THIRD DAY. MERCANTILE LIBRARY HALL, PHILADELPHIA, Thursday, May 27, 1897. The third day's session of the Convention opened with an attendance nearly equal to that of the preceding days. Secretary HENRY C. LIPPINCOTT (at 10 o'clock A.M.), in calling the delegates to order, said: The Secretary has very great pleasure in announcing that our deliberations to-day will be pre- sided over by the company's friend, and the friend of right admin- istration in life insurance, Col. Noah A. Plympton. Colonel PLYMPTON, after an enthusiastic greeting, came for- ward on the platform and said: Gentlemen, it is not only a pleasure, but it is an honor to preside over such a body of men as are assem- bled together here to-day. I have attended many meetings of the local underwriters' associations in different parts of the country; I have attended the meetings of the National Association, and the Fenn Mutual has no reason to hide its face when a comparison is made between its representatives and those of any or all of the com- panies in the country combined. You will pardon me if I take a little advantage of you, this -morning, and take a few minutes—(because there must always be some compensation for a man who is forced into a position—he has a right to get even with those who put him there)—in reviewing the evolutions of life insurance and the progress of our company. I noticed, in a New York journal that I picked up the other day, a. reference to Philadelphia—you are pretty sure to find some such reference in a New York journal—and, while it seemed to me that what I read bore evidence of jealousy, if not of a little malignity, I have thought that it was not intended in that spirit. Philadelphia, to my mind, is the typical American city of this country—next to Boston. (Merriment.) It has more than any other a local flavor, is more genuinely characteristic—"provincial" they may call it, but it is not provincial—and is loyal to itself. Bigness, when made up of an aggregation of discordant elements counts large in figures but not in what it accomplishes. Cities 78
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like Philadelphia, cities like Boston, from the earliest day in our country's history down to our own day, have done more to mould the institutions of this country, to wield an influence for the good of the country and to stimulate the patriotism of the country than , all your aggregations that boast to-day of their millions of money and their areas of population. I have sometimes been amused by the pertinacity with which the merits of our cities have been iterated and reiterated. The other night, in Boston, at a meeting of our underwriters' associa- tion, at which our friend Lippincott was present, we had with us the so-called Demosthenes of Philadelphia, Hampton L. Car- son. One of the speakers had raised a laugh at the expense of Philadelphia, and when his opportunity came Carson made the most of it. After he had wrought us up almost into a state of frenzy by his magnificent panegyric upon the City of Brotherly Love—claiming that there was to be found hereabout all there was worth living for—he quietly observed that if he had sufficient opportunity he could say much more than he had said. A speaker who followed him, commenting upon the fact that all that had been said for Philadelphia was only what Carson could say when not prepared for a speech, said he wondered what, in God's name, would be left of this green earth outside of Philadelphia when Carson got through after having had an opportunity to prepare himself to speak. (Merriment.) But, as I listened to the eloquent Philadelphian, my memory went back, and I have some doubt to-day as to who is the original "Jacobs" in this matter. I heard our friend Lippincott say, years ago, all that Carson had said; when I came down to the meeting at Philadelphia I heard Carson say what Lippincott had said; at another time I heard Lippincott say over again, in substance, what Carson said; and I am in doubt now whether the question is not one as to quality and as to which said the same thing in the best way. However, my own private judgment is that, in our own company we have a gentleman who has said the same things for Philadelphia, and they seem to me to sound better when coming from him. (General merriment.) There is another thing that I congratulate myself upon. You THE PENN MUTUAL LIFE INSURANCE COMPANY. 79 talk about the Penn Mutual being- a Philadelphia institution. Up in Boston we claim that it is a Boston institution, because while we are a little city up there, we own, next to Pennsylvania, the big- gest share of the Penn Mutual Life Insurance Company. But there has always been a peculiar kinship between Massa- chusetts and Pennsylvania, and between Boston and Philadelphia. You talk of your Valley Forge and Germantown, but we fix the date a little earlier for our Lexington, Concord and Bunker Hill. You talk of your Independence Hall and of that grand body of men who met there, under the leadership of the great Virginian who wrote the charter of the liberties of this country, but at the same time we tell you that you had to send to Boston for a man to preside over your deliberations, the one who wrote his name first among those of the signers of that great charter, and wrote it in characters which shall be indelible as long as time shall last. I may mention another thing. You have over here, in your Park, a little house and you say that that was where the greatest sage and philosopher of his day and generation, if not of all days and all generations, Ben Franklin, lived, in Philadelphia. But within a stone's throw of my office, in Boston, I can point to the spot that gave him birth. And I am frank to say that, when Ben Franklin left Boston, he was a model of Puritanic purity, but the associations which he found in Philadelphia were such that, I am afraid, if we were to-day distributing his life insurance, we would uncover the fact that many more beneficiaries existed than were nominated in the bond. (Merriment.) However, I don't bring that up against Philadelphia; I mention it simply as a fact. I sav that if you glory in the name of Franklin in his maturity, you ought to reflect that Boston gave him to-you. It may not always be safe to accept without some reserve all that is said about Philadelphia. I read, in a New York paper the other day, of a little boy at school, in New York, who was told by his teacher that Philadelphia was founded in 1682 and was asked, "What has been done in Philadelphia since 1682?" The little New Yorker thought it up and answered, "Nothin'." Well, now, a good deal has been done in Philadelphia. , I know it is said that you work a little slow. I read, the other day, that you have erected to 80 SEMI-CENTENNIAL CELEBRATION the memory of George Washington the most magnificent monu ment that can be found in the world. Well, this year, you seem t< be going pretty fast in Philadelphia. But then I happened to rui across this statement of facts: you organized to erect that monu ment in 1811—you laid the corner-stone in 1833—and you put 01 the capstone in 1897. That wasn't remarkably fast, but I wil guarantee that for permanence, for stability and for beauty you monument will not be surpassed in this country. (Applause.) I recollect that, a number of years ago—I was pretty youn^ then—I came down here to Philadelphia and saw an immense pili of stones up here on the site of your Public Buildings. The othe: day, as I glanced over that way, I saw that the buildings had no been completed, and I wondered whether some old antiquarian o: archaeologist, in the future, who wants to know when the build ings were begun and who, after poking around and finding th( corner-stone will not discover that time has'obliterated the dati upon it and that all that is left there is "B. C." (Merriment.) Now, you have all been told or have read, or you will all reac when you get home and have time, the brief but very satisfactory history of our company since 1847. In the first month of th( company's existence thirteen applications were received and thir teen policies were issued for an aggregate sum of $56,000. W( have gone along—some of the time pretty slowly but always surel) —until on the day before yesterday, as I am told, 207 policies ir one day were issued for $702,500. (Applause.) Now, that is no' the greatest thing that has ever been done. There are companies that were organized fifteen or twenty years after ours that hav< done much more than that. But there is one little thing we car take pride in, and that is this, that whatever our people have don< they have done well; they have not taken any back steps. I they have not stepped forward as quickly as we wished, there is nc period in their history to which they look back with shame 01 when they took a back step. Now, the evolution of life insurance has been more wonderfu' than that in any other class of business in this country. I remem- ber the old President of the State Mutual—good old "Uncle" Isaac Davis, as we used to call him—a most'magnificent type of the THE PENN MUTUAL LIFE INSURANCE COMPANY. 8l Yankee, who originally came to Worcester with his earthly pos- sessions done up in a bandana and having but nine cents in his pocket. He left one of the largest fortunes ever accumulated in the State of Massachusetts. The old man built up the business of life insurance in that State. I remember that one day one of his policyholders, who had found a decrease in his dividends, met old "Uncle" Isaac on the street and said to him, "Isaac, what do you mean by cutting down my dividends sixty per cent?" "I don't know—me and Clarendon fixed up 'your dividends and we meant to have them right." Again, in the State Mutual, in its earlier years, every applica- tion used to be read in the open Board of Directors and was voted upon by the Directors of the company. One of their number, Charlie Putnam, was a good deal of a wag. One day, as they were all seated around the Directors' table, "Uncle Isaac" rose ponder- ously from his chair, for he was a man of immense size, put on his gold-bowed spectacles, took up an application and remarked, "It appears, gentlemen, from this application, that the applicant has had no aliment for thirty-six years." Charlie Putnam got up and said, "Mr. President, I move that the application be accepted—a man who has lived without eating for thirty-six years ought to be a risk that it would be safe for the State Mutual to take." The old gentleman picked up the paper again, looked it over and said, "I beg your pardon—it says that the applicant has had no ailment for thirty-six years." "Mr. President," said Charlie, "I move the application be declined—a man who has not been sick for thirty- six years is dead sure to get sick the next year after his insurance, and to die and make a loss to this company." So the applicant was declined. (Laughter.) Colonel Plympton here told an amusing story in which two Medical Directors of the State Mutual (Drs. Sargent and Gage) were the principals. One of them stuttered badly and indulged in profanity. It was customary for them to alternate, each week, as Medical Examiners and to pass upon each other's papers. An applicant whom Gage had passed as a first-class risk was declined by Sargent, but upon being again presented three months later, was accepted by the latter as satisfactory in every respect and was 6 82 SEMI-CENTENNIAL CELEBRATION then declined by Gage upon the ground that the application had previously been rejected by a reliable expert. Sargent thereupon stuttered his protestations and profanity but relished the joke when he learned that the reliable expert who had turned down the applicant, in the first instance, was himself. Another thought in connection with the evolution of life in- surance is this. My State of Massachusetts has been in the van in legislation concerning life insurance. It was the first State in this Union to recognize the beneficence of the underlying principle of life insurance. It was the first State in this Union to crystallize its approval of that beneficence into law. It was the first State to enact into legislation that the claim of the widow and the orphan should be superior to those of creditors and to all other claims. It did this for the reason, as it declared in its legislation, for the public good because all associations of men united to prevent families from becoming charges upon the public should be en- couraged. Therefore the Massachusetts Insurance Department was created, and from the day of its creation down to this day it has been the fountain head of authority, intelligence and ability in the matter of legislation and in executing legislation regarding life insurance. First of all, of the States of the Union, Massa- chusetts guarded the interests of the unfortunate as against the fortunate. I remember that, when the law giving a paid-up value to the retiring policyholder was passed, we heard the Jeremiahs of that day complaining that it would ruin the companies. Again, when Massachusetts put extended insurance into her law, the cry of the Jeremiahs was, "Why, you are going to carry this man on for so many years or so many days without the payment of pre- mium;" but Massachusetts did not pause and the law was enacted. Again, there came the question of cash surrender value. Ar- rayed against that legislation were many of the ablest and all of the most conservative. They predicted that when the cash surrender system had been adopted and the Massachusetts companies had been compelled to abide by it, in the event of any financial depres- sion there would be a rush of policyholders to the offices of the companies; that the companies would not have enough ready assets to meet the demand and would be compelled to suspend if THE PENN MUTUAL LIFE INSURANCE COMPANY. 83 stay legislation was not enacted. What has been the history? Sixteen years of cash surrender values in Massachusetts. Has any man heard a rumor of any "run" on a Massachusetts company? (Applause.) Aye, more than that—are there any other companies in this broad land that can show, during the last three years of financial depression, a record equal to that of the Massachusetts cash surrender value companies? Not one. They and they alone can show thirty-two per cent. increase in insurance risks—a less falling off, a less lapse than is shown by any other group of com- panies in this country. Following that, another company, which later adopted it, shows twenty-eight per cent. of gain. Following that, another company, which was the last to adopt it, shows a gain of twenty-two per cent. Following that, we come down to com- panies like our own, that recognize the demand and the right of the policyholder by a loan system showing sixteen per cent.; and we follow down from that to the one company of this country, which has been the meanest of all to its unfortunate policyholders, which has robbed them at both ends of the game—and you find that, in spite of the biggest volume of new business written by any company in the country, the lapse beat the new business all to pieces. (Applause.) Do you tell me there is danger in doing right? The danger always is in doing wrong, in defrauding somebody. (Applause.) Exactly on the same principle, not many years ago, it was claimed that the street car lines here couldn't get along on less than a ten-cent fare. When the experiment was tried, the ten-cent fare nearly drove them into bankruptcy, while a recognition of the rights of the people in a five-cent fare gave handsome dividends to the stockholders. How many men have I known, in the last three years, who, had it not been for the loan provision in our company, would have gone from among us. It is the same with all com- panies; they are all recognizing it; and we thank God that in many things the Penn Mutual continues to lead the whole procession. (Applause.) Now, gentlemen, I have detained you altogether too long. ("Go on" and applause.) There is just one thing more that I wish to say. Twelve years ago I became a member of the Board of 84
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Trustees of this company. There necessarily was misconstruction and misunderstanding at the outset, but—thank God!—the clouds have rolled away and to-day, in the clear sunlight of perfect unity, trustees, agents and policyholders of the Penn Mutual meet to- gether on equal terms, with equal confidence and with mutual love and regard for each other. (Applause.) At no time since I have been a member of our Board of Trustees have I ever known the door to be shut on any proposition looking to the good of this company. Every proposition which has been carried there by those who were your direct representatives in the board has been received with courtesy, has received careful consideration; and I may say to-day that I cannot remember one proposition which was presented, particularly from the agents of this company, that hasn't been adopted by a unanimous vote of our board. The pleasure of our reunion to-day is marred by the sad thought that one face which was familiar to all of us of the older agents—that one hand that we always grasped when we came here to Philadelphia—that one man to whom we always wrote in regard to our business is unable, through sickness, to be here with us. I refer to our late Vice-President, Horatio S. Stephens. Another who is with us to-day, but will not be with us long officially—a sincere, loyal, upright man, who never has done an intentional injustice to any man—is our President, Mr. Needles. (Long continued applause.) But these changes occur. As vacan- cies come, your Board of Trustees has sought, in its best judgment and wisdom, to fill them. There is another, of whom I can speak freely because he is not here this afternoon. I believe you will cheerfully endorse the action of your Trustees in choosing him to fill the vacancy caused by the retirement of Mr. Needles. I speak of a man whom I have known, and by whose side I have sat for ten years past; who, to my mind, is pre-eminent for his integrity; who is not only able but who combines with his ability firmness, a wonderful degree of tact, and a lovable disposition which makes a friend for him in every man who comes within reach of him—Harry F. West. (Ap- plause.) THE PENN MUTUAL LIFE INSURANCE COMPANY. 85 There is another face that I had hoped we would see here with us, but which we miss because of a family affliction. When our good President, a month ago, advised us of his retirement and that Mr. West had been elected to take the Presidency on the first of July, the Trustees were confronted with the question of who should succeed Mr. West. A mental canvass was made and careful con- sideration given to it. There was one Trustee who had come into the board four or five years later than myself, but from the day he came into the board he became a student of life insurance; he went into our Premium Committee and gave freely of his time and his thought to understand contracts of insurance. From the day he went into that Premium Committee until to-day there has never been a proposition looking- to justice and liberality, and that would be attractive that George K. Johnson has not been the champion of, both in the Committee on Premiums and in the Board of Trus- tees. He is a man of splendid business ability, who has proved his ability by his success. We, as employes, know that no one can be found who will not say a kindly word of him. I predict that when you all know him as those who.started with him in the Board of Trustees know him, every agent and employe of the Penn Mutual will hold him in as high and loving regard as the men who are at his back to-day. Now, gentlemen, only one word more. Your company to- dav is in the front rank. There is little to be desired in the way of giving facilities to the agents of this company to do business with. We have as good weapons to work with as are in the arsenal of life insurance. It is our own fault if the next ten years do not quadruple the business, the assets and the surplus of this com- pany. All I can say to you is, conduct yourselves in such a way as to take advantage of your situation, do your level best; and, it you are not with us fifty years from now, when we celebrate the centennial (Mr. Needles has promised to be here in person then), we will be able to write on your tombstone that epitaph which the man read in a little solitary graveyard in Arizona: "He died with his boots on, He did his darndest— : Angels could do no more." (Merriment and applause.) 86 SEMI-CENTENNIAL CELEBRATION Chairman PLYMPTON in making some announcements for general information, here stated that, at their meeting on the pre- vious evening, the Executive Committee of the Agency Associa- tion had voted to hold the next annual meeting of that association at the Hotel Jefferson, in Richmond, Va., on May 17, 18 and 19, 1898. The Chairman added: In the program for to-day the first number is missing. Capt. F. A. Kendall, of Cleveland, 0., was expected to read a paper on Agency Management from the stand- point of a general agent, but when I have explained the situation to you, I have no doubt you will excuse the Captain from this en- gagement. Some few months ago the city of Cleveland, by an overwhelming majority, elected Captain Kendall to take the man- agement of 900-and-odd school mistresses in that city. Instead of devoting his attention to such utterly irresponsible creatures as life insurance agents or telling you how to manage them, he has been engaged most assiduously in the congenial task of studying how to manage 900 school mistresses. I think you will all agree with me that it would be violating the law against cruelty to animals if we insisted upon the Captain keeping his engagement. We will there- fore proceed to the next item of business. It makes no difference whether it is a policyholder who walks up to the window to pay his premium, whether it is an agent who comes there to settle his account or whether it is an officer who comes there to ask a question, no one is ever disappointed who goes to that corner; no man is ever seen to come away from there without a smile on his face; and you have never known of one who was not perfectly satisfied and happy after having visited our friend. Harry H. Hallowell, upon whom the Chair now calls i;o come forward. Mr. HENRY H. HALLOWELL, responding to the call of the Chair, appeared on the platform and was complimented with three rousing cheers by the Convention. He then proceeded to read his paper on "How the Books are Kept;" prefacing it with the remark, "Mr. Chairman and gentlemen, I thank you very sincerely for the spontaneity and fervor of your welcome." THE PENN MUTUAL LIFE INSURANCE COMPANY. 87 ADDRESS OF MR, HENRY H. HALLO-WELL, "HOW THE BOOKS ARE KEPT." The theme, "How the Books are Kept," is one not admitting of romancing nor the infusion of humor in its discussion, but confines the writer to a plain statement of dry facts, for a mass of figures are astound- ing when they record something like. the total amount of insurance out- standing December 31, 1896, of American life insurance companies of $5,055,865,017; and figures are perplexing when the trial balance is incor- rect, and convincing as to "a condition and not a theory" when they show one's liabilities to exceed his assets. I shall endeavor to give you a general idea of the method of keeping the corporation's accounts, and it may be that some of the information imparted may enable you to tell any inquiring policyholder who may be anxious to know how his funds, intrusted to the company's care, are being administered, tor, where a corporation is exact as to the accurate recording of all its transactions there you are reasonably sure to find a faithful admin- istration of the trust placed within its keeping. As bearing directly on the question of accounts, the by-laws of the company provide that, "The President shall have in his care the assets of the company; shall invest and re-invest them," etc. All accounts relative to interest on assets (save on notes on policies) are collected through this department. The Vice-President is given "direction of the correspondence with the agents, and a general supervision of the insurance branch of the business, including accounts and the reports of the agents." The Secretary and Treasurer has assigned to him, in conjunction with his other duties, "the keeping of the accounts of the company, as well as a regular cash account," and the Actuary has in his special charge all matters of calculation as to the value, surplus contributions as to each policy," etc. In transacting the work of such a corporation as the Penn Mutual Life Insurance Company, a thorough system is absolutely requisite. In no way could the enormous and ever-increasing amount of detailed work be suc- cessfully accomplished, except by a strict conformity to methods evolved from experience. The system of accounts now in operation is the result of years of careful study and of improvement, and now covers the existing needs of the company's work, and fulfills the exacting requirements of the various State Insurance Departments. The necessity for an enlargement of the method of keeping the ac- counts, following the rapid growth of the company, may best be shown by a reference to the gross receipts and disbursements through different periods of the corporation's career. I speak now of only such transac- tions as pass through the home office cash book, the only agency matters entering into these figures being the cash remittances received from the agents. 88 SEMI-CENTENNIAL CELEBRATION During the tenth year of the company's history we find that the gross cash receipts were $411,812.29, and the disbursements were $385,468.27, a total of $797,280.56 that passed through the books. During the twentieth year, shows receipts of $545,266.97; disbursements of $533,452.26, a total of $1,078,719.23. The year that rounded out a quarter of a century of existence, revealed receipts of $1,164,382.79; disbursements of $1,214,020.85, a total of $2,378,- 403.64. Taking a period still farther on, it is ascertained, by reference to the fortieth year of corporate life, that the receipts were $3,689,613.98; disburse- ments, $3,755,544.51, a total of $7,445,158.49. And now, coming up to the year 1896, the .fiftieth in the ever- increasing career of usefulness of the Penn Mutual Life Insurance Com- pany, we reach the largest volume of transactions, when the receipts were $10,007,332,82; disbursements were $9,816,570.89, giving a total of $19,823,- 903.71. Another way of indicating the increased operations of the company at successive periods may be relatively expressed by the labor or talent (whichever word suits the individual hearer best) employed by the com- pany at such periods. During the tenth year (1857) the official force presented very much the appearance of a Kentucky regiment, as the officers were five in num- ber and the clerks three. In the twenty-fifth year the officers and clerks numbered fifteen, there being seven officers and eight clerks. The fortieth year the officers were nine and clerks thirty-one. Assistant officers being appointed to relieve the officers of some of the onerous duties bearing down on them, as well, also, as to make effective the system of administration of the details of the company's affairs—a sys- tem made necessary by the rapid growth of the corporation and the multi- plicity, variety and intricacy of contracts of insurance issued—on January i, 1897, the list comprised thirteen officers and a clerical force of seventy- two. The first cash book of the company, consisting of four hundred and seventy-three pages, was utilized for six years, from 1847 to February, 1853. During the year 1896 the cash book transactions covered over thirteen hundred and sixty-eight pages. The clearest way to give an idea as to the operation of keeping the company's records would be to trace a premium from its payment until it is in part, or in whole, ultimately merged into the asset accounts. The policy on issuance, necessarily, is forwarded to the agent, and the agent should enter upon his register full details of the policy; then, upon the date of the settlement of premium, the same should be recorded in the daily cash book, whether the premium be settled for in cash, temporary note, or part cash and note, but let the entire transaction be spread upon THE PENN MUTUAL LIFE INSURANCE COMPANY. 89 the cash book with accuracy, for accuracy is essential to good bookkeeping. In accordance with contractual requirements, the agent is called upon to report monthly or oftener to the home office. The premiums paid to the agent, and embodied in his report, are re- mitted, with the report, to the Vice-President; the check to balance the account goes to the Secretary and Treasurer for acknowledgment and col- lection. The report is then given over to the Auditor of the Agency De- partment for analysis and audit. In this department, premium settlements are entered in the agency register (the latter containing a record of policies, grouped as to each agency)—vouchers are checked ofif, commissions and credits taken, are verified to see that they conform to contract agreement. After the report has satisfactorily passed the scrutiny of the auditor, it is handed over to the Comptroller. In the department of the Comptroller is kept an individual record of each policy. Finally, the agent's report is given to the Secretary and Treasurer. In the latter's department are kept the financial books of the corporation (as before-mentioned), as well, also, as a ledger account for each agent under contract directly. with the home office. The account is here journalized, to get the aggregate of the various items of agency receipts and disburse- ments, and to complete the individual ledger account of the agent. The premium has now become a part oT the assets of the company, and takes its place among the investments to fulfill ultimately its mission in providing for a final liquidation of the provisions of the contract for which it was in part a consideration. It is hardly necessary to state that the daily cash transactions are always balanced at the close of each day, and at the end of each month the general ledgers of the company, likewise, are balanced. Our next step takes us to the closing period of the fiscal year of the company, and a balance is then struck as to the year's transactions. The income and disbursements are calculated and the net income is ascertained, and out of this net income provision is made for all the liabili- ties under the policy contracts. The Actuarial Department computes and determines the amount of reserve that it is necessary for the company to hold, and the net increase in reserve for the year is provided out of this said net income of the year. Provision is made out of it, likewise, for all liability under such forms of policy contract in which the surplus abatement is held for accumulation. These figures as to liability for surplus accumulation are furnished by the Comptroller, in whose department separate record is kept of each policy, showing the surplus accumulations that accrue to each' policy from year to year. From the balance of the net income remaining, after all liabilities have been fully provided for, the Committee on Accounts, with the concurrence 00 SEMI-CENTENNIAL CELEBRATION of the Board of Trustees, authorizes the amount of abatement of premium (or dividend) that shall be made for the ensuing year. The surplus or dividend year runs from May I to the succeeding May I. The reason therefor is, that the meeting of the Board of Trustees, at which they de- termine the gross amount of abatement of premium tor the ensuing year, does not occur until late in January, and it requires the intervening time to May l for the Actuary to make the requisite apportionment to each policy entitled to surplus abatement. Some few years ago the Committee on Accounts of the Board of Trustees, realizing that the rapidly increasing volume of transactions through the financial books, and the details thereof, prevented a sufficient audit by the committee, except by prolonged examination, deemed it the part of wisdom to engage a public accountant, vesting him with authority to make an exhaustive and thorough examination of the financial books, covering such period as the accountant might elect to go over, and to sub- mit the result of his examination thereof by report to the committee. This wise course of examination instituted by the Committee on Accounts is still continued, and the committee's recommendation tor an examination subsequently became a by-law requirement, as we find by reference to Article XIII of the by-laws, which reads: "The Committee on Accounts shall audit monthly the cash account, and yearly, or oftener, at their discretion, examine the books, accounts, securities, moneys, papers, effects, and genera] state of the business and affairs of the company, and report to the Board the amount of profit and loss, the amount of surplus to be divided. ****** "They are authorized to employ such special auditor or accountant as they may deem requisite, at any time, to aid them in the discharge of theit duties." I am pleased to state that each and every examination thus far made by the company's expert has elicited from him a report commending the accuracy of the work, the methods employed, and the system of book- keeping in operation. To quote from one of his reports: "We beg to report that, in compliance with your instructions, we have audited the accounts of the Penn Mutual Life Insurance Company, as to all items of receipts and disbursements, covering the period selected, and verified the same by the numerous vouchers and auxiliary records submit- ted, and found the whole to be correct, and very creditable to the several officers by whom kept. "Very respectfully, (Signed) "H. & W." "P. S.—My confidence in the company and its management is evi- denced to-day by my receiving an endowment policy for $15,000, and my payment to the company of the first premium in full of $i,783-35. "Truly yours, (Signed) "JOHN H." THE PENN MUTUAL LIFE INSURANCE COMPANY, pi At the close of the fiscal year the Committee on Accounts verifies, bv examination (and actually counts), the stocks and bonds and collateral loans claimed to be held by the company, as per its book accounts. A comparison of the report required to be made and submitted to the Insurance Departments of the various States of a few years ago and the one recently adopted by the Insurance Commissioners, in session, will give you some idea of the complicated records which must be kept in order to comply with the requirements of the several Insurance Departments. The adoption of this searching blank by the Insurance Departments was made necessary by the fact that some of the life insurance companies, through ingenious bookkeeping and specious reasoning as to what constituted income and disbursement, were enabled to magnify their operations and cloud their actual conditions. The present blank has materially helped to clarity matters, yet the Commissioners should require all companies to make a division of the item "surplus to policyholders," so as to distinguish clearly how much is actual surplus to policyholders, and how much is accumulation of surplus on deferred dividend plans. A Deputy Insurance Commissioner of the State of Massachusetts tells of an examination by him of a small New York insurance company, where- in he found during his examination that a part of the books had been kept in cipher by the Secretary. The official gave as an explanation thereof that he kept his accounts in this way in order to prevent the company from dismissing him should he become unable to work with his accustomed celerity, on account of his increasing years. It is needless to add that the Insurance Department's representative saw that the offending official dis- continued his way of making sure of a life tenure of his position. The Penn Mutual has been thoroughly examined at different intervals by the Insurance Departments of Pennsylvania and of other States. The Commissioners tor these States voluntarily advanced the statement that in all their examinations of the various companies, in no company had they met with such an excellent method of keeping accounts, giving such essential information and detail, as was found in the methods in operation with the Penn Mutual. The record of the company for the past fifty years, as disclosed by its books, shows that those who were instrumental in shaping its course during that period builded exceedingly well. Security and confidence must ever be the foundation-stone and key- stone of all sound life insurance, and on these latter lines they reared their structure. The development of fifty years of corporate life shows as a result that we have an institution of which we may be justly proud, and it must ever keep on, strong and beneficent under its charter, which is perpetual. All of us here to-day connected with it should be factors in perpetu- 02 SEMI-CENTENNIAL CELEBRATION ating its honorable career. To the incoming administration let us give arr enthusiastic co-operation, showing such zeal, energy, and intelligent busi- ness capacity as will result in helping to safely multiply and broaden the company's usefulness, so that when the spectacled bookkeeper of 1947 tells then "How the Books are Kept," he may be able to pay a tribute of ap- proval, commending the wisdom, judgment, forethought and faithfulness of the makers of the company's history during its second fifty years. The CHAIRMAN (after the applause which followed the paper had subsided) said: To prevent confusion, for I see that three- fourths of the delegates are just ready to get on their feet to move a vote of thanks to Mr. Hallowell, the Chair puts the question at this time, so that no one else will have a chance to make a prior motion. All who are in favor of tendering a vote of thanks to Mr. Hallowell will signify it by rising to their feet. (Here all the delegates rose, and the thanks were voted unani- mously.) The CHAIRMAN. The next item of business is the discussion of the paper which was read at the morning session. Any gentle- man who desires to do so may submit any remarks on the sub- ject. If he does not do it now let him forever hold his peace. (No response.) As the "discussin" seems to have been postponed for the "cussin" later, we will proceed to the next business. Dr. 0. P. REX, Medical Director, responding to the invitation of the Chair to favor the delegates with suggestions as to the best way in which they can perform their duties in regard to medical examinations, and to answer questions on the subject, here came forward and received a cordial greeting. REMARKS OF DR. 0. P. REX, MEDICAL DIRECTOR. After acknowledging his appreciation of the warmth of his reception, Dr. Rex remarked that, being unaccustomed to public speaking, it would be more agreeable to him, if he consulted his own inclination, to change places with the audience, and do the thinking while they did the talking. He continued: But in my own feeble way, which doubtless is known to all of you, I will tell you something about the passage of an application from the time it leaves your hands and reaches mine until it passes through the hands of Mr. McCloy and is finally returned to you as a policy. THE PENN MUTUAL LIFE INSURANCE COMPANY. 93 After the examination is received by me it is sent down-stairs to Mr. Cloy, who looks to see whether the application has arrived, and he will tell you whether or not you have properly arranged the preliminaries. The thunder peal follows the lightning flash, though sometimes far distant, so the application follows the exami- nation; and meanwhile the agent is writing to know why the poli- cies have not been forwarded. The rule of the company is this (and I am sorry to say it is not always carried out) that the doctor making the examination shall not begin it until the signed and properly filled application is in his hands. While I am on this point, let me make a suggestion to you. It may happen that, when you have taken a $1000 policy paper to the examiner and he has complimented the applicant upon his ex- cellent physical condition, the latter is so much pleased that he gets the agent, on leaving the examiner, to ask for an increase. If this is granted, the increase necessitates the making of a urine test. The necessity for this is not known to the physician when the papers are sent in. Consequently I am compelled to return them to the doctor for completion. For this, of course, the doctor is in no way responsible. The agent, in his lapse of memory, over- looks this fact until after the papers are sent out, when the matter leads to considerable correspondence. A change must be made in the figures, and this is attended with delay, which however could have been avoided by a little thought and reflection on the part of the agent. In some instances the agent fails to 'give anything of the family record or any statement of when the parents died, of what disease they died, how long they were sick or their previous con- dition of life. It should be borne in mind that, when a blank is made, there is a definite purpose in making it, and that each col- umn and line upon it is designed to contain something bearing directly upon the case presented to us. Therefore, I would like you, gentlemen, where you can avoid doing so, not to insert a dash or a stroke of the pen, but wherever a question is asked, to make a correct and concise reply to it, remembering that the family record is a part of the structure which we build upon in deciding as to the acceptance or declination of the risk. It is essential for 94 SEMI-CENTENNIAL CELEBRATION the medical department that you should make your papers as thoroug-h and accurate as they can be made. We desire to do work promptly, we desire to be honest and frank in our relations with you, and we desire that you shall be honest and frank in your relations with us. If you know that an applicant drinks to excess, tell us so; if you know that he has any special failing, tell us about it, and we will investigate it. It is important, in order that your papers may be promptly 'made out, that we should feel that you have dealt just as honestly and justly with us as we hope to deal with you. I want you to trust me and I will trust you. A sailor once said that he liked to go to the Episcopal Church and, when asked why, he replied it was because he could talk back to the minister. He said he enjoyed doing that and he knew of no other denomination in which he could have that privilege. Now, I want to "talk back" to you for a moment. Yesterday a statement was made in this room, which you applauded and ac- cepted as true, but which I contend is not true, and I want to pro- duce proof in support of my conviction. That statement was that there had been no advance in medicine, that while surgery had made progress, medicine had remained where it stood in the days of ^Esculapius. I want to refute that statement by saying a few words to you about the Medical Department of the Penn Mutual. First, let me say that for twenty years I lectured in old Jefferson College on clinical matters, such as diseases of the heart and lungs, and finally I established the first course, in that old college, on diseases of children. After making it a success I retired. I have not time to go further into personal matters and I make this refer- ence only to say that the progress in medicine has been just as rapid as it has been in other sciences. The term "charlatan" has been dropped and the term "scientist" substituted for it. It is true that surgery in America has made a great advance, but the ad- vancement in medicine has been equally marked, and I want to tell you of what advancement there has been in the Medical Depart- ment of the Penn Mutual. A gentleman now in this room under- went an examination and was declined as a risk, some years ago, because his height was less than five feet nine inches, and his THE PENN MUTUAL LIFE INSURANCE COMPANY. 95 weight was two hundred pounds. But we now take applicants who are 45 per cent. over standard weight and we find them to be acceptable risks. Again: when I took charge of the medical department a homoeopathic physician was not allowed to receive appointment papers as an examiner for this company. I have found, upon inquiry, that some of my best examiners to-day are homoeopathic physicians. Is not that an evidence of a progress in medicine? There are also on my rolls to-day the names of first- class eclectic physicians, whose papers I accept as freely as I accept papers from the old-school doctors. Let me say further that the Penn Mutual was the first company to appoint female medical examiners, and let me tell you that we have seen no cause to regret having done so. The risks received from that source are as good as any upon our books. So that, upon the whole, we think we are not open to the charge of .being old fogies, but that we are going along as rapidly and surely as can be expected. I know that in the past five years the Medical Department of the Penn Mutual has made more rapid progress than was made in all the previous years. DISCUSSION.—MEDICAL. Chairman PLYMPTON, referring to Dr. Rex's allusion to the subject, went on to speak in a humorus way of the alleged slowness of Philadelphia. He said it reminded him of the story told in Chicago about a man who fell from the top of a building of many stories in height and who astonished everybody by reaching the earth in quite a leisurely way, without serious injury. When in- terrogated, the man quietly explained that he "came from Phila- delphia, where they never do things in a hurry." Dr. REX retorted with a humorous statement to the effect that the reason why the express trains from Boston to Philadelphia were put on, it was alleged, was to enable the New Yorkers to get away from Boston more quickly. Mr. SIMON WOLF, replying to Dr. Rex, explained that the statement made by himself, to which the doctor had taken excep- tion, was that medicine had made no advance in comparison with that of surgery. He disclaimed having said that medicine had made no advance whatever. He continued: I personally knew 96
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that medical science, especially in the Medical Department of the Penn Mutual, had made an advance; for I remembered that, last year, after my wife had applied for a policy and had been rejected, she insisted upon coming personally to visit Dr. Rex—and I came with her. (Merriment.) Gentlemen, I know every word of the English language thoroughly and do not use a word unless ad- visedly; therefore what-you are now thinking of never then entered my mind at all. (Renewed merriment.) Well, I was going to say this, that the moment Mrs. Wolf was seen by the doctor, he said, "W^hy, how did I ever come to reject so good a risk?" Mrs. Wolf was passed, thus showing that there is some advance in science. (Continued merriment.) But the point I made yesterday was this, that the person who examines the individual at the place where the application is made, who has known the, applicant for a lifetime, who knows the moral and phy- sical risk, who is present at the examination, ought to be more competent to judge as to whether the risk shall be accepted than the medical director who, with his college experience, sits in his room and has nothing to guide him but the dry details. That is the point I was making. I may be wrong, but that is my opinion. In regard to the advance of which the doctor has spoken, I may say that no one appreciates it more than I do. But if a per- son weighing 200 pounds, after having been previously rejected, is now accepted, that does not show an advance in medical science, but simply an advance in experience. Then, too, if you now recognize homoeopathic physicians, that is not an advance in science, but simply an advance in being more liberal than you formerly were. Now, I would like to ask the doctor this question. If either of my parents has died of consumption many years after my birth, or if any member of my family has died of it, does it follow that I, as an applicant, am to be regarded as destined to die of that dis- ease? Dr. REX. The truth is this. We do not any longer believe in the hereditary character of phthisis, but we believe in a predis- position to phthisis; that there, may be in the system, in certain cases, a soil on which the disease will develop and finally eventuate THE PET^N MUTUAL LIFE INSURANCE COMPANY. 97 in phthisis. A man may contract a cold from being exposed in a storm and he may escape with no other consequences than a slight sickness, but where there is a predisposition to phthisis the condi- tion may be intensified from slight causes. Where the disease appears in a family of children, all of them have been known to become victims to it. Mr. WOLF. Then the same rule may apply to a case of in- sanity which is not inherited? Dr. REX. That has nothing at all to do with the question. Mr. W^OLF here suggested a case in which the parents of an applicant had died at about eighty years of age, without having given any indications of a tendency to phthisis, and where, out of nine children, the brothers and sisters, of the applrcant, six or seven had died of the disease. He suggested that the applicant was more apt to contract the disease from the other members of the family than to suffer from it through heredity. He requested an answer with respect to such a case. Dr. REX replied that in such a case, where phthisis had de- veloped among a family of children whose parents had not been known to have the disease, there is as much to be feared as if the parents had died of phthisis. Mr. MEYER HARRISON inquired whether Dr. Rex had con- sidered the question of appointing homoeopathic physicians in localities like Denver, Colorado, and other portions of that State. Dr. REX replied that he had not, and intimated jocularly that he thought the intelligence necessary to qualify a man of the homoeopathic school could not be found in the extreme West. Mr. HARRISON protested against what he regarded as an im- putation upon the homoeopathic fraternity of the West. Dr. REX explained that his reply was simply a joke, that it had not been intended as a serious statement, and that he felt that what he had done in the matter of appointments in Western towns disproved any assumption that he had failed to appreciate the merit and ability of the medical profession there. Mr. STOCKWELL. There is a feeling among field men that there is a sense of etiquette existing between the examiners of the various companies, in consequence of which, if an applicant is de- 7 98
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dined by one company, his case is settled so far as any other com- pany is concerned; in other words, after they have been once de- clined, applicants do not receive that consideration which it seems to us they deserve. I would like to know if there is any truth in our suspicion that people are sometimes declined by a company because other companies have said "no." Dr. REX. My dear sir, etiquette plays no part in the question. We are looking- for business. Whether Dr. Sc-and-so approves a case and we decline it or not, ethics play no part in it whatever. This is not a county medical society nor a state medical society, where certain specific laws govern. I can assure you that the fact that one company declines a risk has no weight with us. Bunyan says, "Let every tub stand on its own bottom," and we try to bear that injunction in mind. Mr. GOULDEN. I wish to ask this question: Are applicants restricted, in examinations, to the particular medical schools in which they believe? Dr. REX. If an applicant prefers to be examined by a homoeopathic physician, he has a right to be examined by a physi- cian of that school. At the present time we have given instruc- tions to consult the wishes of applicants in this regard. DISCUSSION—ACTUARIAL. The CHAIRMAN. The next item upon the program is the answering of questions by the Actuarial Department. Actuary BARKER, responding to the invitation of the Chair, here came forward and was received with applause. Mr. Chairman and gentlemen, I am here ready to explain anything that any of the agents may desire to know about in regard to the operations of my department or the forms of policies, distribution of surplus, or standard values. We had a little dis- cussion here, yesterday, upon several points, but there may be others on which information is desired. Anything I am ques- tioned about I will give you information upon to the best of my ability. Mr. GEORGE L. BAHL. I ask the Actuary whether the divi- THE PENN MUTUAL LIFE INSURANCE COMPANY. 99 dends of surplus on convertible term policies can be used annually, after the end of the first five years? Mr. BARKER. I have to say that originally, upon the adoption of the convertible term plan, it was decided to defer dividends until the end of the term period. It was found that many parties desired to have those ten-year convertible term policies, but did not desire, and were not willing to permit, the dividends to remain and be accumulated for so long a time as fifteen or twenty years. There- fore the suggestion was made to the committee to allow a distribu- tion of surplus on these forms every five years. This was con- curred in by the committee. The present plan adopted on all these policies is long enough to determine whether there had been any special mortality or other reason why the dividend should not be declared, or whether it should be a diminished one. So that now the dividends on those plans are declared every five years and are applicable to the payment of the premium on the next anniversary, or can be broken up into five or ten-year portions to diminish the following premiums or to pay premiums on a new policy, if taken at the end of that time. Mr. BAHL. Do I understand you that at the end of the first five years the dividend may be used as an annuity to pay succeed- ing premiums? Mr. BARKER. It can be so applied. Mr. WATKINS. In the case of a holder of a policy having been paid three or four years, then two or three years having elapsed and no payments having been made in the meantime, can that holder renew that policy by paying up his back premiums, without an examination? Mr. BARKER. He cannot. Mr. WATKINS. Let me ask you why? Suppose a man has paid, say three years on a ten-year endowment. The extension period carries him over that ten years. You have got to carry it here anyway. He wants to give you his money—why won't you take it? Mr. BARKER. That is an exception to the general rule. My general answer probably would not apply to the case of a ten-year 100 SEMI-CENTENNIAL CELEBRATION endowment, where the extension would carry him to the end of the endowment period. Mr. WATKINS. Make it twenty years. Mr. BARKER. As to any other form where the extension runs to the end of the period, there would be no necessity to re- quire an examination. Mr. MACOMBER. I did not propose to take part in this dis- cussion at all, but I would like to have a little light upon the sub- ject of the life rate endowment policy. Many years ago, when I first commenced my work with the Penn Mutual, the life-rate en- dowment policy was the popular policy. We did business very extensively on that plan. Now, after paying twenty-odd pre- miums on No. 18,900, which I took out on my life while I was an agent of the New York Life Insurance Company—while I was an apprentice—I found that I had a certain amount of surplus and a certain amount of reserve; and, wanting to know (not being enough of an actuary to decide it myself) at what time this policy would mature as an endowment, I wrote to our actuary to know when it was likely to mature. .As the company is now earning dividends and as those dividends are earning interest—if the com- pany progresses during the intermediate time as it is progressing at the present time—I may hope that when I am about seventy- nine years old I will see that policy mature as an endowment. (After a request from the Chairman, to make the question more specific, Mr. Macomber continued:) I want to ask this question: Whether, in the opinion of the Actuary, in the expectation of life, any wrong would be done if the company was to settle the life rate endowment policies and pay the amount of reserve and accumulated amounts of that period, or would it be necessary to have the policy modified in terms to that extent. Mr. BARKER. In reply to Mr. Macomber's query, as to whether in such a case—a case of a life-rate endowment having run a number of years—any injustice would be done if the con- tract was so changed so as to pay at the end of the expectation of life, from the starting of the policy, the accumulated dividend up THE PENN MUTUAL LIFE INSURANCE COMPANY. 101 to that period with the reserve, even though together they do not reach the amount of the policy, I have to say this. I cannot see that any injustice would be done to any other members of the com- pany, but it would require a special authorization by the Board of Trustees to make any such change in the contract as to provide for the payment of that full reserve. It is not the custom of the com- pany, in such cases, to pay the full reserve as a cash surrender value, but to charge a small fine upon the reserve in order to replace the retiring number with a new one. Mr. JOHN F. BROWN. In the past five years contracts have been liberalized, and by resolution of the Board of Trustees the new benefits -have largely been extended to the old members as well as the new. I want to know, does that practice now apply in the increased loan and surrender value cash loan, etc., to our old policyholders as well as to the new ones? Mr. BARKER. In reply to Mr. Brown's question, as to whether the new values and more liberal features of the new poli- cies have been extended to the old contract, I have to say that they have not been; that that old policy was upon a different basis. Upon the new policies, we are reserving on a higher basis; conse- quently the reserve upon the new policies is larger and will per- mit a larger value to be given on the surrender of the policy. I have no doubt that when the probationary period of three years has elapsed (which has been cited as the measure of time after which loans will be made for smaller amounts than $100), applica- tions for loans of small amounts on old policies will be granted the same as upon the new one. Mr. HART. I would like to ask this question, which is some- what in line with the question suggested by Mr. Brown. Would it not be a matter of justice to the old policyholders to extend to them the new and liberal values contained in the new policies, particu- larly the privilege of the non-forfeiture extension system? I have a policy, which I have carried for eleven years, in which that privi- lege is embodied. Mr. BARKER. In answer to Mr. Hart's query, I would say it would not be feasible to extend to the old policies that have no 102 SEMI-CENTENNIAL CELEBRATION extension feature incorporated in them to-day the privileges which have been adopted for subsequent policies; it would probably be impossible to do so except by a special agreement between each and every person interested in that policy and the company. The contract could not be varied by the company, in giving extension features instead of a paid-up value, and this be made to apply to all policies, except, as I have said, by the special consent of all inter- ested. There might be many who would be glad to avail them- selves of the privilege of the extension feature, but there are others who prefer the paid-up policy. I have had many complaints from men who have had extension features in their policies, who per- mitted their policies to lapse, and received that extension, who claim that they would have been much pleased to have had paid-up policies. If every new feature introduced bv a company was ex- tended to the old policies, endless confusion would probably arise. It might cause the company to refuse to adopt new and liberal measures. It might prevent them from adopting such a system if it was necessary to apply them to all the previous policies. The plans, under such an arrangement, could never be changed or modified. If the new and very liberal values adopted are found not to be to the advantage of the company, under the present arrangement the company can simply cease to issue any more of them and can change from that time forth to some new basis. So that it would be impracticable to make all changes apply as suggested by Mr. Hart. Mr. KENDALL. I have great respect for the management of the Penn Mutual. I believe in their infallibility, but sometimes things occur that in my stupidity I am not able to comprehend. Here is one instance that I would like to have the Actuary speak about, and it is one that might save a large amount of trouble if the reasons for certain actions were comprehended. It is within my experience that a person carrying an ordinary life policy, after carrying it about two years, concluded it was not what he wanted and asked to have that policy changed into a twenty-year endow- ment. And the orders were for a new application and a new 104 SEMI-CENTENNIAL CELEBRATION term life plan, I say simply this, that almost any form of joint life policy could be issued. The principles relating to insurance are so expansive in their character that they may be made to cover almost any possible contingency of life. But the question is one of feasi- bility. It was our custom formerly to give rates for almost any kind of policy asked for on joint life plans; but we found, after our young men had spent many hours in each case to make the neces- sary rates and calculations, that in sixteen months we made sixty- six such calculations and issued only one of that number; and that policy was returned not taken. We have now in force forty-six joint life policies. We really had not the men to spare to make a lot of calculations which would never be of any practical use and would result in nothing. Therefore it was concluded to limit the joint life forms to two classes—joint ordinary life and joint ten- payment life policies. We think that those, with the other forms of policy adopted by the company, ought to be sufficient to cover almost any desirable form of insurance. Mr. ROOT. I ask if the policyholders in our company can ob- tain a loan on the payment of the third annual premium? If that is answered in the affirmative, I would like to ask, why not embody that in the contract? I would like also to ask Mr. Barker if the figures in our policies of loan and cash paid up and extended values are guaranteed. If they are, why use the word "illustration" and why not use the word "guaranteed?" Mr. BARKER. The first question is whether, after the third premium is paid, a loan could be obtained on our new policy. I answer that the loan can be obtained immediately after payment of the third annual premium: that is, at the beginning of the third year. As to the second question, whether or not our figures which are contained in our policies are guaranteed, I have to say that, so far as it is possible to have them guaranteed, they are guaranteed. Our rate-book, which has been carefully prepared, is the basis for the figures to be inserted in those policies, and that is guaranteed. But we cannot guarantee against the inefficiency or carelessness of a clerk who might exchange slips containing values prepared for different policies and insert the wrong values in each policy. It THE PENN MUTUAL LIFE INSURANCE COMPANY. 105 is impossible to guarantee against errors; but so far as it is possi- ble we do guarantee the figures that are put in the policy. They are prepared with extreme care and the policies are written with care, but in the hurry incident to the issuing of over two hundred policies in a day errors may creep in; and I feel sure that you will agree with me it would be inadvisable to guarantee figures under such circumstances. Mr. ROOT. Referring again to the loan values, it would seem from what the Actuary said that loans can be obtained at the end of the second year, and the contract says ''at the end of the third year." Would it not be well for the agents of this company to have it stated in the contract, instead of saying the cash that is obtainable at the end of the third year, to make it "at the end of the second year?" Mr. BARKER. I have to say this, that while we would be will- ing to make a loan at the beginning of the third year, after the three years' preipium had been paid, deducting the interest for a year from that loan, yet we might not be able to pay the full cash value of the policy for the end of the third year, at the beginning of that year; for in some forms of policies the values are lower at; the beginning of the year than at the end of the year. Mr. HALL suggested -that, in the clause relating to the cash and loan values, the words "not to exceed the amount stipulated below" be left out. Mr. BARKER. In answer to Mr. Hall's suggestion that the words be left out, I will read you the clause which is printed on the policy; that is, so much of it as relates to this question. I read as follows: "In lieu of said paid-up insurance the company will, on surrender as aforesaid within thirty days from the date of lapse, pay a cash surrender value based upon the entire net reserve on this policy at date of lapse, computed by the Actuaries four and one-half per cent. total of mortality, less a surrender charge equal to one per cent. of the sum insured by the policy, not to exceed the amount stipulated below." This is an explanation of the method by which those figures are arrived at. But when we find that we have in some cases ex- ceeded this amount which this value would give, and in others 106 SEMI-CENTENNIAL CELEBRATION perhaps are slightly under it, it is necessary to add, "not to exceed the amount stipulated below." The values would not be in strict accordance with the clause, with those words omitted. Therefore, the words have to be inserted, in order that exception may not be taken to the values as taken from our book of values. Mr. LIPPINCOTT. I appreciate that some of our agents are occasionally handicapped by the fact that the policies themselves do not in the most clear and explicit terms contain a statement of the cash and loan values. The reason stated by the Actuary seems to me to be a very weighty one. It is impossible to guarantee all the figures at the home office; but the whole question can be met, whenever it arises as to the accuracy of the figures in the policy, where they are guaranteed by the company, by simply forwarding that policy to the company for examination and verification. This seems to me to be the best way, and it does not delay the issue of the policy in the first instance. Mr. HARMON. I have a policy in my pocket concerning which I was asked to have those figures verified and endorsed; and then the lady would take it. She was advised by a lawyer, and the company refused to endorse them. Mr. LIPPINCOTT. I did not know there had been any such instance of refusal; and I think there would be a reconsideration of such action if the matter was discussed. I do not know that there would be. I think there ought to be. I don't hesitate to say that, whether there is any such reconsideration or not; values should be explicitly stated. The CHAIRMAN. I do not see why, if opportunity is given for a verification of the figures on the policy, it would not be satis- factory. Mr. HARMON (exhibiting a letter). Here is a letter from Mr. McCloy, refusing to do it. Mr. BARKER. I presume that the opening of the door to the exceptions suggested by Mr. Lippincott would result in demand- ing from every agent who had a policy issued a complete verifica- tion of the figures placed in that policy; and, as many companies do not give cash values at all and the Penn Mutual is very far ad- vanced in doing so, there seems to me to be no real necessity for THE PENN MUTUAL LIFE INSURANCE COMPANY. 107 any such action to be taken. Mr. McCloy's letter, written after consultation with me, is in line with the practice which has been adopted by the company in guaranteeing the figures so far as that there may be no errors therein; and it is scarcely in accord with Mr. Lippincott's suggestion. The CI-IAIEMAN. I have no question that the matter will re- ceive attention at the hands of the Board of Trustees at a very early time. (Applause.) I think with that we will let it pass. Mr. BARKER. Even if we did guarantee the figures, the com- pany would still have the right to revise them. Every company, every individual and all business corporations reserve the right to correct any errors which may occur under those circumstances. Mr. IREDELL. Is it proper for a company to send out a policy stating loan, cash and surrender values, unless assured that those statements of figures are correct? Now, that can very easily be settled by having some one, before the policy goes out, revise or check those calculations, as is done in the Mutual Benefit and other companies. When their policy goes out and is delivered to the policyholder, he is assured that its figures are correct. It wi'l be very little trouble for the company to adopt (and I believe it will adopt) some system of that kind, so that it can say that the figures are correct. Mr. DURHAM. One of the very pleasant improvements in the practice of our company, in the last twelve or fifteen years, since I have been connected with it, is the increased willingness, year by year, on the part of the company, to make exceptions in a general way to correct inequalities—I don't mean to say that, but I mean to say to do specially such things as are in line with their general work. Now, I have never had in our agency a single request to have those figures verified. I don't believe there would be one such request in a year, but I think it is ,a good thing-. If the policyholder does want that, we can say to him, "Why, certainly, that is your right." (Applause.) The CHAIRMAN. In answer to the gentleman, I will say that, in issuing almost three million of business during the past year on these forms, I have never had occasion to ask the company to verify any of those figures. Consequently I don't think the danger 108 SEMI-CENTENNIAL CELEBRATION that Mr. Barker speaks of is to be apprehended any more than any imaginary danger. I have not the slightest question, now that it has been called to the attention of the representatives of the com- pany, that at the next meeting of the Premium Committee Mr. Barker will bring the matter to the attention of the committee, and I have not the slightest doubt that the company will substanti- ate any representation that it makes as well as the letter of the bond. DISCUSSION.—APPLICATIONS AND DEATH CLAIMS. Mr. JOHN J. McCLOY, Supervisor of Applications and Death Claims, responding to the call of the Chair, appeared on the plat- form, and after a cordial welcome, said: I want to say to Captain Harmon that his question was prob- ably intercepted before it got to our department. I cannot recall having received any such question as the one he has just stated. In the few remarks that I have to make, I desire simply to call attention to the importance of properly completing the application before forwarding it to the home office. And I cannot do better than to go over each question as it appears upon the application blank. In answer to "Question No. i B," it would be some accom- modation to our department if you, gentlemen, will always be sure to write the name in a clear, legible hand, and also include the applicant's Post Office address. If he resides in a city having numbered streets, the number and street as well as the town and state should be given. In answer to "Question No. 2 B," the kind of business always should be stated—it he is a clerk, whether in a drygoods house 01- a manufactory; if a mechanic, the precise kind of labor performed. In any occupation in which there is a possibility of extra hazard, the precise duties performed should be stated. Of course if he is in any way connected with the sale of liquor, that also should be carefully explained. The previous occupation also is important. In answer to "Question No. 2 A," the name of the proposed beneficiary should also be clearly and legibly written; and where it is a wife, her maiden name should invariably be given, as it enables THE PENN MUTUAL LIFE INSURANCE COMPANY. 109 us to identify the beneficiary when the time comes to pay the death loss. Please note that we do not write policies payable to un- named beneficiaries, that is, to children unnamed. In such cases the wife or some one should be named as trustee to receive the money for the children. In answer to "Question No. 3," great care should be given to correctly state the age and date of birth. This is a point on which agents often err, and the error or omission compels correspon- . dence, which of course causes delay. It would be well to remember that under our rules the age of a person born in any month of the first column would change in the opposite month of the second column, as below: January ......................................July. February ..................................... August. March ....................................... September. April ........................................ October. May ......................................... November. June ......................................... December. July .........................................January. August ...................................... February. September ................................... March. October ..................................... April. November ................................... May. December ....................................June. The matter of family record, as explained by the Medical Di- rector, is also of importance. Care should be exercised to have as full information given in regard to the ancestry and the brothers and sisters as is possible. This often determines whether the appli- cant will be accepted, limited or declined. In answer to "Question No. 6 A," we always desire to know the amount of insurance carried and the companies in which it is carried. This becomes of great importance, particularly where the application is of large amount or for the'cheaper plans of insur- ance. "Question No. 6 B," we find frequently answered incorrectly; ^and in such cases we always feel that an applicant has not been as icrank with us as we had a right to expect, and the case is prejudiced 110 SEMI-CENTENNIAL CELEBRATION to that extent. It would be well in every instance to read the question, emphasizing the different points covered thereby. In answer to "Question No. 7," the kind and amount of policy as well as the manner of paying premiums should be carefully stated, especially as to how the surplus is to be used. Remember that there are several ways of using the surplus, viz: to reduce premiums, purchase additional insurance, or in accordance witli the five-year option plan, or to accumulate for the different stipu- lated periods, as for instance ten, fifteen or twenty years. The application should be dated on the day that it was signed, being careful that it does not bear the date of Sunday; and it should also state the facts as they were on that date. If an applicant desires to be rated at the younger age, please make note in pencil, to that effect, on the lower margin of the application. And remember, in all cases where the applicant is fifty years of age or over, or where the application will make his insurance with us for more than $1000, that a urinary examination is necessary by the rules of the Medical Board. Mr. GOULDEN. Would it not be well for the gentleman (Mr. McCloy), as he has suggested the importance of supervision, to say something for the benefit of gentlemen present with regard to changes? Are these gentlemen to understand that they can make changes in an application without their being attested by the signature, of the applicant? Mr. MCCLOY. In reply to Mr. Goulden's question, I state that of course an agent is not authorized to make any corrections in the application unless such corrections are attested by the appli- cant's signature. It should be remembered that we annually issue nearly thirty millions of insurance on this application blank; and where such a large amount of money is involved the application should be written with as much care as you would write a deed for your house. You will recognize that it is a much easier matter for you to go around the corner, see your applicant and have a correc- tion made under his authority than to wait for the home office to call attention to the error, and then go to see the man, when he it, expecting that you will bring the policy with you. (. Mr. KENDALL here remarked that sometimes the agent did THE PENN MUTUAL LIFE INSURANCE COMPANY. Ill not know the fact when the applicant made a mistake in signing his name. He mentioned an instance in which he asked the appli- cant to state his full name, and the latter omitted his Christian name and merely made use of his middle name and his surname. Mr. KENDALL suggested an inquiry as to the case of an appli- cant who requests that the policy shall be payable to the wife. Mr. MCCLOY replied that in that case, if it was to answer "Question No. 4," as to whether the applicant was married or not, the company always assumed that he was married. Mr. MCCLOY, in reply to an inquiry by Mr. Bahl, explained tliat the company's agreement specially prohibits the service on any railroad train. This is covered by a special permit which accom- panies the policy, issued without extra charge. DISCUSSION.—ACCOUNTS. The CHAIRMAN announced that the next item of business, "Policyholders' Accounts," which had been assigned to Mr. Jacob Leithmann, Comptroller, would be passed over informally, because of the absence of Mr. Leithmann, who had temporarily retired from the hall, being quite unwell. The Chair added that the next item of business was "Agents' Accounts," and he called upon Mr. H. H. Marot, Auditor. Mr. H. H. MAROT, the Auditor, here came forward and offered to give any information that might be desired in regard to the agents' accounts with the Auditor of the company. (No inquiries were made.) Mr. KENDALL. Before we adjourn I want to say one word, and that is this. Many of the agents here imagine occasionally that they are having a hard time, but they know nothing of the grievances of the agents of other companies. I want to say that many of the agents of the Penn Mutual are better situated than any other set of agents of any other company in the land. Whenever I get disgusted I go and take a look at things in the New York Life and the others, and I become reconciled to my situation. I wouldn't be under the harrow as those fellows are; I would rather quit the business. (Applause.) Mr. GOULDEN. I want to endorse every word that Captain 112 SEMI-CENTENNIAL CELEBRATION Kendall has said. My colleague, Colonel DeForrest and myself are right in the net, amongst the home offices of the great leading companies of the United States, and I want to say to you that, in our Underwriters' Association and generally, the agents are ever- lastingly complaining. They say to us, "Why don't you pay big- ger commissions, for then we would work for the Penn." They become thoroughly disgusted, and I want to say they have had ten times the amount of trouble that you, gentlemen, in the Penn Mutual have had. Therefore, you ought to bear patiently the ills you have and not fly to those you know not of. Mr. JOHN F. BROWN. I think it would be proper for us in some way to show our appreciation of the superior literature which has been given us. I refer particularly to that brief history of the company that was sent out to the general agents a few weeks ago. I think that the author and compiler of that little book should have an expression of appreciation from us. I was charmed with the elegant diction of that work. It fell into my hands at 11 o'clock at night, and I read the whole fifty-six pages before I went to my rest; I could not lay it down until I had read the whole of it. I think it is one of the most complete little histories that could be placed in the hands of the agents, for their instruction and guid- ance. The CHAIRMAN (by unanimous consent) here appointed a committee to prepare a resolution in accordance with the sugges- tion of Mr. Brown. The committee was constituted as follows: Messrs. Brown, of Clarion, Pa.; Iredell, of Cincinnati, and Goul- den, of New York. The Chair also suggested, by way of expedit- ing'an adjournment, that the committee be empowered to incor- porate in the record of the Proceedings of the Convention the resolution which would be prepared by them. A vote was taken, and the suggestion of the Chair was adopted as a motion regularly made. The committee subsequently re- ported the following: Resolved, That the chaste historical brochure, written by Mr. H. C. Lippincott, Manager of Agencies, and printed for the occasion of this semi- centennial celebration of the Penn Mutual Lite Insurance Company, has received our most hearty appreciation, not only as a valuable historical THE PENN MUTUAL LIFE INSURANCE COMPANY. 113 and instructive book, but as another evidence of the literary ability and diction of the author, to whom the credit belongs for the great superiority of the company's literature furnished to the agents. JNO. F. BROWN, J. W. IREDELL, JR., J. A. GOULDEN, Philadelphia, May 27, 1897. Committee. Mr. MART. I think it necessary for the agents of the com- pany to voice their appreciation of the hospitalities extended to them by the officers and Trustees of the Penn Mutual. I therefore move that a resolution of thanks be voted to the officers and Trus- tees of the Penn Mutual Life Insurance Company for the generous hospitality extended by them on this occasion to the agents, as their guests, at their expense; and also for the entertainment and instruction they have afforded the agents on this occasion. The resolution was adopted by unanimous vote. The business of the Convention liaving been completed, an adjournment was ordered. BANQUET AT THE UNION LEAGUE. PHILADELPHIA, May 27, 1897. One does not need to say much of the Union League as a suitable place in which to give a banquet. The company, through its committee, held to the idea that in extending its hospitalities to those of its own household, those who through few or many years had been instrumental in advancing its prosperity and progress and sustaining its repute, nothing less than the best which modern facilities afforded would be appropriate for an expression of its thanks and appreciation. The Union League was therefore selected, and it is needless to say that all the accessories were in keeping with the place. The flowers, the music, the menu and the oratory; the seriousness, the gaiety, the comradeship, the exalta- tion which rightly comes from a knowledge of good done; the assured hopefulness for the future springing from lofty aspiration- all these united to make the occasion memorable. Seats had been provided for 208 persons, and with few excep- jl4 SEMI-CENTENNIAL CELEBRATION tions all were occupied. While all the tables were most beautifully decorated, the one devoted to the speakers was most conspicuous for elaborate ornamentation. At this sat the officials of the com- pany, a number of the older Trustees, the counsel of the company, together with agents and others who had been selected to make postprandial addresses. Harry F. West sat at the post of honor in the center, and on his right was President Edward M. Needles, who retires from official life July I, together with James 0. Pease, the oldest Trustee in the service of the company; Henry C. Townsend, its counsel for more than fifty years; Trustees William H. Rhawn, Benjamin Alien, N. Parker Shortridge, Aaron Fries, and Samuel B. Stinson. A place had been reserved at the left of the Chairman for the newly-elected Vice-President, George K. Johnson, whose absence was due to the death of his mother. Then came the Chairman of the Agency Committee, the senior general agent of the company, Dr. R. Allison Miller, and farther along were seated Joseph H. Harrison, Secretary and Treasurer Henry C. Brown, Medical Director Rex, Counsellor Samuel B. Huey, and J. W. Iredell, Jr., General Manager for Ohio, Kentucky, and Tennessee. Conspicuously located at the several tables were Trus- tees Charles D. Barney, Charles J. Field, Noah A. Plympton, Lincoln K. Passmore, Benjamin Rowland, and Frank Markoe. Messrs. John H. Watt, Frank Pyle, and W. Beaumont Whitney, all Trustees, were placed with some of the more prominent general agents of the company and representatives of the insurance press. Among the latter were noted Henry R. Haydcn, Dr. J. A. Fowler, Robert R. Dearden, F. C. Oviatt, F. A. Durham, P. J. Hanway, Charles A. Jenney, and .B. P. Tillinghaste. Of the whole number of agents attending the several meetings all were present. Every place was a post of honor. No such thing as class distinction was permitted. The pupil sat beside the professor, the trustees mingled with clerks, and the man who had written a first application was as well pleased with himself as his veteran neighbor whose years were many and whose work was large. The committee in the arrangement of the seats seemed to have in mind the newspaper injunction, to the effect that every notice should be put at the top of the column next to reading mat- ter; and all the guests esteemed themselves to be thus placed.