policyholders of the class then surviving? A. Yes.
Q. Now, if you will look at your report to the German gov-
ernment under date of 1904, does that state the amount paid
out in dividends that year on the deferred dividend policies
then maturing — is that it (pointing to entry) — take for ex-
ample the ten year class? A. No, sir; it is only the accumu-
lation.
Q. It is only the accumulation? A. Yes, sir. That shows
how much has been assigned to that class in that year.
Q. Does this mean an amount maturing in 1904, or what
are the policies mentioned in the table I now show you? A.
That is the addition to the fund in 1904.
Q. Am I not right in supposing that table in your report
of the year 1904 as to ten year policies means the policies that
run from 1904 to 1914? A. Yes, sir.
Q. And does it show the amount paid out on deferred divi-
dend policies maturing in 1904? A. Yes, sir.
Q. And what amount was that? A. It was in that year
78,000 marks.
Q. 78,000 marks in the particular class stated? A. Yes.
Q. Now, do you put at the time when the dividend period
is about expiring, either at that time or in the year preceding,
an accumulation to the credit of those policies which had not
been before placed to their credit? A. Only that for the year
— for the year 1904.
Q. Then you do not make a practice of waiting until the
5560
Digitized by
Google
Testimony of John Fuhrer
year before the dividend period expires and then put in a gross
accumulation to meet the necessities of distribution at the end
of the deferred dividend period? A. No, sir.
Q. That amount that you put in the year of distribution
and the year before are simply the gains for those years? A.
That have been accumulated.
Q. And you then make your aggregate of the amount that has
been credited year by year during the deferred dividend period?
A. Yes, sir.
Q. Now, I wish you would take as an illustration a policy ma-
turing in 1904, Avith a deferred dividend period of ten years, ac-
cording to your reports to the German Government, and show — I
am speaking, of course, of a class of policies — I am speaking of a
class of policies, and I want you to take a class maturing in 1904
with a deferred dividend of ten years, and tell me "what amounts
had been credited annually to that class according to your reports
to the German Government ? A. These are only the figures which
belong to that year for the whole class.
Q. Have you got in those reports before you the data so that
you can give me that ? A. We can give you the amount that had
accumulated for policies maturing in 1905 on a ten-year class.
Q. Can you give me by year ? A. Not from these statements.
Q. Have you got other statements that you can use? A. They
are all alike.
Q. In other words, it is not so important, so far as your com-
pany is concerned, perhaps, but to get an illustration of the way
that is done when dividends are apportioned annually in order that
we may have data for comparispn. I would like to know just how
5561
Digitized by
Google
Testimony of Edmund L. Baylies
you have done it in a particular class of policies. Do you under-
stand what is desired, Mr. Fuhrer? A. Yes, sir. You want to
know what was added to the fund each year.
Q. Yes, taking the ten-year class maturing in 1904, and tell me,
during the period of ten years, what was annually apportioned to
that class? A. I cannot give it from these reports, because there
is not enough of them.
Q. How far back can you go with those reports? A. The year
1903, I do not find.
MR. HUGHES : Suppose you withdraw for a moment.
EDMUND L. BAYLIES, called as a witness, being duly sworn,
testified as follows :
BY MR. HUGHES :
Q. Were you or are you the Treasurer of an association known
as the Allied Real Estate Interests? A. I was the Treasurer of
that association when it was first formed, I think in March, or early
in April, 1905, in the form that it then existed, simply an associa-
tion ; and I acted as Treasurer so long as I was in this country.
I went away in May, or about the middle of May, 1905, for my
vacation, and after that time the payments were attended to by Mr.
Alfred E. Marling, under Power of Attorney from me. And to
complete my answer, I am the present Treasurer of a corporation
which has been formed, known as the Allied Real Estate Inter-
ests, organized under the Membership Law of this State, and I am
its Treasurer.
5562
Digitized by
Google
Testimony of Edmund L. Baylies
Q. What "was the purpose of the association? A. The purpose
of the association was to stimulate public interest and arouse dis-
cussion in reference to the bill known as the Mortgage Tax Bill,
which was then pending before the Legislature, with a view to
having its provisions fully discussed, and, if possible, understood,
and to arouse public interest in the dangerous nature of some of
the provisions of the bill as introduced.
Q. What amounts were collected for that purpose? A. I can-
not give you the exact figures, but it was over twenty thousand
dollars, and I think not over twenty-two thousand dollars, some-
where between those figures.
Q. Did insurance companies contribute to the fund? A. I can-
not answer that of my personal knowledge. The checks were
handed to the Treasurer by various members of the Committee,
who constituted themselves a soliciting body; as we had to act
very promptly, the various members of the Committee went to
their various friends, people interested in real -estate, and got checks
and sent them to me, and I deposited the checks and paid out the
moneys so received.
Q. You had nothing to do with the soliciting yourself? A. Ex-
cept in one instance, I went to one insurance company and that
company declined to contribute.
Q. So you did not get anything from your own efforts? A. I
personally received nothing from any insurance company.
Q. Who. has the books of the association ? A. Of the old asso-
ciation, it has closed up its books. I presume they are in the hands
of Mr. Marling, of H. S. Ely & Company.
Q. What disbursements were made for the purposes you have
55^3
Digitized by VjOOQ 16
Testimony of Edmund L. Baylies
mentioned? A. The disbursements are of several sorts. Per-
haps the heaviest disbursement was in advertising ; advertising in
the papers of this city, in Brooklyn, and very generally through-
out this State, to arouse public attention and attract it towards the
fact that this bill was pending. I think we advertised in almost
every county of the State. Then there were further
BY MR. COX:
Q. What kind of an advertisement, Mr. Baylies, did you in-
sert? A. Calling attention to the dangerous provisions of the bill
as this association knew it from the point of real estate owners and
loaners on bonds and mortgages. We thought that it would in-
terfere with the character of the mortgages, which had a very
well established value under the decisions and laws of this State,
and that this was an attempt to change the law which would
create g^eat confusion in the minds of loaners and borrowers, and
we thought it would disturb the mortgage market very seriously
and deter many people from making loans.
Q. They were display advertisements urging people to oppose
the bill ? A. That was their character.
BY MR. HUGHES:
Q. They were, not in the nature of reading notices ? A. Oh, no.
Q. They were straight advertisements? A. Qearly, paid for
as such.
Q. Then what disbursements were there in addition to those?
SS64
Digitized by VjOOQ IC
Testimony of Edmund L. Baylies
A. In addition there were disbursements for traveling expenses.
We employed men to go out to Buffalo and other leading cities in
the State. We paid the expenses of the people who went to
Albany to oppose the bill and we paid some attorneys' fees, chiefly
to men in this city.
Q. And who represented the interests as attorneys? A. The
President at that time of the association was Mr. Edward Van
Ingen, who did the major part of the work. He has since died.
Most of the disbursements of that character were made through
him.
Q. And the entire $20,000 or $22,000 was disbursed in the man-
ner you have stated ? A. Yes.
Q. What proportion would you say was disbursed for adver-
tising? A. I could give exact figures, but my impression is that
very nearly one-half was paid for advertising.
BY THE CHAIRMAN:
Q. You are the legal custodian of the books now? A. I sup-
pose that I am, in a certain sense, and I am ready to produce them
for the Committee's inspection if they wish them, although they
are not in my actual custody.
Q. You stated that the old books were in Mr. Marling's posses-
sion. Are the present books in his possession? A. No; the
present books of the new association are subject to my order.
Q. And you said these were display advertisements? Were
they not accompanied many times by reading notices also to be
published in connection with them? A. Well, I cannot speak of
SS^S
Digitized by VjOOQ 16
Testimony of Edmund L. Baylies
that as of personal knowledge, but my impression is that we paid
for nothing but display advertisements. If any reading notices
were given, I think they were given without pay. There was a
great deal of editorial comment by the newspapers who received
these paid advertisements.
Q. But I mean matter accompanying the advertisements sent
out under the auspices or by your association which were designed
to supply the papers with arguments or with matter for publica-
tion as reading matter besides the display advertisements ? A. I
think that was so, sir, but I cannot speak from my perscmal knowl-
edge.
MR. HUGHES : Is there anything further?
THE CHAIRMAN : Except that we would like to know how
much was collected from insurance companies.
BY MR. HUGHES:
Q. Yes, I think I asked Mr. Baylies that. Can you tell how
much was collected from insurance- companies ? A. I have not
said that I knew anything was.
Q. No, I understood you to say so. Perhaps we had better
have the books? A. It would be an insignificant fraction of the
whole.
BY MR. COX:
Q. What corporations then mainly would you say these sub-
scriptions came from, if not from insurance companies? A. They
SS66
Google I
Digitized by ^
Testimony of John Fuhrer
were in part from trust companies and very largely from indi-
viduals who were interested in estates that were loaning on bond
and mortgage, and that thought their interests, would be prejudiced
by the passage of this bill ; in part from attorneys who represented
loaners of money from other States, who had been in the habit of
loaning money here, and who felt that if this law was enacted they
would be unable to continue in this State, and were therefore op-
posed to the bill.
THE CHAIRMAN : We had better have the books.
MR. HUGHES : I think that if you can control the production
of the books showing the amount received, and disbursements in
connecticwn with the Mortgage Tax matters last Spring, we should
be glad to have them.
JOHN FUHRER resumed.
Q. Now, this is a statement of the surplus, added annually on
policies maturing in 1904, and also a statement of the total sur-
plus to the credit of those policies in each year from 1896 to 1904,
inclusive? A. Yes, sir.
MR. HUGHES : I offer it in evidence.
(Paper marked Exhibit 820.)
Q. And that is in accordance with, and taken from, your re-
ports to the German Government ? A. Yes, sir.
5567
Digitized by
Google
Testimony of John Fuhrer
Q. Dealing with the policies of the class described? A. Yes,
sir.
Mr. Hughes then read Exhibit No. 820.
Q. And that total of 78,691.80 marks was the total amount dis-
tributed among the surviving policyholders of that class in 1904?
A. Yes, sir.
Q. Now, is it the fact that in connection with your other de-
ferred dividend policies of ten-year classes, maturing in other
years and of periods other than ten years, say, for example, fifteen
or twenty years, you have had the same method of apportionment?
A. Yes, sir.
Q. And you have shown in your reports to the German Govern-
ment annually the surplus added according to the amounts whidi
you set aside in each year? A. Yes, sir.
Q. And those amounts in each case corresponded with the an-
nual dividends declared that year? A. Yes, sir; plus the interest.
Q. Have you had any controversies with the German Govern-
ment? A. No, sir.
Q. Never? A. Never.
Q. Always got along easily? A. Yes, sir.
Q. The question was asked of President Doremus a little while
ago as to the comparative mortality in Germany and America.
What has been the experience of your company? A. Our experi-
ence has been more favorable in Germany up to several years ago.
Q. Up to about what time? A. A few years ago.
Q. Four or five years? A. I should say, perhaps, two or three
years.
5568
Digitized by VjOOQ 16
Testimony of Cornelius Doremus
Q. What is the general American experience as compared with
general German experience? A. I should say, generally speak-
ing, the mortality in America is better, more favorable, than in
Germany.
Q. How do you account for the exceptional experience of your
company in that respect? A. It may be the acceptance of a great
many risks that were aliens to this country, that were not bom
here, perhaps, that were not acclimated enough.
Q. You had a large business ? A. Among the German
populaticm.
Q. Among those of German parentage? A. Yes.
Q. And you think that possibly that operated against your com-
pany? A. Yes.
Q. You have the estimate book which has been used by your
agents, have you not? A. No, sir; we never authorized that at
all.
Q. Well, you can get one of them, can you not, so we can ex-
amine it? A. The agents may have some.
Q. You can get one from your agents. And I would like to
have you make up a statement of your actual results, if you have
not one here, on your annual dividend policies ? A. Yes.
CORNELIUS DOREMUS resumed.
BY MR. HUGHES:
Q. Mr. Doremus, has the Germania Life Insurance Company
been a participant in any syndicate transactions ? A. It has not.
55^9
Digitized by
Google
Testimony of Richard Morgan
Q. Has any officer of the Germania Life Insurance Company
participated in any syndicate where the Germania Company has
acquired in any manner securities floated by the S)mdicate? A.
Not to my knowledge, and I do not believe so.
RICHARD MORGAN, called as a witness, being duly sworn,
testified as follows :
BY MR. HUGHES:
Q. Mr. Morgan, what is your business ? A. life Insurance.
Q. With what company are you connected? A. The Bankers'
Life.
Q. In what capacity? A. Well, as adjusting policies and a di-
rector.
Q. Are you a director of the company ? A. I am.
Q. Do you hold any office wit}i the company? A. No, sir.
Q. Did you ever hold any office with the company? A. I did.
Q. What office did you hold? A. President
Q. From what time? A. From about 1891 to 1902.
Q. When was the Bankers' Life Insurance Company organ-
ized? A. Originally organized in 1869, and known as the Bank
Qerks' Mutual Benefit Association.
Q. When did the Bank Clerks' Mutual Benefit Association or-
ganize? A. I think it was March, 1869.
Q. How long did it continue in business under that name? A.
Until June, 1893 — ^June or July.
Q. And what change in the business of the company took place
S570
Digitized by
Google
Testimony of Richard Morgan
in 1893 ? A. It re-incorporated, I think, under the Laws of 1887,
and started in to do a general life insurance business under the
assessment plan.
Q. As an assessment ccMnpany? A. As an assessment com-
pany.
Q. It had previously done business as an assessment association,
had it not? A. Well, no; it was more on the fraternal order.
Q. More on the fraternal order, doing business among those
connected with banking institutions? A. Solely, just in New
York and vicinity.
Q. Did it change its name in 1893 ? A. I believe it did.
Q. What name did it then assume? A. The Bankers' Life In-
surance Company of the City of New York.
Q. What was done with reference to the policies which had
been previously written while it was the Bank Gerks' Association ?
A. A provision was made in the constitution, which was voted
upon on changing to the assessment plan, whereby one dollar for
each one thousand dollars insurance in force on the 31st day of
December each year, should be set aside in order to reduce the
cost of those old members and to waive the assessments.
Q. Where was that one dollar per thousand to be obtained?
A. From the contributions of Oass B and the premiums.
Q. And what was Class B? A. Qass B consisted of all new
members who entered the association, I think — well, after they
re-incorporated and started into do a general business, I think that
commenced along in the early part of 1893, or 1892, it might pos-
sibly be.
Q. Then you had two classes. Class A, consisting of the assess-
5571
Digitized by
Google
Testimony of Richard Morgan
ment policies which had been issued when the order was more or
less a fraternal one, and then Class B, of all policies issued after
your re-incorporation, as a general assessment company? A.
That is right.
Q. And by a provision in your constitution on your re-incor-
poration the members coming in under Class B were to contribute
one dollar per thousand to reduce the expense to the old members
OMi tinning as Qass A ? A. That is right.
Q. And those two classes were kept distinct? A. Distinct.
Q. And the cost of the business was separated in order to ascer-
tain the results as to each class? A. Yes. No more were ad-
mitted to Class A.
Q. What sort of business did the new concern do in 1893, what
policies did it write? A. Only ten-year term.
Q. When did it commence to do business on a reserve basis?
A. Well, although we set aside a reserve, we kept it intact our-
selves. We were not required by the Department to maintain a
reserve other than the amount of one assessment on all policy-
holders, that constituted our reserve.
Q. That was the reserve under the law ? A. Yes.
Q. In other words, while under the law you only had to have a
reserve as an assessment company, equal to the amount of one
mortuary call ? A. That is right.
Q. You, in effect, established a reserve for your own purposes?
A. Yes, and in some instances it was larger than what would be
required by a regular company.
Q. Well, it was larger than what would be required by an old
5572
Digitized by
Google
Testimony of Richard Morgan
liiie company ? A. Yes, it was in many instances, where a policy
was written annually.
Q. You established that reserve for what purpose? A. Well,
the company did it for its own protection as a matter of safety.
Q. What was your scale of premiums at the time that you estab-
lished that reserve? A. Well, the scale of premiums was made
up very oddly. It was not according^ to actuarial science what-
soever. It was taken from the mortality table. Whereas the
number dying in each year on a ten-year term basis, for instance,
the number of deaths at each age on each one thousand lives in-
sured. And it was Mr. Townsley who was connected with us at
that time — instead of taking the actuary's tables on a ten-year
term basis he simply took that percentage and just scratched off
the last two figures and put down $8.91, whereas it was $891.
Q. What Mr. Townsley is this? A. The president of the Life
Association of America.
Q. What had he to do with the Bankers' Company at that time?
A. He was general manager. He came to us when we started to
do a general business.
Q. That is 1893 ? A. 1893, I think it was, or perhaps 1894.
Q. Was he actuary of the company? A. He was everything
pretty much.
Q. Did he fix the rates in the manner you have stated? A.
Why, he assured the board, we were then all bank men, and we
practically took them on his assurance that they were adequate and
right.
Q. This was at what time, 1896? A. Oh, no.
Q. Earlier than 1896? A. It was along in 1892 or 1893.
SS73
Digitized by VjOOQ 16
Testimony of Richard Morgan
Q. Did you make any change subsequently? A. Yes, we
found that those rates were inadequate.
Q. When did you find it out? A. We found it out in 1895.
Q. How was it brought to your attention? A. Why, we com-
menced to get insurance books that we never had access to before,
and we saw that the rates were inadequate right straight according
to the net premiums. For instance, you take an age 60 on a ten-
year term, we were charging $10.90 per thousand, whereas the
ordinary premium, I think, is somewhere in the neighborhood of
fifty or fifty-one dollars.
Q. What justification did Mr. Townsley have for this method,
or suggest? A. Well, he claims, that, I think it was the Provi-
dent Savings, had worked along on those figures there, and they
had been successful, and I don't know perhaps but what he
brought one of the Connecticut companies — the Aetna, or one of
those comj^anien which did a term business, and they were able to
carry the policies at about the fig^ure he indicated for a period of
twenty-five or thirty years without raising the rate.
Q. Why did not that satisfy you? A. Well, we ccmsulted ac-
tuarial advice and we were informed after taking regularly estab-
lished tables, the American Experience table there, we were well
satisfied that those people knew more than Mr. Townsley.*
Q. Who was the actuary that you consulted? A. I think — I
don't know as we consulted any one particularly. Mr. W. D.
Whiting.
Q. Did you consult Mr. Whiting or did he become consult-
ing actuary? A. Yes, Mr. Whiting was actuary along in 1897,
after Mr. Townsley had been dismissed from our employ.
5574
Digitized by
Google
Testimony of Richard Morgan
Q. When did Mr. Townsley leave? A. March 26th, 1897.
Q. Under what circumstances ? A. Dismissed by the Board.
Q. For what? A. Well, for deception of policyholders.
Q. In what way? A. In trying* to get control of the com-
pany by asking for proxies and sending out a circular that
purported to come from the Board, whereas as a matter of
fact the Board had no knowledge of it, neither did the officers
give any consent to it.
Q. What was done in or about 1896 when you elevated your
scale of premiums? Did you approach the premiums charged
by the old line companies? A. Yes, sir.
Q. Pretty closely, practically the same premiums? A. The
net premiums were exactly the same.
Q. In other words, although not a level premium company,
and although operating under the assessment law, you tried
to put your premiums on a level premium basis and to main-
tain outside of any legal requirement, the necessary legal re-
serve? A. Yes, sir; and I guess we are the only companies
that are doing it.
Q. Did you in your policies provide for cash values and
cash loans and paid-up insurance and so forth? A. Well, we
did, I think ; the policies issued by Mr. Whiting under his su-
pervision, we did provide for it, but they were estimates.
Q. They were estimates? A. Yes, sir.
Q. What authority had you for issuing policies of that de-
scription as an assessment company? A. Well, there was a
provision of law there that gave the right ; we considered we
had the right, provided it was only an estimate, to do it.
S57S
Digitized by
Google
Testimony of Richard Morgan
Q. That is you estimated what you thought you would be
able to pay, but you did not make an absolute guarantee? A.
No.
Q. Did you submit your policy forms to the Insurance De-
partment? A. Yes.
Q. To whom did you submit them ? A. I cannot say for all
of them.
Q. What individuals? A. But when they went up there
they went to Mr. Appleton.
Q. You were President of the company during this period
from 1891 on? A. Yes.
Q. And before you issued the payments substantially equiv-
alent to the premiums charged by legal reserve companies and
made these estimates of returns in cash surrender values and
paid-up insurance you asked Mr. Appleton's approval? A. I
won't say certainly for that, Mr. Hughes, on those policies,
but I know subsequently we did not dare issue anything with-
out going up to Albany.
Q. When you say subsequently you mean at that time? A.
I should judge it was in the latter part of 1898.
Q. Well, were you called down by the Insurance Depart-
ment for issuing these policies? A. Decidedly so.
Q. About what time? A. I should judge about the latter
part of 1888.
Q. And how long had you been issuing them at that time?
A. I should judge for about a year and a half or a year.