Taking the table of New York State companies first, it will be noticed that there were ninety-two companies in business at the beginning of 1878. Of these twenty-eight were in business at the beginning of 1904. Forty companies have been organized since 1878, of which number eighteen are still in business. This gives total retirements since 1878 of eighty-six companies, with a capitalization of $19,103,000. The second table shows non-state companies reporting to the New York insurance department. Ninety-four companies were doing business in New York at the beginning of 1878. Of these fifty-eight remain, while thirty-six have gone out of business. Sixty companies have entered the State since 1878, of which ten remain. Eighty-six companies, in all, have been in New York during the period and are now out, representing capital amounting to $23,305,The total capital of companies reporting to the New York department which have gone out of business in the past twenty-five years is $44,408,000. Against this is to be placed the $56,102,875 of capital now represented in the State of New York. Any fair consideration of the profit question must take into account this retired capital. These companies went out of business because it was not profitable to remain in the business. If 11% be considered a fair profit on $56,102,875 of capital now engaged in the business, what shall be said when the capital is increased by $44,408,000 which has gone out, making the total $100,510,875 of capital which has been engaged in the insurance business during the twenty-five years. It is impossible to figure out just where this would place the dividend question, because it is not possible to here compute the length of time that each of these companies did business. Sufficient, however, is the fact that about three-fourths as much capital has gone out as still remains. ness. Farther evidence along the line of profit is to be had in the fact that during the marvelous industrial expansion of the past few years, a very small amount of money has been put into the insurance busiA very large amount of capital which has been invested in industrial enterprises did not begin to earn 11% dividends. If the business has been so marvelously profitable, capital would have engaged in the business because capitalists are always looking for investments which will earn large dividends with the minimum amount of hazard. Only a few million dollars at the outside have been invested in the fire insurance business in the past five or six years, while several enterprises have been floated with a capitalization exceeding the entire capitalization of all the American fire insurance companies reporting to the New York insurance department. The evidence seems all to tend to the support of the proposition that the fire insurance business has not been and is not unduly profitable to the capital engaged in it. It farther appears that the surpluses which the companies have been accumulating as a bulwark against conflagration waves are not to be considered in any sense a withholding of profits which belong to the public by reason of undue prices. On the other hand, these accumulations of surplus appear to be what they are claimed to be, simply a wise precaution on the part of the men managing the corporations to insure that the indemnity they sell shall be worth under all circumstances what it purports to be. Had the fire insurance companies reporting to the New York insurance department distributed their surplus down to an amount which would have been proper in a less hazardous business, many of the companies would have been forced out by the Baltimore conflagration. Farther evidence of the wisdom of this accumulation of surplus may be found in a comparison between the number of companies forced out of business through the Chicago and Boston fires and the number forced out through the Baltimore conflagration. In the earlier days, the companies operated with a smaller surplus, and, as a consequence of insufficient safeguarding, they were unable to stand the strain of a great fire. The managers learned a lesson from those fires and so were in much better position to weather the fire of last winter. As was stated in the beginning of this paper, what the public desire in the matter of fire insurance indemnity is unquestionable value. Were it otherwise, business could not be conducted, because the fire insurance policy enters into almost every transaction of any importance in this country. As between lower rates and value, there is scarcely any business man in the country who would hesitate about choosing value. He may think from a cursory examination that he is paying too much for his indemnity, but he would rather pay more than less if the less lessened the value. The companies are striving to reduce the expense of transacting the business, but such reduction is difficult to effect and it is not probable that any very large reduction can be expected in the immediate future. Capital is entitled to a fair remuneration for its use and the risks to which it is subjected, and taking the capital which is in the business and which has been forced out of the business, through lack of profit, and the farther fact that capital is very slow to engage in the fire insurance business at present, it cannot be fairly claimed that the profits of the fire insurance business are unduly large. The business is of wide scope, and the man in the border sections of the country has the privilege of buying insurance at home just the same as the man in the large centers. Taken by and large, with all its shortcomings, with all its problems, with all the hazards covered by it, the growth and development of the fire insurance business is one of the striking features of American finance, and has contributed more than can be enumerated in a paper like this to the general prosperity of the country. Philadelphia, Pa. F. C. OVIATT. THE TRUE BASIS OF FIRE INSURANCE In a recent number of THE ANNALS, the undersigned sought to show that "Underwriting profits such as are insisted upon by the insurance companies are in the nature of extortion." In support of this assertion, the condensed Income-and-Outgo account of the American fire insurance companies reporting to the Insurance Commissioner of Connecticut was, inter alia, cited from this official's public report. The figures quoted were those actually sworn to and presented by the companies themselves. Yet they were referred to by an organ representing the fire insurance interests, in this wise: "He (the author) has tried to assimilate the Connecticut Fire Report for the present year, but his maldigestion has produced the following astonishing net return, which shows a profit so large that even the sellers of certificates in gold mine probabilities could not duplicate it:" (Here followed a reproduction of said Income-and-Outgo account.) The astonished apologist whose words have just been quoted goes on to say that "the experience of all companies with assets of $1,000,000 or over" during "the year 1898 showed an underwriting loss of 11%; 1889, 134%; 1900, 41%; 1901, 41%. The balance for 1902 was in the companies' favor, showing an underwriting profit of a fraction over 4.%." Let us look at the results of the operations of the Joint Stock Fire Insurance Companies doing business in this country, and let us deal with those very same years when the "million dollar companies" saw such hard times. Yet first, let us remember the favorite trick, exemplified above, of the Fire Physician: it is his habit to play upon your relative ingenuousness, and whilst you, in broad general terms, talk of fire insurance "business," he will discuss mere "underwriting." Very carefully does he insist on this casuistic distinction between "underwriting" and the other uses of money furnished by the assured; for it is in this distinction that he finds your undoing. You would not seek long for the retort destructive, if an innkeeper talked of his "losses" in a vein such as this: "With few exceptions, every meal I serve has meant a loss-in fact, I shall have to raise the price of meats 25% to every guest. will continue to be sold at 10 cents." However, the glass of beer You would know that because |