*>^x>use, reject the application on the life of a child — not be-
'^^e of fear of foul play, for this, in our experience, does not
^^^^^^t in this country, where poverty seems to gather the chil-
dren closer to the mother's breast. But because such insur-
ance by its low average of persistence and high average of
mortality, cannot be a paying business for the company and can
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only result in the payment by the average policyliolders of
claims, on the lives of the imder average."
Q. How long has that rule been in your manual? A. Oh, a
good many years, sir.
BY MR. PRENTICE:
Q. In regard to the table just put in evidence, the lives ot
children which you insure are selected lives, of course ? A. AD
of them.
Q. And therefore it would be perfectly natural to suppose that
the percentage of death among those would be less than the
percentage of death among the lives of children in the thirty-one
<:ities? A. Yes, sir; and it is true that they are, and that is one
argument in our judgment against the theory that the children
are abused, because if insured children were abused I think it
would be found that statistics would show how mortality was in
excess of that of population instead of under it.
Q. Has a case ever been brought to your attention under
which there was suspicious circumstances ? A. There have been
charges in the newspapers of such cases. We have always in-
vestigated them and never have found a single case.
Q. Have you contested the payment of any death claim be-
cause of suspicious circumstances in connection with the death
of the insured? A. Not on the lives of children we have not.
Q. I mean as to a child ? A. Not on the lives of children.
BY MR. HUGHES:
Q. You were asked in regard to the table of increasing life
and endowment policy. Will you state what the origin of that
table is and what has been your experience in reference to it?
A. The origin of the table upon which over 58 per cent of our
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business is now written (over 21 per cent, more are upon plain
20-year endowment tables) was the discovery made when we
constructed mortality tables from our own experience. Pre-
viously the benefits had been determined by English examples
Without knowledge of the real mortality at each aee. We found
ttat we were losing money on certain ag:es and making money
A'sproportionately at other ages. This table was based upon
actual experience of mortality with a nearly uniform loading. Its
adoption marked the beginning of the use of really scientific ta-
Wes of benefits in industrial insurance on this side of the water.
■'^a.lcing the infantile and adult tables togfether and comparing
them with the tables in use before January i, 1896, it will be
10 la rid that there are many changes. The younger ages show
^argfe increases in benefits; the older ages decreases. This was
^^^ clone to save money.
^^ - As matter of fact it did save money, didn't it ? A. No, sir,
-*- go on to show.
\i- Go on. A. It was done in order to treat each age ac-
cording to our experience of mortality and treat all alike. The
ratio of claims paid to premium income has indeed decreased a
few points ; but this has been the experience of the Prudential
of Newark, which retained the whole life adult table. The mor-
tality of the country has decreased. The influence of medical
inspection has been toward the reduction of the ratio. But the
J'a.tio of death claims to premium income in the Metropolitan
Aas always been and still is higher than in the Prudential of
^ev^rark with the old table. It was higher than in the John
rlancock, which retained the whole life policies until that com-
pany 5Qn^g years ago adopted full immediate benefits on large
policing — 2^ plan it has been compelled to modify. If at the same
^^^> therefore, our benefits are less it is because with the mor-
^*^y experience these ages earn less. As a matter of fact, we
^ ^ot save money. The net amount of increased reserve which
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Testimony of Haley Fiske
we have put up on these adult policies down to December 31,
1904, after deducting the savings on death claims comparing
both the reserve and the death claims with the whole life table, is
$1,692,969.
The endowment at age 80 is the same variety of whole life as
that years ago adopted by the New England Life Insurance
Company. Whole life tables are really endowments at age 95.
We shorten this to 80 because many do live to be 80, and we have
made our whole policies payable at 80. In the cases of those who
have paid for fifteen years we adopted the cash dividend system
for whole life policies ; we guarantee a reversionary dividend in
the increasing life endowment policies. This reversionary divi-
dend is much larger than a cash dividend on whole life policies.
The latter is paid quinquennially. The reversionary dividends
are yearly after the third year. We believed that this guaranteed
increase would encourage persistence. We believed that old
age endowment would meet a demand which was arising, espe-
cially in England, the influence of which we believed would ex-
tend in this country. The paid-up provisions are simple and
prevent any misrepresentation as to amount which was some-
times made under the whole somewhat complicated table; and
the endowment period also fixed a terminal date for paid-up
policies, which saves a dissatisfaction sometimes arising from
the expectation of life paid-up policies. In short, the design of
the table was to save money, but to be fair to every age by a
table constructed on the same principle as ordinary policies,
where a certain loss at some age and undue profits at other ages
would be criticised and intolerable, and to prevent any possible
misrepresentation.
Now, compare this table in its results with the whole life table.
In apparent criticism of its relative benefits to policyholders we
were asked what would be the maximum amount payable at the
age 80 for a ten cent premium under an increasing life and en-
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<lowment policy issued at age lo, and the answer was $297. To
the question as to what amount would have been paid in pre-
niiums the answer was $364. As this table was being contrasted
^th the whole life it is only fair to state what the position of a
^an who took the whole life would be.
The amount of premiums paid would be the same, $364, but
*e death benefit would be but $240.
f-^nder the increased life and endowment policy he would
'"eceive in cash from the company at age 80 $297, but under the
^'lole life contract he would Aot only receive nothing, but be
'^g'ed to continue to pay ten cents a week, and should he sur-
^^ Until age 90 his gross payment of premiums would be $416
^^hich a death benefit of $240 would be paid.
^'W, take the case of inability to continue the insurance. What
SX^ \\^e respective benefits to the policyholder ? Suppose he had
paid for twenty years and had applied for a paid-up policy. Un-
der the increasing life and endowment table he would get a paid-
up policy for $85, payable a$ an endowment of age 80. Under
the whole life table he would get a paid-up policy for only $77,
and this would be good for thirty-four years and 157 days. Take
the man in each case when he reaches age 65. If insured under in-
creasing life and endowment table he would have a policy on
which he would be paying no premium, good for $85 at death or
age 80. If insured under the whole life table he would have no
insurance at all — it would have expired ; or if the company should
SX^nt him a whole life paid-up policy it would be for only $65.
iiiese illustrations we think sustain and justify the increasing life
^dowtn^nt table.
Q- What age did you take the insurance at, in illustration, as
to the paid-up policy of $85. A. Don't I state there?
2- Is it age 10, to which you referred a little further back?
^•^gre 10, yes, sir.
^' -A.iid under that table the person insured at age 10 is sup-
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posed to pay ten cents a week? A. Howard, have you got my
red book, the table of rates ?
(Book produced.)
Q'. Well, that is your illustration, ten years?. A. Yes, sir; I
thought you were going to ask as to some other ages, and I
wanted to be ready.
Q. Take age lo, that would be on the basis of ten cents a
week, or $5.20 a year? A. Yes, sir.
Q. And in twenty years he would have paid in how much,
$104? A. Yes, sir.
Q. Now, you give him at that time, being thirty years of age,
a policy paid up for eighty-five dollars, payable at the expiraticm of
fifty years ? A. That is right, sir.
MR. CRAIG: Or death.
THE WITNESS : Or prior death.
Q. Or on prior death? A. Or on prior death. Under the
whole life table he would only get seventy-seven dollars, only good
for thirty-four years and a hundred and fifty sevfen days.
Q. And age thirty, under the combined experience table, the
expectation of life is thirty-four years. That is, for which you
would give the paid-up policy ? A. Thirty-four years and a hun-
dred and fifty-seven days, under the whole life system.
Q. Under the whole life system how much would be given
in case of death on the paid-up policy age thirty? A. If he died
prior to that time, seventy-seven ^dollars.
Q. And under the increasing life and endowment, if he died, it
would be how much? A. Eighty-five dollars, but if he died a
year after he would in the one case get eighty-five dollars, and in
the other nothing.
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Q. Well, that would be a criticism which would attach more to
the paid-up policy for seventy-seven dollars on the term, A. That
is true, but if he were getting a whole life on the other policy, it
would be sixty dollars, as against eighty-five dollars.
Q. But age thirty, and before the issue of the paid-up policy
under the whole life plan, how much would the man receive, say
if he died at age twenty-five? A. If he died at age twenty-
five
Q. Insured at ten years at ten cents a week on the whole life
plan. A. That is fifteen years, is it not ?
Q. Yes. A. Two hundred and forty-two dollars, I think.
Q. No, we are talking of the whole life plan, if he died at age
twenty-five. A. I misunderstood you.
Q. Insured at age ten, at ten cents a week? A. He would get
two hundred and forty dollars.
Q. And under the other plan ? A. He would get two hundred
and forty-two dollars.
Q. Is there anything further in your testimony that you desire
to explain, Mr. Flske? A. There is just one thing, Mr. Hughes,
that I felt a little sensitive about, and that was the Bulletin. Mr.
Hughes asked about Bulletin 449. I want to say that I wrote Bul-
letin 449, in which occurs the sentence, "The Metropolitan is prac-
tically a mutual company, and it is managed in the interest of the
policyholders alone," about which Mr.Hegeman was asked, whether
our men are instructed to represent the company to the people as a
mutual company. That sentence was a reminder to the men of the
institution by speech and pen repeatedly given to them, and they
well understand the reference concemmg the company's real atti-
tude toward the policyholders, namely : That while it is a stock
company its dividends are limited to seven per cent. ; that nearly
five per cent, is made out of the investment of capital ; that the
stockholders, therefore, make two per cent, out of the business;
^^ the capital will never be increased out of surplus ; that the
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Testimony of Haley Fiske
policyholders can outvote the stockholders for members of the
board of directors ; that millions of dollars have been paid in divi-
dends to Industrial policyholders beyond any provisions of their
contract ; that annually about $600,000 has long been paid for in-
dustrial dividends, against $140,000 to stockholders ; that the sur-
plus is kept down by these payments to policyholders; that the
officers can have and do have no other ambition than to manage
the company in the interest of policyholders ; and that, therefore,
it is particularly a mutual company. I never authorized any rep-
resentation that the company is in form a mutual company, for all
our financial statements and advertisements show the capital and
surplus, and in all of these addresses I have mentioned the stock
dividends to show how little the stockholders make out of the busi-
ness.
Q. And whit did you say was the extent of your non-partici-
pating business? A. In the ordinary department?
Q. Yes. A. I think it is practically all.
Q. All non-participating? A. Yes.
Q. And in the industrial department ? A. It is all ncm-partici-
pating.
Q. Except these amounts which are shown to be paid from year
to year as a concession to the policyholders ? A. Yes.
Q. So that practically, the profits are accumulated for the
stockholders? A. Except as they are distributed to the policy-
holders.
Q. Except as you give a certain amount. The non-particpiating
means that the policyholder has not any right to share in the
profits? A. It means he has no right to share in the profits, but
we also say we have the settled policy to keep down our surplus
to ten per cent, of our assets, and we do distribute it as a matter
of fact.
Q. Well, that is a settled policy which you can unsettle ? A. It
is a settled policy referred to in this bulletin.
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Q. That is what you had in mind? A. That is what the men
had in mind when they heard it, and that coupled with the fact
that the company had put the right to vote in the hands of policy-
holders, make it very proper, I think, to say to our men that we
are practically mutual, so far as the fact that we are managing
the company in the interest of the policyholders and nothing else.
Q. I suppose all companies would claim to be mutual to that
extent? A. No, stock companies who are in it to make money,
whose dividends were not limited, could not make that claim.
Our point is that we can only make two per cent, out of the busi-
ness.
Q. You have a legal right to take all the profits for the stock-
holders, save to the extent that your business is participating, and
that is a very small fraction ? A. We have no right to take it at all
under the charter. It is held for the security of the policyholders.
Q. You mean it cannot be distributed to anybody? A. To any-
body except policyholders.
BY THE CHAIRMAN:
Q. You have stated that your management is constantly en-
gaged in endeavoring to cheapen the administrative expenses of
your company ? A. Yes.
Q. Is there any affirmative legislative action that will assist you
to do that, that you can suggest? A. I do not think legislation is
needed at all, sir, in the industrial business. I think if left alone
we will work out these problems better than any legislature can.
We are in the business and we are studying it, and we have not
any other work to do in the world than to work it out, and we will
do it if we are left alone.
Q. There is no power that you need in addition to those now
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Testimony of Haley Fiske
possessed by you? A. I think not. I think perhaps the reserve
laws may be said to be a little severe, but we do not complain of
them.
BY MR. HUGHES:
Q. You have, from time to time, gone to the legislature to get
power to distribute your surplus in stock dividends? A. In the
earlier years, yes.
Q. But not for many years? A. No, not since I have had any
connection with the company.
Q. You said yesterday that Lake Shore & Michigan Southern
stock was now worth four hundred dollars, according to your
information. A. No, I said I understood our company had been
offered four hundred dollars and declined it for a large block.
Q. Your testimony as reported is as follows : ^*Q. There were
no quotations in excess of 320? A. I am not certain that is so.
I think I did hear of sales above that. I understand that it is now
at four hundred." A. What I am quite sure I stated is that we
have been offered four hundred for our large block of stock and
declined it, and my statement yesterday was that a large block
of this particular stock is worth a great deal more than a small
amount. If you will recollect, the stock of this company is held
almost entirely by the New York Central, and there is very little
out that is not in the hands of two or three people.
Q. I notice the quotations in this morning's paper; sale of 430
shares at 340. A. Well, I can quite well realize if there is any
desire to buy the large blocks of stock it would be easier to make
a small market to tempt people to buy. I still think we could
get 400.
Q. My inquiry was directed to the quotation. I understood
your testimony was to that effect. A. I did not intend to so
testify. Perhaps I ought to say on that whole subject, I do not
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Testimony of Haley Fiske
know whether I made it entirely clear, the fact that Mr. Read
bought this stock for the Metropolitan without charging the
Metropolitan any commission, and that his claim is that he bought
it from Butler at 350, and that Butler divided the difference with
him as commission. And that he claims that he is right about it.
I do not want to do any injustice to Mr. Read. He is quite certain
that his transaction was entirely justified by the rules of the Street
^d of right dealing.
Q. If he was dealing with the Metropolitan without obtaining
3 commission, that put the Finance Committee upon inquiry, did
't not ? A. The Finance Committee passed a resolution authoriz-r
Mighim to buy at not exceeding 350, and nothing was said at that
time al>out commissions.
Q- And he did not charge any commission upon the sale? A.
There was no charge for commission when the bill came in.
Q- Then did not the committee understand that he was making
a profit in some way? A. I think the Finance Committee under-
stood that he had made a commission. The amount of it they
had no idea of until a week or so ago.
v- In your company because of the large industrial business
that you have, there is a great deal of expense in regard to adver-
tising anci printing, stationery and postage, is there not ? A. We
think as to advertising it is very low indeed as compared with other
companies We advertise very little and very seldom.
y- So far as your stationery, postage and printing are con-
cerned? A It must be large.
y* -^rid large as compared with other companies? A. I don't
^^ ^ to that.
Q- Well, I notice that in the Metropolitan statement of last
Decerriber the advertising, printing, stationery and printing is put
at $&35,822.54 and in the Mutual the same items, advertising,
printing and stationery and postage is put at $1,134,833.76. How
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Testimony of Edward W. Scott
does your stationery compare with the Mutual, I mean in extent?
A. Why, I do not want to be put in the attitude of criticizing the
Mutual
Q. Well, we will not say anything about the Mutual, but in
comparison "with an old line company you have perhaps larger
demands for stationery and postage, have you not, on the same
volume of business? A. We have very large demands indeed,
and we print our newspaper, as I said yesterday, 4,000,000 every
other month, and our form supplies are very numerous indeed.
EDWARD W. SCOTT resumed.
BY MR. HUGHES:
Q. Mr. Scott, I referred in your examination the other day to
the test case which had been brought by your company to deter-
mine the construction of the tax upon gross amount of premiums.
I will ask you whether the law to which you referred was Section
187 of the tax laws, laws of 1896, Chapter 908, as amended by
the laws of 1901, Chapter 118, authorizing an annual tax upon the
gross amount of premiums received during the preceding calendar
year by every domestic insurance company for the privilege of
exercising corporate franchises and of carrying on business in
the State. That law provided that the taxes to be paid over before
the first day of June in each year? A. Yes, that is correct, Mr.
Hughes.
Q. And the question for decision was whether the tax was
retroactive and whether the law imposed a tax upon premiums
derived from contracts made prior to the time the statute took
effect? A. Yes.
Q. And the decision of the court was that as the statute did not
go into effect until October i, 1901, that the provision in the law
that the tax should be based upon the amount of premiums re-
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Testimony of Edward W. Scott
ceived during the preceding calendar year must refer to the calen-
dar year commencing January i thereafter, since if the year com-
mencing with the preceding year was intended, the law would be
retroactive, the tax reacting during nine months when no law
authorizing it was in existence ? A. Yes, sir.
Q. That being the decision of the Court of Appeals, as reported
in the 179th New York, page 227? A. Yes, sir.
Q. There was no testimony required in the case, was there?
It was a simple matter of statutory construction ? A. Yes.
Q. And the record was a very brief one? A. Yes, sir.
Q. Mr. Andrew Hamilton appeared for you in the Court of
Appeals? A. In the Court of Appeals.
MR. GILBERT: I think he appeared before the Appellate
Division.
Q. And also in the Appellate Division ? A. I think not.
Q. Who appeared in the Appellate Division? A. Mr. E. E.
McCall — I think I am correct about that.
Q. And who tried the case at Special Term for your company ?
A. There was no Special Term.
Q. It was a certiorari proceeding? A. Yes, sir.
Q. Who argued it? A. Mr. McCall, as I remember it. I think
he had it before the Appellate Court.
Q. Who handled the matter before the commissioner in the first
instance, before the comptroller? A. In the first instance?
Q. Yes. A. Mr. McCall.
Q. In what other matters have you retained Mr. Andrew Ham-
ilton beside the tax case just mentioned and the preliminary term
matter? A. In no other that I recall.
Q. Have you ever retained Mr. Andrew Hamilton in connection
with any matters of legislation? A. No, never, sir.
Q. Who has represented you in r^^ard to such matters? A. I
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Testimony of Edward W, Scott
think we have employed counsel on two or three occasions to ap-
pear before committees.
Q. Do you know on what occasions? A. In Massachusetts,
twice, I think.
Q. In connection with what proceedings or legislation? A. In
connection with some bill that was pending; I cannot recall now
what it was. It was some time ago.
Q. Who is William H. Buckley? A. Mr. William H. Buckley
is a resident of Albany.
Q. An attorney at law? A. Yes.
Q. How long have you had him under retainer? A. Diflferent
occasions during the past four or five years, perhaps.
Q. When did you first employ him? A. Well, that I cannot
say definitely.
Q. I find on October 26, 1901, William H. Buckley, five hun-
dred dollars, general services, what were his services? A. He
kept us advised of legislation in diflferent States.
Q. Including New York State? A. Including New York
State.
Q. I find on December 24, 1904, an item of William H. Buck-
ley, five hundred dollars. What was that for? A. Well he was
paid — he was not paid a regular retainer, he was paid small
amounts at diflferent times.
Q. I find on March 6, 1903, William H. Buckley, five hundred
dollars. What was he paid the amount previously mentioned in
1902 for, and what was the five hundred dollars in 1903 for ? A.
Well, for the same services, I presume, that I stated.
Q. All together in connection with legislation, was it not? A.
Well, not in the sense of influencing legislation.
Q. February, 1904, five hundred dollars and June 23, 1905,
five hundred dollars — ^the fact is that he has had five hundred
dollars a year for several years? A. Well, I do not know just
how that foots up. I should think it would average that.
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Testimony of Edward W. Scott
Q. Well, it appears as I have read it, five hundred dollars for
several years. What was he paid it for? A. That is correct.
For the services I have stated.
Q. Well, I do not recall your stating much on the point. A. He
kept us advised with reference to legislation in the different States,
or anything that occurred that would be of interest to us.
Q- Have you any statement from him with regard to legislation
P^riding? A. No, sir.