THE OMAHA DAILY BEE: SUNDAY, FEBRTTABY II, 1908,
Report of 4h Eiamlitatloa of fhe Rrl Mataal Life luxrair
rnmpinr aa Made or tlta Ininranr Depurtinf ( of Iowa,
Piled la the OBlr at the Aadltor of -State February 1.
THIS REPORT H IMRMSHEn RY THR tflMPUT.
!! Moines, lorn. Nov. . 19yn
Hon. It. P. Csrroll, Auditor if State. Dee Moines, la.
Sir: In compliance with your Instructions. I rntnmnnd an examina
tion of the condition of affairs of the loyal I'tilon Mutiinl I Jfe Insur
ance t'ntnptny on October 9th. 19T, anil havlhir thla day completed the
ante, I beg to report as follow:
This company was first organised January 12th. 185. In Marahalltnwn.
fa., under the nam of tho Royal I'nlon Fr1ndlv Society, ort the fraternal
plan, with rate, however, equal to thoee of a etn reserve i'nnipn. On
March ISth, a reorganisation and reincorporation waa effected on a
legal reserve basis, and the name was ohanged to the Royal I'nlon Mutual
Llfo Insurance Companv. New Articles of Incorporation and Ry-lvtws
were adopted at thla time, and on September 21. 1886. the mid Article were
mended, fixing tlie Inflation of the company home office at Des Moines,
Iowa.
On Mav 57th. IW. the company reinsured the risks of the Iowa
Mutual IIf Insurance Company of Cedar Rapids. Iowa, a legal reserve
ompanv organized on the mu'tml plan, acquiring thereby an amount of
Insurance of about (Jftnwn by Individual agreements with each policyholder.
The German-American Mutual I.lfc Association of Atlanta. .. a
stipulated premium association, which had been In existence for about
nine months, bv an agreement dated Sept. 171th. 1896. reinsured Its mem
bers, bv re-exanilnatlon and re-rarina- on ft legal reserve basis, In the
Royal Mutual Company, the said company taking; over by this agreement
an amount of t'2it),"' of Insurance.
On Mav 18th. 1899. the I'nlon Ufa Insurance Company of Omaha, Neb.,
legal reserve stock company, re-Insured lt risks with the Royal I'nlon
Company, the latlr company acquiring by this transfer and agreement
Some (2.000.000 of Insurance.,
It Is evident from the fact of the large proportion of the risks re
Insured ns above now remaining on this company's books, that an ex
cellent clrss of huslnena won obtained thereby. There Is no evidence that
any consideration whatever oiher ttuin that stated In the agreements on
file, was paid for the nald btisineHS, and the agreement Indicate that It
waa obtained at a low cost.
UlARANTEB PI'Mll.
"Article IV of the Articles of Incorporation, provide aa follows:
Section 1 At any time or times when In the Judgment of the di
rectors It shall be to the best Interests of the company to establish a guar
antee fund there may be a guarantee fund subscribed to this corporation,
which shall not exceed One Hundred Thouaand Dollars In the aggregate, to
lie dlvried Into shares of One Hundred Dollars each, and at least half of
the tots! amount of the gusrantee fund so established shall be paid In. In
money, wfthln ninety days after the subscribing of such funds, and the
remainder shall be subscribed and secured as by taw required In urh cases
of subscription to the capital stock of Joint stock companies. The )wrt
of snld guarantee fund which Is subscribed and secured aa aforesaid may
be called for by the directors from time to time when they deem It neces
sary or expedient, and shall bo paid In, In money, when 'so called for. Bald
entire guarantee fund shall stand aa a guaranty with the other assets
of the. company, to meet all obligations to policyholders and all liabilities
of the company.
Section 2 The paid In guarantee fund shall be Invested In such e
curltles as are provided by the statutes of the state of Iowa for the In
vestment of life Insurance funds, and such securities shall become a part
of the assets of the company. The entire assets of .the company shall stand
ns an Indemnity and guarantee of all risks and liabilities of the company.
Section 8 The Investment of the guarantee fund shall be at the same
rate at that of other Invested assets of the company, and all Interest
readied from such Investment shall Insure solely to the benefit of and be
long only to the shareholder of said fund, and thn amount thereof shall be
PAia over to the shareholders at the time and In such manner and amounts
(but at least once a year) aa the board of directors may determine. v
Section 4 The Hoard of Directors shall have power to declare dividends
on the unimpaired guarantee funJ from the net surplus earnings of the
cc ir.pany In an amount not exceeding the equivalent of 7 per cent per
annum, as compensation to said shsre holders for guaranteeing with such
fund the risks and obligations of thn company.
Section & A majority of the directors may at any time, after twelve
years from the dates of establishing such fund, authorize the withdrawal of
aid fund; provided that such withdrawal shall not Impair the strength and
stability of the company.
pectlon 8 No transfer of the guarantee fund shares of this company
hall be deemed valid unless made upon the books of the company by the
person or persons having the power to transfer the same upon the surrender
of the certificate.
In accordance with the above. It was voted by the Board of Directors,
at a meeting held October 6th, 18!7, to establish ft Guarantee Fund, and
subscriptions and cash to the amount .of (nO.OOO were received before the
date of December 31. 1897. On November 1st. 1900. the Board of Directors
voted to Increase the amount of the Guarantee Kund to the run limit or
1100. non, as provided In the Articles of Incorporation above quoted, and cash
subscriptions to the amount of tho additional (50,000 were received before the
date of December 31, 1900.
A copy of the share certificate Issued to subscribers, and a list of the
share holders with the amounts of Individual Interests, are attached hereto.
A, total of 7 per cent, Including Interest and dividends. Is now paid
annually on the par value of the shares.
. Rome question has been raised as to whether or not the company
should treat this fund as a liability In making up Its annual statement. In
view of the ubove, I deem it but proper to state that In an opinion now on
file In your office, the Attorney General of Iowa has held that the Guaran
tee Fund of this company, created aa It has been and as it Is now being
held, is not a liability and should not be so treated In the annual statement
of the company. .
MAXAGEME3T.
The affair's of the company are now managed by a board of eleven
directors, six of whom are elected by the policy holders and five by the share
holders.
Regarding the election of directors. Article V, Section 2, of the Arti
cles of Incorporation; read as follows:
' " Section 2 The Board of Directors named In these Articles shall be
divided by lot Into three equal classes. Tho first class shall hold office
until the next ensuing Annual Meeting; the second class until the second
Annual Meeting; the third class until the third Annual Meeting. Their suc
cessors shall be elected by the policy holders ul ihelr Annual Meeting In
January of each year, for terms of three years each, and until their sue.
censors arc elected and qualified.
In the event of the establishing of a guarantee fund, as by these arti
cles provided, the share holders of such fund shall have the right to select
by election, additional directors equal In number to those to be elected by
the policy holders, who shall have powers co-ordinate with the existing di
rectors In the management of the affairs of this company until the redemp
tion of the guarantee fund, when their offices shall cease. Said additional
directors and their successors shall be elected In such manner and. for such
terms of ofllce aa the share holders may provide; provided, that nothing In
the above shall operate to prevent the share holders from selecting among
Royal Union Mutual Life Insurance Company
OF DES MOINES. IOWA.
f flAXK D. JACKSON. PrwtluVfit. GILBERT B. PBAV. JAMES TAOfJAKT PRIETLE", Med. Director.
SmXKV A. FOSTER, Secretary. Treasurer. N. M. HUBBARD, Jr., Oeneral Counarl.
TWENTIETH ANNUAL; STATEMENT, DECEMBER 31, 1905
AVAILABLY! FTTNDS LIABILITY ES.
.. . ... . I Present Value of Outstanding Policies, being amount required by
.Mortgage ioans secured oy nrst liens on larm lano in rowa. , ,-,.-,, hv Insurance Department of Iowa. it.ltr. t on
us.;.tm nn present Value of supplemental Lontract not involving Ufa Con
tlngepoles
Without
Improve
tnents.
Amount
loe ned.
No. of
A App.
Value
Av. Amr, Rate of
Loaned Interest
Missouri. Nebraska, South Dakota and Oklahoma
Loans to Policy Holders
Agents' Balances Bee u red br Bond
Amount of Interest Due and Accrued
Amount of Premium Due and Preferred
Cash In Bank and Office '.
Total Available Funds. ...
INCOME DURING 1906.
Deceived for Premiums
Received from Interest and all Other Sources..
' Total Interna ......
i.n.M
9,066
33.116.30
K.XH.fll
ft, 756,35
..n,ao7.mT.ao
.1 MO.M.m
,438.0tl
838,72. 88
All Other Liability
Total Liability
Surplus to Follcy Holders
DISBURSEMENTS AND A CCTTM UI xAT I ON 8 .
Paid Policy Holders
All Other Disbursements .
Total Disbursements
Balance of Income Accumulated
a.nfiaoo
io.5.a
,...1.3f.7.Stt!W
.... l&o.4.7
l.(O7,917.00
....$ 142.4a.1ft
Pre
Value. Acres. Per Acre. Per Acre. Realized
ioxva rAnvt tms'R.
t !tT.!Ufi linear II4V5 4,xM R. 24
SOUTH DAKOTA FARM LOANS.
47.S1 14.241 LS3.V .L'14 9 M
C"A FARM t1ANS.
I.fiM.mn 40.f.' " -"V" 104
UISHOURI FARM LOAK&
, its; as.is
.. ..iMA FARM liOANS
.?) T. HC..HH 11.417 33 S3
KANSAS FARM I1AN8.
nn n urt ji 2 XI
DES MOINK8 AND OTHRR cTT LOANS (WITH IMPROVEMENTS
J'.jn 70.04" 40.1HI
$.f7
7 4F.
I 44
13 34
8
s
3i
tn
I fe
ll 43. THS
flP.Ml
Il.f,1.:i4
$ 35. Wl 4
343.070. i4
Total Disbursed and Aeoumulated $ 638,728.69
Insurance) in Force December 81, 1905 f 15,170,104.00
Deposit with Auditor of Htate of Iowa 1,879,077.44
Kxceaa: of Irpoit above amount required by law. . . 71,214.44
Gain Poring Yoar in surplu to Policy Holders $27,810.00
Per cent of actual eipectcd Death Loaatw 50.2 Pet.
Rate of Interest and Profit earned on mean Invested funds. . .6.11
lflnn
1SW2
19"3
1904
,40,CM
i6on,5M
t.3J,477
4.246.160
,f
l,t6,6m .1M.4 i,C3S.S0S
2.1W.SW .606.SM 31J.fi:
t6i,0 10,2T7.4 772,07
1.34.60n 12.SW.725 a,0t.2M
1.1RH.794 14.34Z1W a.06, 4tW
The eomnanv had. oil June 30. 1905. s,M policies in fore. Insuring
114.429.08. In thla total I have Included no policies on which the premiums
were more than sixty days overdue on June 10. 1P0&. Tha valuation schedule
includes 676 new policies, insuring 1872,000, on which tha premiums had re
mained unpaid more than sixty dsya, which policies were deducted from
the total shown by the said schedule. I had allowed tham to remain on tha
schedule for the reason that about two-thirds of them have since been paid
and the work of adjustment by cancellation and reinstatement on Decem
ber Jl. 1906, will thus be lessened. It should be stated that had the premium
collection been made with the same doaenesa In June as ia usual in Decem
ber, the amount of Insurance herein shown to b In forco would be about
$16,016,000. ... I
1 And that the company carries policies payable In a fixed number of
Installments at death without other option, at the said face amount of the
Insurance account. I have advlsod that this should be changed, and that In
the future all such policies should be carried at the present value of the in
stallments. On the other hand, the company has failed to take credit In Its
Insurance account for the accrued temporary Insurance on return premium
policies, of which there are a considerable' number. Aa the amounts Involved
In these two omissions will but slightly reduce the Insurance account
when adjusted, and aa proper reserves are held on both forms of policy, 1
have not corrected the reported amount In forca Juna 80, 106, but an ad
justment will be made In future reports.
LOSSKS BY DEATH.
The following table shows th percantago of death losssa to mean
mm,n, mt rl.tr fnr the. niaat ten veaTSl
Year. Mean Amount of Risk. Death Losses Incurred.
16 f 1.836.813 I M
IK 2.H81.971 17,000
1.S7 4.090,813 23.000
lsf 4,761,!T 26.000
W9 6.102.67 68,500
KK 6.174.707 103.000
1901 8.348,401 .
1902 ,8S1,39 71,026
190S I 11.280.62 8.600
inru . 13 312.9fi 101.600
The figures for the percent urn oi aciuat to expeciea mortality ior ine
v,iri nrovinna to 190a were, unfortunately, not made by the company.
and I could not take the time necessary to compute them without unduly
prolonging the examination. It must be understood that the percentages
given above are only valuable as an approximate comparison between the
years, and should not be taken aa illustrating the true mortality experience
of the company. ' , ......
A close estimate of the percentage of actual to xpected deaths for
1905 gives the low figure of 60.3, which Indicates a careful selection of risks,
and this condition is verllled by an inspection of the proofs of death and
the applications. , . , , , .
The Iowa business of all companies shows a remarkably low mortal
ity the lowest, In fact, of any state; this being due In part to the salu
brity of the climate, but is principally due to the temperate habits of the
people themselves. Cases of fraud or misstatement in the applications are
comparatlvoly rare, which fact speaks well for the honesty of the Insuring
public In this state. . .....,.,
Under the above heading It should be stated that all the company'
policies provide that payment shall be made within sixty days from the
date of acceptance of proofs of death. It is the practice of this company
to defer payment until the end of the sixty-day period specified In the
policy, making partial payment In cases where money Is urgently needed
by the beneficiary. This practice Is defended on the ground that there
Is a considerable saving of Interest on account of the deferred payment,
for the remaining pollcv holders, and thnt It allows time for the company
to detect possible cases or rraua. i no inner conicnuun in piainuu jus
tified by the experience of the company. It may be questioned, however,
whether the gain In interest alone warrants the deferring of payment. It
Is evident that there la no unnecessary delay In obtaining proof and com
pleting claims and releases. This fact 1 have verified by a careful In
spection of the profits of death on file.
RECEIPTS AD EXPEXDITIRES.
I have brought the examination to the date of September 3wtli. 1905,
Inclusive and have made a careful audit of the books and accounts to that
date. The following are the receipts and expenditures during 1904 and
1906. according to the ledger accounts:
(RRCBIPTS 1904.
Balance of Ledger assets Dec. SI, 19o8r as reported 21,011,529.08
Add agents' debit bals. and other not admitted Itema December
31, 1903 14.789.99
Pet.
.83
.69
.66
. .63
.97
1.26
.84
.72
.61
76
I 32.61(03
48.917.uu
NON-LEDOBR ASSETS, JUNE 30, 1906.
Interest due and accrued
Net uncollected and deterred premiums ..
Orosa asset, June 30, 1906.....
Lesa items urutdmlted:
Furniture and fixtures 4 6.010.67
Commuted commission ...m. 6.HU.M
Agents' debit balances unsecured 10,112.13 11,744 35
Total admitted assets, June 80, 1906
LIABILI1IE8, JUNE JO, 1906.
Terminal reserve on policies and addition. Act, 4 per cant..
Lesa reserve on policies reinsured
...tl.428.870.6t
...11,407,12(13
.. LIS7,(88.00
.. 1,(26.00
l,,.tH,HW,
Nat reserve mm,...
Death losses unpaid ,
Leaui luaecv rcvmiou., ,,...
Present value of supplementary contract
iTemlums paid in advance
Dlvidenda due policy holders
Agents' salaries and expenses due and accrued
Salaries of officers and director due and accrued,
durplus
Total liabilities 81,407.126.33
The following are tha receipt and expenditure during 1906, to and in
cluding September 20:
RECEIPTS TO SEPTEMBER 30, 1906.
Balance of net ledger assets, December 31. 19i4 11,227,327.94
Oross new premiums received $ 89,607,(4
Less returned premium (424.12
Heinsurano premium 170.00 695.02
41,226,28.00
6,0400
6,oijo.oO
83.844 00
..i0
i.lMM
810.00
4ft. 84
181,940.96
I 89,312.92
Dividend applied to purchase add. (no ledger ac
count) , 271.96
Surrender value applied to purchase adds, (no ledger ac
count) 435.60
Total new premiums 90,038.88
Oross renewal premiums received ,. M,b6o.9i
Less: Return premiums 44298
Reinsurance premiums 8,M8.o2 4,131.60
1302, 434.10
Dividends applied to pay renewal premiums, no ledger
account
8.924.84
Total renewal premium $306,858.94
Premium note, loan or lien restored by revival of
policies 4,661.72
Total premium Income
Interest on mortgage loans ,
Interest on premium notes, loan or Hen
...t 36.44S.94
... 15.6J3.10
t 400,(49.04
Total Interest 62.070.04
Bills payable 4.UU0.O0
'Total halance of net ledger asset Dec. 31, 1903..
their representatives on tha board of directors one or more of tho then ex-' Gros new premiums receivea
isting directors, who shall act In common a representatives of both Inter- l,ess: neiurn premiums...
.$ 440.15
n,O26.S19.07
..$US8,871.D4
esis. . Any vacancies occurring In the board of directors, shall, at their an
nual meeting, be filled by the representative bodies who originally elected
the directors whose office has become vacant.
1 Five of tha six directors elected by the policy holders under the above
quoted, section, are directly Interested In the guarantee fund aa share
holders therein, so that the policy holders have but one representative on
the .board who is not interested In tho said fund. I think that this condi
tion should be changed and that no dlretcor elected by the policy holders
should be In any way Interested,' as a shareholder or otherwise, in the
Guarantee Fund.
. Unusually full and complete racords of the proceedings of the Board
of directors and the Executive Committee of said board are kept, and K
is evident from a careful reading of these records from organization, that
the responsibilities and direction of the affairs of the company have been
and are conscientiously and faithfully assumed.
A list of the Board aa at present constituted is hereto attached.
' .'Notices are sent to policy holders sixty duys before the annual meet
ing for the election of directors, and proxy forms are sent to the new pol
icy holders with these notices. Copies of the nottcu and proxy form, are
attached hereto.
ripeuklng generally concerning the matter of proxies, I believe that, If
given at all; they should not be valid for a longer period than the date of
tho annual meeting of the policy holders for the election of directors next
following thn dale of fhelr Issue; in other words, that they should expire
at the time of adjournment of the meeting for which they aro given and a
new proxy should be issued for every subsequent annual meeting and eleo
tion. It should not, however, 'In my opinion, be mode too easy for an hon
est and efficient management to he. removed from office.
lllri)!JM)S.
' The company writes most (' ita policies with a deferred dividend pro
vttlon. though annual dividends are provided. If asked for In the applica
tion, commencing two years after Issue. A very conservative policy is fol
li.wr't tv th company lu tlxliig the amount of these annual dividends;
mall Initial amounts, with a steady Increuse each year, being puld. Com
Ieti,in lias Increased thn cost of obtulnlng new business during the past
,en years or more in thin and most other companies to such an extent that
dividends . have been materially affected thereby.
V - " POLICY 4-4IXTRACTS.
The policy contracts are curefully drawn and cleur &nd liberal In their
provisions; the Interests of the. policy holders being conserved therein,
mid cash, loun, paid-up and extended insurance values are granted. The
earlier issues were written on the full reserve hnsls without preliminary
term, but all policies issued during the past ten years provide fur valuation
and loading on the one-year preliminary term basis. The usual plans or
forms of ' Insurance are followed wit1 some few exceptions, the rates In all
eases being adequate, to provide the legal reserve with a proper, loading for
expenses. There aro a few assessment policies still In force taken over
rrom the I'nlon Life Insurance Co. of Omaha. Neb. The company treate
these .policies as natural premium lasuea and properly charges a rate
equal to the full natural net premium on the basis of the Actuaries' 4 Per
Cent Table, with a small loading for expenses, and any saving on mor
tality or Interest Is returned to the iolley holder In the form of dividends. 1
Dtuing a period from 1X9K to 194 Inclusive, the company issued policies
with a provision for a loan of 26 per rent or more of each premium called
nn "Advance Dividend." which loan with Interest wus made an Increasing
' lien against the policy, to he deducted at death or surrender or maturity,
some of these policies providing for a return of a part of the premium loan,
In case of. death during a specified period. No policies with the "Advance
Dividend" feature have hern issued since July 1st. 19i4.
' , The guarantees are. In most cases, equal to the Actuaries' 4 Per Cent
llcserve, hut a careful examination shows that they are not in excess of
the said reserve In any cane, and are therefore within the legal limit.
1 Speaking, generally, 1 should ray that while the payment of the full
reserve In ease of surrender may be an attractive feature to prospective
."' and retiring policy holders. It works somewhat to the Injustice of those
who remain. dnce the cost of replacing the surrendered policy must be
borne by them collectively. A moderate forfeit should be required of those
withdrawing, for the purpose of meeting this cost. The higher surrender
values also offer a great temptation to policy holders to drop their Insurance
artel to "twlHt" the policy that Is. to Induce the Insured to surrender it and
' apply ha value to the payment of premium on a new iiollcy In the same or
' Home 'other Company at an advanced age. This practice aim-ays results
In an eventual loss to the Insurer, even If. bs In many of these cases, he
obtains a rebate on the nw premium from the agent (notwithstanding the
law and the rules of the company against It) In addition to his surrender
; value en the old policy.
I find that the company has. in one rase, accepted the principal sum
.' under one policy tlo.Onn, which sum became payable at deathi. as a trust
fund paying to the widow of the insured 4 per cent Interest thereon.
While this ia undoubtedly a good business proposition for the company,
, since the average rate of interest on their mean assets exceeds per rent,
1 have advised that this arrangement la not poriulselble, for the reason that
the policy did not provide for It as an option, and therefore there was no
' life contingency. . The amount has since been paid i$5.0iio to the beneficiary.
' AttKST. COMMISSION" A D 0Tlt At TO.
I 'have marie a thorough examination of the company's agency con
tracts, and I find that In some cases thn commission and bonuses paid
thereunder, are. In my Judgment, excessive. lu many cuses. continuous
.. renewals are allowed, idepondlng. however, upon the production of a stated
, amount of business. While the three managing agents having the largest
y allowances are producing business in excees 01' the minimum required by
the rontracts. and the tutld hurtneps Is 01 good quality and persistent, I do
. not consider that the company would be justified In renewing those con
tracts on the same terms, as the cont is too heavy in proportion to Its
' resources. . There would be equal. If not greater persistence in premium
., payments If more margin were retained on commissions and paid nut in
r, increased dividends to policy holders. t'nder these conditions, agents
should nud It easier to write Insurance, and their renewal Income would
be increased.
Aa before state,!, under the headin "Dividends." the cost of new busi-
ness is excessive in most companies, and I beg to state It as my opinion thjt
V the evil can only be satisfactorily cured by concerted action by the state for
.the restriction of expenses and compensation to tgenls. It Is undeniable
v that It Is dentiable to increase the volume of Insurance In force if It can b
done at a reasonable cost, since the Vroportlunate expense of management
" is. or should tie. decreased thereby, and there is also a gain on account of
' frh medical ne,.rtloii. 1 nese ara rarlora which should Increase dividend
ia a company which Is otherwise carefully and economically managed, which
IS' tha fact In the present instance
. ISt HA4 K ACt Ol ST.
' The following la thn Insurance account for the past ten years, compiled
from tho annual reporta to ttie auditor of state:
Veer. Risks Written Terminated. In Force Dec
'Reinsurance premium
1.879.75 1.ST9.90
Dividends applied to purchase adds (no ledger avect).
Surrender values to purchase adds (no ledger acct)..
Total new premiums '
rAB. ...... -1 1 nrnmhimt received
Less: Return premiums ....( 3K5-j
Reinsurance premiums 6,132.24-
8187.0G1.R4
180.36
6M.90
.(167.9aj.80
372,956.44
6,518.10
1367.438.84
. 4.783.86
Total receipt to Sept. 80th, 1906. inclusive 1,6M,347.02
EXPENDITURES TO SEPT. 30. 1905.
Death claims, including additions 67,777.00
Matured endowments l.OuO.Oo
Premium notes, loans or Hens voided by lapse 34.640 45
Surrender values paid In cash li,67fi.35
Surrender value applied to purchase additions 453.60
Dividends paid policy holder in cash 3,391.81
Dividends applied on renewal premium 3,94.84
Dividends applied to purchase additions 271.1M
Total paid policy holders
Dividends to guarantee fund share holder
Commissions and bonuses to agents, first year...
Renewal commissions to agent
Agents' salaries
Other agency expenses
Agency supervision and managerial ex p. (traveling!
Medical examiners' fees
Mcdlcnl directors' fees
Inspection of risks
Officers' salaries ,
Employes' salaries
Rent
Advertising
Printing and stationery
Postage ..
Legal expenses
Insurance taxes and department fees ,
Acturlal services
Collection and exchange
Express and freight
Loan expense
Office expense
Subscriptions to Insurance Journals
Telegraph and telephone :
Bill payable 1
Dividends applied tJ premium (no ledger aocount).
Total renewal premiums 3372.222.20
Premium notes, loans or Hens restored. by revival of
policies i.bfA.iA
Total premium Income
Interest on mortgage loans.. , .itt .ys
Interest on premium notes, loans or Uena 23.lfc9.08
..( 113,535.91
7,000.00
75.384.10
21.ttbO.tiO
4.015.00
tf.61J.00
1.2J6.10
4.675.60
2.023.00
1.666.66
16.9iH.u6
8,132.98
2.340.92
1.953.68
.. 3.861.66
i.200.18
4.334.2S
9.971.31
1.010.63
612.84
188.78
1.071.37
783.31
121.60
282.H8
4.O0O.0O
Total Interest
Bills payable ,
Total receipts
EXPENDITURES 1904.
Death claims, Including additions
Premium notes, loans or Hens voided by lapse ,
Surrender values paid In cash......
Surrender values applied to purchase adds, (no ledger account).
Dividends applied to pay reiwi premiums mo iiroi
Total exDendltures
: Balance of net ledger assets, Sept. 30. 196
I Invested in the following
I LEDGER ASSETS. SEPT. 30TH, 1905.
. I Mortgage loans (Including loan tax Hen, (38.66)
ru" :s 4 1 Policy loans ;
iV.....ot J Advance dividend certificates
i Interest on advance certificates
. 1 Premium notes and Interest '
Commuted commissions
Furniture and fixtures
Agents' debit balances
Cash In ofllce
Cash In bank
( H7.iK16.14
13,000.00
(1,649,090.75
..( 94.683.67
.. 28,768.12
.. 17,671.86
.( 293.950.10
. 1,390.396.92
,.t 919.589.65 1
.. 179.3il.70l
.. 203, (99.63 I
22.416.02 :
22.418.65'
5.621.55!
6.167.12 1
28,087.96 !
1,013.16
1.961.68
Total ledger assets. Sept. SO, 1905
NON-LEDGER ASdETS, SEPT. 80TH, 1906.
au' I Interest due and accrued
4,783.86 I K't uncollected and deferred premiums
nu-iHenris armlied to nurchaee additions (no ledger account) 180.26,
Dividends paid policy holders In cash 3,234. id
Total paid policy holders......
Dividends to guarantee fund snare holders
Commissions and bonuses 10 agents lat year..
Renewals, commissions and bonuses to agents
Agents' salaries
Other agency expenses and allowances
Agency supervision and managerial exp. (traveling, etc.).
Mexlical examiners' fees
Medical directors' fee
Inspection of risks
Officers salaries -
Employees' salaries , -
Rent
Advertising
Postage
Printing and Stationery '
l'gal expenses
Furniture and fixtures
Insurance, taxes and department fees
Acturlal services ,
Collection and exchange
Express
Iiun expense
Office expense 1
Subscriptions to insurance Journals
Telegraph and Telephone
Bills payable '
Total expenditures .'
Bulance of net ledger assets, Dec. 31, 1904
Invested in the following:
LEDOER ASSETS. DEC. 81, 1904. ,.
Mortgage loans (including loan tax Hens. (343. 26
Collateral loana
Policy loans
Advance dividend certificates. 1st yr. tprem. note acct.)...
Advunce dlv. certificates renewal (prem. uote acct.)
Interest on advance dividend certificates
Premium notes and Interest
Agents' debit balance (gross)
Commuted commissions
Furniture and Fixtures
Cash in bsnks
Cash In office , v
.(150,012.42
7,000.00
181.417.3S
81,349.70
4,340.00
11.587.90
1.420.47
6,711.50
Gross assets. Sept. 30, 1906
Iess items unadmitted:
Furniture and fixtures
Commuted commissions
Agents' debit balance, unsecured..
..(1,390,396.92
..( S3.771.S2
42.473.52
..(1.465.G42.26
...( 6,167.12
... 5.621.55
... 11,125.08
22,923.76
The valuation of the Iowa, Missouri, Oklahoma and Kansa land and of
the lots end Improvements In Ie. Moines snd other Iowa cities on which
loans have been made are so evidently conservative that I have not con
sidered It necessary to have them re-appraised. Hellahle appraisements of
the South Dakota land which I have caused to be made by your direction
how that the valuations of this land made by the company ara not ex
cessive. Appraisements of the Nebraska land are not yet completed at tha
fine this report Is written, and they will be suhiect of a supplemental
report.
Insurance to the amount of the legal requirement Is carried on bulldlnga
Included In the admitted security, and complete abstracts of title by com
petent attorneys are filed with the mortgage.
The amount of overdue Interest nn all mortgages on September 30th.
190R. ws (S.34S.91: the annual Interest Income from mortgage at that date
being approximately (48.0m). Foreclosure proceedings have been commenced
In a few cases, but have always been discontinued by settlement out of
court. I
POLICY LOANS.
The policy loans have been thoroughly checked and the total by the
card record found to agree with the amount shown by the ledger account,
and the total on deposit as recorded in the office o? the Auditor of State
also agrees with the ledger account. The policies on which loans are re-
rirted are all In force and there are Tin hmns In excess of the Artusries'
per cent terminal reserve.
"ADVANCE DIVIDEND" CERTIFICATES.
The company Includes In Its premium note sccount (2n3.7W.n3 of "Advsnca
Dividends" before described under the heading "Policy Contracts." It will
be noted In the annual statement for 1904. that (18.346.46 of premium notes
were not admitted aa assets because not covered by reserve. This amount
was composed of first-year advance dividends, which, of course, has no
security behind them, on the preliminary term terminal I. aula until the
second year from Issue. The company having ceased to Issue policies with
the advance dividend feature on July 1st, 1904. all of these policies now In
force are In their second year, and the reserve being sufficient to cover
the amount of the advance dividend note or certificates, there will be no
tich deduction from the l9oB assets on December 81. 1906.
PRRMII'M NOTES.
I have made a careful Inven ory of the premium notes on file In the
company's office and find the tot il amount remaining unpaid on the same
to agree with the ledger aocount. A comparison of the unpaid portion of
the said notes with lue lenn.nai reserve on the policies, shows that the
said reserve Is not exceeded In any case.
AGENTS' DEBIT BALANCE8.
An exhaustive examination of the agents' accounts shows them to be In
good condition, and I find the ledger balances are being rapidly reduced by
applied commissions. Most of the agents to whom salaries und allowances
have been made are producing sufficient persistent business to Justify the
said allowances and the company has sustained few losses on account of un
productive agents.
OTHER ASSET8.
The Interest due and accrued on mortgage loans, premium notes,
advance dividend certificates and policy loans, has been computed from tha
card records.
The uncollected and deferred premiums have been tabulated on the
basis of the dates of the policies aa given In the valuation schedule: no
allowance In this tabulation ha been made for uncollected first premiums
on new Issues, since the company values Its policies on the terminal basis
with fltst year preliminary lorm, and therefore carries no reserve lia
bility the first year. The premiums on all policies Issued prior to 19u6.
which were 60 days or less overdue, have been Included lu the above tabu
lation. The cash balance In the Valley National bank September 80, 19"6. cer
tified to by the attached certificate. Is (8,583.10. This amount, less the
total' of checks outstanding. (6.620.42. equals the balance shown In my state
ment nf assets on that date. (1.961.68.
The cash In office was counted In my presence by the cashier on Oc
tober 31, 19(6, and the amount thus found added to the total cash paid
out since September 30. 1906. and the total cash receipts since that date,
according to the cashier's books deducted. The balance agreed exactly
with the amount reported to me to be on hand September 30, 19u6.
LIABILITIES.
RESERVE VALUATION.
I have made a complete and Independent valuation nf all the com
pany's policies and additions In force on June 30, 19o5, on both the
terminal and mean baais, nn the department schedules, according to thn
actuaries' 4 per cent, one-year preliminary term method. The company
bases Its reserve liability, in common with most Iowa companies, on the
terminal assumption that Is. that December 21 is the end of the policy
year, taking credit lor the net deferred premiums aa assets, and I havs
calculated the surplus on that basis.
I made careful verification of the various reserve table In use by
the company, finding them to be correct, with one exception. I have also
examined and read the policy contracts for the purpose of determining the
correctne.su of the descriptions given on the valuation schedules.
I have also completed a valuation of all the policies In force June 80th.
1906. on the mean and terminal bases as of December 31. 1916. for the pur
pose of lessening the work of valuation by the Department after the latter
date.
The total amount of the reserve on the mean basis. June 30th, 1906,
deducting the reserve on the portion of policies reinsured, and Includ
ing additional paid-up insurance purchased by dividends. Is (1,277.619. an in
crease on that dute xover the terminal method of valuation of (51.256.
The supplementary contracts not involving life contingencies, which
consist of .obligations to pay annuities certain to beneficiaries under In
stallment policies terminated by the drath of the Insured. I have valued
without regard to the actual datxa of the contracts, thus following strlotly
the method of policy valuation.
OTHER LIABILITIES.
An Itemized list of the unadjusted and unpaid claims ha been fur
nished me by the company, and I am satisfied that this list Is correct.
There are now no claims in litigation, and where claims have been restated,
the records show aa above stated, that there was Just cause for contest
In the Interest of all the policy holders.
The item "Salaries of Officers and Directors accrued and due," and
will not appear In subsequent statements, as the company now pay all
salaries on the last Instead of tho ftrat day of each month.
The expenses of the company have considerably exceeded the loading
on the premiums, but It must be remembered. In Justice, that this is the
case in nearly all companies there being few exceptions. The cause Is,
of course, the fierce competition for business and the consequent Increase
in agency expense. It is proper to stste. however, that suggestions which
I have made for the reduction of this expense have been adopted by the
company, and that the agency contracts for the year 1906. have been ma
terially modified with thla end In view.
All "miscellaneous'' or other accounts, legal expenses or sundry Items
that were not fully explained by the book entries, have been carefully
analysed and Investigated, und I have found no evidence of any transaction
or expenditure that was not legitimate.
There are no subsidiary companies for the handling of Investments
and no loans have been made to officials of the company.
Those methods of management which I have felt called upon to criti
cise are not such as affect In any way the inherent soundness or solvency
of the company, and the said method can readily be and are now being
corrected and changed.
The reduction In the cost of new business is the most difficult prob
lem with which the management has to deal, but I am satisfied that much
can be done toward the eventual solving of this problem If the efforts of
the oflicers are supported by proper co-operation on tho part of the agency
forces.
In conclusion I beg to state it is my belief that there Is a sincere
desire on the putt of the present management to guard carefully the policy
holders' Interests, and to welcome any suggestions for the furtherance of
the suid interests. This, and the evident spirit of loyalty among the offi
cers, agents and employes, speaks well for the future of the company. I
also wisii to say that I have had the co-operation and assistance of the
officers und employes during the examination, and that all document or
hook or information asked for have been cheerfully furnished. Respect
fully submitted,
(Signed 1, F. S. WITHINGTON. Actuary and Insurance Examiner.
LIST OF AXSI AI, SALAIIIES PAID.
.(L442. 718.51
Total admlttad assets. Sept. 30. 1906
LIABILITIES. SEPT. 30TH, 1906.
Terminal reserve on policies and Adds. Act. 4 pel. (est.),...
Death loses unadusted and unpaid
'oa'ii Present value of supplementary contracts
1 3vj 79 1 Due- and uncollected on supplementary contract
18 279 60 ' Premiums paid in advance
9 463 20 Dividends due policy holders uncollected
0 424 50 i Carles of officers and directors accrued and due
1 510 75 Agents' salaries and allowances ,
iVm.'ST i Surplus
5.952 95 To,al ''abilities. Sept. 30. 1906 (1.442,718.61
1 09 66 n company has included In the Item "Loan Expense" the accrued
11 315 73 1 interest on mortgages purchased, and has added to its interest receipts the
S'i8 84 ' moun ot ald accrued interest when paid. This has the effect or unduly
. J91 g4 , increasing the Interest receipts.- I have advised that the amount paid to
j- .1 , KiL.iT., im iivvivii 111 ilia icugiu ns mi uitnr, lu uiivicev
.M.OT u.. K1. n.,,l..i.l ...ill l K ...,.. K
(1,263.330.00
10.567.50
33.911. Ul I
1,000.00
2.451.50
2.233.65
1,146.64
285.00
, 127,ftM3
1905.
(6.OO11
6,000
S.fico
1.500
600
2.0O8.5',
1.413.50
126.50
received, and this method will in the future be followed.
In cases where the death nf the Insured has occurred under a policy
contract, providing for the payment of the face amount In installments In-
eteud of in one Hum. the coiiiiiunv lias included In ItH reitm-teit Atrwmnt nf
ii.iif, death claims paid the amount of Installment paid to beneficiaries during
14 the year. This Is incorrect the true method, wnlch is provided for in the
t JwT-ita lit annual statement, Is to include the present value of the Installment In the
"11 !'-'- aj amount paid for death claims, and to enter the same amount as Income
..ii.z-i.a-, .sh undj,P item No. 16. The amount of Installments puld during the year under
, these supplementary contracts should be entered under Item No. 13 of DIs-
OFFICERS. 1904
F. D. Jsckson, President (5,000
S. A. Foster, Secretary .' 6.0ro
O. B. Pray, Treasurer 2,500
J. T. Priestley. M. D., Medical Director 750'
N. M. Hubbard. Jr.. Attorney 300
D. H. Foster. Superintendent of Agencies
BOARD OF DIRECTORS. lftOff.
REPRESENTING POLICY HOLDERS. x
F. li. Jackson. J. T. Priestley, M. 1., W. K. Boardmafl,
S. A. Foster, J. S. Graydon. S. A. Robertson.
REPRESENTING GUARANTEE FI ND SHARE HOLDERS.
G. B. Pray. J. A. Graydon. D. G. Batsnnr.
N. M. Hubbard. Jr.. I M. Priestley.
Each director receives a salary of (Sfti.OO per annum and five member
receive In addition (120.00 as members of the Executive Committee and five
others (120.00 as members of Aud'tlng Committee.
Ol AB.ttTKK h'l AD SHAKE ItOI.DEHg.
NOVEMBER 28TH. 1906.
estate.
Jr.
805.476. 25
375.110!
169.505. 12 ;
59.619. 66 1
12fi.9tK.49 1
16.6S3.Xi
16.4ti'.!5 ;
19.118. ."
5.621..
3.4;. 0,-
437.38
1,565.37 :
.(1.227.327.94
! bursements.
I SALARIES AMD OTHER 4 OMPESATIOX TO OKFK KKS
AD DIRECTORS.
A list of annual salaries- palo to officers and directors, with the annual
, amount paid to employes, for the years 1'4 and 1905. is hereto attached.
; The President. Secretary and Treasurer each receive, In addition to
: tlielr salaries. (300 per year as members of the Board of Directors, and
(120 per year as members of the Executive Committee tf the said Board.
tne i-ame amount heln(! paid to other members. As these are salaried of-,
fleer mho are presumed to glvr their entire time to the affairs of the
Coniunv. they should not receive this additional compensation. The I
President snd Secretary received renewal commiaeintis In 1W4. on business I
ncrsonnl v written bv them In previous years, amounting to W37.26 and
(12501, respectively. In 19n6. to Sept. 30th. Inclusive, their renewals on the
same huMnesa amounted to 3260.41 and (223.65, respectively. The amounts
received from this source In IW4, they have previously reported to the
Auditor of State.
A resolution or the Hoard or mrectors, passed at a meeting neifl May
Name.
T. V. Gra ydon.
J. T. Priestley...
F. D. Jackson...
N. M. Hubbard,
G. B. Pray
S. A. Foster
D. J. Batsner
K. Martlndale estate..
Lillian ,M. Priestley....
J. S. Graydon
W. K. Boardman
C. F. Kuehnle
Harriett H. Hubbard..
W. L. Eaton
B. J. Patrick
No. Shares.
30
176 3-4
ISO 1-10
80
87 2-10
63 2-10
60
a-.
20
10
10
10
8
6
3-4
Amount.
( 3o,ouo
17,675
13.010
8. 0iX
8,70
U.22K
6.11OO
2.500
2.500
2.CO0
l.oo
1,000
l.oOO
875
oOu
Total leds-er asset
The above balance will not agree witu uia annual report, ror tne .
reason that It Includes all accounts whtch are necessary to make a com
nlete leduer balance. In mskinv its Annual Report to the Auditor of j
State, the company haa attempted to reduce the statement to a cash basis.! Kth ,m r.Aa follows:
Any omcer or airector wno snail solicit, insurance snau receive as
185
1896
, 1ST
IDs)
.( tx;,io
7.8a6,6'7
2.738.93ft
2.801.635
6.437,419
( 377.650
1.14O.5U0
2.007.37
2.no.6no
j.r63
I (.038.877
8.7J5.W4
4.454.569
6.047.404
7.157.964
31.
Ouin.
( 4.6.106
1.6s,m
731.616
590.836
3,110.550 k
This was done on the mistaken advice and belief that that method was
correct. It is erroneous, for the reason that all transactions, whether
cash or otherw ise, should be reported and are .necessary In order to find
the true condition of the company s nuances.
It will be noted that I have added to the reported balance December (L
1903, the amount of several ltema necessary to complete the gross ledger
balance. The method I have foil iwed does not alter tho amount reported
by the company as admitted asse s. (1.266.798.20, which Is correct.
Other items not affected by the change to a ledger basis, have bsan
correctly reported with the exception of "Bills payable, (13,000," which' was
omitted from both sides of the aocount.
As the company's legal expenses seemed rather large for the past two
years. I made a careful analysis nf these accounta. and found that the
amount reported covered settlements on an arouinulatlon of cases which
had been pending In the courts ttr seversl years past. There are now no
contested claims outstanding.
In making the analysis of tha legal expenses. I have found no item
except those which were legitimately paid for attorneys' fees or court
rests. An examination of the pipers In these rases show that the ex
penses of litigation were ampl Justified by the circumstances, and that
thev were properly Incurred as a protection to the policy holder.
Having made a reserve valuation of the police aa of June 30th, 194. I
have compiled a complete statement of afceet and liabilities on that date,
which follow. . .
I.UXIKH AO ft. IB, Jl .MS u, lSOO.
Mortgage loans
Policy loans or Hens.. 4
Advance dividend certificates
Interest on advance dividend certificates
Premium notes ..
Cash In bank
Commuted commission
Furniture and fixture
Agent' debit balance (gross).
mi.6!W.65
176.8S-8.47
102.61(68
30.976.96
24.282.63
4.467.77
(.8:4.55
(.01067
24.87268
(1.347,4375
his compensstlon 40 per cent commission on the first annual premium
and 7 per rent renewal on each subsequent premium for the term of ten
years, and expenses to be paid ny tne company.
Another resolution of the Board passed Jan. 17, 1899, Is as follows:
"Resolved, That on any Insurance written, out of the first premium
shall be paid the full maturity cost, according to the Actuaries' Table of
Mortality and 4 per cent interest, the cost of the medical examination
and Medical Directors' fees and col of inspection. On each renewal of
such premium the Interest of such officer or director shall be 7 per ceut."
While these resolutions are now practically Inoperative, I recom
mend. In view of the Increased compensation now received by the officers
and directors that they be resclnd"d. snd. acting upon this recommenda
tion, the ExecutKe Committee of the Board of Directors unanimously
adopted the following resolution at Its meeting on Ort. Sail. 1906:
"Resolved. That 110 commissions on llrst, premium or renewal com
missions on subsequent premiums shall be paid to sny director or ofllrer
on business written by such director or officer sfter this date."
It is proper to state In this connection . thnt most of the renewal
commission! now received by (he officers sre paid on business, written
Ing th earlier years of the comaii)'s existence, when the si Utiles psld
the said officer were small.
I think it should, in Justice, else be stat'-d that in several instances
as shown by the minute of the Board of Directors' meetings, some of
the officer have declined to areept advances in salary voted to them by
the Board of Directors. I
At the meeting of the directors on January 22. 1894. President Jack
son' salary was. at his request. In view of his election as Governor of
Iowa, reduced from (2.(00 to (700, and at the Directors' Annual meeting
tha following year, January 23, 1895, th same amount was fixed for that
year, on his insistence. .
ASSET.
MORTGAGE LOAN 8.
The following table show the distribution of the loan September 30,
1906, on real aataM. mad by th company:
A pp. Value ,
1.000 (100000
(il AKAM'F.E KIM1 MHARE HOI DERs' CERTIFICATE.
Royal I talon Mslisl Life Insurance ( oniptsr.
This certifies thst is the owner and holder of ..
shares of (10o each in the guarantee fund of the Kovul I'nlon Mutual Llf
Insurance Company of lies Moines. Iowa, snd that there has been nnld on
the same the sum of Dollars. The Maid shares aro fully paid up
and nonassessable and are entitled to the interem earnings and dividends
as provided by the amended Articles of Incorporation of the Royal I'nlon
Mutual Life Insurance Company, adopted September 26th. A. D 197.
These shares are transferable only on the books of the' said Royal
I'nlon Mutual Life Insurants Company, In person or by attorney, on return
of lid certificate.
In Testimony Hereof, and by order of the Hoard of Directors of the
Royal I'nlon Mutual IJfe Insurance Company, witness our hands and cor
porate crI this day of A. D. 1
Secretary. President!
LETTER OF NOTIFICATION OF POLICY HOLDERS' MEETING.
DEAR SIR: As a member of this company you are entitled to a vote In
the matter of Its management. As It may not lie convenient for you to aot
personally, will you please sign the enclosed proxy, which li 'the usual
form, and forward the same to the secretary of this ruiiany, to be num
bered and compared with the company's books. The bv-l&ws require all
proxies to be on file with the secretary sixty days before the annual meet
ing In order to be effective. I am, truly yours.
SIDNRY'A. FOSTER. Secretary.
AMENDED ARTICLES OF INCORPORATION OF THE ROYAL L'NIOK
Mt'Tl'AI, LIFE INSURANCE COMPANY.
Article 6. Section 2 The annual meeting of the policy holders for tha
election of directors, and the annual meeting of the director, for th trans
action of business, and for the election of officers whose terms havs expired
shall be held on the first Tuesday after the 16th day of January In each y ax!
at the office nf tho company In Dee Moines, la.
PROXY.
o the Officer of the Royal Cnlun Mutual Lifa Insurance Company:
w-liiifiiit-n 1 ucio.-r nuinuni, ana appoint r. I. Jui'KSOIl. B. A. Foster
and J. T. Priestley, or any one of thein, as my attorney or proxy for
nte and In my natu. to represent me and caat my vote fully as I might
do If personally present, at all annual meetings of the policy holders of tho
Royal I'nlon Mutual Life Insurance Company of De Moines Iowa ex
cept when I am personally present. '
Signed
Address
Data
Policy No...............
SHERtllAlM MARTIN. General Agent, 919 New York Life Building, Omaha, Nebraska.