FINANCIAL POSITION

OF THE COMPANY

THE ADDRESS OF JOHN S. THOMPSON, V.P. AND MATHEMATICIAN

It has been well said that it should be the aim of a life insurance cornpany in the interest of safety and conservatism to understate the value of its assets within reasonable limits and to overstate, or at any rate be very careful not to understate the value of its liabilities. Let its look at a few of the Mutual Benefit's as-sets in the light of that statement.

The first item on the list of assets is the home office. Our present plant cost us six and a half million back in 1927 and is carried on the books at four and a quarter million. Immediately on the completion of the building we wrote off one million and three-quarters, and since that time we have written off another half million at the rate of about eighty-five thousand a year, which is all that the Federal Revenue authorities will recognize in the computation of our federal income tax. You may remember that, on the occasion of our housewarming in 1928, attention was called to the fact that the hundred feet of Broad Street frontage on which the old home office stood. cost the Company $20000 in 1858 and was carried at twenty thousand even at a time when it was worth that much per running foot. I am not going to attempt to say, nor do you care, what the value of our present property will be seventy years from now, but I am sure that our attitude toward the establishment of those property values is just as conservative and sound and sane as it was during the years past.

And now look at the next item. which isn't quite as inviting—fore-

closed real estate. Initially the book value of our real estate was fixed at the mortgage value, plus any advances made prior to taking title. plus any outlay for permanent improvements whether made before or after title. plus costs of acquisition. We did not add any due and accrued interest. Last year, however, we thought that this method of ascertaining hook values might be improved upon, and we proceeded to write off all the miscellaneous expenditures, including costs of acquisition. and reduced those book values to the original mortgage value, plus such capital additions as had been made. That course involved the elimination of about $3,350.000. It is hardly necessary to remind you that appraisals mean little at a time like this. In fact, the absence of purchasers at reasonable prices is what produces the present condition and an appraisal would be merely the opinion of some more less reliable authority as to what a piece of property is worth under average conditions. Hence, we abandoned the idea of using appraisals for this purpose and adopted the simple rule above described for reducing our real estate values by the amount stated.

At this point it might be appropriate to refer briefly to the improvement in the mortgage situation. , . , It is worth noticing that the first index. namely, the size of the group of properties in process of foreclosure, shows striking improvement in the last three Nears. That group is now about half what it was in January 1933. The next index in logical

order is the total volume of proper-ties acquired. In 1935 these were less than two-thirds of those of 1934. The acquisitions through foreclosure during the first four months of this year are only three-quarters of those of the corresponding months of 1935, they are less than half those of 1934 and only about forty per cent of those of 1933. Thus this situation, unpleasant as it looked three or four years ago. is working itself out. Sales have increased, prices have improved and there are plenty of indications in the larger picture that the end of that improvement is not vet.

One of those indices is the gross farm income as estimated by the Federal Bureau of Agricultural Economics. According to this high authority the farm income. which was steadily maintained at about eleven billion dollars during the years 1923 to 1929 inclusive. dropped to a little over five and a quarter billion in 1932. a vivid contrast, not only to

the 517,000,000,000 income of 1919

but to other pre-depression years. Since that time there has been a remarkable improvement. not entirely related to the activities of the Agri-cultural Adjustment Administration. In 1933 the farm income rose to six and four-tenths billion: in 1934 to more than seven and a quarter billion: in 1935 to over eight. In other words, last year it was more than fifty per cent over the minimum of 1932. Excluding benefits under the A A A. the 1935 income was 43 per cent higher than in 1932. In the first three months of 1936, the farmers' gross income I including bene-

22   THE PELICAN