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pursued with respect to dividends and endowments. Amounts paid for re-insurances are treated as disbursements. Re-insurance is treated as any other business operation, the company being credited with all it receives and charged with all it expends in the process.

In "Expenses of Administration", first year's commissions include all moneys paid and indebtedness incurred to individuals for procuring new business. Renewal commissions include amounts paid for renewals and in commutation of renewals, and any increase in the indebtedness of agents. "Other Expenses of Administration" are analyzed in a supplement under a dozen different headings. Profit and Loss items, on both sides of the account, pertaining to investments in securities, are derived from a schedule called "Movement of Securities'. The schedule covers some thirty columns, many of which are completely filled in every case.

Having thus included in Disbursements everything which made for loss during the year, the exhibit continues with a statement of premium reserves and of specific reserves not to be increased from the profits of the year Then a statement is given of profit reserves and of other reserves, for special purposes, which are subject to adjustment when apportionment is made of the profits of the year. When this is done and a balance struck, we have the net profits of the year, the disposal of which is noted under appropriate heads.

The balance sheet is very much like our own.

The items which have appeared in this summarized form are now taken up and traced back to their source, and compared with other items to which they are most closely related. In a schedule called "Distribution of Premium Income and Payment of Losses', required for participating and non-participating policies, respectively, premiums received, amount of losses and of surrender values paid, and the amount reserved for claims unpaid are all reported under various categories of insurance and kinds of policies. Considerations received for annuities are treated in the same manner, so far as the method is applicable.

The death-losses are taken up in mortality schedules showing the total actual mortality as compared with the expected: (1) on the entire business, (2) in the general class, (3) in the class of partially impaired lives, (4) in the class of impaired lives, (5) in the tropical class, (6) in the semi-tropical class, (7) annuities on male lives, and (8) annuities on female lives. These eight schedules show the mortality of insured and annuitants by number of persons and by amounts, grouped according to year of birth of the insured or the annuitant, the actual mortality being compared with the expected, at each age. This makes in the case of insured persons, seventy-eight groups in each of six schedules, and in the case of annuitants ninety-four groups in each of two schedules, with all the details. necessary to deduce the actual and the expected mortality for each group.

The same death-losses are also taken up in six schedules entitled "Financial Result of the mortality in the business year". These schedules show, for each of the eight classes just enumerated, what provision for the death-losses was made from (1) reserves, (2) costs of insurance, and (3) amounts received from re-insuring companies; and consequently, what the profit or the less from mortality amounted to in the several classes.

The amount paid in Dividends, and the amount set apart as Profit Reserves for the payment of dividends at the end of specified periods, are made the subjects of searching analysis. A schedule called "Distribution of Profits and Movement of Profit Reserves" shows the amounts insured under each of seven classes of participating policies, divided according to dividend periods. The amount paid in each class is shown; and in classes with dividend periods longer than one year, the amounts of profit reserve from the previous year, with additions from surplus, are also shown.

In order to arrive at the figures shown in this schedule for policies with dividend period of more than one year, such policies are shown in 85 groups according to class and year of issue, with the amounts insured and the movement of the profit reserve during the year. These exhibits of policy-groups will in time (they were begun in 1899 and include 20-year deferred dividend policies) show the history of each class of deferred dividend policies from the year of issue until the year of maturity. The particulars required in the case of maturing groups are

1. Amount insured at time of distribution, with reserve on same.

2. Total income from premiums to time of distribution.

3. Total income from interest to time of distribution.

4. Total disbursements of losses.

5. Total disbursements for commissions and expenses of administration. 6. Total disbursements for surrender values.

7. Profit fund on hand for distribution.

8. Total amount of premiums on which this fund is to be apportioned.

The Policy schedules are four in number, two for participating and two for non-participating insurance. The two which describe the "Movement of Outstanding Insurance" are similar to our own; while two others show the amounts insured, the net annual premiums, and the premium reserves for the year, under each of eleven different forms of Policy.

This exhibit of the business as a whole is supplemented by an exhibit of the German business sufficiently elaborate to show its magnitude, cost, amounts paid and general condition.

The labor incident to the preparation of annual reports falls chiefly upon the Actuaries' Department, the Treasury Department and the Division of Policy Claims. These departments contain about 250 employees and the extra time work required is about 18,000 hours, an average of 72 hours extra work for the entire force.

CHAPTER IV.

AGENCY ORGANIZATION AND METHODS.

THE BRANCH OFFICE SYSTEM.

While a strictly logical method would perhaps have placed this chapter first, it was thought that the reader would be more interested in how the business was obtained after a little study of the business itself. Life insurance, as we have seen, consists in the co-operation of a large number of persons under well defined contracts, for the purpose of distributing the pecuniary losses caused by premature death. Incidentally it becomes a plan for the accumulation of money for those who live long: the main fact is the co-operation of the insured. How best to secure this co-operation is one of the chief problems of the life insurance manager. Many insurance organizations are able to handle safely and wisely the business they obtain, but they obtain comparatively little, hence their value to society is small. The useful company is the company that insures many lives and makes the benefits of life insurance effective to many persons.

The early method followed by all companies was the General Agency method. A General Agent was given control of certain territory, and allowed to appoint sub-agents who procured most of the business. The company paid the General Agent for all business turned in, and he in turn compensated the sub-agents. Under this system only a few men do business directly with the Home Office-the business is practically farmed out to the General Agents. If they are lazy, incompetent, or disgruntled, the company gets comparatively little business from their territory. If they die, or resign, or stop business for any other reason, a new General Agent must be appointed and the business reorganized. The sub-agents-the men who do the hard work-are not properly encouraged, taught or compensated.

After an experience of nearly fifty years with the General Agency system the New-York Life began to take back the territory farmed out to General Agents and to establish the Branch Office system. This change was completed in 1903, and the Company is now represented in all the chief business centers of the world by its own Branch Offices. Each office is in charge of an Agency Director and a Cashier, who are appointed by the Company. They are paid a salary according to the work they do and according to the economy with which they conduct the affairs of their office. The Agency Director is in charge of the territory attached to the office, finds new agents, makes contracts with them, instructs them in their duties, and, when occasion requires it, recommends the termination of their contracts. All agents' contracts are made direct with the Company and subject to its approval. Every agent is attached to the Branch Office of the territory in which he works and reports to it.

The Cashier has charge of the inside affairs of the Branch Office- of the books, the correspondence and the clerical force. He makes a daily report of all financial transactions, accounting for all money received and disbursed, this report being mailed at the close of each day's business. He also makes, on behalf of the Agency Director, a monthly statement, showing in detail the work of each agent attached to the Branch. All business is carefully examined for errors or incompleteness before it is sent to the Home Office, and is sent in special envelopes according to the character of the business, in order to facilitate distribution when it arrives. The records of each office are complete with respect to the business passing through it, and they are in respect to completed business duplicated at the Home Office, so that in case of fire, accident or theft no embarrassment will result. The fixed charges of a Branch Office may be terminated on thirty days' notice, and if an office is discontinued there are no commissions to be paid to a General Agent.

ADVANTAGES OF THE BRANCH OFFICE SYSTEM.

The Branch Office system accomplishes three desirable ends: (1) It places the field work and agency expenses absolutely under control of the Home Office; (2) it brings the men who obtain the business into close touch with the Home Office; (3) it places the facilities and conveniences of the Home Office within reach both of agents and of the insured. It secures a constant supervision of the agents' work by trained men who are on the spot with opportunity to advise. Every agent's contract is with the Company; a careful record of each man's business is kept at the Home Office-not only of how much business he secures, but of how steadily he works and how well his business stays on the books. All necessary correspondence is conducted for him, leaving him free to devote all his time to securing business. To the policy-holders in its territory the Branch Office is practically the Company. Here they pay premiums and secure loans, and here are paid to them the various benefits which arise under their policies.

In order the better to secure oversight of the field work the Company groups the territory of its various Branch Offices into Departments, each of which is under the general supervision of an Inspector of Agencies, or a Supervisor. The Supervisors and Inspectors are usually men who have been markedly successful as Agency Directors-men of strong personal character who have the faculty of inspiring others; men who thoroughly understand the business and are usually large personal writers-men qualified to lead and to help others. The Agency force of the Company has thus come to be a compact organization-something like an army-which is always in close touch with the Home Office.

The Official Examiner of the Insurance Department said in his report of an examination of the Company made in 1908: "The business of this Company is conducted under the Branch Office system, in contrast with the General Agency system. The Company deals with Branch Office Cashiers, who are paid salaries, and the policy-holder after the second year, deals almost wholly with the Branch Office Cashier, and is, therefore, to that extent, divorced from the agency department and the producing part of the business. This fact is one of the elements which has brought the Company to its present low expense rate, referred to later.

Practically little of the Company's business is therefore mortgaged for renewal commissions."

THE NYLIC ASSOCIATION.

In order further to cultivate an esprit de corps the Company organized in 1895 the "Nylic Association". The word "Nylic", formed from the initial letters of the name of the Company, had long been in use as the Company's cable word at New York; it was now to designate a composite class of New-York Life agents, each with a definite standing based upon length of service and amount of business done. Good standing in the association was also to carry certain emoluments, which would make it worth while for an agent to continue with the Company for life and to maintain a high standard of production. The question has long been mooted: "Is the life agent's work a profession?" Other professions are made up of men who have passed certain prescribed examinations; but every profession at the outset is composed of men who have achieved certain results. The Nylic Association established a class of life insurance agents, based upon steady production, upon loyalty to their own Company, and upon principles and methods which bring cumulative benefits to all who follow them.

The Association is composed of five classes called respectively- Freshmen Nylics, Nylics of the first, second and third degrees, and Senior Nylics. The period of membership in each of the first four classes is five years. The conditions of membership were first made easy-a man must write and pay for at least $25,000 in new business during each year. In 1899 the requirement was made $50,000 of paid-for business. After two years' service the "Freshman Nylic" begins to receive extra compensation upon the business written two years before-that is still on the books of the Company! Nylics of the first, second and third degrees receive extra compensation each year based upon the business written five years previously and still remaining on the books of the Company, the extra compensation being at a higher rate for each degree attained. After a service of twenty years the Senior Nylic is guaranteed compensation for life, provided he does not enter the service of any other company, this compensation being based upon an average of his several income. bases during the first fifteen years, and the business remaining on the books from the year in which his production was smallest while a Nylic of the third degree. Certain provision is also made for drawing Nylics who become totally incapacitated.

THE ELIMINATION OF WASTE.

The general effect of the Nylic system has been to eliminate waste from the business-waste of time and energy in securing and instructing agents, and waste of money in writing business that did not prove permanent. To keep his membership in Nylic an agent must secure an average of about $1,000 per week during each year; he must remain with the Company at least three years in order to receive extra compensation; such extra compensation always depends upon the amount of his business that remains on the books. He is working for a permanency; he works more steadily; the longer he represents the Company the more efficient he becomes. The standard is not so high as to discourage any man who is going

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