti our home office build ing for the purposes of taxation and place it beside tho same value of the Equitable Life Assurance Society's home office building. The official valuation for purposes of taxation of our home office build ing is $1,050,000; of tho Equitable home office building, $3,800,0011. A statement of the fienres at which each property was entered in the asets of its respective company. December 3L 1890, is as follows: The borne office building of the Kow York Life, (1,914,000; homo office of the Equitable. (15, 140,000. Tho department's estimate of the raluo of our property is approximately 80 percent, while tho assessors' figures for the purposes of taxation are a little more than 50 per cent of its book value. As the gentleman who Appraised Onr Home Office Building. has never made an appraisal of the ralue of tho Equltable'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 ap proximately (7,CO0,CO0, if the book value ot our home office were accepted at par. - I cite these figures as strongly bringing out the truth of ray suggestion concerning opinions as to real estate values. Everyone is fnmilUr with the eminent success of the Equitable Life Assurance Society, and no one would bo so absurdly unjust to that company us to allege a loss on this one parcel of real estate of $7,500,000. or, indeed, any loss at all, from the policy holders' 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 au thority on real estate values in New York who will place on our home office building to-day 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 1SG9 and ex ceptionally well located. Any one who knows anything about thehietory of real estate valuation in New York in 20 years will agree that there has been during that period a heavy advance in this and all prop erty .similarly situated. The building has not been allowed to deteriorate in any particular, and it would soom that our statement or actnal cost, $l,91i,0C0, was a very conservative figure. Ilolbrook Hall, Now the Tosemite. On this item a loss has been made. Briefly, tho facts aro these: Inl8S2we made a loan on this property when in course of con struction, 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 the property to us, after foreclosing, was very little more than the amount of the loan. The work or completing the structure wa then placed In the hands of an eminent constructing engineer. He sup plemented his own knowledge by employing an architect, and the building was finished. It was filled with a desirable class of ten ants 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 prpof construction, the architect made the same error precisely that the architect or Vice President Morton's hotel, the Shore ham, at Washington, made, and both build ings had to be reconstructed for substan tially the same reason. The mistake of tho architect in each case was in creating such a condition that dry rot speedily destroyed the timhers and the Buildings Had to Be 'Vacated at once. It was then discovered that in ad dition the foundations of Holbrook Hall, put in by the men who first obtained the loan, were Insecure, and as a -final result the whole structure had to come down. It was then re built under the supervision of McKlm, Head A White on the most approved lines, and there is not a firmer structure of its class in this country to-day. The abso lute loss to us, therefore, was ap proximately the cost of the first building. This we charged off and entered the property in our annual statement at the cost or the present building and ground. The figures, (7.066, the appraiser of the In surance Department refused to accept. Four hundred and eighty thousand was named instead, and entered in the Insurance De partment's findings. It is proper to add that on our present basis of rental this property will yield, when fully rented, net income of 6 per cent on the value placed upon it by the Insurance Department and would yield a little more than 4 per cent ou our valuation, ((723,060). I do not desire to evade full responsibility for mv-, self and the Finance Committee In this mat ter. The claim of infallibility in the invest ment or reinvestment of hundreds of mil lions of dollars is one I have never set dp. 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 nad not only secured an appraisal of the value of the property as It now stands, but also had investigated the value or the property when it was pur chased, 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 in vestigation was made, and as his findings seem to do ns iniustlce, 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 fig ures supplied by the Department of Taxa tion or the French Government on his re quesfrepresonted values fixed solely lor its particular purpose, unr manager at "ans. with a great deal or difficulty, succeeded in getting the Credit Foncier, the largest insti tution oi its jcinu in r ranee, ana a society the reputation of which is well-known throughout Europe, to have a valuation made or our property. This valuation was made with the greatest care of its most competent and ex perienced inspectors. The estimate of the inspectors 'exceeds the fig ures of the French Government by (163,000, and their estimate of its prospective value, based on Improvements certain to be made bv the city of Paris exceeds the ficures adopted by the Superintendent by (393,600. As I understand It, the variation In the Superintendent's figures from the probable actual value of this property ts slmihir to the loss whioh would appear if the home office building or the Equitable Life Assur ance Society should be entered in a schedule of its, assets at $3,800,000, its value for pur poses of taxation, and not at (15,000,000, its book value. To place the property or the Equitable in a schedule pf its assets at such a total as to show a loss of (11,340,000 would be so unjust as to become absurd, vet an ex actly similar thing seems to have been done in this case. Our Western Buildings. The report or the Superintendent of Insur ance values the office buildings recently erected by us in Minneapolis, St. Paul, Kansas Cltynd Omaha at their cost to the compsnj.but his opinion of the wisdom of the investment seems to bo uncertain, as this language indicates: "There is no im mediate prospect that thpy (the buildings) will prove as profitable as tho investments of lilo insurance companies should." I de sire to offer a word in that connection. Theroaretwo reasons why the Immediate income from these properties is smaller than we may l airly expect to receive in tire future. First The buildings woro- begun under ; normal condlt'ons, but were completed In t ma miosi ot i nenDu ot ousiness depression i in tue four cities named, ana accordingly we have had fower tenants and lower rents than we may reasonably expect hereafter. Second The buildings were located with a view to future development of their re spective cities. Any one who has observed the rapid growth of the West will appreciate tho necessity of considering the future even more than the present in the location of an office building. Present revenue was there fore not so mueh or a consideration as that the buildings should be so located that the future may tend constantly to increase and not to decrease the rent-producing power and value of the property. ouJ will understand, of course, that investments ui tuia ciiaracter aro vatuaoio oecanse tue clement of risk in reinvestment is practi cally eliminated. The money expended In this way is a fixed item ror a 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. Tleldlng TJs a Fair Return on the money invested, and I am further ad vised by competent authority that since the date of our purchase or the real estate on which bese buildings are situated there has been a net appreciation in its' selling ralue of (500,000, as shown br ap praisals made at the close of 1S90 and by purchase of adjoining property since made by other people. In entoring these properties on our books and in submitting our estimate or their value to the Superin tendent, which he accepted, wo did not tako tins cviuenc inorease into account as evi dence that the erection or this chain of Western buildings was well considei ed. I point you to tho fact that the investment was entered upon after discussion and ap proval by the Board of Trustees. It is ray 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 practica ble to those sections or the country whence It emanates. In this case, a part or tho money received was invested amongst the people who paid it. The only theory on which these buildings can be ranked as bad or even doubtful in vestments is one which discredits the future growth of the Western States. The report notices that "As advertisements of the com pany they (the buildings) no donbt have a considerable value." This is eminently true. The territory in which. these bulla lugs serve especially To Advertise the Company, Includes the States of Minnesota, North and South Dakota, Montana, Iowa, Nebraska, Kansas, Missouri, Texas and Indian Terri tory. The people of the States have con stant business and social intercourse with one or more of the cities in which the Duild lngi have been placed. The buildings have, therefore, become widely known, for, as tho Superintendent's report says, "Each of them forms one of the attractions of the city in which it is located." The evil Influence upon the company's business is extremely important. In 1886, the year before the buildings were begun, the aggregate new insurance written by the company in the territory in question was (8,017,200. This aggregate has -steadily in creased until for the year 1891 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 or the business re markable, but its quality was such as to make it most desirable in every way, and without the buildings it is safe to say such results eould not hare been obtained. 1 may add, by way of general comment on real estate matters, that while the Superin tendent notices that the company owns 147 parcels otreal estate, and has 900 other par cels under mortgage, and the further ract that these properties are scattered not only through many States of this country, but over two continents,the nature of his duties made it necessary, perhaps, to omit com ment on the real estate transactions in which profits hare been realized and to confine himself practically to the four par cels which he discusses; but your Interests reach further, and you Will Naturally Be Pleased to learn in this way, not only the relation of the items criticized to the company's total holdings, but also the clrcumstaucos sur rounding each case. If these related facts tell you anything it is the probable exist ence, to-day, of a surplus largely In excess of $13,000,00. We all accept the Superin tendent's figures, yet as you and I are pecu liarly interested in the whole case, we are permitted between ourselves to riew the possible effect of these facts. Suppose, for example, that the Superintendent had ac cepted the well-known opinion of one of the heaviest holders of New York real es tate as to the value of the Plaza Hotel (2,750,000 and that he bad aocepted the value of our home office building on a rental basts of 5 per cent net, and that he had ac cepted the inside figures of the inspectors of the Credit Foncier as to the ralue or the Paris property; his net reductions on real estate including his heavy deductions on Holbrook Hall, would have been only (129, 309 25. This alone would increase our sur plus $$00,000. Agency Management. Under the head "fund of agency manage ment," 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 in terest and upon insufficient security. To persons unfamiliar with the life insurance business his statement wouldseemto Indicate the worst possible management of, our agency department. The facts, therefore, need to bo 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, I will say, enter into a contract with Brown, who is general agent for a State, that he shall receive a commis sion or 25 per cent of the first year's pre mium on all policies placed by him, and a renewal commission of 5 per cent on each renewal premium paid on such policies. A New Arrangement Made Necessary. Brown, of course, finds It necessary to em ploy Jones and others as sub-agentg, and he ordinarily pays them the 25 per cent com mission allowed him by the company on first year premiums. Brown relies upon bis re newal commissions for his own compensa tlon,but while be continues inactive service lie is frequently allowed to draw a fixed amount against commissions for his living expenses, such amount being regulated by the circumstances ot the case. As competi tion increases Brown finds that in order to retain sub-agent Jones, he will be obliged to pay more than 25 per cent commission. To db this Brown is obliged to make a new arrangement with the company. Instead or increasing Brown's first year commission the company agrees to advance to him a sum equal 'to two renewals ov jo per cent on business" secured by Jones, and to hold ull nfllwiwn'fl ft.f'l.n Mnnnral AAmn.1.. t.n .. .. Ucr theicontract as security fortheadvance. Brown is now able to pay Jones 35 per cent commission, und so retain his services. But at the end of the j ear Brown is apparently indebted to the company in an amount equal to 10 per cent ot all first year's premi ums secured by Jones, and the larger the business the larger the apparent debt. This wilt 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 annually this result will not be reached lor several years, but if the total amount paid to Brown has not exceeded what the. business was actually worth the time will come when tho commissions accruing under his contract will exceed the total cost of the year's busi ness. Disappearance of the Indebtedness. Brawn's business from this time forth will require a less expenditure on the part or the company in proportion to its volume than heretofore, and his so-called indebted ness, as it appears under his contract, will disappear more rapidly than it accumu lated, at which time Brown will realize the prout tor wnicn ne has worked. The oonv pauy baring already paid for this business in large pair, win uare a lower expense ratio to this extent In the future, and its surplus will be correspondingly Increased. tuu win notice mat tuts debt does not rep resent money which Brown has squandered or retained ror his own uses. He has simply used the money to carry on the com pany's business. U it should ever happen tht Brown's renewal commissions fail to cancel the debt, the business has simply . Mio vuiujMiuy wuat ibco3c urown.anci the company has taken good care that the total amount of commissions and adranoo reoelred by Brown should nerer be a sum greater than the new business secured by him was worth. One I C. Vanuxem Co. The Superintendent criticises the arencv or Messrs. L. C Vanuxem & Co., at Phila delphia, Pa., and alleges a debt to the com pany on account of what he terms vextrara gant allowances" or several hundred thou sand dollars. Beferring to the illustration above of the method on which a general agent's business ts conducted and tho manner in which an apparent debt might oo contracted, when 1 state that from 1887 to 1S91, Inclusive, this firm wrote business ag gregating (132,000,000, a clear explana tion is afforded you of how, under the above practice a larzft debt nirhtinnigii-tn exist. In this particular agenoy the ad-' vance ceucpipiaicu ui our illustration took on various forms, under various contracts, "which, however," wcro always subjeot to our approval. Against the commissions earned, and to bo earned, the members of this firm drew advances for living expenses, as before referred to, and advances dn ac count were made to some sub-agents, but at no time has the amount of money advanced toL. 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 Large Territory, and by creating a renewal interest "In this ease of very large proportion." We havo avoided frequent chances in general agents and have largely escaped the danger of having our business carried to other-companies bv an agent whoso interest In any given policy ceased with the first year of its existence. In this w ay Messrs. L.C. Vanuxom & Co. hare done for years a larger business than tho entile new business of sev eral of the smaller life insurance com panies and the largest business of any single agency in the United States, it has been done at a not unreasonable ex pense, and the cost of Its procurement has been Included each year tn the disburse ments of tho company. Tho whole theory'of this organization and the purpose of the ad vance is: First, to produce a large business, and secondly, to create an incentire for tho general agent or manager to procure busi ness at the lowest possible cost, in order that after a period of years he may begin to realize a return commensurate with tho work done. A Sub-Ledger Needed. As thocost or tho business is charged off each year, It becomes necessary to keep with the manager a blotter- 'or sub-ledger, and the Items are all brought forward from time to time. Of course, this' under tho illustration would show for an office doing twenty millions of new business tn a year and for a series of years, a large appaient debt and the superintendent of insurance, instead of riewing the business as we haro dono as simply business paid for, decided to go Into this sub-ledger and spread before vou the apparent debt. It is of first importance that you understand clearly that this money Is not due fiom L. C. Vanuxem & Co. In the ordinary accept ance or the word (debt) it is due under the terms or their contract at such time as the commissions earned on the business done will liquidate the money adranced from time to time for the conduct of the business. It has not been squandered by them nor re tained by them. It has not benefited them personally, and never can until as stated the earnings of their business have liqui dated all moneys drawn for erery purpose, under the oontract. Including advances and agency expenses of every kind, and hero 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 ad vances, in every case, were charged t;0 ex- nunena In tn i-nmtwnii'a hnnlra wtiAn Tl advances were made, and that the company has never counted them as a part of its assets or surplus. Tho supeiintendent, therefore, instead of unearthing with great difficulty something the company desired to conceal, as he states, practically set up an arbitrary standard of what he thought our business ought to cost in any given year, and charged up as a debt the differences between his opinion and ours. It would be scarcely less unjust to the company had he alleged, in any given year, tha t th e aggregate amoun t paid tor the procuiement of the business' of that year was one or two millions too large, find 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 dne respect for the opinion of the official with whoso conclusions I differ, that in matters or this character the conclusions of men who hare had 30 years' experience in this business as to the propriety of pay ing a giren sum for a given volume of busi ness (they alone being conversant with the surrounding circumstances and contingen cies) are as likely to be correct and in the interests of policy holders, as the opinion of a gentleman who, while eminently qualified for tho duties of his office, cannot pe cred ited with snecial knowledge in the particu lar interests now under discussion. Spanish-American Department. The Superintendent naturally treats at some length the affairs of the Spanish-American department. The Invitation extended to him bv our board of trustees to examine the condition of this company was called out chiefly by nn Incorrect and misleading statement relative to an alleged defalcation by one or its managers, for which the com pany, it was stated, alone must suffer. I shall refer pilnclpally in the matters dis cussed by the Superintendent under this head, to this central and to you most im- Sortant question. It is a fact that Mr. J. erzbacber, one of tho managers at that time of the Spanish-American department, became a defaulter for a large amount. The statement as originally published, that Mr. Merzbacber defaulted direct to the com pany, was an error. Under the contract which we bad with the two managers of the Spanish-American department, each became re sponsible for the actions of both, and Mr. Sanchez, of the othor, general manager at that time and the manager or the Spanish American department at the present time, accepted, under the terms of bis contract, full responsibility for the Merzbacber short age. Tuis shortage consists of two parts: A direct theft bv Mr. Merzbacber from Mr. Sanchez of $419,822 92. and $119,059 10 which was an overpayment by Mr. Merzbachcr to the former general manager of the Spanish- American department." Some of the Shortage Made Up. Since the date on which the accounts were made up and the shortage definitely deter mined, the item of (119,059 10 has been con siderably reduced on the books of the com pany by accrued renewal commissions re tained 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. Merzbacber, has been reduced since December 31. 1890, by (166,671 89, leaving a balance due January 1, 1892, of $253,151 03. The actual net profits for the year JS91 to this department have not yet been fully determined, but Its balance sheet shows that they will not fall short of (100,000. This leaves the balance due the company on this acoount on this date a sum but little excess of $150,000, ror which the company also holds abundant security. The superintendent closes his re view 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 inter ests of the company. That conclusion is not correct. The department has always been eminently successful, and Its business has been obtained at normal cost. As to S. L. Dinkelsplel. The Superintendent expresses the opinion that S. L. Dinkelsplel was retained too long as an agent of the company. Mr. Dinkel splel secured for us.a large amount of de sirable business. The men Whom he insured were among the wealthiest and most Influ ential in the cities where he worked. It came to my knowledgo, however, after 4 time, that his business methods were objec tionable, and ror that reason, in the year 1889, his agency terminated. Mr. Dlnkel splol's contract comes under tho gen eral illustration cited above, except that he was a personal solicitor only, and many modification were made to enable him to handle the peculiar class of business which he wrote. Advances were made for the same purpose. It Is probable, however, that while there is to-day on our books a large volume of business of the best quality written by Mr. Dinkelsplel, a reasonable re newal interest will not finally liquidate the adrances made, and that this business will ultimately cost us more than it should. For any error in judgment in employing this man, as well as for any ultimate loss, I do not desire to escape from auy proper respon sibility. Two Other Questions Baised, Mr. Jtoomis L. White, the Superintendent of Insurance, discusses at some length the relations which have existed for about 16 years between the New York Life Insur ance Company and Mr. Loomia L. White, a member of its 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 net for it as brok ers without having the opinions of such trustee as to the value of securities colored by the probable commission which the firm would recelvo on such transactions. Sec ond, whether or not the company liad the right to purohase securities through such firm of brokers. The first question may be briefly disposed of w ithout discussion by a simple statement of the results. In the years covered by Mr. White's connection with tho New Vnrlr Tiro .Insurance Company about $65000,000 of se curities have been purchased by the com pany's Finance Committee and a consider able proportion of this through the firm of whlcn Mr. White is a member, Messrsv Loomis L. White Co., and op the 30th of June last the Superintendent, after valuing these securities At a Time of Depression, found them worth to the company some thing more than $J,000,000 above the cost ralue at which they are carried on the com pany's books. Such a result Is the Finance Committee's action and in so far as Mr. White's action Influenced it, is an eridenco of the value to the company pr tbla connec tion. The second question is one on whioh opinions of counsel differ; 1 bare reviewed now with yon the imtTer m. - -' -, criticisms of the Superintendent's report. I shall stop here. I realize fhat there are other criticisms which I" havo not referred to, and I do not deem It necessary to do so. I havo tried to present to you fairly the facts con corning those of most importance, and I be lleve I have shown you that, while there have been errors In the management or this companr, there has been no betrayal or trust. A full criticism or errors with an equally full statement of management de serving commendation would hare been only fair to you and perfectly satisfactory to me, howeTer severe these 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 or the Case, and, In addition, unfortunately, so stated his criticisms as to make it probable that you may have misunderstood and overrated their importance. I desire to reiterate my disclaimer of infallibility, and repeat the message sent from Europe last summer, that "In business of our magnitude mistakes are inevitable, and wo compare favorably with others; but my Integrity of purpose cannot be shaken. General net results are the touchstones in every business." We need not go far to find confirmation or this. Errors havo been roado, perhaps, in the management pf every company doing business, but as there are some of common notoriety, I mayrefer to them without Beem ing 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 lost outright $440, 000 through the defalcation or its financial correspondent at Indianapolis in 1838. The Mutual Benefit Lire Insurance Company or Newark, N. J a company eminently con servative in nil things, lost about the same amount on Elizabeth, N. J., bonds. It Is a well-known ract that the Equitable Life Assurance Society marked off in 1889 and 1890 almost $1,000,000 on real estate, and that It carries nearly $2,000,000 In Its pub lished statement of assets and sur plus as . "commuted commissions," agency balances, etc., which is practically another form of expressing what the Superintendent calls a "debt" in the case of L. C. Vanuxem Co. In the re port of the department examination of the the Mutual Life Insuranoe Company, made in 1880, it was stated that $939,701 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 havo simply recited a list of average errors which, in proportion to the Interest at stake.represent less loss than the experience of any business or Which I have knowledge and with which the management or the New York Life Insurance Company invites com parison. EtII Practices Referred to. I referred in ono of the opening para graphs of this letter to the new and larger responsibilities which have been met to the best of our ability within ton years. Among these has been the growth of certain evil practices in the conduct of the business of life insurance. Several suggestions for their remedy have been offered, but for their complete reform it does not seem tome that any adequate remedy has yet been named. Tho worst practices, the most demoralizing and in every way the most reprehensible, are the giving ofrebates to the Insurers and tho more or less constant attempts of companies to en tice into their own service the agents of competitors. This is a natural result of fierce competition, and in my judgment should be speedily eliminated; and it seems to me that the one and all sufficient remedy would be (and I desire to go on record as Indorsing that plan) to limit by statute the amount of insurance that a com pany shall placo upon its books. That amount baring been reached the incentire of that company for obtaining new business is entirely taken away and it is practically eliminated fiom the contest. This might disappoint ambitious managers, (myself included,) but from the point of view of a citizen it would be altogether beneficial. Such a law would tend to give the younger and smaller companies a better opportunity to grow and would greatly strengthen and extend the beneficent work of life Insurance by at once curtailing errors in the conduct of the business and widening .the field of operations. A Few Words in Conclusion. In conclusion let me say: When my official relations with the New York Life Insurance Company began, 29 years ago, its assets after 18 years of existence were less thnn (2,000.000 and, its surplus less than (200,000. Its history since its officially determined as- antm .Tnnn snia ntinn nnn nnn f.eKmnivintn surplus and its annual Income of over$30,000, 000, 1 submit to your impartial judgment as the achievement of my associates and my self during the administration of our trust. I remain, yours faithfully, William H. Beeus, President. , Arranging for the Spring Work. Colonel John Y. Culyer and Chief Bigelow Intend to look over the ground to-day at the park'entrance for the library building. The Colonel agrees with the Chief that the pro posed building is a little too long to har monize with the surroundings. He said he was now preparing for the spring work and completing the decorations on the bluff. He adds that Schenley Park will be very beautiful and a credit to the city when all the improvements hare been made. HOictSFOBD'S ACID PHOSPHATE For Impaired Vitality And weakened energy, is wonderfully suc cessful. AT THE NEXT MORNING I FEEL BRIGHT AND. NEW AND MY COMPLEXION IS BETTER. , MT doctor cays It acts gently on the stomach, liver ana kidneys, and Is a pleasant laxatlTe. This drink is made from herb, and is prepared fornso as easily as tea. It Is called LANE'S MEDICINE All druggists sell it at SOc. and $1.00 per package. Buy one to-day. Lane's Family Medicine moves the bowels each day. In order to be healthy, this is necessary. de23-M-TWTbs ' SPECIAL-JUST IN. V 200 pieces of All-Wool DRESS GOODS, 3S inches wide, in all the latest spring colors Checks, Plaids, Stripes and Cheviot Efiects-which for quality and style far surpass anything ever shown in this market before AT BOe PER Hundreds of pieces of New Wash 8c to 37jc per yard. Handsome NewFlgured Surah and DOUGLAS 151, -153 and 155 Federal A REASON FOR IT! The unparalleled success of-our annual clearance sale can only be accounted for by the low prices that prevail in erery department in Carpets. We are offering unheard-of bargains. Moquettes which we hare been holding at 1 25 we now offer at 85c. Bern nants in 10 and 20-yard lengths. Ingrain Tapestry and Body Brussels at half price. In Furniture we are offering Bedroom Suits, Dining Boom Suits, Hat Backs and a .complete line of Housefurnishing Goods at manufacturers' prices. These are last fall's goods and must be sold to make room for new spring stock. , KEECH, CASH 23, 925, 927 PENN AYE., - - OPEN SATURDAY The Weakness And prostration, like that tired feeling, o sure to follow the Grip, is really the most dangerous stage of the disease and can only be overcome by taking a good tonic medi cine like Hood's. Sarsaparilla Which builds up the whole system, purifies the blood and prerents 'relapse and attacks of other diseases. Be sure to get Hood's. Severe Straggle with the Grip Postmaster Foster, Of Lubec, Me., says regarding Hood's Sarsa parilla: "Last spring I had a serere attack of the Grip which left me In a rery feeble condition. I had no appetite, was nervous, and was in a poor, way generally. I was ad vised to take Hood's Sarsaparilla And in a few days I began to improve. My appetite increased till it seemed that I eould not get enough to eat. When I had taken three bottles I feltas well as ever, and I may Bay better than ever. I heartily recommend Hood's Sarsaparilla." HOOD'S PILLS are purely vegetable and are the best family cathartic. Extract of Beef. Do vou want a" cup or Bzzr TzaT See that it is made from the oxxcikz. Incomparably the best. Pure, palatable, refresh- ing. Di! dissolves clearly. See Baron fi Liebig's sig nature in blue on each label, thus: Jal8 AMUSEMENTS. FOURTEENTH Annual . Benefit OF PlTTSBUR6L00GEN0.il, . B. P. 0. ELKS, FRIDAY AFTERNOON, FEB. 5, 1332, . AT GRAND OPERA HOUSE Attractions From All Theaters. Don't fall to be -with us. Tickets exchanged for reserved seats Thursday morning, Feb. 4, at 9 o'clock. fe3-83 THEATR& This Week Matinees Wednesday and Saturday. MR. POTTER OF TEXAS. February 8 Kate Castleton In "The Dazzler." . fel-31 a-K,.isr jd ysss& TO-NIGHT. MATINEES WEDNESDAY and SATURDAY MARIE HUBERT 1TKOHMAN. ( THE 1 WITCH. Prices, 15c, 25c, 60c, 75c. Wednesday and Saturday Matinees, 25o, 50c, Reserved. Next week Thos W. Eeene in repertoire. Ja31-63 DUQUESNE. LeaZ'fffier. AGNES HUNTINGTON OPERA COMPANY THURSDAY. TONIGHT FRIDAY. SATURDAY EVENINGS CAPTAIN TnERESE AND SATURDAY MATINEE PAUL JONES. Next week ROS1NA YOKES. fe3 THE ALVIN THEATER. CHARLES L. DAVIS, Owner and Manager. To-night, Wednesday and Saturday Matinees, SOL SMITH RUSSELL, -IN-PEACEFUL VALLEY. Next week OLD HOMESTEAD. fel 00 ART EXHIBITION ADMISSION FREE. Pittsburg School of Design ror Women, Penn Building, 708 Penn avenue. The ex hibition opens on Tuesday, February 2. and continues until Saturday, February 6, In clusive from 10 a. M. to 5 p. x. The spring term begins February 9. fe2-19 A. W.HENDERSON, Principal. TTARRY WILLIAMS' ACADE3T1 To-night, Matinees Tuesday, Thursday and . Saturday. WEBER & FIELDS' OWN VAUDEVILLE CO. Ja31-19 YARD. .Dress Goods and Ginghams from India Silks just received. & MACKIE, Street, Allegheny, Pa. rel-icwr LOW PRICES. CREDIT NEAR NINTH STREET EVENINGS. Miu&t I . .. '. 'I TAK NEW ADVEKTISE3IENTS. KAUFMANNS' DEPSflTMENT ATTBSCT ONS ALL THE GO! ALL THE RAGE! ALL THE STYLE! MEITAEI CAPE A large variety of these very new, nobby, convenient and becom ing garments to choose from at this price. They are made of fine Scotch Cheviots in the new navy blue shades. You'll pay 20 for the same thing elsewhere, in is OUR price. If the saving of $9 is an object to you, come to us. ANY-FUR TRIMMED JACKET Ayr 2 'Km MM JE31 S lL 1 ' 1 l!m H' 1141 IMAMS! Jit f I- if i' r I -i i fli I $8.75 Ladies, this offer is our GRAND FINALE, any Fur-Trimmed Jacket in the house for 8.75. 25 FUR-TRIMMED JACKETS, 22 FUR-TRIMMED JACKETS, 20 FUR-TRIMMED JACKETS, 18 FUR-TRIMMED JACKETS. $15 FUR-TRIMMED JACKETS, VIZ FUR-TRIMMED JACKETS, This is the last and best chance to get fine Fur-Trimmed Jackets not for nothing, but as near to' nothing as they'll ever be. JACKETS m6ore AT $1. This day last week we had 1,300 of them to-day only 600. Next week we'll have none. Take the hint and come at once. Among these Si Jackets you'll find all kinds of materials and styles many having been marked down from $4, 5, $6 and 7. THE CHILDREN'S REEFER SALE Is another attraction such as we, AND WE ONLY, can offer. All the Reefers are now exhibited on three counters, from which we offer choice at $1, $2 and $3, respectively. On the $1 Counter You Will Find Former $3 and $4 Reefers On the $2 Counter You Will Find Former $5 and $6 Reefers. On the $3 Counter You Will Find Former $7 and $8 Reefers. 245 CHILDREN'S WALKING COATS, As fine and as pretty as they make 'em, are worth $5, $6 and 7; will go at $3.00. MUSLIN UNDERWEAR SALE! ANOTHER AVALANCHE OF SNOWY GARMENTS THIS WEEK. Q7p For good Muslin Gowns, trimmed J'u with lace or embroidery; worth GOc. 7En For fine Muslin' Gowns; yoto trim J Jj med with Brows of Hamburg insert ing between tucks, embroidered ruffle on neck and sleeve, high shoulder; worth $1 10. IQn For good Muslin Drawers, with hem Iwv and cluster of tucks abovo yoke band; v, orth 33c. QQn For fine Muslin Drawers with wide wwl ruffle or embroidery and S tucks above yoke; worth GOc. Remember Our Infants' Deparim't POSITIVELY LAST WEEK OF FREE DISTRIBUTION OF GOODS. KAUFMANNS' Fifth Avenue and Smithfield Street. KoeMei'sInstallinentHoiise. d m9 SiXth St. 2d Floor, I MEN'S & BOYS' CLOfflNfi ON CREDIT, (Ready-Made & to Order. ) Ladies' Cloaks & Jackets Watches & Jewelry, ON INSTALLMENTS.! AT Cash Prices-Without Security TERMS: One-thin! of tho amount purchased must be paidaowc; toe mianco in small weekly or inonuuy payments. .Business trans&etea rtrictlr confidential. Orvn aauy, com o a. nu uu jr. la. Satur days until it r.jtt. TPUTARIAN PUBLICATIONS FKEE Sqdnnvrittsburg. ' U12-U ANOTHER CUT, AND A DEEP ONE! A VERY DEEP ONE! ALL Not only a few at this price, but several hun dred, and the cheapest one in the lot marked down from 10, while many were originally sold at S12, $15, $18, 20. And, now, ladies, THREE DOLLARS buys your choice. The cloth alone is worth double and treble the price you pay for the garment all made up. BEST FUR TRIMMED JACKETS. Come in this week and take ALL AT $8.T5. Qj For good Muslin Corset Covers; sojd 30 at no store below 13e. nCn For very fine MnMin Corset Covers, mJj trimmed with Ilamburz inserting and hemstitching; V shape; worth 50c on For good Muslin Skirt with cam fc3l t,rj0 raffle and cluster 4o' tucks above; worth 40c. lOp For fine Muslin Chemises full size IOl and finish; goodsewlug; worth 30c. Little Things, but Big Bargains Here. iWvc ADV DIPT. A GREAT DRAWBACK ' lias been our total lnabllltv to set goods made fast enough at tho prices we are sell Ins for, I will sell, for another weefc. solid coin silver Thimbles at 18 Cents Each. DO WE LOSE MONET ON IHEM? NOT ON TOUK TINTYrE. Also tfiis week, 800 Boys, Girls. Misses and Ladle' stem-winding Watches at $2.75 Each. II 65 FIFTH AVE, WOOL IMAMS! Sole Ownar of tho "Forever War ranted" Brilliants I VQTA1G DIAMONDS J&31-UWT3U ?.. f wjtvn JK iiiu3isi imUmtii0tiitM
Significant historical Pennsylvania newspapers