Business: Giant Insurance

A joy to megalomaniacs are the thumping big round numbers of U. S. business. Biggest and roundest of all are life insurance numbers. Insurance men delight in rolling off the $108,800,000,000 of insurance in force, the industry’s total resources of $21,000,000,000. That sum is larger than the U. S. national debt. The companies’ annual income exceeds the normal Federal budget. Insurance men love to relate that U. S. insurance companies hold for investment more than 20% of all U. S. railroad bonds, 35% of all utility bonds, 35% of all industrial bonds, 22% of all farm mortgages. Two-thirds of the business is done by the ten largest companies of which the leader is MetropolitanLife—No. 2 U. S. corporation.* Though insurance men are exceedingly proud of their Depression record, they were glum last week when the Association of Life Insurance Presidents (culling reports from 44 companies and 82% of the legal reserve business) announced that volume of new insurance for the first seven months was off 15.3%, that July volume was off 23.5%-Despite the drop alert and ubiquitous salesmen placed $5,700,000,000 of group, industrial and ordinary insurance in the seven lean months. U. S. life insurance has doubled in the past ten years. It now amounts to 70% of the world’s total. Accustomed to whopping big increases year after year, insurance men were disappointed in last year’s trifling increase in total insurance in force. The $16,400,000,000 of new business was almost entirely offset by lapses and surrenders of policies. There have been only a few life insurance receiverships, among small concerns, during the Depression and the big companies have invariably taken over the policies, in almost every case without loss to the policy holder. This practice is not to save the face of the industry, but because it is profitable business for the strong companies. Large reserves and ultra-conservative investment policies enabled U. S. life companies to increase their total payments to beneficiaries and policyholders $638,000,000 from 1929 to 1931. Loans to policyholders have leaped more than $1,000,000,000 since the 1929 stockmarket crash, reaching a total of $2,827,000,000 for the 44 companies reporting May 31. Many a U. S. citizen found that his savings for a rainy day had been all washed away except his insurance, a fact which insurance men think will sell more & more insurance when private incomes again turn upward. Depreciated security prices are of little concern to insurance companies if payment of interest and eventually principal is assured, for the bulk of their funds is in bonds and mortgages. Mounting policy loans have given life officials the greatest concern, followed by farm mortgages. R. F. C. credit has removed the threat of wholesale railroad defaults. Federal credit agencies have bolstered the farm mortgage situation. But policyholders of many a company will probably this year receive smaller dividends to credit against their premiums.

Since the famed New York insurance scandals of 1905 (in which Chief Justice Charles Evans Hughes got his political start as a persistent, logical inquisitor), insurance companies have been very sensitive to public opinion. For years afterwards insurance company-baiting was a prime sport of legislators throughout the land. In the wake of the scandals the Association of Life Insurance Presidents was formed largely to straighten out bungling laws, sweeten public opinion, promote standardized practices. Later the Association concerned itself more with broad insurance questions, gathering statistics. Its annual December meeting is the big insurance moment.

*No. 1 corporation is American Telephone & Telegraph with consolidated assets of $5,024,000,000. Last week A. T. & T. directors gathered in Manhattan, pondered its earning of $4.02 per share for the first half, its cash and liquid securities of $214,000,000, its 712,000 stockholders, declared the regular quarterly $2.25 dividend. The country interpreted it as a gesture of confidence. Not so sanguine, the directors of E. I. du Pont de Nemours & Co. last week cut the dividend from $3 to $2, although General Motors (of which du Pont owns 9,981,000 shares) paid its regular 25¢ quarterly dividend fortnight before.