486 REINSURED, RETIRED, AND FAILED COMPANIES IN 1914 statement of the amounts remitted by foreign casualty companies in this country to their home offices and their receipts from the same in REGISTER, HENRY V., Philadelphia. [See Cyclopedia for 1913-14.] REGISTER LIFE INSURANCE COMPANY, Davenport, la. Organized 1889. W. M. Radcliffe, president and general manager; P. W. McManus, vice-president and treasurer; Louis E. Knocke, secretary and auditor. REID, ARMOUR DUNCAN, general manager and secretary of the Globe Indemnity Company, is a native of Canada and was born of English and Scotch parentage in Kingston, Ontario, March 13, 1874. He received a common and high school education and began his business career in insurance. He was inspector of agents in Canada for the London Guarantee and Accident Company, subsequently becoming superintendent of agents for the Ocean Accident and Guarantee Company in Canada. Later he was transferred to the company's United States department offices, where for ten years he was executive superintendent, and until appointed to this present position on the organization of the company in 1911. He was secretary and treasurer of the Liability Insurance Association and was elected president of the association in 1910. He is also secretary and treasurer of the Workmen's Compensation and Information Bureau. REINSURED, RETIRED, AND FAILED INSURANCE COMPANIES IN 1914. The following is a list of life, casualty, and miscellaneous insurance companies which ceased to do business for various causes in 1914. Aegis Life of Denver, Col., reinsured by the Central States Life of St. Louis; American Accident of Cleveland, reinsured by the Republic Casualty of Cleveland and American Liability of Cincinnati; American Home Life of Fort Worth, Tex.. reinsured by the International Life of St. Louis; American Life and Accident of Portland, Ore., reinsured by the First National Life of Tacoma, Wash.; American Mortgage of Chicago, receivership; Appalachian of Bristol, Tenn., reinsured by the Columbia Life of Cincinnati; Bankers Guarantee and Casualty of Cleveland, Ohio, receiver RESERVES IN LIFE INSURANCE WHY THEY ARE NECESSARY 487 ship: Casualty Insurance Company of the South, purchased by the Southern Mutual Aid, of Birmingham, Ala.; Chicago Life, receivership; Citizens Trust and Guarantee of Parkersburg, W. Va.. its fidelity and surety business reinsured by the National Surety; Employers Indemnity of Philadelphia receivership; First National Slavonia Union of New York, liquidated; Four States Life of Texarkana, Ark., purchased by the Pan-American Life of New Orleans; German National Life of Chicago, reinsured by the Northern States Life of Indiana; Lone Star Life of Dallas, Tex., reinsured by the Great Southern Life of Houston, Tex.; Michigan State Life, reinsured by the Lincoln National Life of Fort Wayne, Ind.; New Orleans Casualty, reinsured by the National Life of the U. S. A.; North American Accident Association of Saginaw, Mich., reinsured by the North American Accident of Chicago; Original Ideal Life of Jonesboro, Ark., liquidated; Springfield Mutual Disability of Springfield, Mass.. receivership; Standard Life of America, Camden, N. J., reinsured in Philadelphia Life; State Mutual Life of Rome, Ga., receivership; United Brothers of Friendship of Oklahoma, receivership; United States and Dominion Life of Minnesota, receivership. RELIABLE LIFE ASSURANCE COMPANY, Indianapolis, Ind. Organized 1907; capital, $144,930. George Vonnegut, president; Ralph Bamberger, vice-president; Otto L. Kipp, treasurer; Isidore Feibleman, general counsel; W. H. Hinton, secretary; Miles J. Furnas, agency director. RELIANCE LIFE INSURANCE COMPANY OF PITTSBURGH, Pa. Organized, 1903; capital, $1,000,000; J. H. Reed, president; T. H. Gwen, vice-president; H. G. Scott, vice-president and secretary. J. N. Jamison and T. J. McKenna, Jr., assistant secretaries; É. G. McCormack, general manager. REPUBLIC CASUALTY COMPANY, Cleveland, Ohio. Organized 1914; capital, $153,100. U. G. Deuman, president; J. B. Shifflett, vice-president; J. H. Sillman, secretary and general manager. RESERVES IN LIFE INSURANCE — WHY THEY ARE NECESSARY.* The word "Reserves as used in life insurance is apt to be misleading, because it has a different meaning in connection with banking. In a bank the reserve is not a fund to meet the deposits, but is an additional guarantee to depositors. It is therefore in the nature of surplus. In life insurance, however, the reserve is the fund which is necessary to meet the obligations as they accrue. The necessity for the mathematical reserve may be seen from the following simple explanation: If the policyholders were to pay annually their actual share of the death losses according to their attained age, there would be no necessity for a reserve at the end of each policy year. This may be readily seen by considering that the company experiences the American Table of Mortality, and that each person is called upon to pay the death rate per thousand dollars on that table. If a man were thirtyfive years of age, he would pay $8.95; if forty-five, $11.16; if fiftyfive, $18.57; if sixty-five, $40.13; if seventy-five, $94.37 per thousand. The rapid increase in rate suggests that it is not to the advantage of persons to take their insurance in this way because the older the age the greater the cost. This is the reverse of the natural condition, where the heavier cost should be paid during the producing years. *By Arthur Hunter, Actuary New York Life Insurance Company. 488 RESERVES IN LIFE INSURANCE WHY THEY ARE NECESSARY In Whole Life Policies, therefore, a level premium is charged which is an equivalent of the gradually increasing rate. For example, at age thirty-five the premium, without margin for expenses, for a whole Life Policy on the basis of the American Table of Mortality with 32% interest, is $19.91, which is greater than the death rate per thousand under the American Table up to age fifty-seven. If the calculations are mathematically correct, a group of men who paid the Ordinary Life premium would in the end be in the same position as a group of men who paid the annual or increasing premium, taking account of compound interest. In order to accomplish this result, the excess premiums in the early policy years must be accumulated with interest to meet the time when the actual cost of the insurance is less than the level premium. The reserve is the guarantee that the company can, in spite of the insufficient premiums of the later years, meet the heavier death losses at the older ages. The necessity of carrying a reserve under Ordinary Life policies may be looked at from another standpoint. Before the policy is issued the value of the benefit granted by the company must be equal to the value of the obligation assumed by the policyholder, leaving out of account all questions of expenses, and dealing with the matter solely from the mathematical standpoint. If that were not so, then the company is giving too much benefit for the premium, or is charging the insured too large a premium for the benefit. One year after the policy is issued, the liability of the company, which is, to pay the sum insured, must be larger than at the date of issue, because the insured is older and nearer the time when death will occur. On the other hand, the value of the obligation of the insured, which is, to pay the premiums, is smaller than at the date of issue because he is one year older and less premiums will be received in the future. The difference between the obligation of the company and that of the insured increases with advancing age, and represents the reserve. The method of looking at the reserve as an accumulation of over payments is called the retrospective method because, in order to calculate the reserve on any particular policy, we consider the excess of premiums paid over the cost, plus accumulated interest. When we look towards the future to determine the value of the company's liability for death benefits and of the insured's liability for payment of premiums, it is called the prospective method, and was described in the preceding paragraph. Under Limited Payment Life policies the excess premium is paid for the privilege of discontinuing premium payments at the end of a stated number of years. These excess premiums must be carefully invested at interest so that the reserve after all premiums are paid will be equal to the mathematical single premium which the company must have in hand to pay all future death losses without further payment of premium. Under an Endowment insurance the reserve must consist of a sum which would be sufficient to meet the death loss and accumulate an amount equal to the face of the policy in event of the insured being alive at the end of a stated number of years. RESERVES IN LIFE INSURANCE - WHY THEY ARE NECESSARY 489 DEMONSTRATION OF RESERVE. An illustration of the reserve calls for a lenghty table unless an advanced age is taken. At age ninety the limit of the American table is reached in six years, but a demonstration at such an age must be considered from the theoretical standpoint, as life insurance companies do not generally issue policies above age sixty-five. It should be understood that while all the lives are supposed to die under the American Table at age ninetysix, the experience of the companies in recent years has shown instances of persons living beyond that age. The following table gives the number living out of 100,000 persons who entered at age ten, the number dying being given at each age from ninety to ninety-five. The premium for the Whole Life Insurance is $502.68 per thousand. The following is a financial exhibit of the transaction, allowing interest at 3%, and leaving out of account the question of expense. The initial figure of $425,770 is obtained by multiplying the premium of $502.68 by the number of persons living at age ninety, who are each assumed to pay a premium for $1,000 insurance. Interest for a year at 3% is $12,773, which, added to the premium, leaves available the sum of $438,543, out of which is paid the death losses at the end of the year, of $385,000; i.e., $1,000 on 385 persons who die between ages ninety and ninety-one. The balance of $53,543 is the total reserve, which divided by the number of persons living at the end of the year, 462, gives the reserve per thousand of $116. As will now be shown, the reserve of $53,543 is needed to meet the future liability and is not surplus. As there are 216 policies remaining in force at the end of the year the reserve per thousand would be $224. 490 RHODE ISLAND LIFE UNDERWRITERS' ASSOCIATION Particular attention is drawn to the fact that the sum of the second year's premiums and the second year's interest is not sufficient to pay the year's death losses, and, accordingly, the company has to draw from the reserve fund to the extent of about $5,000. By inspecting the table already given, it will be seen that the premiums for the third, fourth, and fifth years, and interest for the same years are less than the death losses. For example, during the third policy year the premiums and interest amount to $113,287, while the death losses amount to $137,000, thus creating a deficit of about $24,000. It should be noted that while the reserve held by the company decreases, the reserve per policy or per thousand increases, because there are fewer persons to share in this reserve. The death losses for the three men who die before attaining age ninety-six are exactly met from the reserve in hand at the end of the preceding year, the premiums paid at the beginning of the year and the interest thereon, so that when the death losses are paid to those who enter age ninety-five, but do not attain age ninety-six, the fund is exhausted. Three facts are brought out clearly from the foregoing demonstration: first, that the reserve is necessary to carry the contract to completion; second, that the reserve is an obligation of the company and is not of the nature of surplus; third, that the reserve is drawn upon to meet death losses when the level premium is insufficient in the later years of the policy. RESERVE LOAN LIFE INSURANCE COMPANY, Indianapolis, Ind. Organized 1897, capital, paid in, $100,000. Chalmers Brown, president; W. R. Zulich, vice-president; G. L. Stayman, secretary; G. A. Deitch, counsel. RESIDENT AGENTS' LAWS. [See fire insurance section.] RETALIATORY OR RECIPROCAL LAWS. [See fire insurance section.] RHODE ISLAND, INSURANCE SUPERVISION IN, 18561915. The insurance department was established in 1856, and was composed originally of a board of three commissioners. In 1863 the law was amended making the State auditor ex officio insurance commissioner. The auditor is elected by the legislature annually. [See Cyclopedia for 1913-14 for list of former officials.] Charles C. Gray is the present commissioner. RHODE ISLAND LIFE UNDERWRITERS' ASSOCIATION, was organized in April, 1911, and reorganized in February, 1913. Officers were elected as follows: President, C. C. Blanchard; vicepresident, M. H. Stearns; secretary, B. M. Smith; treasurer, Wm. H. Griswold. The present officers, elected in 1914, are: President, Maurice H. Stearns; vice-president, S. M. Power; secretary, B. M. Smith, Providence; treasurer, Herbert M. Wheaton; executive com |