vestments in the case of savings banks inadvisable? A. Yes,
sir, I think so.
Q. Do you think it would be better to have an open field and
no favors and trust to the personal judgment of the Directors or
Trustees? A. That is my judgment, Mr. Hughes.
Q. Have any securities been bought by the Washington Life
from Mr. Ryan ? A. No, sir.
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Testimony of John Tatlock
Q. Have any securities been bought by the Washington Life
from the Morton Trust Company? A. Yes, sir.
Q. To what extent? A. We bought two hundred thousand
dollars of the Japanese Loan, second series, sixes.
Q. Anything else? A. No, sir, nothing that I can think of.
Q. Have any securities been bought from Governor Morton?
A. No, sir.
Q. Have any securities other than the two hundred thousand
dollars of Japanese sixes been bought by the Washington Life
from any one connected with the Board of Directors of the
Washington Life? A. No, sir.
Q. Or from any firm or institution in which any officer or
Director of the Washington Life has an interest ? A. No, sir.
Q. From whom were the American Tobacco securities pur-
chased? A. They were purchased on the market from — they
came through two or three firms. Kingsley, Mabie & Co. were
one, I think. I do not remember the names of the others.
Q. And no officer of your company was interested in those?
A. No, sir.
Q. I mean in the securities which were sold? A. Oh, as to
that I do not know. You mean in the sales to the company ?
Q. Yes. A. No.
Q. Did they sell their securities to the company? A. No, I
do not think so, not so far as I have any knowledge.
Q. Your information is to the contrary ? A. My information
is to the contrary. They were bought on the board, and the
names of the sellers appeared on the advices.
Q. Then is it your idea that an insurance company should es-
tablish relations which will give it an opportunity to make profit-
able investments by knowledge of the Wall Street market? A.
Well
Q. In other words, which is the policy which you prefer, to
have an insurance company managed by men who have no other
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Testimony of John Tatlock
interest, who limit themselves to conservative investments in
established securities, or in real estate, or to have it managed
in such a way that opportunities for profit through syndicate
transactions, or purchases of securities which will likely rise in
value may be seized and taken advantage of promptly ? A. Well,
I prefer the latter.
Q. You prefer the latter? A. I regard the first as tending to
a state of affairs — ^which leads toward a state of aflfairs which is
popularly called dry rot.
Q. And you see no danger in the latter? A. I do not.
Q. So that you are frankly and candidly in favor of having
the investments of an insurance company handled by those that
are closest to the financial operations of Wall Street? A. Yes,
sir.
Q. Because of the opportunities of making money ? A. Yes,
sir, always on the condition and under the circumstances that
they are handled by men of integrity and good and recognized
sound judgment.
BY THE CHAIRMAN:
Q. Mr. Tatlock, of what advantage is it to policyholders that
there should be non-participating insurance? A. They have
the advantage of paying less premiums than they do— than they
are called upon to do upon the participating plan, and of know-
ing exactly in advance what their insurance is to cost them.
Q. Why do they have a less premium for non-participating
business ? A. Because the contract is they shall have no profits,
and the premium is made less on the basis of that contract.
Q. Can such policies be written without endangering the sta-
bility and responsibility of the company? A. Yes, sir.
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Testimony of John Tatlock
Q. Why should not premiums generally be reduced to a non-
participating basis, if those premiums upon that basis will still pay
into the company sufficient to make it stable and responsible? A.
There is no reason, but as a practical matter it will be found, I
think, that a company cannot continue on a non-participating
basis only.
Q. Why? A. It could not pay sufficiently attractive commis-
sions to enable agents to get the business.
Q. That is solely a matter of competition is it not? A. That
is solely a matter of competition.
Q. So that competition aside, is there any reason why all busi-
ness should not be written so far as premiimis are concerned upon
the lower premium which would indicate a non-participating busi-
ness? A. No, sir.
Q. There is not? A. There is not, leaving aside the question
of competition.
Q. Leaving aside the question of competition? A. Yes, sir.
Q. It then would be a manifest advantage to the public, because
they would obtain the same insurance at a less rate of premium,
would it not ? A. Yes, sir, but it is fair to say that participating
policyholders in many companies who pay premiums for a number
of years do obtain their insurance at less cost than if they had
taken a non-participating policy in the first place.
Q. That is just what I was coming to. Now, what has been
the experience of insurance companies as to the cost of insurance
between participating and non-participating policyholders, which
of them obtain their insurance cheapest? A. Well, as a matter
of fact, in many companies, owing to the extremely low rate at
which non-participating insurance has been sold, and the only
moderate dividends which have been paid on participating policies,
it is true that the non-participating policyholder has obtained his
insurance at a less cost than the participating policyholder. But
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Testimony of John Tatlock
in other companies I think it is a fair statement that the contrary
has been the case, as it should be.
Q. Then it depends necessarily upon the ability with which
the company is managed ? A. Yes, sir.
Q. And it also depends upon this fact that in the past there
has been a lack of co-ordination or homogeneity in the basis upon
which participating and non-participating rates have been com-
puted; in other words, non-participating rates have been made
too low.
Q. We reach thie other branch of the question then, why should
there be any non-participating business if that be true? A.
Simply because some people have preferred it.
Q. But if the company is managed so that all its surplus earn-
ings, except what is required for administration and reserve funds,
are distributed as dividends, there is some probability that the
insurance will be cheaper, if the company is well managed, than if
written on a non-participating basis, and at all events an absolute
certainty that the business will cost the policyholder no more than
it should cost him? A. That is true if the non-participating
rates are put on a proper basis in the first place.
Q. If they are not put on a proper basis they are on an entirely
wrong basis are they not ? A. Then the non-participating policy-
holder gets his insurance a little cheaper.
Q. And that would be a wrong to all the other policyholders?
A. Yes, sir.
Q. Then why is it not an absolute equity to prohibit non-partici-
pating business entirely in the insurance business, and write all
business upon the participating basis? A. Upon the non-partici-
pating?
Q. Upon the participating business. Wherein will the harm
come there to the company or the policyholder? A. I do not see
any objection to that for purely mutual companies.
Q. What objection is there for those that are not purely mutual?
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Testimony of John Tat lock
A. Because it seems to me it is all right for a stock company to
write — to sell insurance on the best terms it can make.
Q. You believe a stock corporation, as in the case of an ordi-
nary business corporation, is one primarily created to make money
for its stbckholders? A. Within the limits in its charter, yes.
Q. Is there any reason why you make your reply to my last
question? A. No.
Q. Viewing it from the standpoint of the public and the policy-
holder then, is there any reason why all business should not be
participating business? A. I can see no good reason against it.
Q. And no other reason you can suggest except that in the case
of stock companies they ought to have the right to determine what
classes of business they would sell for themselves? A. Yes, sir.
BY MR. HUGHES :
Q. If a non-participating premium is adequate, why should a
participating premium be a cent more? A. Because of the con-
tract rights that are given to a policyholder on a participating
policy.
Q. Those contract rights are to return him moneys which he
may pay in by being charged too much? A. How do you mean
by being charged too much?
Q. By being charged more than the insurance will cost? A.
Yes, for the purpose of getting something back.
Q. Now, the scheme of insurance is to give a man insurance at
what it cost the company ? A. Yes.
Q. In a mutual company? A. Well, all companies are practi-
cally mutual, and the body of the policyholders is the company.
Q. Yes. In other words, you would carry in the case of a
stock company the amount of a fixed dividend charge into the fixed
expenses? A. Yes.
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Testimony of John Tatlock
Q. You do not in this country load premiums with the idea of
paying bonuses as in England ? A. Well, what they call bonuses
in England are what we call dividends.
Q. I understand that, but you do not load your premiums for
the purpose of providing dividends? A. Yes.
Q. What? A. Participating premiums are loaded largely for
that purpose.
Q. And only for that purpose? A. Well, yes, you can say only
for that purpose, and for providing for contingencies.
Q. There is no good reason why if a non-participating prem-
ium is adequate in carrying the insurance you should charge a
penny more for a participating policy except on the theory that
that penny more is going to be given back to the policyholder in
some way? A. Yes, that is right.
Q. And yet the expenses of American companies very fre-
quently exhaust the entire loading on participating premiums ? A.
Yes, sir.
Q. Is that so in the Washington Life? A. Yes, sir, it is.
Q. Is it so to-day — do you save anything in your loading upon
participating business? A. I do not think we will for this year.
I am trying my best to get them down.
Q. So the situation is that the participating premium, though
made higher than the non-participating upon the theory that there
will be a return to the policyholders, in fact, does not permit that
return, because the excess is used up in expenses? A. Yes, sir.
Q. Well, that would seem to indicate that the non-participating
premium was not adequate? A. Well, in a g^eat many cases it
has not been adequate.
Q. If all your rates were made as your non-participating rates
are made, with a view to meeting the cost of carrying the insur-
ance without intending to return to the policyholder any benefit
in excess of charges, you could not get along unless you reduced
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expenses still further than you have been able to do? A, That
is undoubtedly true.
Q. So, according to your present scale of reduced expenses,
your non-participating rates are not adequate? A. Yes, well,
academically no. They are adequate to carry the cost of non-
participating business.
Q. How can such a thing be academical when we know practi-
cally yes? A. What I mean is that non-participating rates are
adequate to pay the cost of carrying those policies. They are not
adequate in the sense that most companies are conducted, I think
the non-participating policyholder has an advantage over the
participating policyholder.
Q. Then you charge a higher premium on the participating
policy on the theory that the policyholder is to get the money
back? A. Yes.
Q. And then you pay such large commissions to the agent to
get that policy that there is not any money coming back? A.
There is not enough ccnning back to reduce the cost of those poli-
cies to the cost of non-participating policies ; that is the condition
I understand exists.
MR. HUGHES: That is all.
THE WITNESS: May I make one more correction, Mr.
Hughes?
MR. HUGHES: Certainly.
THE WITNESS : I mind that we bought from the Morton
Trust Company one other stock, Louisville, Memphis & South-
eastern, $100,000.
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Testimony of John Tatlock
Q. The views you have expressed here in regard to investment
you understand to be the views of your Finance Committee? A.
I do.
(Handing paper.)
Q. Is that a correct statement of the loading on the issues of
1903 and 1904? A. Yes, sir.
MR. HUGHES: I oflFer it in evidence.
(Paper marked Exhibit No. 802 and read by Mr. Hughes.)
Q. What is this book that is now shown you? A. That is a
book which was prepared by former agents of the company now
dead, which I believe the former management of the company
allowed its agents to use.
MR. HUGHES : I will have it marked for identification.
(Paper marked Exhibit 803 for identification.)
(Handing witness paper.)
Q. Are these the actual results in 1905 of the apportionments
on deferred policies where the period matured in 1905? A. Yes,
sir.
MR HUGHES : I oflfer them in evidence
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Testimony of Cornelius Doremus
The papers are marked Exhibits 804, 805, 806 and 807.
Q. Who made these up, did you? A. No, they were made
up
Q. Are they all 1905? A. Yes, I know that.
Q. How do they compare with the estimates? A. Weli, they
are, naturally, under them.
Q. To what extent, roughly? A. I cannot tell that. I have
not examined them.
Q. Considerably? A. Considerably, yes, sir.
CORNELIUS DOREMUS, called as a witness, being duly
sworn, testified as follows :
BY MR. HUGHES:
Q. Mr. Doremus, you are President of the Germania Life In-
surance Company? A. I am.
Q. How long have you been President of that company? A.
Seven or eight years.
Q. Is that a stock company? A. It is.
Q. Is this a copy of the charter and by-laws of the company
(handing book)? A. It is.
MR. HUGHES : I will have it marked for identification.
<Book marked Exhibit No. 808 for identification.)
•Q. Your company was organized in i860? A. It was.
Q. Under the laws of the State of New York? A. 1853.
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Testimony of Cornelius Doremus
Q. The General Act of 1853, relative to life insurance com-
panies? A. Yes, sir.
MR. HUGHES : I read from the Charter the following pro-
vision, of Article 4:
"In the election of Directors every stockholder in the company
shall be entitled to one vote for every share of stock held by
him ; every policyholder paying at least one hundred dollars per
annum in premiums, or annuitant entitled to an annuity of not
less than one hundred dollars per annum, shall be entitled to one
vote ; and every person whose life is insured by a policy, the legal
reserve on which at the end of the last policy year amounted to
one hundred dollars or more, shall be entitled to one vote for
each even hundred dollars of the amount of such reserve, and
all of such votes may be given in person or by proxy/*
I read the following from Article 6, of the Charter :
"The capital of said company shall be two hundred thousand
dollars, divided into four thousand shares of fifty dollars each,
which shall be personal property, transferable only on the books
of the company in conformity with its by-laws.
"The holders of the said capital stock may receive interest
thereon at a rate not exceeding seven per cent, per annum. For
such interest the Board of Directors may declare dividends, and
designate the time and manner of their payment.
"No division of profits will be made until the stockholders shall
have first received interest at the rate of seven per cent, per an-
num on the amount of the capital stock."
Article 12.
"No loan of the funds of this company shall be made to any
Director or officer of the company."
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Testimony of Cornelius Doremus
Article 13.
"Within three months after the expiration of the year 1867,
the officers of the company shall cause a general statement to
be made, and,a balance to be struck of the affairs of the company,
which shall exhibit the amount of surplus or net profits of the
company, as near as the same can be ascertained^ after deducting
a sufficient amount to reinsure all outstanding risks, and to
cover other contingencies, as provided by law. Twenty per
cent of the net profits thus ascertained, in addition to the
amount to be divided among the stockholders for interest on the
capital, pursuant to Article 6, shall be apportioned and divided
in cash among the holders of the capital stock of the company,
and the remaining eighty per cent, of the said net profits shall be
equitably divided in cash, or at the choice of the assured in such
other manner as the Board of Directors may determine among
those policyholders who, by the terms of their policies, partici-
pate in the profits subject to the regulations of the Board of Di-
rectors from time to time, as to the period during which a policy
must have been in force to entitle the holder to such participa-
tion, and as to the period for which the dividends shall be de-
clared. And, on or before the first day of July, in the year one
thousand eight hundred and sixty-nine, and in every subsequent
year or at such other times as the Board of Directors may deter-
mine, the officers of the company shall cause a general statement
to be made and a balance to be struck as aforesaid. After de-
ducting a sufficient amount to reinsure all outstanding risks, and
to cover other contingencies provided by law, a sum equal to five
per cent per annum of the capital stock, in addition to the amount
to be divided among the stockholders for interest on the capital,
pursuant to Article 6, shall be apportioned among the holders of
the capital stock of the company, and the remaining net profits
shall be equitably divided in cash, or, as the option of the assured
in such other manner as the Board of Directors may determine,
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Testimony of Cornelius Dorenius
among those policyholders who by the terms of their policies
participate in the profits, subject to the regulations of the Board
of Directors from time to time, as to the period during which a
policy must have been in force to entitle the holders to such a
participation, and as to the period for which dividends shall
have been declared. In case of death of anybody insured, his
ratable portion of the profits which may have accrued prior to his
death and since the last division of profits, shall at the next suc-
ceeding term of dividing profits be paid m cash to his legal
representatives or assigns."
Q. Was that a provision of the original Charter that every
policyholder paying at least one hundred dollars and so forth,
should be entitled to a vote, or was that the amendment of 1901 ?
A. That was a provision of the original Charter.
Q. So that the voting power of policyholders has remained the
same since your organization ? A. Oh, no ; it was formerly
Q. Which part of this paragraph that I have read was the
amendment of 1901 ? A. First, giving them the right to vote by
proxy as well as in person, and then giving them that right and
determining the extent of. their rights upon a scientific basis:
the stockholders had a right to vote for each share of stock,
and we give the policyholders the right to vote for each one
hundred dollars' interest that they have. If a policyholder has
a policy, that is, on which the reserve is one thousand dollars,
he has ten votes, the same as a stockholder with ten shares.
Q. In other words, you calculate the policyholders' interest
in accordance with the amount of the legal reserve against his
policy? A. Exactly.
Q. You give him one vote for each one hundred dollars of that
reserve, just as you give a stockholder a vote for each one hun-
dred dollars' worth of stock he has? A. Yes, sir.
Q. That is, for each share ? A. Yes, sir.
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Testimony of Cornelius Doretnus
Q. You figure that the policyholder has an interest in the
company measured by the reserve against his policy at the time
being? A. I think that is exactly it.
Q. So that the older the policyholder is, I mean in relation to
his company A. The more votes he has, sir.
Q. The more votes he has ? A. Certainly.
Q. And if there should come a question at any time of the con-
trol of your company through the votes of policyholders, it
would be the older policyholders who would control the situa-
tion? A. Well, the stockholders are such a drop in the bucket
as compared with the policyholders
Q. I mean the earlier policyholders. Did I say stockholders?
A. No, you said policyholders. Yes, that is it.
Q. In other words it would be those that have been longest
in the company who would have the majority of the policy-
holders* votes? A. Or a new policyholder of a few years would,
of a very large amount.
Q. That would come in and modify it? A. Yes, sir.
Q. And how has that worked in practice? A. Excellently.
Q. Do the policyholders vote? A. Surely.
Q. Do they vote in person or by proxy ? A. By proxy alto-
gether.
Q. How many policyholders have you? A. Upwards of
100,000. I simply speak from memory.
Q. Well A. I would not attempt to say that, you know.
Q. About 63,000 or 64,000? (Handing paper.) A. Oh, yes.
Q. About 63,000 in number? A. Yes, I would say so.
Q. How many votes of policyholders were cast at the last
election? A. 13,000.
Q. Who held the proxies ? A. The three officers of the com-
pany held the proxies. I vote them.
Q. Who are the three officers to whom the proxies are is-
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Testimony of Cornelius Doremus
sued? The President, Vice President and Second Vice Presi-
dent.
Q. What means are taken to get the proxies? A. Only at the
time we made that change in our charter we addressed a com-
munication, a letter of mine of which you have a copy, to our
policyholders direct.
Q. Is this the letter (handing paper)? A. It is.
MR. HUGHES: I offer it in evidence.
(Paper marked Exhibit 809.)
Q. This was sent out after the amendment of 1901 ? A. Yes,
sir.
Mr. Hughes then read Exhibit No 809.
Q. What amounts have been distributed to the stockholders
by the Germania? A. Seven per cent, up to 1868, 12 per cent,
since then.
Q. Twelve per cent, since then? A. Yes, we declared our
first dividend to policyholders in 1868, and thereupon they be-
came entitled to an interest in the dividends. "
Q. Have any dividends been paid to stockholders aside from
the 7 per cent, up to 1868, and the 12 per cent, since that time?
A. No.
Q. No other division in any way? A. No.
Q. And the capital stock has not been increased? A. No.
Q. What amount of insurance is in force? A. About $110,-
000,000, I should say.
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Testimony of Cornelius Doremus
Q. How much of that is ordinary insurance? A. Just ex-
actly what do you mean by ordinary, Mr. Hughes ?
Q. Well, as distinguished from industrial? A. Almost the
whole of it, practically the whole of it. I think there is only
three hundred thousand dollars of industrial left.
Q. Can you give the figures? A. I can, from this blue book.
Q. Are they — these figures are yours (indicating) ? A. $103,-
937,343 and $383,924 industrial. We discontinued doing indus-
trial business twenty years ago.
Q. Were you connected with the company at its organization?
A. Before. The first policy was issued on the 17th of July, and
I entered the company the 21st of May, i860.
Q. In what capacities have you been connected with the com-
pany since that time? A. I have
Q. In what capacities, I say, have you been connected with
the company, what offices have you held in the company? A.
Everything from clerk to President, up or down, as you may say.
Q. So you are familiar with the entire business of the com-
pany? A. Yes, sir.
Q. Certain questions were asked you with regard to pa)rments
in connection with legislation and other matters. You have
furnished the Committee with this statement. Is that acccurate
and complete? A. Yes, sir.
MR. HUGHES; .1 offer the paper in evidence.
(Paper marked Exhibit No. 810 and read by Mr. Hughes)
Q. What is the amount of the surplus of your company? A
$4,744,717.00.
THE CHAIRMAN : Before you leave that topic I wish you
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