L . HG-8ST7 SHORT ACCOUNT OF THE SOCIETY TOR EQUITABLE ASSURANCES ON LIVES AND SURVIVORSHIPS, ESTABLISHED BY DEED, Inrolled in his MAJESTY'S Court of King's Bench, at Westminster. ' LONDON: PRINTED BY BYE AND LAW, ST. JOHN'S SQUARE, CLEIIKENWELL. 1806. SHORT ACCOUNT, 4*0. 1>Y the constitution of this society, the Assured are mutual Assurers one to the other. A life may be assured from the age of eight to sixty-seven, for any certain time, or for the whole continuance of life, upon payment either of a gross sum, or of an annual premium, each pro- portionate to the age at which the life begins to be assured, and to the time the assurance is to continue. Assurances may be made for any sum from 201. to 50001. The following tables shew the rate of annual premiums for assurances made on a single life for one year, for the certain term of seven years, and for the whole continuance of life : whereby any A 2 person * person will be enabled nearly to estimate the pre- mium to be paid for any term greater or less than seven years. But every policy becomes void, upon the party whose life is assured going beyond the limits of Europe, (unless licence shall have been specially obtained from the Court of Directors, and a proportionable premium paid) or dying upon the seas. The policies of persons assured on their own lives also become void, if the assured die by their owi> hands, or by the hands of justice. A Table A Table of Premiums for assuring the Sum of one hundred Pounds upon the Life of any healthy Person, from the Age of eight to sixty-seven. Age. One Year. Seven Years at an annual Pay- ment of For the whole Life at an an- nualPaymentof 8 to 14 17 9 11 5 1 17 7 15 17 11 1 2 11 1 18 7 16' 19 2 1 4 7 1 19 8 17 112 1 6 1 20 8 18 3 3 1 7 5 218 19 5 1 8 6 228 20 7 3 1 9 5 237 21 8 10 1 10 1 246 22 9 3 1 10 6 254 23 9 8 1 11 263 24 10 2 1 11 6 271 25 10 7 12 1 281 26 11 1 12 7 291 27 11 7 13 2 2 10 1 28 12 1 13 9 2 11. 1 29 12 8 14 4 2 12 3 30 13 3 14 11 2 13 5 31 * 13 9 15 7 2 14 7 32 14 4 16 3 2 15 9 33 15 16 10 2 17 1 34 15 ,8 17 8 2 18 5 35 16 4 18 10 2 19 10 36 17 o 19 7 3 1 4 37 17 9 208 3 2 10 38 18 6 2 1 9 346 39 19 3 2 2 11 362 40 208 2 4 1 3 7 11 41 220 254 399 42 236 266 3 11 8 43 246 279 3 13 8 44 2 5 6 292 3 15 9 45 268 2 10 10 3 17 11 46 2 7 10 2 12 6 402 47 290 2 14 4 427 48 2 10 3 2 16 4 4 5 1 49 2 12 3 2 18 6 4 7 10 50 2 15 1 308 4 10 8 A 3 t 6 ]- A Table of Premiums tor assuring the Sum of v;ne hundred Pounds upon the Life of any healthy Person, from the Age of c'isht to sixty-seven continued. Seven Years at For tiie whole Age. One Year. an annual Pay- Lite at an annu- ment of al Payment of 51 2 I? 4 328 4 13 6 52 2 19 1 349 4 16' 5 53 3 1 370 4 19 7 54 330 3 9 5 5 2 10 55 350 3 12 564 56 373 3 14 8 5 10 1 57 398 3 17 6 5 14 58 3 12 3 4 6 5 18 2 59. 3 15 1 438 628 60 3 18 1 4 7 1 6 7 4 6*1 415 4 10 11 6 12 4 6? 4 311 4 15 6' 17 9 63 4 78 4 1.9 8 737 64 4 10 9 5 4 10 7 9 JO 65 , 4 15 2 5 10 10 7 16 9 66* 5 1 5 17 7 8 4 1 67 5 5 6 652 8 12 1 AH addition of twenty-two per cent, computed upon the premium, is cbargtd upon military perfons} and an addition of eleven per cent, on officers on half pav ; officers in the militia, feneibles, and the like levies ; also on persons not having had the small-pox. The Court of Directors have a discretionary power of fixing the premium* *hen any peculiar hazard attends the life upon which the assurance is made. Persons preferring the payment of a gross sum or single premium upon an assurance for any certain term, are chargeable in a due proportion to the annual premium for such- term. Every person making any assurance with the society pavs five shillings in the name of entrance money ; aud, if the fum assured exceed one hnndred pounds, the entrance money is charged after the rate of five shillings for every hundred pounds. But if the person, upon whose life an assurance is proposed, doe* not appear before the Directors, the entrance money is charged after the rate of one pound for 'every hundred pounds. Also every person proposing any assurance is required to make a deposit of five shillings, and in case the sum proposed to be assured shall exceed one hundred pounds, the deposit will be increased after the rate of two shillings aud six-pence for every hundred, which deposit, if the party afterwards decline making the assurance, or neglect to complete the same for the hpace of one lunar month, is forfeited to the use of the society ; but if the Court of Directors refuse or decline making such assurance, the money deposited is. returned. [ 7 ] The following tables exhibit a specimen of the rates of annual premiums for assuring a gross sum, upon the contingency of one life surviving another, and also of a certain sum payable upon the extinc- tion of either of the two joint lives. A Table of annual Premiums payable during the joint Con- tinuance of two Lives for assuring one hundred Pounds, or an equivalent Annuity on the Contingency of one Life's surviving the other. Ages. Premium. Annuity equivalent to .100, to be paid from the Death of the Life assured, during the Re- mainder of the other Life. Life to be assured. Life against which the Assurance is to be made. 10 10 20 30 40 50 60 70 80 186 1 9 1 1 8 3 1 7 8 1 6 11 l 6 1 4 11 1 3 4 5 14 6 6 14 10 7 14 11 956 11 13 15 13 5 23 13 40 10 8 20 10 20 3<> 40 50 60 70 30 1 16 6 1 17 1 15 9 1 14 8 1 13 6 1 12 1 1 10 6' 1 8 3 5 6 11 641 706 8 4 11 10 1 9 13 7 18 12 8 30 9 6 30 10 20 30 40 50 6'0 70 80 255 260 246 229 2 11 1 18 10 1 16 7 I 13 9 558 629 6 19 6 838 10 6 13 18 12 10 30 9 3 A 4 Table, Sfc. continued. Ages. Annuity equivalent to '100, to be paid from Life to be Life ajjaimt which the Premium. the Death of the Life assured, during the Re- assured. Assurance is mainder of the other to be made. Life. 40 10 2 19 2 536' 20 2 19 10 5 19 9 30 2 18 2 6 16 8 I 40 2 15 11 8 1 50 2 12 10 . 9 16 6" 60 294 12 14 3 70 2 5 11 18 5 6 80 2 1 10 29 19 10 50 10 4 11 5. 1 4 20 4 1 10 5 16 2 30 4 1 6 12 2 40 3 17 10 7 16 9 50 3 13 10 9 12 8 60 377 12 6 8 70 316 17 11 80 2 15 28 12 6 tfo 10 5 16 9 4 19 3 20 5 18 1 5 IS 10 30 5 16 3 6 7 7 40 5 14 7 10 10 50 5 10 7 9 8 60 524 32 5 6 70 4 9 10 17 5 8 80 3 17 11 27 19 10 67 10 8 1 4 17 S 20 829 5 10 5 30 8 10 6 4 40 7 18 7 755 50 7 15 6 9 o 6 60 788 12 3 70 6 10 8 17 1 8 sd 589 27 511 A Table of annual Premiums payable during the Continuance of two joint Lives for assuring one hundred Pounds, to be paid when either of the Lives shall drop. Age. Age. 1. s. d. Age. J. s. d. Age. Age. 1. s. d. 10 10 2 17 1 20 35 473 35 45 5 13 10 15 3 1 1 40 4 14 6 50 650 20 357 45 5 3 6 55 6 19 2 '25 3 9 3 50 5 35 4 60 7 IS 6 30 3 13 9 55 6 10 2 67 10 12 35 3 19 6 6'G 7 10 2 40 40 5 11 9 40 4 6 10 67 9 13 9 45 5 19 9 45 4 15 11 25 25 4 10 50 6 1 8 50 5 7 10 30 450 55 745 54 6' 2 8 35 4 10 3 60 834 6*0 729 40 4 17 4 67 10 5 6 67 9 6 3 45 562 45 45 674 15 15 350 50 5 17 10 50 6 17 9 20 3 9 6 55 6 12 6 - 55 7 11 25 3 13 1 60 7 12 5 60 896 30 3 17 6' 67 9 15 ,9 67 10 11 1 35 4 3 1 30 30 4 8 11 50 50 778 40 4 10 4 35 4141 55 803 45 4 19 5 40 5 11 60 8 18 2 50 5 11 3 45 596 67 10 18 10 55 6 6 1 50 6 1 55 55. 8 12 2 60 7 6" 55 6 15 5 60 990 67 995 60 7 15 67 11 8 5 20 20 3 13 11 67 9 18 1 60 60 10 4 9 25 3 17 5 35 35 4 19 67 12 2 1 30 4 1 9 40 556 67 67 13 15 8 N. B. From the above specimen of premiums, the reader will easily judge of the proportional premium for any intermediate age. Every person desirous to make assurance with the society must sign a declaration by himself or agent, setting forth the age, state of health, pro- fession, occupation, and other circumstances of the persons whose lives are proposed to be assured ; and also, in case such assurai ce is made upon the life of another person, that the interest which he has C 10 1 has in such life is equal to th sum assured. This declaration is the basis of the contract between the society and the person desirous to make such assurance ; and if any artful, false, or fraudulent representation shall be used therein, all claim on account of any policy so obtained, shall cease, determine, and be void, and the monies which shall have been paid upon account of such assurance, shall be forfeited to the use of the society. Every person making assurance with the society, becomes a member, and enters into a covenant that he will conform to, observe, and keep the statutes, bye-laws, rules, orders, and ordinances of the society. But no member has a right to vote at a General Court, who is not assured in the sum of 5001. or upwards, upon a life or lives for the whole continuance thereof. The business of the society is conducted and carried on by fifteen Directors, annually chosen eut of those members, who are assured with the society in the sum of 20001. or upwards, upon a life or lives for the whole continuance thereof. Of whkh fifteen, one is President, and two are Vice-Presidents of the society; and five Directors constitute a Court. The Directors from time to time nominate five persons Trustees for the society, to execute policies and take securities in their names ; and whenever the number is reduced to three, new Trustees are nominated. The [ 11 ] The present DIRECTORS are PRESIDENT, The Right Hon. Sir CHARLES MORGAN, Bart John Silvester Esq. > Vke Pre8identa> Richard Clark, Lsq. j John Clarke, M. D. Henry Dealtry, Esq. Richard Frewin, Esq. Mr. John Hounsom James Hume, Esq. Newman Knowlys, Esq. Abraham Langford, Esq. Eev. Robert Lewis Charles Morgan, Esq. Joseph Planta, Esq. Robert Ray, Esq. Richard Twining, Esq. The TRUSTEES are, The Right Hon. Sir Charles Morgan, Eart William Mainwaring, Esq. William Osborn, M. D. Richard Clark, Esq. Richard Frewin, Esq. Actuary, Mr. William Morgan. Assistant Actuary, Mr. Thomas Cooper. A General [ 13. ] A General Court for the election of Directors is held annually upon the last Thursday in the month of March, or within forty days next after, at which Court Ten of the then Directors are to be con- tinued for the year ensuing, and Five other mem- bers of the society are to be chosen and admitted into the number of Directors, in the room of Five who are annually to go out. The Directors elect from among themselves one person to be President. The President nominates two of the Directors Vice-Presidents, to act in his absence. On the death of a President, another is elected, and if at any time five vacancies happen in the number of Directors, the same are filled up by a General Court. Four General Courts are held in each year,, (upon the first Thursday of the several months of March, June, September, and December) and as many more as the President, either of the Vice- presidents, any Five of the Directors, or any Nine members qualified to vote, shall think necessary. At these Courts are exhibited Accounts of the state of the affairs of the society: and statutes, bye-laws, rules, orders, and ordinances, are made for the good government thereof; but such statutes, bye-laws, rules, orders, or ordinances, are not binding [ 13 3 binding until they have received the approbation of two successive General Courts of the society, whether quarterly or extraordinary. The premiums of assurance are from time to time vested in the public funds, or on real or other good or sufficient securities, at the discretion of the Directors. If any premium remains unpaid thirty days after the time stipulated in the policy, such policy be- comes void; but if the defaulter shall, within three calendar months after the time so stipulated, (the person on whose life the assurance was made being then alive and in good health) pay the said pre- mium, together with the additional sum of ten shillings upon every 1001. assured by such policy, then such policy is revived and continues in force. If at any time it shall appear to a General Court of the society, that the premiums received, and to be received, will not be sufficient to pay the claims, then the General Court are to direct a call to be made upon the several members of the society, in proportion to the sums then assured, for making good the deficiency, for which call credit is to be given, and the call afterwards to be repaid, with interest, at the rate of 3 per cent. If a call should at any time be requisite, (which is highly improbable)^ the member assured for a single year will be rated towards such call in the proportion 6 [ 14 ] proportion of two-third parts of the sum charged upon the members assured for the whole conti- nuance of life, for every 1001. by them respectively assured. If in process of time it shall appear to a General Court, that the society has acquired a capital more than sufficient to uphold its credit, as well as to satisfy all claims, to which it may be liable, the members of the society, \vho are subject to con- tribute towards a call, will participate of the benefit thereof in proportion to the sums in which they are assured, and to the number of years of their Standing in the society, either by an increase of their respective claims, or in such other modes as a General Court shall deem most expedient. Persons who shall make assurance for annuities to commence upon the extinction of the life assured, instead of gross sums to be paid on such event, are not liable to contribute towards a call, nor entitled to any proportion ef a dividend. All claimants, upon the decease of any person whose life shall have been assured by the society, must make proof thereof by affidavit or certifi- cate, and give such further information respecting the same as the Court of Directors shall think satisfactory. The time for payment of claims accruing by death is, within six calendar months after proof of the death shall have been made as aforesaid. And And, if any difficulty, doubt, or controversy shall at any time arise in the society, touching the management or concerns thereof, the matters in dispute are left to the decision of his Majesty's Attorney General, and Solicitor General, and the senior of the King's Council practising in the Court of King's Bench, all for the time being; the opinion of the major part of whom, on a case fairly stated and laid before each of them, is final in determining the same. N. B. In case the more Immediate purpose of an Assurance shall have ceased, and the owner of the Policy shall be minded to dispose of the same, rather than keep it on foot; or if through unforeseen misfortunes, any person assured by the society, shall himself stand in need of that assistance which was intended for a surviving family, the society will, upon application, be- come the purchasers of such an interest at a fair price. A Court &3" A Court of Directors is holden every Wed- nesday at the Society's house in New Bridge Street^ near Black-jnars Bridge, from Eleven to One o'Clock. No person is permitted to make an assurance unless he shall, at least eight days before, have signified his intention *, nor until he shall, by him- self or agent, have signed the Declaration pre- scribed by the deed of settlement and rules of the . society. Attendance is given at the office from Nine o'clock in the morning till Three o'clock in the afternoon. * See the form of a Proposal in the last page. THE [ 17 ] THE SUBSTANCE OF A DECLARATION Required to be made and signed in the Office, by or on the Behalf of a Person who pro- poses to make an Assurance on the Life of another. T A. B. of the Parish of St. James, in the city * of Westminster^ Gent, being desirous of be- coming a Member of the Society for Equitable. Assurances on Lives and Survivorships, and intend- ing to make Assurances in the sum of upon the life of C. D. born in the parish of St. Mary, in Stoke Neu-ington, in the County of Middlesex, November the 25 th, 1746, but none of Malmsbury, in the County of Wilts> Clothier; and having perused and considered that * clause of' the Deed of Settlement of the said So- ciety, * The Clause which is referred to in the Declaration. That every person desirous of making assurance with the so- ciety, shall sign or execute a declaration in writing (in the pre- sence of one credible witness who shall attest the same) setting forth the age, state of health, profession, occupation, and othef circumstances attending the person or persons whose life or lives shall be proposed to be assured : which declaration shall be the basis of the contract between the said society and the person B desiring [ 13 ] ciety y which requires a declaration in writing of the age, state of health, and other circumstances attend- ing the person icJiose life shall be proposed to be assured^ do hereby declare and set forth, That the said C. D. has not any disorder which tends to the shortening of life ; that he has had the small- pox ; and that the age of the said C. D. does not exceed sixty years ; and that I have an interest in the life of the said C. D, to the fall amount of the said sum of, and I do hereby agree that this declaration be the basis of the contract between the said society and me, and that if any untrue averment is contained in this declaration, all monies which shall have been paid to the Society upon account of the assurance made in consequence thereof, shall be forfeited. Dated the third day of February, in the year of our Lord One Thousand Eight Hundred and Six. desiring to make assurance with them ; in wliich declaration if any artful, false, or fraudulent representation shall be used, and the same shall at any time thereafter be discovered, from thenceforth the sums which shall have been paid to the society on account of any assurance so fraudulently obtained, shall be forfeited to the use of the society; and all claims to be made on that behalf shall cease, determine, and be void, to all intents and purposes whatsoever. THE THE SUBSTANCE OF A DEC LARATTO N Required to be made and signed in the Office, by or on the behalf of a person * who proposes to make an assurance on his or her own life. T A. B. born in the parish of St. George, in the * County of Middlesex, June 6th, 1751, but nowofJValthamstow, in the County of Essex, farmer, being desirous of becoming a member of the Society for Equitable Assurances on Lives and Survivorships, and intending to make assurance in the sum of upon and for the continuance of my own life, and having perused and considered that * clause of the deed of settlement of the said Society which requires a declaration in writing of the age, state of li, and other circumstances attending the per son whose life shall be proposed to be assured, do hereby declare and set forth, That my age does not exceed ffty-six years ; that I have had the small-fox ; and that I am not afflicted with any disorder which tends to the shortening of life ; and I do hereby agree that this declaration be the basis of the con- tract between the said Society and me, and that if any untrue averment is contained in this declara- tion, all monies which shall have been paid to the Society upon account of the assurance made in con- sequence thereof, shall be forfeited. Dated the third day of February, in the year of our Lord One Thousand Eight Hundred and Si,i\ * See the clause in the foregoing note. fD 1 P- fr &Q ^ rh s 1 m o i * ' 6 fD O c^ g W , 3 g. 1 1 6 g f **5 < f- tr -s P- O S- g o **i a> 3 5 rt VW ^L, ^ -^5 W) p & * H ' o o S| S" o cr 6 2 C P o> H r P Cfl C c/5 (*) O -! c s 3 3 3 en cT J cr d. 8 s ^ HH O P- sr o> g 3 1 < f & hjj c 2 a o" 1 0> s r^ Si r-h s{ ^ s i | P w - r < 0* 3 ^ pT 3 n o c r* B* rf* c w ^~3 o -*t> I U V i tfl w _ o ^ H pe O , Q N C Cp J'riuttd by i*je and Law, br. J-jiin s Square, Ckrkeuwdl. THE METROPOLIS AND ITS MUNICIPAL ADMINISTRATION: SHOWING THE ESSENTIALS OF A SOUND SYSTEM OF MUNICIPAL SELF-GOVERNMENT, 2fe applicable to all obm populations ; AND THE SUBJECT-MATTERS THAT COME PEOPEELY WITHIN THE EANGE OF MUNICIPAL ADMINISTRATION. BY J. TOULMIN SMITH, ESQ., f ^Lincoln's Enn, 23arrtstcr=at;3Lafo, AUTHOR OF ' LOCAL SELF-GCVEENMENT AND CENTBALIZATION,' ETC. LONDON : TRELAWNY SAUNDERS, 6, CHARING CROSS. 1852. Price One Shilling. LONDON : PRINTED BY JOHN EDWARD TAYLOR, LITTLE QUEEN STREET, LINCOLN'S INN FIELDS. CONTENTS. Page INTRODUCTION 5 CONTRAST BETWEEN THE SYSTEM OF CENTRALIZED ADMINIS- TRATION, AND THAT OF MUNICIPAL SELF- GOVERNMENT . 8 THE PROPER OBJECTS FOR MUNICIPAL ADMINISTRATION . 14 THE CONDITIONS ESSENTIAL TO TRUE MUNICIPAL SELF- GOVERNMENT 21 PRETEXTS FOR CRIPPLING MUNICIPAL SELF-GOVERNMENT. FORMS AND DISGUISES UNDER WHICH THAT CRIPPLING is SOUGHT TO BE EFFECTED, AND THE CONSEQUENCES THEREOF 27 PRACTICAL ILLUSTRATIONS OF TRUE MUNICIPAL SELF-GO- VERNMENT. THE TRUE CONSTITUTION OF THE CORPORA- TION OF LONDON ........ 34 PRACTICAL ILLUSTRATIONS OF TRUE MUNICIPAL SELF-GOVERN- MENT. INTERNAL ARRANGEMENTS AND CONSTITUENCY . 41 WARDS AND WARD-MOTES, AND THEIR ACTION . . .48 TRUE MUNICIPAL SELF-GOVERNMENT FOR THE WHOLE ME- TROPOLITAN DISTRICTS 55 THE METROPOLIS AND ITS MUNICIPAL ADMINISTRATION INTRODUCTION. IF there is one subject more than another which must occupy attention in immediate sessions of Parliament,, it is the muni- cipal condition of _.f4e metropolis, and the mode of management and control of the various concerns which affect its general well- being, as a community. This is a topic which can no longer be evaded. The Sewers Act of the session of 1851 was avowedly only a temporary measure, devised to keep some machinery at work until a comprehensive system should be framed. What took place in the same session on the Government Water Bill points the same way. Already have Bills been introduced, or mentioned, which are designed to embrace these subjects. It is high time, then, that the attention of those most nearly concerned should be fixed upon the merits of this question. A matter which affects so deeply the nearest and daily interests and well-being of two millions and a half of the population of these realms, is no trifling matter. It is at least equal in actual importance, even so far as ensuring the maintenance and development of the poli- tical, civil, and .religious liberties of the whole of these realms are concerned, to the much talked-of New Reform Bill. I hope, indeed, to satisfy every earnest reader, before I have done, that, 6 THE METROPOLIS AND ITS in practical importance, it surpasses any measure of the latter nature of which any idea or hint has yet been broached in any quarter. The present condition of this huge metropolis exhibits the most extraordinary anomaly in England. Abounding in wealth and in intelligence, by far the greater of it is yet absolutely without any municipal government whatever. And this, in the face of the historical fact that the municipality of the City of London did, for ages, play a most distinguished and invaluable part in the various struggles that have taken place in England for the maintenance and securing and developing of political, civil, and religious liberty. But it is well known, to all who take an active interest in public affairs, that there is, at this time, no place in England in which it is so difficult to collect a true and reliable expression of public opinion, none in which there is so much general apathy and indifference to the public duties and responsibilities which devolve on every citizen of a free state, as the Metropolis. No friend of free institutions will wish to see London England, as Paris is France. But he certainly will de- sire that London, in its large sense, should not be behind the rest of the kingdom in the interest it takes in the discharge of public duties. He will desire that the metropolis of the world should not be merely the most fertile field in the world where- in jobbing Boards and Commissions, irresponsible and uncon- trolled, may experimentalize and play their pranks before high heaven, at the expense of a supine and merely money-seeking population. He will desire that the inhabitants of this great hive should regard themselves, and be regarded by others, as having something else to do with the concerns around them, than being the obedient submitters to arbitrary mandates the uncomplaining payers of rates, over neither whose amount, nor mode of levying or expending which, they are held worthy to have the slightest control. The metropolitan districts have, since the passing of the Re- form Act, sent members to Parliament. But it is rather an in- version of the order of things, and looks rather like a juggle, that men should be called on to exercise a function that implies a knowledge and just appreciation of wide and general interests, whether national or foreign, while they are denied the exercise MUNICIPAL ADMINISTRATION. 7 of those functions by which alone the capacity for the former can ever be really attained. I allude to the functions of dis- cussing, expressing opinions upon, and controlling, their more immediate and local affairs. The old philosophers guessed at generalizations, and tried to make specials agree with them. Such is the course of those who have supported, and who would now support, the extension of a Parliamentary suffrage, but would withhold or despise active Local Self- Government. The Baconian system, triumphant in the sciences of dead matter, has yet to be acknowledged, and taken as a guide, in the certainly no less im- portant science of politics. But, apart from this general consideration, there is no point of view, even as to material interests, from which the subject can be looked at, which does not leave it perfectly clear that, if the inhabitants of the metropolis would not sink into mere passive victims of rival jobbers or selfish monopolists, they must promptly bestir themselves to assert and exercise an active and vigorous control over those matters which concern their common well-being, their health, and comfort. Everyone is aware that there has, within the last two or three years, been a great increase in amount, and also in extent of range, of the Sewers Kate; but nothing has yet been done which justifies any of the magnificent pretensions upon which alone the Metropolitan Sewers Com- mission was established. Every one is aware that the only re- sult yet seen of the Metropolitan Burial Act has been, to impose fresh functionaries upon the public purse, and to ask for an enormous credit at the public charge ; while the realization of any of the promised benefits is impracticable. Every one is aware that the existing quality and price of the Water supplied to the metropolis are anything but satisfactory, and are the result of the existence of a practical monopoly. The list might be ex- tended to Poor, Police, Paving, Gas, and all those various other matters which so intimately concern the well-being and general comfort of a community. It does not, by any means, follow that every one of these (such, for example, as gas and water) should become objects of direct municipal management. But it is ne- cessary that many of them, such as sewers, police, paving, and so on, should be under such an immediate control. And it does follow that, when the habitual looking after their own affairs B2 8 THE METROPOLIS AND ITS becomes a part of men's conscious and ever-present responsibi- lity, they will have their eyes fixed on the due management of such matters as gas and water supply. They will then, by a constant healthy tone of legitimately expressed public opinion, prevent that which must always be best done by private enter- prise from ever degenerating into monopoly. This latter is not the least important, nor the least practical, of the results of active institutions of local self-government. CONTRAST BETWEEN THE SYSTEM OF CENTRAL- IZED ADMINISTRATION AND THAT OF MUNI- CIPAL SELF-GOVERNMENT. IT is one thing to consider whether the metropolis shall put on a full municipal existence ; another, to consider what form of municipal existence it shall so put on. Although the former point must, necessarily, be much illustrated while the latter is being treated of, it will yet be well, as it certainly will be logical, to make some direct observations upon it in the first place. That it is not unfitting to do this, is proved by the fact that the eager graspers at centralization are already busy. Self-appointed bodies, which presume, without a shadow of warrant for it, to call themselves the " Metropolitan Sanatory Association " and the " Metropolitan Rate-payers' Water Supply and Drainage Asso- ciation," &c., &c., are eagerly at work. The present Ministers appear, however, to have come to the conclusion that it is abso- lutely essential they should depart from the course of centraliza- tion, which has hitherto been the great characteristic of their policy. If the language of an organ usually considered to fore- shadow ministerial intentions mean anything, it means that those who have struggled in resistance to centralization, and in the endeavour to uphold and extend local self-government, have suc- ceeded in making a firm impression in quarters long identified with the most hostile policy. The Globe of the 25th November, MUNICIPAL ADMINISTRATION. 9 1851, uses the following language, which is well worth quota- tion : " The old observation of Burke perpetually recurs, amidst all these propositions for devolving on the shoulders of the general government everything everybody wants to be done better than it is done at present. . The lower the spheres into which the government extends its direct agency, the more it undertakes to attend to the business of the county or parish; besides that of the empire, the more inefficient, ultimately weak and contemptible, its action becomes. There is one alternative to exhibit imbecility and incur contempt, a drama the Board of Health has rehearsed on a small scale most successfully. . . . Another alterna- tive of the all- administering system is, that it should succeed in usurping minor functions, superseding local associations, and casting over the land a wide net of functionarism, after the admired French or German pattern. We are happy to think that such success is improbable as things go in England ; and that no such success is coveted for themselves by the present holders of high official station. Of all systems, that of an army of central functionaries, for all sorts of local objects, is that which is least accordant with the precedents, and least congenial with the spirit, of Englishmen. And, of all systems, it is that most utterly selfish in the whole moving springs of its mechanism. When the Bishop of London next looks out for unselfish men, when, with sighs, he renounces every expectation of find- ing them in parishes, companies, or corporations, when he waxes sceptical whether on earth they exist, out of lawn sleeves and bishops' palaces, let him at least not seek them in the state-salaried locust-host of all-regulating and all-paralysing bureaucracy." It has long been the habit of a few self-seeking individuals, laying hold of some plausible pretence of public good, to preach the utter incapacity of all local administration for effecting any good, and to picture forth what great things themselves would do if only they could succeed in getting irresponsible powers cen- tralized in their own hands. That large part of the public which finds it less trouble to adopt opinions set before them than to exercise vigorous thought for themselves, has been thus led to look with ill-favour upon all shapes and mention of local admi- nistration, and to support every reckless scheme of centralization that has been proposed. This end has, as usual with sophists and the self-interested supporters of a bad cause, been chiefly accomplished by taking, in every case, a perverted and unreal ex- ample, and representing it, in even its abuses, as the natural and necessary illustration of local management. The line of illus- tration and argument uniformly adopted, shows as hopeless an 10 THE METROPOLIS AND ITS ignorance of English institutions and English history as it does a deep-seated hostility to the very spirit of free institutions, and contempt for the dignity and attributes of the free man. Main- taining,, therefore, as I do, that Municipal Institutions are the very first essential to the existence and maintenance of any nation in freedom and prosperity, and the only means by which the interests, social and moral, of any community can be effi- ciently and thoroughly cared for and worked out, it is desirable that it shall be well understood in the first place what it is that is meant when Municipal Institutions are spoken of. The term " Municipal Institutions " is itself a vague one. It is, really, just as applicable to oligarchic as to popular, to narrow as to wide, institutions. Hence I much prefer the far more ex- pressive and comprehensive, as well as more English term of " Local Self-government," the government of the affairs of every place by the men of that place. When, then, I speak of local self-government, and advocate its universal application in opposition to centralization, I mean a reality, and not a sham ; a thing, and not a name. I mean that men shall actually have, as an habitual part of their existence and consciousness, the rights and responsibilities of free men ; not that, by the jugglery of certain hollow forms, they shall be merely the machinery by which local oligarchies shall be erected into shape and being. In my late work upon local self-government and centraliza- tion* I have defined local self-government as " that system of government, under which the greatest number of minds, knowing the most, and having the fullest opportunities of knowing it, about the special matter in hand, and having the greatest in- terest in its well-working, have the management of it, or control over it." The difference between free institutions and despotic govern- ments, is simply the difference between men taking care of their own affairs, and men submitting to have their affairs taken care of, for them, by others. Between a bureaucracy and an indi- * Local Self- Government and Centralization : the characteristics of each; and its practical tendencies, as affecting social, moral, and political welfare and progress : including comprehensive outlines of the English Constitution. 1 vol. fcp. 8vo, pp. 410. (John Chapman, 142, Strand.) MUNICIPAL ADMINISTRATION. 11 vidual despotism there is no difference in principle. Each is equally fatal to liberty and human progress, and to the develop- ment of every generous and elevated aspiration and effort. But a bureaucracy is the more really dangerous to human freedom, because it may be more speciously disguised under the names and forms of a free constitution ; and so, by blinding the people for a time to the reality, the more insidiously and effectually do its work. Moreover, a host, made self-interested in the main- tenance of wrong, and in the violation of the rights and liberties of its fellows, is far more difficult to be dispersed, even when its true character becomes understood, than is a single despot or a few. Hence the bureaucratic system is that to which the ene- mies of human freedom have invariably had recourse in modern times. Hence central poor-law boards and boards of health, and Crown-appointed boards and commissions of all kinds*. They are truths of which the mere statement carries its own demonstration, that his own affairs must always be best known to every man himself; that his own interest in their good man- agement is the strongest ; and that he must himself the soonest learn those lessons of good management which success and failure alone can teach. It is necessarily the same, by an as- cending step, as to every special district, and the affairs which concern, in common, all who dwell within it. A man who is unable to take care of his own affairs is deserving only of pity as an imbecile. A town or district which is unable to manage its own local affairs, being unshackled in the exercise of that man- agement, is an impossibility, as imbecility can never affect a whole district. No central authority can ever, by any possible human machinery, know, as the inhabitants must always do, the circumstances and conditions of a district, and so know how its affairs may be best managed. It follows, clearly, that the more opportunities men have of understanding, and of knowing thoroughly, that on which their best welfare requires that they should have, and should pronounce, an opinion of their own, and the more they shall thus be able to understand any opinions * See fully upon this subject my work on Government by Commissions Illegal and Pernicious. TJte Nature and Effects of all Crown-appointed Commissions : the Constitutional Principles of Taxation : and the Rights, Duties, and Importance of Local Self- Government. 1 vol. 8vo, pp. 380. 12 THE METROPOLIS AND ITS put forth by others,, and the reasons of those opinions, the bet- ter. The wisest and most statesmanlike policy will always be that which the most effectually tends to make it^a part of the habitual business, and regular and unevadible duty, of every freeman, so to know and understand, and to give utterance to opinion. The practical idea, and the result, of local self-government are, to bring it constantly home to the contemplation and practice of every man, that the state is made up of individuals, of whom every one has his part to fulfil. The practical idea, and the re- sult, of centralization, on the other hand, are, to diffuse the pas- sive impression that the state is something apart from its mem- bers, and that it has the right, and the function, to keep each and all of those members within a certain tether, the length of which it belongs to it to determine, and for which no right nor responsibility of judging belongs to them. The object and result of all legislation in the direction of cen- tralization are, to take away the free action of every man over his own property ; to stay the free use, by every man, of his own resources, his own ingenuity, and his own free efforts and enter- prise. Universal obedience to the pedantic schemes of a few self-appointed closet theorists is proclaimed to be more conducive to human progress, than the development and spreading of truths wrought out by the ceaseless and multitudinous energy and en- terprise of millions of active, thoughtful, and practical men, daily meeting, face to face, the difficulties to be overcome, con- scious of the responsibility that lies upon themselves to grapple with and overcome them, and directly interested in attaining the best results. This is what centralization really does, and is, when stripped of the disguises under which its advocates always seek to cover its natural repulsiveness. The empirical and un- discussed projects of interested individuals are enforced as law over the whole land, instead of such arrangements being adopted as those who alone are interested have chosen, by their own well- considered counsel and free consent. The only encouragement given is to those who are subservient enough to follow up the particular hobby of the individual who happens, for the time, to have chief influence in any special central board. Where true local self-government actively exists, on the other MUNICIPAL ADMINISTRATION. 13 hand, as many minds as possible being engaged, having the most means of knowing every condition of the circumstances to which any proposition applies, and with the greatest practical interest in seeing the best applications carried out, the result is, neces- sarily, a state of certain and steady progress. If any newer and better adaptation, in any department, be discovered, it can neither be silently suppressed nor openly frowned down by a few whose self-love or self-interest may happen to be touched. It is secure of a free and fair discussion by those interested only in the at- tainment of the best ; and, if it have the character of truth and soundness, it is sure of ultimate adoption; for the interests of all are identical with the adoption of the most efficient means by every one. In short, the system of centralization is demoralizing, degrad- ing, and inconsistent with a spirit of freedom, and with the ex- istence of free institutions. It is a system of which the neces- sary effects and entire tendencies are, the smothering of truth ; the obstructing of investigation and true inquiry; the promul- gating and enforcing of individual and interested schemes and crotchets; instead of the encouragement of careful, reasoned, elaborated truth. It is a system whose necessary result will always be, in a greater or less degree, according as it gains ground, to dwarf and stunt the development of the human faculties, and to check the putting forth of those energies which can never have free play except under that system with which centralization is in direct and perpetual antagonism the system of individual, local, and general self-dependence, as carried out by institutions of true local self-government. For the results of the latter will always be active, never passive. It is not only that free men will not let others interfere to manage and control, for them, their affairs ; but it is, that free men will have the consciousness of the duty and responsibility not, themselves, to leave undone that by which the welfare of their own community may be best advanced. They will never descend to the humiliating work of going to others, whether Parliament or men in power, to crave from them the doing, for them, that which they have the power arid means, by sustained self- exertion, of doing for themselves. Every man will feel that it is not by having our affairs well ma- naged, for us, by others, that we are, or can ever be, free, or 14 THE METROPOLIS AND ITS maintain free institutions ; but by all having the ever-present consciousness that it is to ourselves that the right, and also the responsibility, belong of doing, and doing well, what the common welfare, and our own, demands*. I have thus endeavoured to make it understood what I mean by that local self-government which I maintain it to be the inte- rest and the duty of the whole Metropolis to assert for itself; and having thus afforded some materials for judging whether the re-assertion of that principle, in place of the existing centralized machinery, is not of the highest importance. I shall next pro- ceed to show the classes of objects which come legitimately within the scope of institutions of local self-government. I shall show at the same time what the important effects of such insti- tutions must always be, even as regards matters the actual man- agement of which does not itself come within the wholesome scope of such institutions. THE PROPER OBJECTS FOR MUNICIPAL ADMINISTRATION. I HAVE already shown that the fundamental idea of local self- government is, that men shall actually have, as an habitual part of their daily life and consciousness, the rights and responsibilities of free men. I have shown that its practical development consists in the existence of institutions by which it is made a part of the habitual business, the regular and unevadible duty, of every free- man to know, and thoroughly to understand, all matters that concern him, and by which he shall have the habitual oppor- tunity and duty of expressing his opinion upon those matters. I have now, more definitively, to show what are the classes of objects that come within the direct range of management by institutions of local self-government, as well as the effects which such insti- tutions must always have, even as regards matters the actual management of which does not come within their wholesome scope. Both these points are of almost equal importance in a * See further, p. 31. MUNICIPAL ADMINISTRATION. 15 practical point of view, in reference to the advantages of a full municipal organization of the metropolitan districts. It will always, in a free state, and it forms the only real se- curity for the maintenance of freedom that it should, be a part of the habitual business of institutions of local self-government that all matters of common interest should be discussed by their means, and thus have opinions formally and legitimately expressed thereupon. It is necessary to say thus much, because there are some who would narrow down local self-government to being the mere instrumentality for discharging purely local offices; and these, of the most limited range. It is not necessary here to argue a point so plain. It is only necessary to guard against being misunderstood. But, in the distinction between matters proper for general discussion and expression of opinion upon by means of institutions of local self-government, and matters which it befits institutions of local self-government exclusively to manage and control, there lies a practical point of the very highest im- portance. The reality of true institutions of local self-government re- quires, that the management of all affairs in which a number of persons have a special common interest, should be in the hands of those persons themselves, and without liability, as to those affairs, to external dictation or intermeddling. In one age it may be perceived that certain special objects demand a foremost place in this category ; in another, that different and perhaps additional objects demand an equal place. To attempt, in any one age, to tie down institutions of local self-government to certain definitive and peculiar tasks, still more, to attempt to tie them down to the fulfilment of any of these in a particular way, does but betray the grossest ignorance of human nature and of the foun- dations of social and political union. Empirical pretenders in modern legislation have oftentimes done their best in this direc- tion, with the necessary result of leading to mischief instead of good*. But it is a necessary consequence of the fundamental idea of local self-government, that there should be certain general prin- ciples which may always be taken as a guide in considering what * See Local Self- Government and Centralization (already referred to), p. 35. 16 THE METROPOLIS AND ITS classes of objects come within its practical scope, and to what extent such objects thus come within its scope. The true test of what things they are that municipalities should take under their own immediate management and control I apprehend to be, the necessities which spring up out of the very fact itself of the grouping of men together in the special form which the municipality assumes. I am aware how much has been said as to what does, and what does not, belong to municipalities to discharge. I am fully aware of the widely differing theories that have been started upon this point, and of the endless forms of schemes which interested parties have built up on those varying theories. But a long and careful study of this subject, and the trying it by every principle and illustration, has left the fullest confidence in the soundness, and, therefore, the importance, of the test above stated. It follows from this test, if a true one, that different classes of objects will fall within the scope of municipalities of different sorts ; the shire and the borough, for instance. But, as we have to do, now, with the metropolis alone, the consideration of merely rural municipalities may be dismissed, and attention confined to the consideration of the more closely ranged town populations. And the illustrative method will be the most useful way of dealing here with this subject. There are certain matters which are equally necessities for comfortable existence, whether a man builds his house far away from all others, or whether he builds it in the close-packed street. There are others which only grow up into the shape of needs by the very circumstance of his coming into neighbourhood with numbers of other men. Thus, no man can live in comfort- able existence anywhere, without taking means to provide him- self with a supply of water and of artificial light. These are purely personal things; which, moreover, will always remain personal things whether we live solitary or in the crowded town. The want of either does not spring from neighbourhood ; nor can neighbourhood affect the existence or nature of the want. It may increase or lessen the facilities for meeting the want, but it can never make it the proper business of a municipality, instead of that of the individuals, to determine how that want shall be met. MUNICIPAL ADMINISTRATION. 17 On the other hand, the man who lives alone, far removed from any neighbours, or from chance of any, (in the remote regions of some new settlement, for instance,) has no one to fear or to guard against ; no one to dispute with ; no one continually to buy and sell with ; no one to annoy by any operations that he may carry on ; and he makes his goings-out and his comings-in, and the mode of each, in just such manner as pleases himself alone. He is, accordingly, entirely unconcerned with any arrangements as to police, the administration of justice, the regulation of markets or streets, or the condition of any poor and indigent. The con- ditions which make arrangements as to these several matters, or any of them, needed, grow up out of the fact of the aggregation of men into those groupings whence and wherein local self- government itself exists as a practical institution. It is the arrangements, then, connected with such matters as these that form the proper subjects for immediate and active control by institutions of local self-government. The benefit of such arrange- ments is felt by each and all men, as members of a community, and in their relations to the other parts of that community. The only object for which society exists at all with social and political bonds, and the only true characteristics of freedom in the nature of those bonds, are, that every man shall have the fullest opportunities of putting forth, the most effectively, all the energies he has, with the condition that, in doing this, he shall not inflict hurt or prejudice upon his neighbour. Remembering this, we immediately get a clearer view of the application of the test already suggested. Let us illustrate this. In a single house, standing in the country, in any English county, there never can be danger of any neighbour being an- noyed by any nuisance arising from the drainage or other refuse which results from the fact of domestic life. Every man will therefore make what arrangements as to these matters may best suit him. And he never can have any difficulty in such arrange- ments, as what is thus offensive in some respects is valuable in others, and most easily available in the nearest field or garden. But the moment he enters the town, the whole case changes. The refuse of every house is (unless carefully heeded) a nuisance to the next house ; and the means of its useful application are not at hand to every man. It beqomes, in self-defence, an abso- 18 THE METROPOLIS AND ITS lutely essential part of the duty of all to see that no man shall be guilty of such nuisance ; and, as the sources of it are inevitable, it becomes a necessary function of the whole, as a community, to make those arrangements by which the source of the nui- sance shall be so disposed of that it shall not grow to be such. Combined municipal action only can effect the purpose. Every one of the cases of true municipal management might be gone through, and illustrated in the same manner. But now let us look at another aspect of the subject. Much confusion has grown up through not separating the different parts of questions which have some points of union but other points of the widest difference. It has been said above, that the supply of water and of artificial light cannot fall within the range of objects of sound municipal management. It may, however, often happen that the circumstances of juxta-position, &c., may give facilities for more cheap and effective supplies of one or both these articles than could otherwise be afforded. Still, the avail- ing of those facilities must remain purely optional to every in- dividual, unless men's private interests and properties and do- mestic comforts are to be interfered with by arbitrary force. Every proposition of this nature must stand, therefore, upon its own merits, and claim support by the proved excellence of those merits. But, at the same time, if some enterprising body a water-company for example offers an easier and cheaper supply of water than can be afforded by every man digging a well for himself, it is no less clear that such company must not be al- lowed to carry out its objects, or distribute its benefits to indi- viduals, without similar safeguards being provided as in other cases, against annoyance to the rest of the public for the benefit of those who are disposed to avail themselves of the promises of the new device. While, therefore, the utmost facility should exist for private enterprise to develope itself in these, as in all other ways, the carrying out of such enterprise must always pro- perly be subject to such regulations as will protect the public from the gaining of any advantage to individuals at the expense of that public. Thus, for example, no such company should be allowed to break up the highways merely at its pleasure, but only at such times, and under such terms and conditions, as shall be determined by the whole municipality*. * See, after, pp. 29 and 30. MUNICIPAL ADMINISTRATION. 19 As much misconception exists on this topic, it may be well to remark that everything will always, and necessarily, be the better done the more immediate and direct is the interest and respon- sibility in its well doing. That matter will always be best done in which the personal interest of those concerned in it is the most felt, the most near, and the most constant. Wherever private enterprise can be availed of to achieve any end, that end will, therefore, be certain to be more speedily and cheaply and effectively achieved, in that way, than by any other means. Mere speculation, at the public expense, is prevented ; and at the same time every inducement is offered to attaining the best ends by the most effective as well as economical methods. The motive to exertion is very different, both as to preparation and action, when there are not the resources of others to deal with, and when there are actual personal interests involved in the results, from what it is when men are merely hired and paid to superintend and manage. Wherever, therefore, it is possible that any works can be effected in this way, it will always cer- tainly be the best way, care being taken that the municipality discharges, watchfully, its true functions, as already pointed out. It is evident that arrangements as to police, the administration of justice, markets, the poor, highways, town-drainage, &c., cannot ever be carried out properly (if any of them can at all) by such private enterprise, even under the checks above named. The nature of the circumstances involves general and not indivi- dual interests. But all matters of the first group above men- tioned, those which affect the needs of men in any mode of life, can be thus carried out, and will therefore be always thus most effectually carried out. The example of the complaints in London against the existing water companies forms no exception. On the contrary, the existence of those complaints, and the un- questionably just grounds for them, only afford proof that there have not existed heretofore, and do not now exist, in the metro- polis, municipal institutions by which the public interests have been, or are, protected against private interests; which latter have thus had the opportunity offered to them of growing into monopolies. But they will become monopolies ten times as burdensome, and with the loss of all stimulus to the devising of better and cheaper methods, if either municipalities themselves 20 THE METROPOLIS AND ITS undertake the experimental works necessary for supply of water or gas, or have such experimental works forced upon them by any centralized machinery. An example has already been given of a legitimate and healthy mode by which both private enter- prise shall have its free scope, and the public be protected against abuse and against the growth of a monopoly. The London (Watford) Spring Water Company has announced a proposition for supplying certain parts of the metropolis with the whole- somest and purest possible water. It has submitted the clauses which it proposes to ask to get embodied in an Act of Parlia- ment, to such local institutions as exist, in the first place, and has modified these clauses in accordance with suggestions thrown out by the bodies thus consulted. Protective clauses to the public interests, and entirely preventive of any danger of mono- poly or abuse, are thus secured, while the private enterprise which originated the scheme, will alone carry the works out. And this leads to the more direct notice of another point, al- ready referred to, and one of vast importance in estimating the value of institutions of local self-government. Regulations may exist, protecting the public interests against private monopoly, but, unless there exist some means by which the constant obser- vance of those regulations can be ensured, they are but a "mockery, a delusion, and a snare." Institutions of local self-government afford these means, complete, infallible, and costless. This I have elsewhere fully pointed out, and have shown that the only road to true and thorough Law Reform can be through the instrumen- tality of Institutions of Local Self- Government*. When the Metropolis is organised into a full and efficient system of Local Self- Government, it will form one department of the habitual business of every separate part of it to see that no clause of any Act of Parliament, or other regulation, which affects the interests of that part, is evaded or violated. The onerous and unequal task will no longer rest with public-spirited individuals to be at the cost and hazard of maintaining public rights and interests at their private exertions and expense and risk. * Local Self -Government and Centralization (as before), p. 298 and note ; and see chapter 18 (Trial by Jury) ; 22 (La\y Reform) ; 15 (Practical Forms of True Local Self-Government) ; &c. MUNICIPAL ADMINISTRATION. 21 THE CONDITIONS ESSENTIAL TO TRUE MUNICIPAL SELF-GOVERNMENT. WHAT local self-government really means, and what is its im- portance, as also what are the subjects which legitimately come under its cognizance, and in what manner, have been already shown. It cannot be necessary, then, to use any argument to prove that the state of things which now exists in the metropolis, is clearly unwholesome and unsafe in point of policy, and con- trary to the self-respect and the general interests of the inhabi- tants. If free institutions are anything else than a mere name, it is quite obvious that this state of things is altogether incon- sistent with sound government or permanent security. The self-respect, moral and political dignity, and pecuniary interests of every inhabitant of the numerous metropolitan parishes, alike require that steps should be taken to assert and ensure a true practical municipal existence. Brought to this point, the question is met by those difficulties which always afford an excuse to the apathetic and the insincere, to do nothing, or to obstruct ; while they are precisely the diffi- culties a readiness to grapple with and overcome which becomes and proves those who are in earnest. While some are altogether staggered at the attempt to deal with a population of two millions and a half, others are eagerly attempting to pervert the opportu- nity into one of fixing more firmly the bonds of centralization upon the metropolis, under cover of making the whole into one immense municipality. All honest and earnest men see just as much danger and mischief in the latter of these courses as in the former. It has been because it is felt very deeply, that this important question is not one that can be dealt with, for other than ill, by any empty declamation, that I have dwelt upon the points already treated of. I have endeavoured to arrive at and illustrate cer- tain principles, which must be thoroughly understood before any practical results can be arrived at. To apply those principles, now, towards getting at practical results, let us see what are the conditions necessary to be characteristics of any institutions which 22 THE METROPOLIS AND ITS shall realize true local self-government, and render possible the actual sound discharge of those functions which belong to it. It is the first essential of a true municipal existence that there should be a constant accumulation and bringing together of the experience, as it arises, of those concerned, in relation to all those matters in which they have, as a community, an interest. It is incidental to this condition, though so specifically im- portant as to deserve a separate statement, that there must be able to be an actual knowledge, among all, of the affairs, as a community, of the whole ; a constant intercommunication of the experiences of all ; and a felt consciousness that all are concerned in the well- working in every part. The limits within which the municipality can act, as a unity, must be such that all needed action shall be within range of the easily reached constant know- ledge and observation of every man within it. Thus, and thus only, can all see and know and comprehend the relations in which each stands to the whole, and in which the whole stands to each : a perception, knowledge, and com- prehension which, self-evidently, lies at the bottom of the very possibility of so directing or controlling the management of what is of common interest, in any respect, as that the result shall be the permanent promotion of the common good. This is equally necessary whether we consider the efficiency and sound- ness of immediate management, or of what may be called judicial watchfulness, as those two separate aspects of mu- nicipal healthy activity have been already explained and illus- trated. As a part of the practical arrangements necessary to the ful- filment of these conditions, it is an absolute essential to true local self-government that there should be a constant and immediate responsibleness, to all, of those to whom may be committed the actual direction and carrying out of any part or work of munici- pal duty. That is, that all, in order to the full discharge of the duties and responsibilities belonging to them as members of the community, may have full knowledge of all the relations of the interests of the whole to every one, and of those of every one to those of the whole, and that none of these is abused. This is an education true and genuine, such as no paraded school system can give either the reality of or any equivalent for. It is an educa- MUNICIPAL ADMINISTRATION. 23 tion of men-creatures to be truly men and freemen, knowing and understanding the rights and duties and responsibilities at- tached to freemen, and therefore conservative of the institutions which provide and give full scope for these. Every man thus has a felt and habitual consciousness of his part and interest in those institutions. And it is proper, here, to remark, briefly, upon a vulgar objec- tion often raised to municipal management. It will be found, upon examination, very greatly to strengthen, instead of weaken- ing, what is here insisted on as to the importance and essentials of institutions of local self-government. To state this objection in its most recent terms, but which embody what has been long urged by those far less candid, it is said that " people will be elected to such bodies, not because they particularly understand the business, but because they will keep down the expenses. They will be frequently elected on poli- tical grounds, grounds which have no reference whatever to the subject-matter for the consideration of which they are appointed. The quantum of knowledge is a matter of chance*." As I have stated this objection in the form of a quotation, it may be allowed to give the answer, also, in the shape of two quotations; the one pointing out a fact, the other illustrating similar facts by reference to the very principles which have been pointed at, above. The "Spectator" of 13th December, 1851, in alluding to the prostrate condition of freedom in France, says : " In no single act of political life is the Frenchman allowed to take a part, except as an employe of government, or at the rare intervals of the elections : and even now, that universal suffrage is the law of the land, except for that one day on which he deposits his ballot, the political life of the French citizen is a suspended animation." In "Local Self-Government and Centralization" already quoted, after referring to the often loudly urged panaceas in which " the mere time and act of election are all that is touched," it is said : " But it is self-evident that the mere act of Election can create no true representation ; and that none such will ever exist unless, by the constant habit of observation and active personal discus - * Mr. Hawlcsleys evidence before the Committee on Metropolitan Water Bills, 1851 : Questions No. 13,024 and 13,625. c2 24 THE METROPOLIS AND ITS sion, the electors are trained to understand, fully, all the classes of subjects with which the elected have to deal." The fact, then, is simply, that the objection only applies where the essential conditions already insisted on do not exist. The cases are not true Institutions of Local Self-Government ; merely names and shams. These essential conditions not being present, the only things those uttering where the scant oppor- tunity of uttering at all is given them can utter, is concerning the single thing they are let have the means and opportunity of understanding, namely cheapness. Thus it is that a narrow and short-sighted policy defeats its own ends. There could hardly be wished a more conclusive proof of the truth and sound- ness of the very principles and essentials I am insisting on, than is thus furnished by a dissection of this very objection. Let the conditions thus shown to be essential be applied to the metropolis. What result do we arrive at, as to the necessary character of any municipal arrangements by which there shall be secured, as I have before put it, ' ' a reality, and riot a sham ; a thing, and not a name; that the inhabitants shall actually have, as an habitual part of their existence and consciousness, the rights and responsibilities of freemen, and not, by the jug- glery of certain hollow forms, be merely the machinery by which local oligarchies shall be erected into shape and being?" It will be self-evident that it is a mere farce, so far as any true municipal existence is concerned, to talk of erecting the whole of the metropolis into one municipality, whether for all or for any purposes. What commonness of interests and management can Whitechapel have with Paddington, or Lambeth with Hackney ? W r hat confidence can any man ever have, if the whole metropolis be one large municipality, that the affairs of his district will meet with a fair and intelligent consideration and treatment? The proposition is unworthy of discussion. Yet are its evils so great, while the specious pretenders to liberalism, disguising centraliz- ing ends, are so anxious to fasten this hollow form, instead of any proved reality, upon the metropolis, that it will be right to dwell shortly upon the topic. Local Self-Government can nev T er consist, as many imagine, or argue as if imagining, in having local bodies, elected or otherwise, and leaving the exclusive management of everything MUNICIPAL ADMINISTRATION. 25 in their hands. Its true ends can never be achieved by blindly giving up all authority and judgment, whether nationally or locally, to an oligarchy or a clique, although elected by even universal suffrage, a " suspended animation" being the condi- tion of the so-called electors except during the mere time and act of the occasional election. Those ends can only be achieved by making every man to feel that he has, himself, duties and responsibilities, co-extensive with his rights, in watching over the affairs of the community he belongs to, and seeing that those to whom any public functions are entrusted fulfil them*. What must always be true of any district in the land will be- come more profoundly felt, the wider the district to which the facts apply. Parliamentary omnipotence, whatever the suffrage by which the members may be elected, is merely organized oligarchism ; centralization in its most dangerous and irrespon- sible form ; and the surest means to the fastening of every form and ramification of centralization upon any land. And a Metro- politan Municipality, in the shape of a merely so-called repre- sentative body, to which shall be committed all deliberation and action for the whole metropolis, is merely oligarchism under a similar form, and the necessary parent of mischiefs as great. It is mere centralization the more dangerous as it is disguised under the delusive name and hollow husk of a barren te Repre- sentative System." It is self-evident that no such body can ever fulfil any of those conditions already shown to be essential to true local self-govern- ment, and to the efficient fulfilment of municipal functions. It can neither have constant knowledge, and understanding, and intercommunication, of all the experiences of every part, on which experiences alone sound and useful action can ever be taken, nor can it know how far any works done, as for the whole community, affect, in their practical relations, the wants and interests of special parts and individuals t. Such a body can never be other than a mere clique, father of costly jobbery and fimctionarism ; however more or less decently all this may, at one time or another, be disguised, and cloaked under philanthropic or liberal pretences. Great schemes may * Local Self- Government and Centralization, pp. 36, 51. f See this matter treated under another of its aspects, after, p. 32. 26 THE METROPOLIS AND ITS be paraded, that attract by their vastness of design, and fascinate by the carefully wrapped-up sophistry of their theoretical scien- tific completeness ; but the real interests, the practical welfare of the community, are not fulfilled. Compulsory taxation is levied, (that is, property is confiscated] without scruple and without stint, to carry out these grand theoretical schemes, for it is easy to deal with the thousands and the millions of other people's money. There can, and does, exist, really, no true public opinion to influence the action of such bodies ; for the very conditions (already mentioned) on which the formation of any true public opinion must always depend as an essential, are wanting. Every opportunity, on the other hand, is given for the getting up of factitious but loud imitations of public opinion, in self-interested quarters, and of forcing these spurious and hollow imitations before the public as efficient instruments ; the actual public being, all the time, in a passive state of mere " suspended animation." Such a scheme is but centralization under one of its most insidious and dangerous disguises. It will always be true of separate municipalities, as it is of a nation, that the marked difference between a government of centralization and the activity of real institutions of local self- government is the difference between a volcanic state of per- petual bubbling revolutionary elements, and a state of safe and sure progress ; between a state of insecurity to person, property, and institutions, and one of security to all these ; between a state of soundly-developed and acting public opinion, and a state where what may be called " Public Opinion " is merely artificial, facti- tious, and unsound. I shall next allude to some of the pretences under which the mischievous system of Centralized Administration and irrespon- sible Compulsory Taxation is attempted to be sustained, and to the mode in which, and the special means by which, such a sys- tem is being now attempted to be more firmly than ever fastened on the metropolis. MUNICIPAL ADMINISTRATION. 27 PRETEXTS FOR CRIPPLING MUNICIPAL SELF-GO- VERNMENT. FORMS AND DISGUISES UNDER WHICH THAT CRIPPLING IS SOUGHT TO BE EFFECTED, AND THE CONSEQUENCES THEREOF. WHILE the operation of local boards is on no pretext more sneered at, as already mentioned, than for the point of " cheap- ness" being that which mainly guides elections, it is certain that there is no argument which the forwarders of centralization have so much urged, and striven to impose upon the public with, as that of this very same " cheapness," as the great blessing which would follow from the new system. This argument has been sought to be enforced by the most unscrupulous charges against local boards, of reckless extravagance and lavish expenditure. So inconsistent are the arguments and pretensions of the self-inte- rested and the unprincipled. The whole history of centralized management proves that, in- stead of being an economical one, it is, invariably, the most ex- travagant and costly. To give detailed illustrations would be superfluous. I shall confine myself to quoting the words of an " Address" put forth to the inhabitants of the metropolis, by the delegates from metropolitan parishes, on the 10th of December 1850, on the subject of the Metropolitan Commission of Sewers. " With loud pretences," says this document, which should be in the hands of every ratepayer, te with loud pretences of regard for the public welfare and a strict economy, and with loud vaunt- ings of the advantages of the concentrated wisdom of a special board of management, entrusted to a few select and crown-ap- pointed functionaries, the [local] commissions which had existed before November, 1847, were superseded. The new commission thus appointed was, after thirteen months of inefficient action, but heavy rate-making, itself superseded, under a new act of Parliament prepared by, and which must be presumed to embody the accumulated experience of, those who proclaimed themselves the only persons who understood, or were able to administer, the matters which, under the new commission authorized by that 28 THE METROPOLIS AND ITS act, were committed to them on their own terms. A few months, however, only elapsed before it was found that these new and self-proclaimed guardians of the public welfare were far more in- competent than any of their predecessors ; while their meetings degenerated into unseemly squabbles, and their discussions into personal imputations and attempts at individual self-exaltation. A third supersedeas took place ; but the only change which the public has known has been an enormously increased charge of rating, accompanied by neither the abatement nor prospect of abatement of any one of those evils, the existence of which was made the excuse for fastening the new system on the metropolis." This statement is only confirmed, and rendered the more striking and important, by that contained in another document, issued by the Commissioners of Sewers themselves, exactly a year after the date of the above ; from which it appears that, while the estab- lishment charges (the very matters that it was pretended would be most reduced by "consolidation") were 12,838 before the supersedeas of November, 1847, in January of 1849 these amounted to 16,778 ; in October of the same year to 22,820 ; and in August, 1851, to actually 24,753; while the amount of works done by the centralized commission was actually less, by nearly one-fifth, in the period of these highest and nearly doubled expenses, than what it was when these were lowest ! Another device, nearly related to the last, to which the cen- tralizers have had recourse, in order to attain their ends, has been the representing several totally different and quite unconnected things as all necessary to be brought under one and the same immediate management. And then, on account of the com- plexity of one of these, it is pretended that a permanent cen- tralized body is alone capable of undertaking that management. No more crafty device than this has ever been resorted to in order to attain unprincipled ends. Not entering on all the mat- ters of water, gas, sewerage, even insurance companies, which it has been declared, by the centralizers, ought to be thus brought under centralized management, it will be sufficient to call atten- tion to the well-known attempts to represent water and sewerage as necessary to be connected in one system. This has been the favourite attempt for several years. I have already* shown the * See before, p. 16. MUNICIPAL ADMINISTRATION. 29 essential difference, in nature and character, between the two needs out of which works for these several objects arise. But not only do these needs differ, altogether, in nature and character. The works by which they are to be accomplished differ, also, en- tirely, in every respect. It is impossible to express this difference more clearly than was done by an eminent engineer, familiar with both classes of works, before a committee of the House of Com- mons in the session of 1851. "There is," says Mr. Hawksley, " no connection between the two classes of works ; they are per- fectly unconnected : they are perfectly dissimilar. The circum- stances under which a water-supply is granted are perfectly dis- tinct from those under which the sewage is carried off. The structure is different : the means are different : the nature of the supervision is different: everything, in point of fact, even in principle, is different. In the one case it is a supply, so to speak, of goods sold and delivered : in the other case, it is simply the removal of a nuisance. One is a statical work ; a work which, once constructed, is carried on with very little supervision or re- pair: the other is a dynamical work, which requires constant supervision and extreme care in its management*." It is pre- cisely this difference which, arising out of the very nature of the needs and circumstances, makes the one able to be well and most efficiently done under the entire management of the municipality, while it is absolutely impossible that the other can ever be so efficiently or economically done or managed in this way, as when individual energy and immediate interest are stimulated, in the way of private enterprise. It must be remarked here, to prevent any misapprehension, that it is not pretended that no municipal body can properly, under any circumstances, engage on works of the latter of the two above-named kinds. Special circumstances may, in rare cases, render it desirable to do so. It is certain, however, that, when any borough attempts, as a corporate body, to carry out any trading concern (whether water-supply, gas, or any other), even though professing to be for the benefit of its own members, the work will be less well done (other conditions being the same) * Evidence before committee on water-supply, 1851 ; questions 13,599 and 13,608. 30 THE METROPOLIS AND ITS than when a comparatively small number,, whose individual attention is given to it because their immediate interests are con- cerned in it, have the sole management of it. It may be volun- tarily determined, by the whole body of inhabitants, that they, as a municipality, shall do a work which no persons can be found willing to undertake as one of private enterprise. To object to this would be to interfere with the very principles of local self- government, however much better, under other circumstances, private enterprise would effect a similar end. But this voluntary entering on such a work is a totally different thing from the attempt, such as is now making in the metropolis, to impose on any district a system of administration (whatever its special character may be) which is to include such matters. It is obvious, as already intimated, that every municipality may impose what conditions and terms it pleases before allowing any company of private enterprise to execute works which must necessarily affect, more or less, matters properly under municipal control. These terms and conditions may very properly limit prices and profits, guarantee a cheap and constant supply to public buildings or small cottages, ensure quantity and quality, or otherwise, as well as regulate the breaking-up of highways. This is a very different thing from mixing up, as the centralizers wish, different classes of works in one immediate and improper management. It will be the business of the municipality to take care that these terms and conditions are fulfilled. This will be the surest protection to the public ; sound policy at the same time dictating that the conditions should never be so stringent or narrow as to shut out scope and reward for still further enter- prising effort. Having thus alluded to some of the pretences under which the centralized system of all-engrossing management is being en- deavoured to be fastened on the metropolis, and other parts of the kingdom, let us glance, briefly, at some of the special conse- quences, as regards Free Institutions themselves, that will neces- sarily follow from the establishment and permanence of such a system, whether it be carried out openly by a Crown-appointed commission, or whether it be craftily disguised under the hollow husk and empty sham of a (so-called) " representative system." When men leave things to be managed, for them, by others, MUNICIPAL ADMINISTRATION. 31 whether those others be Crown-commissioners or occasionally elected bodies, they cease to have their own attention fixed con- tinually on them; cease to accumulate and to communicate experiences ; cease to understand, therefore, the relations of the whole to themselves as individuals, and of themselves to the whole*. They are gradually less and less able to know or under- stand anything at all about the true merits of matters so im- portant to their interests ; and they become the mere helpless victims of demagogues, jobbers, and speculators. And, mental independence gone, moral independence goes too. Men are taught that, not self-reliance and self-help, but reliance on, and subserviency to, governments and official personages, is their interest and duty. They are taught that neighbourly cha- rities and sympathies are to be commuted for so many shillings in the pound paid to the rate-collector ! Selfishness supervenes over everything. It swallows up every sentiment; engrosses every thought. And the spirit of enterprise is chilled out. Practical monopoly becomes the rule. Inducement to fresh endeavour there is none. Besides this, it is a system of practical communism and confis- cation. Irresponsible taxation necessarily forms a part of the system. The helpless ratepayers are taxed, without any real means of scrutiny, and without hope of redress. The plan of compulsory taxation, moreover, is applied to all parts of the system, whether any of the special objects accomplished are needed by the individuals charged or not. And permanent debts are fastened, like a mill- stone, round the necks of the victims ; as, no place being allowed to private enterprise, every cost, every experiment, every compensation, becomes a permanent charge 011 the pockets of the ratepayers, which future improvement and future discovery can only add to, instead of lightening. The natural tendency is to a state of dead stationary bondage. This is the sort of system that it is now being sought, which is, at this moment, being eagerly striven, to fix upon the metropolis, and over the whole land. But the matter must be glanced at in even a political point of view ; for, as local self-government can be the only true founda- * See before, p. 14. 32 THE METROPOLIS AND ITS tion of free institutions, so every interference with the sound and healthy action of that local self-government must always weaken the foundations, and lessen the reality, of free institutions. That political liberty is dangerously affected by the giving over to Crown-appointed Commissioners to do or superintend any matters whatsoever that concern freemen, needs no proof. It is self-evident. But political liberty is equally, and even more dan- gerously, because more insidiously, affected when such an elective body as has been mentioned has the management of such matters committed to it. True representation is killed out. The empty and delusive form alone remains. Not only is there no place given for the intercommunication of experiences, as already shown to be the first essential of true local self-government, but, supposing any one or two individuals, elected by any district, could, by any superhuman means, know and understand all the conditions and needs of their own district (a thing never pos- sible), they are not put in a position to apply themselves to, and avail themselves of, this knowledge. Each has to do with the affairs of all the districts. He may know a little of his own. He can know nothing of the others. Yet has he to pronounce an opinion upon them all ! And thus all grope on together in the dark, equally ignorant, and equally irresponsible to those whom the opinions and votes of each affect. The system is well devised for playing into the hands of jobbers : for nothing else is it available*. This sort of representation is far worse and more degrading than the ancient system of serfdom, as it prevailed in England. Under that system, while free men always went up, themselves, to the municipal meeting, to discuss and determine their own affairs, the serfs of any man appeared, at that meeting, by the latter, as their representative. But even these serfs did discuss and determine for themselves and among themselves, all those minor matters which concerned them among each other f. The system that has been proposed for the metropolis J, however, will * See after, p. 48. t See this important point explained and illustrated in Local Self- Government and Centralization, p. 224. J I allude here to the bill introduced in the session of 1851, and a^ain in the present session, by Mr. Mo watt, under the delusive pretence of being MUNICIPAL ADMINISTRATION. 33 leave the whole of the inhabitants of these vast districts mere helpless passive victims ; wound up, at distant intervals, to go as mechanical and necessarily unreasoning voting machines; but, for all the rest of their existence, in a mere state of " suspended [but rate-paying] animation." As for the mode in which, and the means by which, it is being sought to impose this system upon the metropolis, it is sufficient to say that these, in themselves, are a violation of the first prin- ciples of local self-government. It is just as much an usurpation for Parliament to pretend to intermeddle and deal with, and cut out and carve, the limits and functions of local self-government, as it is for any executive to turn a national assembly out of doors and dictate what sort of a new one there shall be. It is even more dangerous, as a mode of effecting a coup d'etat, because more subtle and insidious, and therefore less likely to meet with prompt resistance. In either case, right, justice, law, and the constitution, are equally out- raged. In each case it is the force of brute strength, and not that of constitutional and legal sanction, that enables the pur- pose to be accomplished. It is, indeed, curious to see how des- potism, thus exhibiting itself, runs in the same direction, and accomplishes its purposes under similar pretexts, in different countries. Thus, at the very time that it is being sought to accomplish these illegal and unconstitutional objects in London, by means of trick-got Acts of Parliament, the same sort of thing is being done, under similar pretences, by Louis Napoleon in Paris at the point of the bayonet ; for we are told, in the jour- nals of 17th December, 1851, that there appeared, the day before, a decree appointing, in each arrondissement of Paris, a board of health, to consist of nine persons, &c., &c. ! A system of Municipal Government, to be sound and lasting, and practical and beneficial, must not be dictated or imposed. It must spring up spontaneously among those whom it is to affect. They must see and know their own wants, and themselves devise the remedy. Such has long been the practical method recog- a " Ratepayer's Bill " ! ! Other very similar attempts to lead the metropolis, hoodwinked and deceived, to its permanent enslavement, have heretofore been made, and are now being whispered. 34 THE METROPOLIS AND ITS nized by the Common Law of England. It is as applicable to the metropolis as to any other part of England. But both the propositions which are now before the public, in bills and notices of bills for the present session, are dictated schemes, each seeking to impose its own pet plan, and each care- fully avoiding, it would seem, any approach to a system of prac- tical municipal management. I have stated, already, what the conditions are upon which every sound system of municipal management must be founded. It clearly follows that the only practical system for the metropolis is the formation, by a very simple but self-adjusting process, of several Municipal Districts, or Boroughs, each having, within itself, all the functions and activity of true local Self-Government. I shall proceed to develope the practical shape which such arrangements may take, and the mode of their initiation, more exactly. PRACTICAL ILLUSTRATIONS OF TRUE MUNICIPAL SELF-GOVERNMENT. THE TRUE CONSTITUTION OF THE CORPORATION OF LONDON. I HAVE shown what will be the mischievous consequences if the inhabitants of the metropolis either allow themselves and their affairs to be put under the control and management of a crown- appointed commission, or let themselves be deluded, by names and forms merely, into assenting to the erection of one huge metropolitan municipality, in the shape of a so-called represen- tative body, to which shall be committed all the deliberation and action for the whole metropolis. These are the two schemes which it is being attempted, by rival jobbers, to impose on the metropolis. If the inhabitants remain apathetic, one of these schemes will certainly succeed ; or, more probably, a compromise of both will be effected, securing and perpetuating the self- seeking objects to individuals, and the multiplied mischiefs to the public, of both. The consequences shown to attend such systems, support, in MUNICIPAL ADMINISTRATION. 35 the strongest way, the principles previously shown to be essential to a true system of local self-government. The result arrived at by each way of looking at the subject is the same ; namely, that the only sound and practical system for administering the affairs of the metropolis can consist in the formation of several separate municipal districts or boroughs, each having, within itself, all the functions and activity of true local self-government. It may be expected by some readers, that I should next pro- ceed to propound a scheme of my own by which this result should be brought about. Such a course would, indeed, be in accordance with the reckless modern plan of centralization ; whose followers pretend that freemen are to be manufactured by paper constitutions, and think the only work that has to be done in order to carry out any matter, is to get an act of Parlia- ment upon the statute book ; who understand nothing of " Re- form " except in the way of dictation, and can comprehend the rights and responsibilities of freemen no further than these may be set forth by some section of a written and Parliament-passed law. But the principles of local self-government can never be dictated. They must be discussed, understood, and then prac- tically asserted*. I have already said that a system of municipal government, to be sound and lasting, and practical and beneficial, must not be dictated or imposed. It must spring up spontane- ously among those whom it is to affect. In consistency with this view, having hitherto shown the mischiefs of the schemes which, under one shape and other, centralization is seeking to fasten on the metropolis, I shall now endeavour to make the practical working of true local self-government better understood by fixing attention on an example of it. Thus will the inhabi- tants of the metropolis be better able to judge of the true spirit, and also of the practical nature, of active institutions of local self-government ; and so be prepared to receive and act on any suggestions that may be made for the practical re-assertion of such institutions for the whole metropolis. The example to which I allude is that of the old and genuine constitution of the City of London. I am obliged to use these terms, to prevent misapprehension. Much ignorance exists as to the true Constitution of the Corporation of the City of London, * See Local Self- Government and Centralization, p. 256. 36 THE METROPOLIS AND ITS and great prejudice lias long been growing up against that body itself. And it is unquestionable that there has been a wide de- parture, in recent times, from its old and healthy spirit. Hence the greater necessity for directing attention to what its true con- stitution and spirit really are, that, so, both its own sound restoration may be helped, and a true and not a false example stand before those who are seeking to comprehend the merits of the question of Metropolitan Municipalities. It may be remarked that the City of London comes within the bounds already pointed out as essential to the practical work- ing of institutions of local self-government in town districts. It has, from the remotest times, had a denned boundary. And, thus confined within certain limits, it has never, through all the many ages it has seen, had a population too large to fulfil, well and efficiently, all the functions of local self-government. It was able, indeed, from time to time, usefully to embrace within its circle still wider limits than those which lay within the circuit of its ancient walls, still not extending its actual limits beyond what the essentials already pointed out leave consistent with practical and sound efficiency. Thus, the ward of Farringdon Without, now the largest of the wards of the city of London, was formally engrafted with the City in the year 1393. The history of the city of London is closely entwined with the history of England. It has been ever foremost in the struggle for the maintenance of the laws and liberties of England. In many an hour when doubt and darkness sat looming in the hori- zon, the city of London has placed itself at the helm, and carried the bark of our liberties safely over the shoals and quicksands that threatened it. The history of this ancient City is, in itself, an Epic ; the finest that the w r orld has ever stood to listen to : an epic full of action, full of varying fortune, but with, ever, one heroic centre, and which touches the deepest and everlasting sympathies of mankind. Kings have changed : dynasties, when the fundamental laws of English liberty have been threatened by them, have fallen. But, amid all these changes, London, true to her great mission, sound at heart, ever (with rare excep- tions) the foremost champion of constitutional freedom, has still stood. As we read the noble story, we are reminded of the words of the old Saxon chronicler, who, telling of the attacks MUNICIPAL ADMINISTRATION. 37 made, in olden times, against London, by the enemies of England, says : " Often they fought against the city London ; but, praise be to God, she yet stands sound, and they ever, there, fared ill." She has thus stood in past times, and thus only can she continue to stand, because her citizens were always ready to go up to her Folkmotes and the Wardmotes. Thither, as they well knew, earnest men had been wont to go up, through many ages, to do, for themselves, the business which belongs to freemen. And her Lord Mayor had ever known it to be his duty and one from the discharging of which he must not shrink to tell it even to the king upon the throne, that whoever would fill his councils with evil words against the municipal institutions of the land, is an enemy alike to the royal throne and person, and to the laws and liberties of a free people. Proposing to give, presently, some details of the practical working of the most essential parts of the constitution of the City of London, I will first sketch an outline of the principal broad characteristics of its history. The City of London has been, for many ages, an associated community and body corporate, recognized, from the remotest period of history, as possessing, in its character of an associated community and body corporate, full powers and functions of local self-government, and as securing to every one of its citizens all the rights, and imposing all the obligations, of men free and equal before their fellow-men and before the law. The only constitutional and lawful test of citizenship within the City of London always has been, and in reality is now, a bond fide interest in the well-being of the city, following from, and shown by, actual occupancy within it. The presumption of law is, and always has been, that all oc- cupiers within the city are freemen, and therefore full citizens, entitled to the exercise of all the rights, and liable to the dis- charge of all the obligations, of citizens. Even at the time when the law of England recognized a con- dition of serfdom, and when the presumption of freedom and full citizenship was thus liable to be rebutted by proof of the con- dition of serfdom attaching to any person, any and every one, though proved serf-born, who had abided, as an occupier, within the City of London for the space of a year and a day, became 38 THE METROPOLIS AND ITS thereby, according to the general law of England, a free man, and therefore entitled to all the rights and privileges, and liable to all the obligations, of a freeman born. This practical principle, fully recognized by that common law of England which has always favoured liberty, was always largely availed of within the City of London; and the ranks of its citizens were perpetually recruited from this source. And it must be here remarked that the test of a year and a day's occu- pancy is assuredly at least as sufficient evidence of the fitness and bond fide interest in the welfare of the city, of a mere stranger- born, at this day, as it was, while serfdom was recognized by law, of the same qualities in a man born under all the disabilities and disadvantages of actual bondage. Ratepaying tests, and all such other crafty and artificial means of depriving free men of their functions, were formerly unknown. They are mere late and unlawful innovations. Men could not, of old, excuse themselves from the discharge of one set of duties by the omission to fulfil another. All the obligations of citizen- ship lay on all who claimed any of its benefits. Any exclusive class of "freemen " within the City of London was unheard of till a comparatively late period, and then only in connection with certain trading companies, which had only an incidental, and never a constituent, relation to the corporation of the City of London. The existence, indeed, of an exclusive class of "freemen," as composing the corporation of the City of Lon- don, is not only unrecognized by, but is in direct contradic- tion to, and violation of, every charter, record, and statute re- lating to the City of London. The pretence of it serves no other purpose than to maintain a mischievous and unlawful oligarchism, and to be the instrument of unlawful extortion from the followers of one or two occupations. Wards and wardmotes are the ancient, lawful, and most con- venient and effective mode of keeping the roll of citizens perfect, and of keeping the citizens themselves in the continual exercise and discharge of their rights and duties as free men. Into the practical working of these I shall enter presently. The rights and functions of the City of London were main- tained and exercised by the whole body of the commonalty and citizens up to the 24th year of the reign of King Charles the MUNICIPAL ADMINISTRATION. 39 Second. In that year an Information in the nature of a Quo Warranto was exhibited in the Court of King's Bench, against the corporation of the City of London ; the advisers of the Crown being well aware, as the enemies of human freedom have ever been, that the surest way to undermine the freedom of any land, and to bring it within the grasp of despotism, is to sap the foun- dations of municipal institutions, under colour of law. Judgment of forfeiture was pronounced, on that Information, by the Court of King's Bench, composed, as it then was, of the willing tools of the Crown. By this unlawful and arbitrary judgment, the citizens of London were forcibly deprived of the rights and functions which they and their predecessors had en- joyed and maintained for many centuries. One of the earliest Acts after the Revolution of 1689, was a solemn public statute, whereby it is declared that " the said judg- ment" of forfeiture by the Court of King's Bench against the City of London, " and the proceedings thereupon, were severe, illegal, and arbitrary." By the same statute it is further and emphatically declared, "that the restoring of the Mayor and Commonalty and Citizens of the City of London to their ancient liberties, of which they have been deprived, tends very much to the peace and good settlement of this kingdom ; " and that judg- ment and those proceedings are therefore and thereby annulled. It will be seen that the parties who are expressly declared by this statute to be and constitute, then and for evermore, the cor- poration of the city of London, are the Mayor and Commonalty and Citizens of the City. No exclusive class of " freemen " of the corporation is named, or even alluded to, although the free- men of the trading companies are expressly named elsewhere in the same statute. Much less is the belonging to an exclusive body called "freemen " made the condition of being a member of the body politic of the corporation of London, and so of being entitled to the exercise of the rights, and liable to the discharge of the duties, of citizens. Such an absurdity had not then been thought of; or at any rate the attempt had not been ventured to be made to impose it on free Englishmen. It is, on the contrary, expressly and emphatically declared, in and by this statute, that " the Mayor and Commonalty and Citizens of the said City shall and may, as by law they ought" thenceforth and for evermore have 40 THE METROPOLIS AND ITS and enjoy all the rights, franchises, and otherwise of the cor- poration. This description continues, at this day, the only lawful one of the Corporation of the City of London. If that corporation does not consist, in truth and in fact, at the present time, of the mayor and the whole body of the commonalty and citizens, that corporation has no existence. This is a matter of great practical importance. It touches both the question of what should be the shape of any scheme of local self-government as applied to the whole metro- polis, and also the question of any pretended " reform" of the Corporation of London itself. It is the fact that a very large proportion of the citizens of London have been unlawfully hin- dered, and are still unlawfully hindered, in the exercise of their rights and functions. But this exercise must be re-assumed by self-assertion, not by any partial pretended grant. The history of the perpetration of this great wrong and fraud is as follows. In the year 1725 a private Act of Parliament was, by most irregular and unlawful means, procured to be foisted on to the statute book, by a few individuals, in defiance of the commonalty and citizens of the City of London, and of the public statute already mentioned. This Act should be remembered by all men under the title of " The Aldermen's Act" for it was a few alder- men, who had possessed themselves of usurped powers, that got it passed. By this private Act a very large proportion of the commonalty and citizens were hindered and deprived of the exercise and discharge of many of those rights and duties which had been solemnly guaranteed to them and their successors by the universal common law of England, and re-declared by the statute before named. It was not, indeed, pretended that those thus deprived did not form parts of the Corporation. That is a still more modern notion, which has, however, grown up out of the consequences of this private and fraudulent Act ; an Act at least as unlawful and arbitrary as was the judgment of forfeiture which the public statute above named was passed in the most emphatic and formal way to annul. It is unnecessary to enter into details as to the unlawful hin- drances and trammels which " The Aldermen's Act " imposed. It is sufficient that they were designed to have, and have had, the effect of gradually killing out the healthy system of constant MUNICIPAL ADMINISTRATION. 41 habitual attention, on the part of all, to the matters which concern them. They have resulted in getting the affairs of the Corporation of London to be managed by narrow cliques, close committees, and exclusive bodies. The nominal constituency is, at the same time, yearly narrowing : and what there is of it embraces anything but the best and most intelligent part of that great mass of " commonalty and citizens" who really consti- tute, and whose duty it is to re-assert their position as consti- tuting, THE CORPORATION of London. PRACTICAL ILLUSTRATIONS OF TRUE MUNICIPAL SELF-GOVERNMENT. INTERNAL ARRANGE- MENTS, AND CONSTITUENCY. I HAVE given an outline of the general characteristics of the con- stitution and history of the corporation of London. Let us now look a little more closely into the mode of its practical working. This will be useful in two ways. It will give an insight into the reasons of its less satisfactory working of late years than formerly. It will also give a striking example of what the sound working of true local self-government should be. It will, further, give a useful illustration of what the real and wholesome function of the Crown is, as a means for putting in action, on special occa- sions, the functions of local self-government. This is a point modern legislators seem quite unable to comprehend. Nothing can, however, be clearer or simpler. It differs most widely from superseding local self-government by centralization. It has been shown to be necessary to true local self-government that every means should be afforded for the intercommunication of experiences. To effect this, the City of London has been divided, from the oldest times, into many Wards. These were originally equal, or nearly so, in the number of their inhabitants. They corresponded, in reference to the City, to the hundreds in refer- ence to a shire. Even the wards were again, however, for the same wise and all-important ends, divided into Precincts; corre- sponding, again, to the tythings of hundreds. Thus were the 42 THE METROPOLIS AND ITS full rights and functions of freemen secured, actively, to every single inhabitant within the city. In the precincts they gathered in small groups, where every man was personally known to every other man. The opinions, the wants, the wrongs, the suggestions, of every single man, were there freely stated. The multitude was not insulted by being called to a " Public Meeting," where two or three got on to a platform, and propounded " Resolutions," cut and dried beforehand, which could not really be discussed. At these small meetings they settled and disposed of minor mat- ters, and determined what to bring before the wardmotes, where larger numbers met. Having thus determined, upon their own intimate knowledge, time was not idly wasted at the wardmotes. The matters that were brought before the latter had been already minutely investigated ; and the main points of them, having been thus got at, could be easily put before the wardmote for its con- sideration. By far the greater part of these matters were deter- mined, done, and disposed of at the wardmote. Some, having been discussed in wardmote, were found to have a still wider range. These were reserved to be submitted to the full Folk- mote of all the inhabitants. They were of such general and grave importance as to require the sanction of all. This is local self-government in its reality. And it is no fancy picture. It is what did practically prevail in the City of London, and elsewhere through broad England, for many centuries. And to its having thus prevailed, is entirely owing the independence of the English character, its spirit of enterprise, and its mainte- nance of its liberties. Craftily has the practice been over-ridden, both in our cities and our shires, within modern times. It needs only that freemen shall understand it, for them practically to re- assert it. If they are content either to wait for Acts of Parlia- ment, or to accept these when offered, as charters of their liber- ties, they may bid adieu, for ever, to all hope of again practically exercising the rights and functions of freemen. Fortunately we have records left to us of the working of such institutions. If men will look at these, they will not longer let themselves be deluded either by the misrepresentations of inter- ested exclusiveness, or by the crude panaceas of the noisy, and perhaps honest, but ill-informed demagogue. Let us glance at a few facts, taken, almost at random, from some of these records. MUNICIPAL ADMINISTRATION. 43 I will take, first, the widest point of view. Let us see what sort of men they were whether select and exclusive or not that made up the Folkmotes, and the sort of matters these Folk- motes considered and determined. I shall here quote freely from the pages of a tract which I published in 1850, entitled, " What is the Corporation of London ; and Who are the Freemen ?" In 1229 it was ordained " by the assent of the whole citizens," that no sheriff should remain in office more than a year ; and we find a mayor, A.D. 1244, charged with perjury for attempting to admit a sheriff two years together; while, A.D. 1270, the citizens asserted, and exercised, their right to turn out any sheriff who misbehaved himself, and to choose another. In 1248 (32 Hen. III.), the mayor and certain citizens being at Westminster, on another matter, King Henry the Third took the opportunity of asking this mayor and his companions to make certain grants to the Abbot of Westminster. The answer given is a worthy example to all mayors and civic functionaries. It was, that " they could do nothing in the matter without the assent of the whole commonalty." King Henry was still anxious to gain his object. He again had recourse to that mode of proceeding well and emphatically termed in our day " hole and corner." " The King very often begged the citizens to grant to the Abbot of Westminster the forenamed liberties. . . . On an appointed day the mayor and innumerable people of the city with him came to the New Temple, where was the abbot, and others sent by the King. But, when the latter wished to have a talk aside with the mayor and alderman, the whole people forbade it, not allowing them, without the whole commonalty, to have anything to do with the matter, and they all cried out with one voice that they would, in no article, depart from their accustomed liber- ties." The authority of the King was, then, so practically limited that he could not even go to his own inheritance in France, with- out first asking leave of the people. Of this several instances are found. In the 36th year of his reign we read that " the uni- versal commonalty of London having assembled in the church- yard at Westminster, the King asked leave to go to Gascony." In the 43rd year of his reign " the King came to Paul's Cross, the innumerable people of the city being gathered together in Folk- 44 THE METROPOLIS AND ITS mote, and there asked leave from the people to go oversea." And again in the 45th year of his reign, " the King, on the Sunday after the feast of Peter and Paul, asked leave, at Paul's Cross, to go oversea into France, from the citizens of London/' In the 41st year of Henry the Third, A.D. 1257, events took place which, involving several important questions, and spreading over much time, illustrate very forcibly the constitution of the Corporation of London, and the action of Institutions of Local S elf- Government . The following is an accurate abstract of the original most in- teresting record : " Before the feast of the purification of the blessed Mary there had been found in the King's wardrobe at Windsor a roll, sealed with a green seal ; but who put it there was unknown. In this were many charges against the mayor to the effect that the city had been burthened beyond measure by him and his councillors (the aldermen), both in the matter of taxation and in other wrongs done by them. The King, ivishing to know the truth, caused a Folkmote to be summoned for the following Sunday. On that day he caused the said roll to be read before all the people by his justiciary and others, who declared that the King was unwilling that his city should be burthened, but wished to be certified what rich men had been passed over in the taxation, and what poor men borne hard upon ; and whether the mayor and his councillors had appropriated any of the taxes to their own private use. And all the aldermen were bidden to summon, early on the morrow morning, their Wardmotes. And thereat the men of each ward, in the absence of the aldermen, chose from among themselves 36 men who had been so taxed. And, on the morrow, John Maunsel, on behalf of the King, bade them be sworn and certify touching the said charges. But they said that, by the laws of the city, they ought not to be sworn in any inquisition (at the King's command) unless touching life and limb, or suit for land. And so a long altercation took place between them and the King's justices, and nothing was done that day. " And on the morrow, being the Wednesday before the purification of the blessed Mary, John Maunsel coming to the Guildhall, the citizens again refused to take the oath in the aforesaid inquisition. Afterwards a Folk- mote was assembled to decide the point, and the people, in folkmote, decided that they would go into the inquiry, very much to the discomfi- ture of the aldermen. It appears that much trickery was resorted to, in order to hush up the affair. After much delay, the mayor, sheriffs, and aldermen, with four men from each of the wards where the inquiry had been made, were called and cam^ into the Exchequer ; and the mayor and others were then charged, in the King's name, with the wrongs and injuries done by them in the city. And they were charged with altering the mode MUNICIPAL ADMINISTRATION. 45 of making the tax, because the roll of the last taxation had not been read in G*uildhall before all the people, summoned for that purpose, as was the custom ; but that, as soon as the tax-roll was made, tax collectors were appointed, the said roll not being sealed : and so the mayor and they had altered the roll at their pleasure, to the gain of some and loss of others. And it was admitted that, formerly, the tax-roll was accustomed to be read in Guildhall before all the people, but that this had been omitted now for ten years and more. " After many passages between the justices and the others, the latter pleaded not guilty to the charges ; and that they had not changed the manner of taxing ; and that no one had been either unduly burthened or eased by them in that taxation ; and that the last assessment had been made by men chosen and sworn for the purpose by the whole commonalty. After further pleas set up, they were asked if they would put themselves (for judgment) upon the other wards of the city which had, yet, made no inquisitions. And they said that they would defend themselves according to the laws and customs of the city of London. Much further delay and dispute took place. The custom of the city was declared, by the aldermen, to be, that the citizens of London, in cases between them and the Crown, were entitled to clear themselves by twelve sworn men of the City. But the King, dissatisfied, bade the sheriffs to summon on the morrow a folk- mote at Paul's Cross ; whereto he sent John Maunsel and others to ask of the commonalty if such was the custom. The aldermen perceived, by the temper of the people, that the day would go against them, and yielded. But John Maunsel and the others went to Paul's Cross ; where one of them asked ' whether, if their servants [meaning the mayor and aldermen] had done wrong by them, and brought many evils on them and on the City, the former might, according to the custom of the City, clear themselves against the King by twelve sworn men, and against their fellow-citizens by six, and so evade the consequences of their ill deeds.' To this answer was given by the people in Folkmote crying out nay, nay, nay ; and so the day went against the oligarchs of that time, notwithstanding all their trickery." The fact stands clearly out, from the beginning to the end of this remarkable narrative, that it was the whole body of the Commonalty which alone had the right and power, admitted by all parties, to determine the law and custom of the City, and to control its affairs ; and that all the Commonalty of the City were possessed of this right and power. Passing over very many illustrations which might be given of the same point, a remarkable contest for the right of choosing the mayor attracts special notice. The aldermen had chosen Philip Tayllur; 4 but the people declared they would have no one 46 THE METROPOLIS AND ITS but Walter Harvey. The dispute ran high. The aldermen asked the King's support, representing to him that the people would break the peace, forgetting that they themselves would, in such case, be the only cause of it. But the people had followed the aldermen " by hundreds, by thousands, and by numbers beyond count," and cried out continually, " We are the Commonalty of the City, to us belongs the choice of mayor of the City." The aldermen replied by a singular argument. " The choice of mayor belongs to us," said they, " because we are, so to speak, the heads, and the people, so to speak, the members ; and because we, the aldermen, give the judgments in the courts of the City," [i.e. merely as presiding officers; the body or jury of the people always being the adjudgers.] The King's council, well aware that the right really lay, beyond question, with the people, did not venture to give aid to the aldermen. They urged a compro- mise, promising, at the same time, that, the moment the citizens should unanimously agree as to mayor, the King would willingly acknowledge him. Meantime, the dispute unsettled, the King dies. The Earl of Gloucester and others come to the city to proclaim Edward the First. They come to Guildhall, where the aldermen, Walter Harvey, and an innumerable people are assem- bled. The Earl, seeing the number that adhere to Walter, wishes him acknowledged. The aldermen again evade this. The Earl then begs that a Eolkmote shall be held on the morrow, in the churchyard at Paul's Cross ; and says that, on whomsoever the choice of the greater part of the City falls, he shall be mayor. On the morrow the whole of the City (universitas civitatis) comes to the churchyard. The Earl and others tell the aldermen they had better yield. The latter, seeing these magnates with it, and that they cannot do otherwise if they would, submit. And Walter Harvey is declared elected, at Paul's Cross, in full folkmote. Did space permit, I might extend these illustrations almost indefinitely. Let us, passing over several centuries, see what the facts are declared to have been, only 1 70 years ago, by the Recorder of London himself. I quote from his speech in de- fence of the Corporation of London against the quo warranto already named. That quo warranto professed to be grounded upon certain acts and votes of the Common Council. MUNICIPAL ADMINISTRATION? 47 The following are the express and unevadible terms in which the Recorder of London himself speaks of the elements and essential constitution of the Corporation : " This is not," he says, " the act of the mayor, commonalty, and citizens. 'Tis not the 200th part of the Corporation. 'Tis but the act of the Common Council ; and we have distinguished ourselves by pleading, that it does not consist of above 250, when the City contains above 50,000. This was done by a very small part of the citizens of London, and that does no way affect the whole Corporation sure." The "whole Corporation," the " citizens of London," and those whom " the City contains," are here used as equivalent and convertible terms. The Recorder goes on : " There is no ground to say that the Common Council represents the City, no more than a counsel does his client, or any attorney his master; only, as far as is for the benefit of the City, they are chosen and entrusted to make bye-laws. If they offend, they are but ministers and officers ; if they make an unreasonable bye-law, 'tis void, and every man that is aggrieved by it may have his remedy." The following further passage from the same speech expresses, well and tersely, the true bearings of the whole question, and shows how little the Recorder of London dreamed of any ex- clusive pretensions in the constitution of the Corporation of London : " The least citizen, my Lord, has as much and as true an interest in the Corporation of the city of London as the greatest ; and, therefore, 250, if they had been much the greater number of the citizens, would signify nothing to the rest of the body." But we learn also, from the same speech, a matter of fact which, though it can hardly add to the force of what has been already quoted, may be well cited, to clench all the rest : " We know," says the Recorder of London in 1683, " that, the practice of the Common Council in London being to advise for all the inhabi- tants, they are chosen by the un-freemen [not free of companies] as well as others." I have thus shown what the real position of the inhabitants of London is, lawfully and constitutionally, as free men, and as having rights and functions of local self-government as a whole, and in reference to the Folkmote. I shall next point out, more particularly, the working and functions of Wardmotes. For 48 THE METROPOLIS AND ITS the present, every reader will see how thoroughly well-grounded was a resolution that was passed, after very long and full dis- cussion, by a wardmote of the Ward of Farringdon Without, on the 14th December, 1849, and which declared : " That the Corporation of the city of London embraces, according to law and ancient right, all the commonalty of the said City who have been occu- piers within the said City for the space of a year and a day ; and it is the duty of all the said commonalty to take part in all that relates to the wel- fare of the said City, and to discharge actively, of and within themselves, the functions which belong to them as members of that Corporation." WARDS AND WARDMOTES, AND THEIR, ACTION. IT has been seen that, in order to give the means for constant intercommunication of experiences, Wards have existed, from the oldest times, within the City of London. But the mere ex- istence of these is not enough. If they merely have a name and denned limits, it is no more than a husk and a mockery. It may be all very well for modern charlatan legislation to do things in this fashion. But our fathers were wiser. They were prac- tical freemen. A Ward meant something very much more indeed than a mere given area, which should be a polling dis- trict for sending up, by occasional election, one or more mem- bers to a practically irresponsible oligarchy called a Town Council. A Ward always meant, as essential to its existence, the activity of a practical machinery, by which the men who dwelt within it might come together in frequent and periodical meeting or Ward-mote to interchange and intercommunicate their experiences, and to discuss and determine what courses should be taken upon comparing those experiences. The coming of the men of the Wards together at fixed, fre- quent, and periodical times is an absolutely essential element of practical local self-government. Unless provision be made for this, any proposition for what is called responsible or represen- tative control is a mere delusion, a mockery. Public opinion can only be formed by the interchange of facts and opinions. MUNICIPAL ADMINISTRATION. 49 Men will neither observe facts narrowly nor form thoughts upon them, unless they have the opportunity of putting those observations and thoughts into practical action in an immediate way. Nor will they have the capacity to understand who are fit to be elected to represent them, unless they themselves, by ha- bitual experience and consideration, know what sorts of things those are which the representatives will have to manage. The Wardmote provides against all these evils, secures all these good results. The old and most wholesome practice was that, in every Hun- dred throughout England, the men of the hundred should come together at least once a month, to consider and discuss together the matters that concerned them. The Wards of boroughs we have seen to be equivalent to the Hundreds of shires. And we find the practice of this monthly Wardmote to have prevailed in the city of London from the very earliest times. It is not necessary to quote illustrations of this fact. It is sufficient that a regular wardmote was held, and ought now to be held, once every month at least, in every Ward, besides special wardmotes on any special occasions. Some men can derive in- struction from marking the true meaning that lies at the bottom of what have been let degenerate into mere forms. These may be reminded that, even in the annual Precept now read, every St. Thomas's day, in every ward in the city of London, the wardmote inquest is required to meet and inquire and present . " as often times as it shall be thought to you expedient and use- ful, which we will shall be once every month, at the least." One remark may be made to those who, engrossed in selfish- ness, grudge the giving of the time which the maintenance of free institutions requires. Full scope for commerce can only be maintained by the maintenance of free institutions, and the cer- tainty and security of property, person, and enterprise which such institutions can alone guarantee. Any time bestowed over the working of such institutions is, therefore, time really invested for the most lasting and certain of returns ; returns without which all others will be uncertain. The more all men fulfil their duty in this respect, the more safe and certain will the return be, and the less onerous the burthen on every man. And the more prac- tically and thoroughly the institution of wardmotes, and equiva- 50 THE METROPOLIS AND ITS lent institutions, is carried out, the less will be the actual expenditure, both of individual time and of public moneys, in an infinite variety of ways that now absorb both ; for the adminis- tration of justice, both criminal and civil, will be reduced to a speediness and certainty that will affect, most nearly, the moral tone of society and the safety and security, both in person and property, of every individual. And public affairs will be so well and practically understood by all, that unhealthy excitement will not be able to be raised, nor mischievous agitation to rear its head. All men will understand what has to be done ; will discuss it like men of business ; and, so understanding and discussing it, will waste no idle time in the doing of it. Time and expense will thus really be saved to every member of the community ; while, in addition to the great moral gain in the improved tone and spirit of all, the security of person and property will be infi- nitely greater than it ever can be under a mere artificial system of repressive police, such as, alone, centralization is able to conceive of. As to those who attended the Wardmotes, it might hardly seem necessary, after what has been shown of the folkmotes, to illustrate this point. But, as the wardmotes really formed, and always must form, the most practical and important part of any system of true local self-government, it may be as well to show that every actual occupier not only had a right to attend, but was bound to attend, the wardmote ; there to take part in, and, with immediate knowledge, assent to or dissent from, the ar- rangements which concerned him. We find it expressly stated in many of the records, that all went to the wardmote, and took part there. I have already shown how, on an important occasion, the " men of each ward " met in wardmote and chose thirty-six persons in each ward. In an old ordinance of Edward II., it is recited, and reinforced, that " anciently it was provided, for the profit of the city and realm, and to preserve the peace of the King, that every Alder- man should hold four principal wardmotes in the year, to which should come all those who resided [not, necessarily, householders, simply occupiers] in the ward, of the age of fifteen years, and upwards." In the record declaring the erection of the Ward of MUNICIPAL ADMINISTRATION. 51 Farringdon Without into a separate ward, the terms are, with- out any qualification or restriction whatever, that : " The men (les gentz) of the Ward of Farringdon Within may elect one Alderman, sage, sufficient, and able to govern the said Ward of Farringdon Within, and who shall be called the Alderman of the Ward of Farringdon Within : and the men of the Ward of Farringdon Without may elect one Alderman, sage, sufficient, and able to govern the Ward of Farringdon Without, and who shall be named the Alderman of the Ward of Farring- don Without." And, what is very remarkable, it is actually the case that, in the annual precept issued by the Lord Mayor to all the wards of the City, it is expressly required that all the men of the wards shall attend, under penalty ; and the Wardmote Inquest is re- quired to return the names of those who do not attend. " And that at the said general Court you give afore us the names and surnames of all those of your said ward that come not to your said wardmote, if they be duly warned, so that due redress and punishment of them may be had, as the case shall require, according to law." This is further illustrated by the fact that it has always been one of the first duties of the Wardmote to keep its own Roll of citizens perfect. Centralization has introduced the mischievous and degrading device of Revising Barristers, and other such con- trivances for making the rights of free men dependent not on the knowledge and honour of the free-men themselves, but upon the decision and discretion of some functionary set over them for the purpose*. It is impossible to conceive of anything more anta- gonistic to the essence and spirit of free institutions. I have said that one of the first duties of the Wardmote is, to keep its own roll perfect. In the annual precept of the Lord Mayor, the following occurs : " Also that you keep a Roll of the names, surnames, dwelling-places, professions, and trades of ALL PEKSONS dwelling within your Ward, wherein the place is to be specially noted by street, lane, alley, or sign. " Also that you cause the beadle within your Ward from time to time to certify unto you the name, surname, dwelling-place, profession, and trade of every person who shall be newly come to dwell within the Ward, WHEEEBY you may make and keep your Roll perfect ; and that you cause the said Beadle, to that purpose, to make and keep a perfect Holl in like manner." * See Local Self- Government and Centralization, pp. 199, 225. 52 THE METROPOLIS AND ITS In addition to the Beadle, whose business it is to notify the in-coming of any fresh occupier, the Constitution of the Corpo- ration of London, simple and complete in all its parts as it is, has provided full means for arranging the materials for the roll which the Alderman is to keep. These are the Ward In- quest. This body is now annually sworn and, as regularly, violates its oath in every ward to "inquire, by the oath you have made, of all the suitors that owe suit to this court /' that is, of all the occupiers within the ward. These ward inquests ought to be sustained in full vigour, instead of being allowed to fall into disuse. It is the express business of the alderman, annually enjoined upon him, but, like the oath of the Inquest- men, as regularly now disregarded " to put his inquest in mind that they seriously consider the articles of their charge, that they may act therein as their oaths do oblige them." And it is the duty of the inquest " to inquire and present as often times as shall be thought expedient and needful, which shall be once every month at the least." By such means the roll is well able to be kept perfect. It must be noted that these ward inquests, like other juries, are simply, in origin and constitution, bodies sworn, in the place and stead of the whole body of the men of the ward (or county) ; and that their presentments have, properly, to be confirmed in the full wardmote or folkmote. It has been already seen that the presentment of the inquest of thirty-six sworn men of each ward was not held good, but only as their personal opinion, it having been made secretly, and so not affirmed by the full wardmote. The other matters which properly come under the cognizance of wardmotes are almost endless. There is nothing which con- cerns the well-being of the inhabitants which it does not fall within their province to consider and act in reference to. Instead of having only a few antiquated functions, as has lately been absurdly pretended by those who ought to know better, there is no good work affecting the public health or welfare which it is not the function of the wardmote to see to, through its ward inquest, or by whatever other means it finds most suitable. It is idle to pretend, as has been done, that any of these functions have become obsolete because special officers are now appointed to do the things named. Such an absurd excuse only proves the MUNICIPAL ADMINISTRATION. 53 degrading influence of centralization. The very use of institu- tions of local self-government is, to take continual care that all those entrusted with any functions properly discharge those func- tions. It is one thing to have an army of 200,000 men on paper ; another to have that number of efficient men equipped and armed. So, it is one thing to have officers appointed and paid to fulfil public duties ; another thing to have such an organization among those affected, as shall keep perpetual watch that the duties of those officers are all discharged, and that, whenever needed, their functions are put in action without vexation, loss, and harassment to individuals. If we look at the old records we find the sort of things that these inquests were in the regular habit of seeing after. And the very enumeration will make self-evident the im- portance of the institution and the practice, and the enormous saving, to take even a pecuniary point of view, that its restored activity would be, to the public purse, as well as to the time and anxiety of individuals. The following is one example, from many that might be given, of the ordinary articles of inquiry* : " Whether the Roll is complete. Whether any have gone away under any circumstances of suspicion. Whether all on the Roll have come up to the Folkmote. Touching burglars, thieves and robbers, forgers, mur- derers, house-burners ; and the accessories and harbourers of any of these. Touching outlaws, and returned convicts. Touching treasure-trove, mur- ders, and stolen goods found and kept. Touching gaol-breach, rape, abduction. Touching maiming, assaults, false imprisonments, and other breaches of the peace. Touching usurers, traitors, &c., and their har- bourers. Touching petty thefts. Touching the hue and cry wrongly raised ; or, if rightly, not followed up : who raised it, and by whose de- fault suit was not followed up. Touching landmarks broken, removed, or altered. Touching water-courses turned or obstructed. Touching ditches, walls, water-banks, pools, or anything of like sort, meddled with, damaged, or otherwise, to any man's hurt. Touching ways and paths wrongfully obstructed or narrowed. Touching false weights and measures. Touch- ing watch and ward not duly kept, and highways not well maintained. Touching bridges and water-banks out of repair, &c., &c. And many other articles" Space does not allow me to dwell more in detail on these im- portant points. I can only allude, hastily, to one other point, of very great importance, and as little understood now as most other parts of the constitution of the Corporation of London. * See Local Self- Government and Centralization, p. 298. E 54 THE METROPOLIS AND ITS It is commonly supposed that the Aldermen of London are elected for life. Such is not, however, the fact. The history of the Aldermen of London is very curious and illustrative. The first time that we meet expressly with that name in the records of London, is in 1184. They were, earlier, called hundredmen. At first they were not annually elected : but it worked ill, and they were made annual, and not eligible to re-election. This was not satisfactory, as a valuable officer was often dismissed. They were made, therefore, re-eligible in 7 Rich. II. (A.D. 1384). This seemed so useful that, nine years later, it was, not very wisely, determined (and enrolled as a statute in Parliament) that they should hold their offices until displaced for reasonable cause. The power of displacement, however, is in the wardmotes, both at Common Law, and by the necessary construction of this statute. It is unnecessary to dwell, now, on any proposed " Reforms " of the Corporation of London. Such Reforms will never be real or sound until they spring from the inhabitants themselves. The very fact of the inhabitants being content to wait to see what Common Councils and Parliaments will do for them, is one of the worst of the results of the contrivances, already alluded to, by which, in 1725, the Corporation of the City of London was emasculated through the monstrous fraud of the Aldermen's Act. And I cannot do better than conclude this branch of the subject with entreating the reader to ponder well the following words of sad, but too sadly verified, prophecy, which are found in the protest entered, by several patriotic Peers, against the passing on to the Statute-book of that Aldermen's Act : " Because we are of opinion that the several great alterations, made by this Bill in the ancient constitution of the Common Council and other the rights, franchises, and prescriptions of the City of London, will, if passed into a law, entirely subvert and destroy the ancient title which the City at this time lawfully claims and lias thereto ; and will introduce and enact a new constitution upon the City, hereafter to be claimed and enjoyed, not upon the foundation of their ancient title, but of this Act of Parliament ; which must, as we conceive, in all future times, when the City of London may have occasion to assert or defend their ancient title and franchises, bring them under insuperable difficulties, and may be followed with dan- gerous consequences concerning the very being and constitution of the Cor- poration, many of which it is impossible to foresee or enumerate. We MUNICIPAL ADMINISTRATION. 55 think this Bill is the more dangerous, because it creates a new constitution in several particulars contained in it, not framed upon the ancient rights proved, assented to, or disputed on either side, but is a new model, without due regard to the antecedent rights, as claimed on either side, and will deprive a great number of citizens of their ancient rights, and franchises in elections and otherwise, without leaving them any opportunity of asserting the same by due course of law ; and is a precedent of the most dangerous consequence to all the cities and corporations of the kingdom. " Because we are of opinion that the petitions of the many thousand free- men of the City against this Sill ought to be of far greater weight against this Bill than the petition of fifteen aldermen for it; and that the confusion which may arise from the Bill, if passed into a law, may tend greatly to the future disturbance of his Majesty's wise and gentle government." TRUE MUNICIPAL SELF-GOVERNMENT FOR THE WHOLE METROPOLITAN DISTRICTS. I HAVE now shown the importance and the wide extent of the questions connected with the municipal development of the me- tropolis. I have pointed out the practical mischiefs necessarily entailed by the system of Centralization ; and the simplicity, but the vast utility and value, of the application of a soundly-worked municipal system. I have shown what classes of matters they are which come within the proper scope of municipal control ; and also in how important a way the existence of true municipal institutions will always operate, even as to matters that do not properly come under their immediate control. I have pointed out, and demonstrated, what are the conditions necessary to be characteristics of any institutions that shall realize true local self- government, and that shall render possible the actual sound dis- charge of those functions which belong to it. I have exposed the hollowness of each of the mere forms and names under which it is now being attempted, by rival jobbers, to impose on the me- tropolis different sorts of Centralization. I have shown the dis- guises and pretexts under and by means of which Centralization, in its various forms, seeks to gain its ends. I have demonstrated that it is a mere farce, so far as true municipal existence or action is concerned, to pretend to erect the whole of the metropolis into 56 THE METROPOLIS AND ITS one municipality, or to bring it under one (so-called) " represen- tative" scheme. I have shown that the only mode in which free men can really act in the sphere of municipal life, is by each hav- ing a range of common action which he can really know and un- derstand, and which he has full opportunity of interchanging ex- periences as to. I have shown that any (so-called) representative system, without this, is merely a device for driving up herds of men ignorantly to the polling-booth, a contrivance for securing oligarchism and jobbery, under cover of the form and name of popular institutions, but with their reality rendered impossible. Finally : Instead of now pretending to dogmatize as to that which can never be dictated, but must always be asserted, if it is to be real and lasting, I have dwelt, at considerable length, upon an example of what true municipal constitution and action has heretofore been in one part of the metropolis. Thus may the lesson be the best learned of what it ought to be, through the whole, and of how men may best set about to reassert it. The importance and practical operation of different parts of the system have been incidentally pointed out in the course of this illustration. It but remains very briefly to show that what has been said has not been mere vague theory, but that it is capable of simple practical adaptation to the wants and conditions of the metro- politan districts. The best proof of this is found in the fact that such adaptation has actually been suggested, and put into a de- finite shape. In January, 1851, a proposition was brought before a meeting of delegates from the metropolitan parishes, by myself, and was, after much discussion, unanimously adopted by that body"*, which grappled, in a practical way, with the difficulties of the case. This proposition took, as its basis, that the whole metropolis should be divided into boroughs, or districts, to be ascertained, as to boundaries, by a representative body to be specially chosen for that purpose. The fundamental principles to be realized in the separate boroughs or districts are as follows : That no district should contain less than a given number (say * This adoption has been several times since emphatically re-affirmed. It was so, on the last occasion, at a meeting of the same body on the llth February, 1852. MUNICIPAL ADMINISTRATION. 57 100,000 or 150,000), nor more than a given number (say 150,000 or 200,000), of inhabitants. That each district should be divided into wards ; each contain- ing not less than 500, and not more than 1000, male adults. Those who have occupied within the ward for a year and a day, to be the electors for the ward. Each ward to have two or more representatives, annually chosen* (but re-eligible) to a District (i. e. } Borough] Council for carrying out all local purposes. That it should be one of the express duties of one or more of the repre- sentatives of each ward, to meet, in open meeting, the inhabitants of their ward once every month at the least, to lay before them the proceedings of the district council, and to receive any com- plaints or suggestions. This proposition further contained the express provision that, in order to have a machinery adaptable to all cases where com- bined operations could usefully be carried on, a general council should be formed, composed of two or more persons chosen out of its own body by each district council. It will be perceived that the object aimed at in this proposi- tion is very simple, but all-important. It is, first, to erect dis- tricts of such extent that they shall embrace considerable tracts, and yet not so extensive that their parts can have little of com- mon interest between them ; the aim being to ensure an ad- ministration, on a sound and true representative system, which shall, in each district, be satisfactory to all parts of it, and bear not unequally on all. It is, secondly, to secure certain funda- mental principles in the administration of the affairs of each district ; on which principles must ever depend the existence of a true and real responsibility in the administration of affairs, and the satisfactory dealing with details. It is, thirdly, to effect the combined action of different districts, in all cases where any work requires such combined action in order to the sound accomplishment of what the public welfare needs. The first object is to be attained by a representative board specially chosen for the purpose, and which must have a definite time, not exceeding six months, within which to discharge its * Nothing can be more essentially vicious than the system of triennial elections, one-third annually going out. It ensures cliquism, and puts an extinguisher upon any tiling like responsibility. 58 THE METROPOLIS AND ITS functions, at the expiration of which it shall cease to exist. The second object is to be only attained by securing in the represen- tatives (under the permanent system) a true discharge of their duties, at the same time that the represented take a constant due care of their own interests. This double object is only to be accomplished by making every representative to have special knowledge of and communication with a special part of each district ; and by making it an essential part of the system that frequent and regular opportunities shall be given for all to understand well what is doing, and is proposed to be done, in matters so nearly concerning them ; that, so understanding these things, they may see and know whether they are well admi- nistered, and be able truly to choose competent representatives to administer them. The third object is to be attained by the formation of a general council, made up of chosen elements from each of the district councils. Into further details it will hardly be necessary to enter here. It would not be difficult to embody the proposition into a simple and practical Bill, which should attain all the objects of sound administration, together with responsible and efficient activity. This proposition meets the whole case. It would leave the city of London a corporation by itself (restored to its sound constitution and working), and would group round it other corporations, each having, assuredly, intelligence and wealth enough to manage efficiently its own affairs ; and each having extent enough to embrace definite interests, and to ensure an apprehension, by all its inhabitants, of the wants and interests of its whole. And the thorough education of every inhabitant in his social and political duties, the thorough appreciation by each man of the value of the institutions under which he lived, and by which his rights, liberties, and fortunes were protected, would unquestionably be most effectually ensured by the requi- sition for regular meetings of the inhabitants in each ward. At these meetings any complaint would be made, or any suggestion offered, with the certainty that it would have its due attention, and not have to undergo the chilling ordeal of official consider- ation and condescension. There is not the slightest reason to fear that, beside the Cor- poration of the city of London, any of these younger corporations MUNICIPAL ADMINISTRATION. 59 would cut a sorry figure. The Corporation of the city of Lon- don has certain large properties, independent of rates levied. But it applies the income from these properties to certain pur- poses which are not unworthy of it, but to which it would be quite unnecessary that the funds of a newer corporation should be applied. The main objects of municipal existence, sewerage, police, paving, &c., &c., it fulfils by means of rates, annually levied. Such rates all the new metropolitan corporations would, of course, levy, just as readily as the Corporation of the city of London does, and would apply them to similar purposes. It is proper to remark that the above proposition was brought forward with reference, especially, to the administration of mat- ters connected with sewerage and drainage. But it was expressly stated that, in preparing and advocating it, its application to all matters proper for municipal management, such as police, high- ways, poor, &c., &e.,* was considered as a matter of course, and only a question of time. Whether such a practical proposition as this shall become a reality, rests entirely in the hands of the inhabitants of the metropolis. The old principle of the common law is, that, when the inhabitants of any place feel that it is for their interest and good government that they should have, within themselves, and separately from the county of which they form a part, independent functions of self-government, they should shape for themselves the instrument of government, according to which they agree to manage their affairs ; and, this having, after full notice and dis- cussion, been formally adopted by themselves, it shall, as a matter of course, have the king's seal affixed to it, as the means of its identification (not as its authority or warrant). It thus becomes a Charter, and is thenceforth recognized as the law which that place is unto itself. This common-law practice is the most sound and wholesome that it is possible to conceive, and the most worthy of freemen. Certain it is, that, if it bejeft to officials, to " Government," or to any self-appointed individuals, to devise, and introduce, and carry a scheme, it will end only in fixing more firmly than ever the burthen of Centralization and costly jobbery upon the metropolis, however popular and however * See Local Self -Government and Centralization, p, 253. 60 MUNICIPAL ADMINISTRATION OF THE METROPOLIS. specious the pretences put forward may be. The metropolis must understand, for itself, what is being done, and what is right to be done ; and, whatever is done, must be done because it is so understood to be right. Thus, and thus only, can the great object be attained of securing a true and sound system of prac- tical municipal life and action ; an object equally important to the pecuniary, the social, the moral, and the political welfare of that vast multitude of human beings which dwells together, now unorganized, but capable of most efficient organization, within the metropolitan districts. FEINTED BY JOHN EDWABD TAYLOB, LITTLE QUEEN STREET, LINCOLN'S INN FIELDS. ON THE CONSTRUCTION SURVIVORSHIP ASSURANCE TABLES. PETER GRAY, ESQ., F.R.A.S. HEAD BEFORE THE INSTITUTE OF ACTUARIES, 26iH APRIL, 1852, AND ORDERED BY THE COUNCIL TO BE PRINTED. LONDON : PRINTED BY C. & E. LAYTON, 150, FLEET STREET. 1852. On the Construction of Survivorship Assurance Tables. By PETER GRAY, ESQ., F.R.A.S. IN a Postscript to the introductory matter of the Assurance and Annuity Tables, compiled and published by Messrs. Smith, Orchard, and myself in April, 1851 (and which Postscript was written by me), it is stated that I had " devised a new table, which, while answering all, and more than all, the purposes of Tables V. and VI. [which show the single and annual premiums for a survivor- ship assurance of \ for every combination of two ages] , by means of a single value for each pair of ages, and thus occupying little more space than one of them, would also be very much less labo- rious in its construction than the former of those tables. The new tables would, in fact, consist of series of columns supplementary to Mr. Jones's Commutation Tables for Two Lives, and possessing all the properties, mutatis mutandis, with respect to the formation of temporary and deferred, as well as present, whole life benefits and payments, that give to tables of the form of those mentioned their great value." The form of the table to which reference is here made suggested itself to me while occupied in superintending the printing of the work which contained the foregoing announcement. Having, however, had just then, as I thought, quite enough to do with Survivorship Assurances for a time, I contented myself with making the announcement cited, and communicating my ideas in a general way to my coadjutors, Messrs. Smith and Orchard. My attention has recently been recalled to the subject, first, by a suggestion in the January number of the Assurance Magazine that I ought to make my method public, and, secondly, by the reading of a paper by Mr. David Chisholm, at the Meeting of the Institute of Actuaries on the 23rd of February last, in which a method of constructing the same tables that I had in view is very fully described and exemplified. Mr. Chisholm's paper appeared to me to be an exceedingly able one ; and being occupied with a subject to which I had devoted great attention, I listened to the reading of it with much interest. In particular, I was gratified by the recognition, on the part of a gentleman of so much experience, of the value of, and the desirableness of possessing, tables of the kind I was the first to suggest. 4 Construction of Survivorship Assurance Tables. Mr. Chisholnr's method of construction differs from mine. First, his method is essentially logarithmic, while mine admits of being applied both in numbers and in logarithms ; and of the two modes I think the former is the preferable. Again, Mr. C/s method is not continuous ; that is, each tabular value is formed independently of other tabular values, and as a consequence, to ensure accuracy, either the whole work must be subjected to a rigid scrutiny, or the entire computation must be performed in duplicate. My method, on the other hand, in both its applications, is con- tinuous. Each succeeding value is deduced, by the simplest con- ceivable operation, from a preceding value, so that verification at a few points suffices to verify the whole. It seems to me, therefore, that it may not be unacceptable if I proceed now to explain and exemplify the method I had in view. Those who may be disposed to undertake the improving exercise of forming the tables in ques- tion, will at all events have thus a choice of methods presented for their adoption. It is known that which may be also written thus, denotes the present value of jl to be received at the end of n years, provided (a?) shall have died in the nth year, and (y) have been alive at the instant of (a?)'s death. Now to adapt this expres- sion to Mr. Jones's Tables, we must introduce in both nume- rator and denominator such a power of v as will make the latter equal to D^. This will be either v x or v y , according as a? or y is the greater. We shall thus have for the value of the contingency under consideration in the two cases The denominators of these expressions, as they now stand, being already formed (in Jones's Tables), it is obvious that we have now to occupy ourselves with the formation of the numerators only, for the requisite number of cases of variation of #, y, and n. Looking, then, at the numerators, involving three variables, #, y, and n, it might at first sight seem to be requisite to form Construction of Survivorship Assurance Tables. 5 them for every value of. each of these quantities. But, in the first place, since of the two quantities x and y, neither takes any values different from those taken by the other, and since in the first expression each value of x is combined only with those values of y that do not exceed it, and in the second each value of y is com- bined only with those values of x that do not exceed it, it follows that the number of formations is thus at once reduced one-half. And, in the second place, since, owing to the peculiar structure of the Commutation Tables, in both expressions the same effect is produced by any variation given to n as by an equal variation given to both x and y, it further follows, that it will suffice to compute the two expressions for all the values of x and y, and for a single value of n. It is most convenient to make /&=!, in which case the numera- tors of the two expressions (which will then denote the value of the contingencies in respect of the first year) will respectively become And, in accordance with what has just been said, the values of these expressions that will have to be computed, are (supposing the Carlisle Table to be used), of the first, those in which x receives every value from 104 to 0, and y every value from x to 0, and, of the second, those in which y receives every value from 104 to 0, and x every value from y to 0. I proceed now to inquire how these values may be most advantageously formed. The expressions deduced above will be simplified, if for \ (l x 4 +1 ) and l y + l v+l , we write d x and s y respectively. It might seem preferable to combine the constant factor J with the quantity l y + l y+l , inasmuch as d x and s v would then denote, the former the number dying between the ages x and x + 1^ and the latter the number living at age y-f . But the other arrangement will be found to be the more advantageous, since, the values of l y 4- ly+i being generally very much greater than those of /,,. 4 +1 , we are less inconvenienced, in the case of this latter function, by the additional figure which arises from the division of an odd num- ber by 2. The expressions with which we have to deal will there- fore now be denoted as follows : and d,s y v v+l 6 Construction of Survivorship Assurance Tables. The following table, formed from the Carlisle Table of Mortality by a process too obvious to need explanation, contains all the terms of the series s y and d x , with their differences, for which we shall have occasion in the subsequent examples. x&y Sy As, d x M x 104 1 3 5 5 103 4 4 1-0 o 102 8 4 1-0 101 12 4 1-0 o 100 16 4 1-0 99 20 5 1-0 5 98 25 7 1-5 5 97 32 9 2-0 5 96 41 12 2'5 1-0 95 53 17 3-5 1-5 94 70 24 5-0 2-0 93 94 35 7-0 3-5 i 92 129 51 10-5 4-5 91 180 67 15-0 3-5 90 247 76 18-5 1-0 89 323 90 19'5 6-0 88 413 115 25-5 6-5 87 528 135 32-0 3-5 86 663 149 35'5 3-5 85 812 162 39-0 3-0 84 974 178 42-0 5-0 83 1152 196 47'0 4-0 82 1348 51-0 At this point the two methods which I propose to develope part company, and must henceforth be treated separately. I therefore commence with I. The Construction in Numbers. The process is to be continuous. To see, therefore, how suc- ceeding values can be most readily deduced from each other, taking first the case xyy, write down in order a few of the leading terms of the series belonging to adjoining differences of age, thus : ,,105 and so on. Now what we have to ascertain is, how we can most easily pass from any one term to an adjoining term. Examine, then, the succession of values in the several columns. We see that in passing from term to term all the three factors vary ; the Construction of Survivorship Assurance Tables. 7 addends consequently would obviously be characterized by a degree of complexity that would quite unfit them for our purpose. But examine the succession in the several rows. Here we see that only one factor varies in passing from term to term ; and that the terms consequently are nothing else than a series of multiples by this varying factor of the constant product of the two remaining factors. Farther, the differences of these terms will also be a series of mul- tiples of the same constant product ; so that, if this last series be formed, we shall be able, by continuous addition of its terms to the initial value, namely, that corresponding to x y=0, to form, with great facility, the terms belonging to each row. To make this more plain, denote for a moment d m v 105 , d m v m , d m v m , &c., by P, Q, R, &c., respectively; then will the above- written terms take the following form : x y=0 x y=l x y=2 x y=3 PSl04 P*103 P*102 P*101 R? 102 Rs 101 Rs 100 Rs 99 and so on. And their differences, taken from the several rows, will be R(5 101 5 102 ), or, PAs 104} PAs 103 , PAs 10:: , QA* 1M , QA* 102 , QA* 101 , RA* It thus appears that the values occupying the first row in the fore- going scheme will be formed by the continuous addition to the initial term, Ps 104 , of the products of the quantity P (or d m v 106 ), by the successive terms of the series As,,, which is one of those of which a portion is tabulated on page 6. In like manner, the values occupying the second row will be formed by the continuous addition to its initial term, Qs 103 , of the products of the quantity Q (or d m v 104 ), by the successive terms of the same series As y . And so also for the third and following rows. A like property holds with respect to the function belonging to the case z^-y, as may be very briefly shown. B 2 Construction of Survivorship Assurance Tables. x-y s v a>=104 # = 103 a: = 102 0=101 a?=100 1 3 0224420 673260 1849220 1849220 3809394 1904697 5885513 1961838 8082771 2020693 1 4 4 0897680 897680 3698440 1849220 5714091 1904697 7847351 1961838 1-0103464 2525866 2 8 4 1795360 897680 5547660 1849220 7618788 1904697 9809189 2452297 1-2629330 3536212 3 12 2693040 897680 739o880 1849220 9523485 2380871 1-2261486 3433216 1-6165542 4546559 4 16 4 3590720 897680 9246100 2311525 1-1904356 3333219 1-5694702 4414135 2-0712101 6062078 5 20 5 4488400 1122100 1-1557625 3236135 1-5237575 4285568 2-0108837 5885513 2-6774179 8587944 6 25 7 5610500 1570939 1-4/93760 4160745 1-9523143 5714090 2-5994350 8337810 3-5362123 1-2124157 7 32 9 7181439 2019779 1-8954505 5547661 2-5237233 8094961 3-4332160 1-1771026 4-7486280 1-7681062 8 41 12 9201218 2693039 2-4502166 7859186 3-3332194 1-1428181 4-6103186 1-7166080 6-5167342 2-5763833 9 53 17 1-1894257 3815139 3-2361352 1-1095321 4-4760375 1-6666097 6-3269266 2-5013430 9-0931175 3-3846604 10 70 24 1-5709396 5386078 4-3456673 1-6180677 6-1426472 2-4284884 8-8282696 3-2860781 12-4777779 3-8393163 11 94 35 2-1095474 7854697 5-9637350 2-3577557 8-5711356 3-1903671 12-1143477 3-7274916 16-3170942 4-5465588 12 129 51 2-8950171 1-1445416 8-3214907 3-0974438 11-7615027 3-6189239 15-8418393 4-4141348 20-8636530 5-8094918 13 180 4-0395587 11-4189345 15-3804266 20-2559741 26-6731448 y-x d x #=104 #=103 #=102 #=101 # = 100 5 5 0224420 224420 1849220 3809394 5885513 8082771 1 1-0 o 0448840 1849220 3809394 5885513 8082771 4041386 2 1-0 o 0448840 1849220 3809394 5885513 2942757 1-2124157 4041386 3 1-0 o 0448840 1849220 3809394 1904697 8828270 2942757 1-6165543 4041386 4 1-0 o 0448840 1849^20 924610 5714091 1904697 * 1-1771027 2942757 2-0206929 8082771 5 1-0 5 0448840 224420 2773830 924610 7618788 1904697 1-4713784 5885513 2-8289700 1-2124157 6 1-5 5 0673260 224420 3698440 924610 9523485 3809394 2-0599297 8828270 4-0413857 1-6165543 7 2-0 5 0897680 224420 4623050 1849220 1-3332879 5714090 2-9427567 1-1771026 5-6579400 2-8289699 8 2-5 1-0 1122100 448840 6472270 2773830 1-9046969 7618787 4-1198593 2-0599296 8-4869099 3-6372471 9 3-5 1-5 1570940 673260 9246100 3698440 2-6665756 1-3332877 6-1797889 2-6484809 12-1241570 2-8289699 10 5-0 2-0 2244200 897680 1-2944540 6472271 3-9998633 1-7142271 8-8282698 2-0599296 14-9531269 8082771 11 7-0 3-5 3141880 1570940 1-9416811 8321491 5-7140904 1-3332877 10-8881994 5885513 15-7614040 4-8496627 12 10-5 4-5 4712820 2019779 2-7738302 6472271 7-0473781 3809394 11-4767507 3-5313078 20-6110667 5-2538013 13 15-0 6732599 3-4210573 7-4283175 15-0080585 25-8648680 Construction of Survivorship Assurance Tables, x-yy x-y Sy x=99 * = 98 * = 97 * = 96 a; = 95 20 5 1-0406568 2601642 2-0097684 5627352 3-5329050 9936295 5-8279131 1-7057307 108635143 3-4845235 1 25 7 1-3008210 3642299 2-5725036 7235166 4-5265345 1-3248394 7-5336438 2-4164518 14-3480378 4-9193273 2 32 9 1-6650509 4682956 3-2960202 9646889 5-8513739 1-8768558 9-9500956 3-4114613 19-2673651 7-1740189 3 41 12 2-1333465 6243941 4-2607091 1-3666425 7-7282297 2-6496787 13-3615569 4-9750478 26-4413840 10-4535704 4 53 17 2-7577406 8845583 5-6273516 1-9293777 10-3779084 3-8641148 18-3366047 7-2493553 36-8949544 13-7331219 5 70 24 3-6422989 1-2487882 7-5567293 2-8136758 14-2420232 5-6305673 25-5859600 9-5236629 50-6280763 15-5778696 6 94 35 4-8910871 1-8211494 10-3704051 4-0999276 19-8725905 7-3970198 35-1096229 10-8029609 66-2059459 18-4474772 7 129 51 6-7122365 2-6536748 14-4703327 5-3861794 27-2696103 8-3906493 45-9125838 . 12-7929800 84-6534231 23-5717764 8 180 67 9-3659113 3-4862003 19-8565121 6-1096961 35-6602596 9-9362952 587055638 16-3465856 1082251995 27-6712158 9 247 76 12-8521116 3-9544958 25-9662082 7-2351664 45-5965548 12-6963772 75-0521494 19-1894700 135-8964153 30-5408234 10 323 90 16-8066074 4-6829556 33-2013746 9-2449348 58-2929320 14-9044428 94-2416194 21-1794892 166-4372387 33-2054589 11 413 115 21-4895630 5-9837766 42-4463094 10-8527496 73-1973748 16-4500887 115-4211086 230273640 199-6426976 36-4850104 12 528 135 27-4733396 7-0244334 53-2990590 11-9782199 89-6474635 17-8853313 138-4484726 25-3016716 236-1277080 40-1745059 13 663 , 34-4977730 65-2772789 107-5327948 163-7501442 276-3022139 yx d. # = 99 y=98 y = 97 # = 96 y = 95 1-0 5 1-0406568 5203284 2-0097684 6699228 3-5329050 8832262 5-8279131 2-3311652 10-8635143 4-6557919 1 15 5 1-5609852 5203284 2-6796912 6699228 4-4161312 1-7664525 8-1590783 3-4967479 15-5193062 6-2077225 2 2-0 5 2-0813136 5203284 3-3496140 1-3398456 6-1825837 2-6496787 11-6558262 4-6623305 21-7270287 10-8635144 3 2-5 1-0 2-6016420 1-0406568 4-6894596 2-0097684 8-8322624 3-5329050 16-3181567 8-1590784 32-5905431 13-9673756 4 3-5 1-5 3-6422988 1-5609852 6-6992280 2-6796913 12-3651674 6-1825837 24-4772351 10-4902436 46-5579187 10-8635144 5 5-0 2-0 5-2032840 2-0813136 9-3789193 4-6894597 18-5477511 7-9490361 34-9674787 8-1590784 57-4214331 3-1038612 6 7-0 3-5 7-28459/6 3-6422988 14-0683790 6-0293053 26-4967872 6-1825837 43-1265571 2-3311652 60-5252943 18-6231675 7 10-5 4-5 10-9268964 4-6829556 20-0976843 4-6894597 32-6793709 1-7664525 45-4577223 13-9869915 79-1484618 20-1750981 8 15-0 35 ' 15-6098520 36422938 24-7871440 1-3398456 34-4458234 10-5987148 59-4447138 15-1525741 99-3235599 10-8635144 9 18-5 1-0 19-2521508 1-0406568 26-1269896 8-0390738 45-0445382 11-4819411 74-5972879 8-1590784 110-1870743 10-8635144 10 19-5 6-0 20-2928076 6-2439408 34-1660634 8-7089966 56-5264793 6-1825837 82-7563663 8-1590784 121-0505887 93115837 11 25-5 65 26-5367484 6-7642692 42-8750600 4-6894597 62-7090630 6-1825837 90-9154447 6-9934957 130-3621724 15-5193062 12 32-0 35 333010176 3-6422988 47-5645197 4-6894597 68-8916467 5-2993574 97-9089404 11-6558263 145-8814786 12-4154450 13 35-5 369433164 52-2539794 74-1910041 109-5647667 158-2969236 10 Construction of Survivorship Assurance Tables. y #=0 y X\ yx=2 y d m s l04 v m , ^io2*io40 105 , ' d m d m s m v m , and so on. Calling for a moment s m v m , s m v m , s w v m , &c., P', Q', R x , &c., respectively, the foregoing terms may be written thus : and their differences, taken from the rows, will be FA^ 103 , Q'Ar/ ifl2 , The operation here, then, it thus appears, will be altogether analo- gous to that in the former case. The terms in the several rows, being multiples of the quantities P', Q', R' ; &c. respectively, will be formed by the continuous addition to an initial term of series of multiples of the same quantities, by the successive values of Ad xt which also is a tabulated series. The preceding example (pages 8 and 9) shows the practical application of the foregoing precepts, the rate of interest being 3 per cent. The example consists of two portions, corresponding to the relative magnitudes of x and y, x being greater than y in the former, and less than y in the latter. In the first portion, x is constant in each column, and decreases by a unit in passing from column to column. On the other hand, y is equal to x in the first row, and decreases by a unit in descending from each row to the next. As a consequence, the relation between x and y in each row is that indicated by the values in the column headed x y. Thus, in the first row, proceeding from left to right, we have the values of the function corresponding to x =104, ?/=104; x = 103, y=103, and so on ; in the second row we have the values corre- sponding to # = 104, #=103; -r=103, #=102; and so of the succeeding rows. The column headed s y , which is supposed to be written, on a separate piece of paper or card, and consequently to be moveable, contains the successive values of s y , taken from the table on page 6, with their differences, i. e. y the values of As, on alter- Construction of Survivorship Assurance Tables. 11 nate lines. In the present position of this slip the values upon it have, opposite to each, in the column headed 104, the multiple by that value of the quantity we have called P, namely, d m v 105 , it being understood that the initial value and the multiples corre- sponding to the values of As y only, have been independently formed, continuous addition of these giving the multiples corre- sponding to the values of s y , the accuracy of which there is con- sequently the power of determining at any point. If the slip be now conceived to be moved up one step, and so applied to the column headed 103, the same thing will hold. Each value on the slip will have opposite to it in this column the multiple of the quantity called Q, namely, d m v m , corresponding to that value; of which multiples, as before, the initial value and those correspond- ing to the successive values of As ty only have been independently formed, the others being derived from these by continuous addi- tion. It will thus be understood, that in passing from each column to the next the slip has to be moved up one step, and in the position thus attained it will indicate the multiples to be inserted in the adjoining column. A second representation of it is introduced, in connection with the column headed 99, to show the position it will have assumed when the first five columns have been passed over. The foregoing description applies, with but little change, to the remaining portion of the example. In regard to variation in passing from column to column and from row to row, y here takes the place of x in the former portion ; and generally it will be found that in corresponding values the values of x and y are merely interchanged. The moveable slip here contains the suc- cessive values of d x and their differences, and the multiples in the several columns are those of the quantities P', Q', R', &c. Here, too, the slip is shown in two different positions. It seems hardly necessary to remark, that each portion of the computation will consist of 105 columns and 105 rows, and that each column, in passing from left to right, and each row in passing from upper to lower, will contain one value fewer than the pre- ceding ; so that both the last column and the last row will contain each but a single value. It remains to describe the method of forming the addends, which, as has been shown, consist of a series of multiples of a quantity, which is the same for each column, but different for different columns, the multipliers being in the one case (x~7y), 12' Construction of Survivorship Assurance Tables. the terms of 'the series A* tf , and in the other (xZ.y] t the terms of the series &d x . Refer to the series As,,. We notice, first, that none of the values (with the exception of the last two) consist of more than three figures. The required multiples then can be easily formed by the aid of a small table of the multiples corresponding to the first nine natural numbers. Secondly, a good many of the values occur twice, and some of them oftener, so that the number of multiples to be formed will always be less than the number of values in the column to be constructed. And, thirdly, if the values be arranged once for all, in the order of their magnitude,, with space between them for their differences, on a separate slip, similar to that already described, it is evident that then the mul- tiples wanted may be very easily formed by the continuous addition of still smaller multiples. Similar remarks apply to the other series, Ae^, corresponding to the terms of which, also, multiples have to be formed. The formation in this case, however, is much easier. Only seven terms of the series consist of more than two figures ; as many as twenty of them are zero ; most of the others are frequently repeated, and of nearly the whole of these the constant difference is *5. There are, in fact, in no case more than twenty-four distinct multiples to be formed. It is to be noted, moreover, in reference to this series, that a good many of its terms are negative. The multiples corre- sponding to these terms must consequently be subtracted instead of added-, and this change of affection should be indicated in setting them down by prefixing the negative sign. To return now to the example. The values formed, it will be borne in mind, have reference each to a single year only, and are consequently not those that are requisite to be tabulated. The values for tabulation are those having reference to the whole after life time at each age. These values obviously consist of the suc- cessive sums formed by continuous addition of the values formed as above, in which x and y have a common difference. The formation of a few of these final values, for the first six differences of x and y, is shown on the opposite page. This construction needs little explanation. The addends in the several columns will be found in the successive rows in the previous formation. The terms in the present formation, in which the values of x and y are interchanged, will be found occupying corresponding positions in the two portions; and addition of any two of these - Construction of Survivorship Assurance Tables. 13 : 101 100 99 98 97 96 95 x-y = .-j-1 x-y=1 X y = 3 x y = 4: x-y = 0224420 1849220 0897680 3698440 1795360 5547660 2693040 7396880 3590720 9246100 44884 M557< 2073640 3809394 4596120 5714091 7343020 7618788 1-0089920 9523485 1-2836820 1-1904356 1-6046C 1-5237^ 5883034 5885513 1-0310211 7847351 1-4961808 9809189 1-9613405 1-2261486 2-4741176 1-5694702 3-12836 2-0108E 1-1768547 ;8 082771 1-8157562 1-0103464 2-4770997 1-2629330 3-1874891 1-6165542 4-0435878 2-0712101 5-13924 2-67741 1-9851318 1-0406568 2-8261026 1-3008210 3-7400327 1-6650509 4-8040433 2-13*33465 6-1147979 2-7577406 7-81666 3-6422E 3-0257886 2-0097684 4-1269236 2-5725036 5-4051836 3-2960202 6-9373898 4-2607091 8-8725385 5-6273516 11-45896 7-55672 5-0355570 3-5329050 6-6994272 4-5265345 8-7011038 5-8513739 11-1980989 7-7282297 14-4998901 10-3779084 19-01568 14-24202 8-5684620 5-8279131 11-2259617 7-5336438 14-5524777 9-9500956 18-9263286 13-3615569 24-8777985 18-3366047 33-25771 25-58596 14-3963751 10-8635143 18-7596055 14-3480378 24-5025733 19-2673651 32-2878855 26-4413840 43-2144032 36-8949544 58-84367 50-62807 25-2598894 33-1076433 437699384 58-7292695 80-1093576 109-47174 y y-x=0 y-x=\ y-x=2 y-a- = 3 y a? = 4 y-x = 104 103 102 101 100 99 98 97 96 95 0224420 1849220 0448840 1849220 0448840 1849220 0448840 1849220 0448840 1849220 04488 27738 2073640 3809394 2298060 3809394 2298060 3809394 2298060 3809394 2298060 5714091 32226 76187 5883034 5885513 6107454 5885513 6107454 5885513 6107454 8828270 8012151 1-1771027 1-08414 1-47137 1-1768547 8082771 1-1992967 8082771 1-1992967 1-2124157 1-4935724 1-6165543 1-9783178 2-0206929 2-55552 2-82897 1-9851318 1-0406568 2-0075738 1-5609852 2-4117124 2-0813136 3-1101267 2-6016420 3-9990107 3-6422988 5-38449 5-20328 3-0257886 2-0097684 3-5685590 2-6796912 4-4930260 3-3496140 5-7117687 4-6894596 7-6413095 6-6992280 10-58777! 937891. 5-0355570 3-5329050 6-2482502 4-4161312 7-8426400 6-1825837 10-4012283 8-8322624 14-3405375 12-3651674 19-96669' 18-54775 8-5G84620 5-8279131 10-6643814 8-1590783 14-0252237 11-6558262 19-2334907 16-3181567 26-7057049 24-4772351 38-51444J 34-96747* 14-3963751 10-8635143 18-8234597 15-5193062 25-6810499 21-7270287 35-5516474 32-5905431 51-1829400 46-5579187 73-48192' 57-42143; 25-2598894 34-3427659 47-4080786 68-1421905 97-7408587 130-90336( 14 Construction of Survivorship Assurance Tables. corresponding terms will give the M corresponding to the values of x and y that belong to those terms. Thus 4-0435878 1-9783178 M 101 .97= 6-0219056 To show the final arrangement of the terms now formed, I give the concluding portion of the table corresponding to difference of ages five years, as it will appear when completed. The columns D and N are borrowed from Jones. Ages. D N E F M 90 95 256-9646 312-6071 109-471749 130-903360 240-375110 91 96 141-4307 171-17636 58-843673 73-481927 132-325600 92 97 76-75788 94-41848 33-257713 38-514449 71-772162 93 98 41-73244 52-68604 19-015690 19-966698 38-982387 94 99 23-58128 29-10476 11-458961 10-587778 22-046739 95 100 14-048867 15-05589 7-816662 5-384494 13-201156 96 101 8-133289 6-922603 5-139244 2-555524 7-694768 97 102 4-414135 2-508468 3-128360 1-084146 4-212506 98 103 1-999932 508536 1-604603 322267 1-926870 99 104 508536 000000 448840 044884 493724 The new columns here are E and F ; M, which contains the sums of the corresponding terms in E and F, being also now added for the first time to a joint life table. And it will by this time, I suppose, be sufficiently understood that the fundamental properties of these columns are that, taking any pair of the tabulated ages, say 95.100, pi _JIL]. = the present value of an assurance of 1 on (100) against (95); MOO . 100 j) D = 1 (95 -L'Oo.lOO V V (95) and (100); (95) (100); on the joint duration of and the other properties, requisite for the formation of temporary, deferred, and intercepted assurances, necessarily follow from the possession of these. By the continuous summation of the terms in these columns, also, other columns may be formed, ad infinitum, which shall possess like properties in regard to assurances increas- ing from year to year. * If Ng 4 . 99 take the place of D 95 . 100 in these expressions, they will denote the annual premiums for the same benefits, payable during the joint duration of (95.100). Construction of Survivorship Assurance Tables. 15 If in the foregoing construction v be made equal to unity (which leads to r=0, i.e., to the hypothesis of money bearing no interest), the construction will be much facilitated. The results of columns E and F will then indicate probabilities of survivorship, while column M will become identical with column D, since the number of failures after a specified age is necessarily equal to the number alive at the same age. II. Construction in Logarithms. Recurring to the symbolical expressions on page 6, for the leading terms of several adjoining columns belonging to the case , namely, x y=0 xy=l xy=2 xy=3 d m s m v m , we have to examine now, not the differences, but the ratios of those terms. Take a column the first. Here we have j ,,105 fi tt l04*l04< ; a !04 *104 103103 "103 l03 and we should find similar expressions for the ratios in the other columns. It will thus appear that the addends by the use of which, setting out with the logarithms of the initial terms, we should form continuously the logarithms of the successive terms in each column, are (x y=0), Alog.^ l() 4 + Alog.5 l04 + log.(l + r), Alog.^ l03 + Alog.s lo3 +log.(l +r), &c. (x y=l), Alog.c? l04 + Alog.5 l0 3+log.(l + ^ Alog.^ lo3 -h Alog.* loa +log.(l + r), &c. (xy=2), AIog.^ 04 + Alog.5 l0i + log.(l + 0> Alog.c? l03 +^log.5 lol + log.(l + r), &c. and so on. There is nothing formidable here. Additions of three lines will suffice, since the constant, log. (I + r), can be combined once for all with the terms of one or other of the series A log. d x or A log. s y . But I use this method only for verification. There is an easier method for the principal formation. Examine the ratios in the several rows. From the first row we have ,7 , .,105 ,] .,105 16 Construction of Survivorship Assurance Tables. from the second 104 ' I " "101 and so on. Hence, taking the logarithms of these ratios, the addends for the continuous formation of the logarithms of the values occu- pying the several rows will be the terms of the series Alog.s,,. A like procedure to that employed above will show, that in the case x/-y the addends for the formation in columns are series of terms of the same form as those obtained for the case x-?y, the only difference being that the terms of the series Alog.cT, and Alog.s,, are interchanged; and that for the formation in rows the addends are the terms of the series A log. d x . The following table contains the portions of the several auxiliary series here requisite, which come into operation in the examples to be presently given. x & y Log. s y AlOg.Sy Vlog.s y Log. d x A\og.d x Vlog.e/ x 104 o-ooooooo 6020600 6148972 1-6989700 3010300 3138672 103 6020600 3010300 3138672 0-0000000 OOOOOOO 0128372 102 9030900 1760912 1889285 ooooooo OOOOOOO 0128373 101 1-0791812 1249388 1377760 0000000 OOOOOOO 0128372 100 2041200 0969100 1097472 ooooooo OOOOOOO 0128372 99 3010300 0969100 1097472 ooooooo 1760913 1889285 98 3979400 1072100 1200473 1760913 1249387 1377760 97 5051500 1076339 1204711 3010300 0969100 1097472 96 6127839 1114920 1243292 3979400 1461280 1589652 95 7242759 1208221 1336593 5440680 1549020 1677392 94 8450980 1280299 1408672 6989700 1461280 1589653 93 9731279 1374618 1502990 8450980 1760913 1889285 92 2-1105897 1446828 1575200 1-0211893 1549020 1677392 91 2552725 1374245 1502617 1760913 0910804 1039176 90 3926970 1165055 1293428 2671717 0228629 0357002 89 5092025 1067476 1195848 2900346 1165056 1293428 88 6159501 1066838 1195210 4065402 0986098 1114470 87 7226339 0988796 1117168 5051500 0450784 0579156 86 8215135 0880425 1008798 5502284 0408362 0536735 85 9095560 0790030 0918402 5910646 0321847 0450219 84 9885590 6232493 The formation of this table is sufficiently obvious,* with the exception of the columns headed v log. s y and v lg- d x . The values in these columns are the corresponding values in the immediately preceding columns respectively, increased by log. (l + r) = -0128372. The succeeding figures of this constant loga- rithm being 247, or say 25, the requisite correction is made by * A log. Sy and A log. d x must not be confounded with log. As y and log. Ad x . The difference of the, logarithm of a number is by no means the same thing as the logarithm of the difference of that number. Construction of Survivorship Assurance Tables. 1 7 increasing the third and every fourth following term of the series in which this logarithm enters by a unit in the last place. But for the necessity for this correction, it would suffice to combine the constant logarithm with the terms of only one of the series A log. s y , A log. d x . The corrections would in such case fall in the proper places in the values formed for verification, only when the differences of age are of the form 4tn. The initial and verification values are formed as follows : Initial and Verification Values. x~7y x/.y ocy = a-y=13 y-x = Q y-a-13 Log. r 105 ^104 n $104 104.104 V log. 0?104 A n sm 103.103 V log. d m A SIDS 102.102 V log. d m A S102 101.101 V log. d m A sioi 100.100 V log. rfioo A SHX) 99.99 Log. v m n ^99 899 6520914 6989700 0000000 Log. v 105 ^104 S 91 104.91 V log. dm A s 9 i 103.90 V log. dios A 890 102.89 101.88 100.87 99.86 Verificat Log. v dm *86 6520914 6989700 2552725 Log. t> 105 104 99 > <^86 6520914 0000000 1760913 3510614 3138672 6020600 6063339 3138672 1374245 3510614 6148972 3010300 8281827 6148972 0910804 2669886 0128372 3010300 0576256 0128372 1165055 2669886 3138672 0000000 5341603 3138672 0228629 5808558 0128373 1760912 1869683 0128373 1067476 5808558 1889285 0000000 8708904 1889285 1165056 7697843 0128372 1249388 3065532 0128372 1066838 7697843 1377760 0000000 1763245 1377760 0986098 9075603 0128372 0969100 4260742 0128372 0988796 9075603 1097472 0000000 4127103 1097472 0450784 0173075 7162775 0000000 3010300 5377910 ion of tf 7162775 0000000 8215135 0173075 dues. 7162775 3010300 0000000 5675359 7162775 3010300 5502284 0173075 ' 5377910 0173075 5675359 The initial values are, of course, the same in both compart- ments. I have, nevertheless, formed them separately for the sake of symmetry, and to show more distinctly how the addend series vary in passing from column to column. I now introduce an example of the actual formation : 18 Construction of Survivorship Assurance Tables. x-y # = 104 #=103 #=102 # = 101 #=100 # = 99 3510614 6020600 2669886 3010300 5808558 1760912 7697843 1249388 9075603 0969100 0173075 0969100 1 9531214 3010300 5680186 1760912 7569470 1249388 8947231 0969100 0044703 0969100 1142175 1072100 2 2541514 1760912 7441098 1249388 8818858 0969100 9916331 0969100 1013803 1072100 2214275 1076339 3 4302426 1249388 8690486 0969100 9787958 0969100 0885431 1072100 2085903 1076339 3290614 1114920 4 5551814 0969100 9659586 0969100 0757058 1072100 1957531 1076339 3162242 1114920 4405534 1208221 5 6520914 0969100 0628686 1072100 1829158 1076339 3033870 1114920 4277162 1208221 5613755 1280299 6 7490014 1072100 1700786 1076339 2905497 1114920 4148790 1208221 5485383 1280299 6894054 1374618 7 8562114 1076339 2777125 1114920 4020417 1208221 5357011 1280299 6765682 1374618 8268672 1446828 8 9638453 1114920 3892045 1208221 5228638 1280299 6637310 1374618 8140300 1446828 9715500 1374245 9 0753373 1208221 5100266 1280299 6508937 1374618 8011928 1446828 9587128 1374245 1089745 1165055 10 1961594 1280299 6380565 1374618 7883555 1446828 9458756 1374245 0961373 1165055 2254800 1067476 11 3241893 1374618 7755183 1446828 9330383 1374245 0833001 1165055 2126428* 1067476 3322276 1066838 12 4616511 1446828 9202011 1374245 0704628 1165055 1998056 1067476 3193904 1066838 4389114 0988796 13 6063339 0576256 1869683 3065532 4260742 5377910 y-x y = 104 y = 103 y = 102 y = 101 y = 100 y =gg 3510614 3010300 2669886 5808558 7697843 9075603 0173075 1760913 1 6520914 2669886 5808558 7697843 9075603 1760913 1933988 1249387 2 6520914 2669886 5808558 7697843 1760913 0836516 1249387 3183375 0969100 3 6520914 2669886 5808558 1760913 9458756 1249387 2085903 0969100 4152475 1461280 4 6520914 2669886 1760913 7569471 1249387 0708143 0969100 3055003 1461280 '5613755 1549020 5 6520914 1760913 4430799 1249387 8818858 0969100 1677243 1461280 4516283 1549020 7162775 1461280 6 8281827 1249387 5680186 0969100 9/87958 1461280 3138523 1549020 6065303 1461280 8624055 1760913 7 9531214 0969100 6649286 1461280 1249238 1549020 4687543 1461280 7526583 1760913 0384968 1549020 8 0500314 1461280 8110566 1549020 2798258 1461280 6148823 1760913 9287496 . 1549020 1933988 0910804 9 1961594 1549020 9659586 1461280 4259538 1760913 7909736 1549020 0836516 0910804 2844792 0228629 10 3510614 1461280 1120866 1760913 6020451 1549020 9458756 0910804 1747320 0228629 3073421 1165056 11 4971894 1760913 2881779 1549020 7569471 0910804 0369560 0228629 1975949 1165056 4238477 0986098 12 6732807 1549020 4430799 0910804 8480275 0228629 0598189 1165056 3141005 0986098 5224575 0450784 13 8281827 5341603 8708904 1763245 4127103 5675359 Construction of Survivorship Assurance Tables. 19 A log. s y 104 103 102 101 100 99 After what has been said, this example seems to require but little explanation. The arrangement of the values is precisely the same as in the preceding formation in numbers. In the first com- partment x is constant in each column, and in the second y is constant, while in both the differences of age are constant in the several rows. The values here formed are consequently the loga- rithms of the values occupying corresponding positions in the preceding formation. In practice it will be proper to leave the alternate columns unoccupied, to receive the natural numbers, which it is unnecessary here to take out, since, as just mentioned, we already have them in the first formation. Refer to either portion of the present example say the first. The addends in the several columns are the successive terms of the same series (A log. s y ), commencing in each column with the term immediately following that with which a commencement was made in the preceding column. Each term consequently may be traced, from its occur- rence in the first column, in a diagonally ascending line, till it appears for the last time in the first row. It is comparatively easy then, when the addends have been properly inserted in the first column, to insert them throughout, since a single reference for each value will suffice for every occurrence of that value on the same opening of the paper made use of. But the labour of writing the addends may be spared by writing them once for all upon one or more perforated cards of the form here shown. The manner of using this card will be ob- vious from comparison of it with the first por- tion of the example just given. For the first column it will be placed with the first opening over the initial value in that column. Con- tinuous addition then will, it is apparent, pro- duce precisely the same values as already appear in the column in question. To form the second column, the card will be placed so that the initial value in that column shall ap- pear through the second opening, opposite 103, and continuous addition will, as before, produce the required values. To make this more clear, 97 1076339 20 Construction of Survivorship Assurance Tables. the card is here shown in three different positions, adapted to the formation of the leading terms of the first three columns. A lOg. Sy 104 A log. s y 6020600 104 103 A log. s y 6020600 3010300 104 3510614 103 2669886 102 5808558 6020600 3010300 1760912 103 9531214 102 5680186 101 7569470 3010300 1760912 1249388 102 2541514 101 7441098 100 8818858 1760912 1249388 0969100 101 4302426 100 8690486 99 9787958 1249388 0969100 0969100 100 5551814 99 9659586 98 0757058 0969100 0969100 1072100 99 6520914 98 0628686 97 1829158 0969100 1072100 1076339 98 97 1072100 1076339 97 1076339 In a previous part of this paper I intimated my preference for the first of the two methods of construction that have now been described. The reason of this preference may be now briefly stated. It is simply this that when the method in question is Construction of Survivorship Assurance Tables. 21 employed we have the benefit of a continuous process, and conse- quently the power of thorough verification, up to a later stage than when the logarithmic method is made use of. By the first method we form continuously the actual values of the functions, of which, by the other method, we form only the logarithms. And as the operation of taking out the numbers corresponding to these loga- rithms is one to which an infallible check cannot be applied, it seems to follow that we have the greatest security against error by employing the method of construction in numbers. It is true that this method is attended with a little more labour than the other ; but were the additional labour very much more than it is, I should consider it amply compensated by the advantage in regard to security against error which, as we have just seen, this method Another distinction between the two methods deserves to be mentioned. When the logarithmic method is employed we can obtain no more than seven figures in the several results. Seven figures may or may not be sufficient. On this point different com- puters will entertain different views. Those who desire a greater number, however, or to ensure greater accuracy with the same number, can have their desire gratified to the fullest extent by employing the method of construction in numbers. The number of figures that may be obtained true by this method is, for all practical purposes, unlimited. And now, before I close, I would direct attention to a mecha- nical aid, the use of which imparts an almost magical facility to the most complex and extensive computations, and in the absence of which even the best devised methods of applying formulae at all complex, or requiring the employment of many figures, become exceedingly perplexing and irksome. I refer to the employment of paper, ruled in squares, each square being adapted to receive a single figure. By this means not only does each figure necessarily fall in its proper place, and so facilitate subsequent proceedings, but values that occur periodically) and have to be worked up to, as it were, in the course of continuous or other operations, can be inserted in their places in the outset, so as to avoid all necessity for interruption in the work. But one must try this paper to be able fully to appreciate its great advantages, and the facilities it affords. I believe I am warranted in saying that by the employ- ment of it in such operations as have been described in the present paper, the labour that would otherwise be necessary will be found to be reduced one half, while accuracy will be most materially 22 Construction of Survivorship Assurance Tables. promoted. The paper may be obtained by order of any stationer. That which I use (foolscap) has about 70 horizontal lines and*46 vertical lines on a page. I am quite aware that this paper is known to and used by a good many actuaries, as well as in astronomical computations ; but I have recently had occasion to become acquainted with so many instances in which it is not known, that I believe I shall be doing good service in thus prominently directing attention to its advan- tages. I have now finished. I am quite prepared to learn that the practised computer, whatever opinion he may entertain of the methods I have endeavoured to develope, will think that I have been unnecessarily minute in my details as to their application. I admit it. For him I have gone into unnecessary detail. But I have had chiefly in view the younger members of the Institute, whom I would fain stimulate to enter upon the exercise of the construction of tables, and I have been anxious to remove every- thing that might prove an obstruction in their way. If two, three, or four of our younger members would unite for the construction of a complete set of tables of the kind now described, the labour would be comparatively light ; and, besides the benefit they would thus confer on the Profession generally, I feel very sure that, at the conclusion of their task, they would be ready to acknowledge that the exercise had been the most beneficial to themselves of any they ever entered upon. They would find they had acquired such an intimate acquaintance with the structure and properties of the tables, that they could apply them to practical purposes with a facility and confidence which without this preparation long expe- rience only could have imparted. I should be glad to afford, to any of our friends disposed to act on this recommendation, all the assistance in my power in the way of information or suggestion. In conclusion, I think it necessary to mention that the methods developed in the foregoing paper are identical in principle with methods I have elsewhere described for like purposes. London, 15th March, 1852. C. & E. Lay ton, Printers, 150, Fleet Street. THE PERILS OF POLICY-HOLDERS, AND TJII. LIABILITIES OF LIFE-OFFICES. A FIRST LETTER ADDKKSSED ft) LH1 RIGHT HON. WILLIAM EWA11T GLADSTONE, M.P., CHAXCKLLOlt OF J'ilK EXCHEQUER. BY WILLIAM CARPENTER, A 1'OHCY-HOLDiSU AND SllAllii-llOLDliU. SECOND EDITION. The finance of a life office differs essentially from that of any other company ; while it is advancing to insolvency, its income may exceed its outgo for many years, or it may have a large surplus of unappropriated capital, while its annual expenditure greatly exceeds its income. An ordinary balance-sheet is no test of its financial condition ; and, by using bad tables, assuming different rates of interest, operating on different principles, the results of valuations, as they are called, may be made to differ to the extent of many thousands hundreds of thousands of pounds. Da. FAER, in Eegistrar- General's Twelfth Report. WILLIAM STRANGE, 8, AMEN CORNER, PATERNOSTER ROW. 1860. Price One Shilling. ERRATA. Page 61, line 7 from the bottom, for Promoter* read Protector. Page 89, line 2, col. 5, in Table, for 47-2-, ?w/d 23f ; and in 5th line from the bottom, dele 188,422. Page 90, line 3, after like, insert age. Page 134, line S, after, had received, add, on existing policies. J.O.NJJON : TKl) BY JOSEPH CLAYTON, 17, BOUVKKIK STl:- CONTENTS. IMPORTANCE OF LIFE INSURANCE, AND GROWING DISTRUST OF THE OFFICES 7 PARLIAMENTARY INQUIRY, AND REPORT ON LIFE OFFICES. 11 GROWING IMPORTANCE OF LIFE-OFFICE REFORM .... 14 COMPANIES EXTINCT AND IN CHANCERY 15 AMALGAMATIONS AND TRANSFERS OF LIFE POLICIES Professional Amalgamators Monarch and Liver- pool and London London Mutual, Mentor and Eagle British Commercial British Nation Age Birkbeck English and Irish Church Various Amalgamations Unsound Principles on which Amalgamations are effected .... 16 QUESTIONABLE CONDITION OF LIFE OFFICES False Test of their condition Asylum British Commercial General Remarks 31 DELUSIVE BALANCE-SHEETS OF ASSETS AND LIABILITIES London Equitable Kent Mutual Scottish Widows' 1 Fund Consolidated Globe British Em- pire Mutual Unity General New Equitable Liverpool and London Mitre European Crown Colonial Eagle Scottish Equitable False Valuations Delusive Statements of 4 CONTENTS. PAOK Profits American Commissioners' Report on the International, and Messrs. Woolhouse and Nieson's Answers to it 38 PROPORTION OF ASSETS TO LIABILITIES IN TWENTY OFFICES Eagle Scottish Widows' University Standard Mutual National Provident Metropolitan Legal and General Liverpool and London Minerva International Victoria Star Sove- reign Consolidated Gresham Kent Mutual New Equitable European British Industry. . 89 QUESTIONABLE INVESTMENT OF STOCK The Eagle Globe Metropolitan Legal and General National London Equitable County Liverpool and London 93 WHAT THE FINANCIAL STATEMENT OF A LIFE-OFFICE SHOULD COMPRISE Recommendations of Parliamentary Committee 2 and of Dr. Farr Suspicious reserve of Life- Offices 101 No RELIANCE TO BE PLACED ON THE APPARENT RESPECT- ABILITY OF AN OFFICE Conditional value of a Policy Advantage taken of Insurants' Errors Offices which have re- sisted Payment of Policies 100 SURRENDER AND FORFEITURE OF POLICIES. ...... Ill A LIFE-OFFICE ox A SOUND AND SATISFACTORY BASIS . 119 CONCLUSION. 131 TO THE RIGHT HONOURABLE WILLIAM EWAftT GLADSTONE, M.P., Her Majesty's Chancellor of the Exchequer., $c. Tudor House, Cheyne Walk, Feb. 28th, 1860. SIR, THE interests involved in the opera- tions of the Life Insurance Companies and Societies of the United Kingdom are of sufficient magnitude to justify any solicitude or anxiety that may be felt as to the soundness of their position, and their ability to discharge their obligations obligations affecting the prospects of many thousands of Widows and Orphans. Some special circumstances recently induced me to look into the practice of Life Insurance, with a view to determine, as well as I could, how far the dealing of the Life-Offices with their policy-holders, who have entrusted them with many millions of money, for the benefit of surviving widows and chil- dren, is just and equitable. The limits of the inquiry naturally enlarged themselves as I proceeded, and the facts which INTRODUCTION. presented themselves, with the conclusions to which they inevitably lead, were such as to force the con- viction, that the liabilities of a great number of the Companies and Socities now receiving large sums of money in trust for the public, are far beyond any resources they possess, or can command, to discharge them, and that the perils of the policy- holders are, therefore, great. This, Sir, must be my apology for soliciting your attention, in the midst of your manifold and onerous duties, to a few facts and suggestions on this important subject, which I proceed to do, in the following order : I. IMPORTANCE OP LIFE INSTJEANCE, AND GROWING DISTEUST OF THE LIFE OFFICES. Many circumstances have been brought under pub- lic notice, during the last seven or eight years, which have led to the conclusion, that there is much more of show than of safety in many of these institutions ; and attempts have been made to separate the good from the bad ; but hitherto in vain. The policy of " the offices " is, with a few exceptions, one of secrecy and mystification ; and a practice which should be so open and intelligible as to be placed beyond all mis- conception and doubt, is now full of suspicion. The consequence is, that a mode of investment, which Franklin observed, "is the cheapest and the safest mode of making a certain and secure investment for one's family," is so little resorted to, compared with what it would be, were it properly conducted, that complaints are made by various offices, if the Times may be taken as an authority, of the inactivity of their business ; and they are suggesting to popular lecturers on social and economical topics, the pro- priety of animadverting on " the want of thrift and forethought in the heads of families, in thus neglect- ing in prosperity to make timely provision for father- less children and widows." The Times, very reasonably, as I believe, attri- butes the comparative neglect of this admirable, and, 8 IMPORTANCE OF LIFE INSURANCE. with the large mass of the community, only method of making timely provision for their Wives and Children, in the event of their own death, not to any want of thrift or forethought on the part of those on whom the obligation devolves, but to "the growing distrust of the security of Assurance Companies," and "the general dissatisfaction felt at the inadequate returns made for the high rates of premium exacted." This distrust and dissatisfaction is no new thing. Early in the session of 1853, the Government had become so far impressed with a sense of the importance of the Life Insurance Institutions of the country, in both a pecuniary and a social point of view, and with the unsound and precarious condi- tion of many of them, that Mr. James Wilson, then under-secretary of the Treasury, was charged with the duty of bringing them under the review of the House of Commons, with a strong and emphatic recommendation that Parliament should interfere, in some decisiA^e and efficient way, so as to place them upon a safer and more satisfactory footing. In calling the attention of the House to the subject, Mr. Wilson was careful to impress upon it the fact, that the Government had not lightly, nor without grave consideration, made up its mind to ask for legislative interference with these institu- tions. " The Executive," he said, " would have been criminal in the highest degree to stand idly by, with folded arms, and not take some step," with a view to the applying of a remedy to the state of affairs which the Assurance Companies then presented. IMPORTANCE OF LIFE INSURANCE. 9 And, further, to show the House that it was no ordinary case in which the Executive was about to ask it to exercise its legislative functions, for the safety and well being of " the most deserving class of society," he called attention to " the enormous magnitude " to which these life associations had grown, and to u the vast amount of capital invested in the hands of those who managed them " capital " contributed by a class of persons who had justly entitled themselves, by their provident habits, their self-denial, and their enormous annual savings, to all the protection which the House could give them." " In SCOTLAND alone," as he observed, " the lia- bilities of fifteen assurance offices amounted to to 33,000,000 sterling. " The assets, already paid up, amounted to 6,000,000 sterling. " The annual income exceeded 1,500,000 ster- ling. " In GREAT BRITAIN, the accumulated capital of "the companies amounted to 150,000,000 sterling, at the lowest estimate ; " While the income they received amounted to no less than 5,000,000 sterling." Thus, in England and Scotland, only, according to Mr. Wilson who does not, however, profess to give a precise statement the accumulated capital of the offices amounted to 156,000,000, and the income to 6,500,000. The British public has become so accustomed to deal with millions of pounds sterling, that the mag- nitude of these figures does not at once strike the 10 LIFE INSUKANCE OFFICES. mind ; but a moment's reflection will suggest that it is great, and involves interests so grave that they assume a national importance. It was in this light that the Government justly and properly regarded them. "When, the House considered," said Mr. Wilson, " the enormous mag- nitude of the interests involved in these associations when they knew the unsatisfactory condition in which many of them were placed when they re- flected that hundreds of associations were springing into existence one day and falling down the next, they would, he thought, hardly be prepared to allow such a state of things to go on, without endeavour- ing, at least, to apply a remedy." And he added, that, " One of the earliest things to which the atten- tion of the Government was called, on their accession to office, was the abuses which existed in these in- stitutions abuses which they could not permit to go on, without, at least, bringing them under the consideration of the House, and calling upon Parlia- ment to make some effort to suppress them." The House of Commons unanimously acquiesced in the view which the Executive took of this im- portant question, and a Select Committee was ap- pointed, to " inquire into the position of the assurance companies and associations of the United Kingdom, and to report thereupon to the House." 11 II. PAELIAMENTAEY INQUIKY, AND EEPOET, GIST LIFE OFFICES. The Select Committee sat, and took a mass of evidence, some of which was contributed by men of great acquirements and a large practical know- ledge of the internal affairs of many of the assurance offices of the United Kingdom ; and, in the month of August, it presented a report, together with the evi- dence that had been taken. This ponderous blue-book throws much light on the defective management not to say on the fraudu- lent practices of which the public has been too often made the victims. The Eeport exhibits a great desire on the part of the Committee to abstain from all undue inter- ference with the operations of these institutions ; but it speaks in a very decisive tone on the necessity of such an alteration in the law as it was believed would guard the public against the continuance of those mal-practices which had been proved to exist. The business of Life Insurance differs so materially in its general character from ordinary trading trans- actions, that the Committee considered it might be fairly regarded as an exception to the principle of non-interference, on the part of the Government, in matters of trade " The obligations undertaken by such associations have refer- ence to a very remote and uncertain period ; the objects which 2 PARLIAMENTARY INQUIRY. persons have in view in effecting insurances upon their lives is generally of an important and solemn character namely, the pro- vision for widows and orphans, after the death of their natural protectors. Unlike any ordinary transaction of trade, a contract, once entered into, cannot be discharged or abandoned, if doubts of the stability of an office should arise, without a greaf sacrifice of premiums paid in past years, and the necessity of effecting new policies in other offices, at increased rates of premium, owing to the greater age of the insured; and, in the present state of uncer- tainty which arises from the imperfect knowledge as to the real condition of Assurance Offices, persons are thus placed in the anxious and unhappy dilemma of being compelled to perse vere in paying premiums from year to year, with some suspicion and doubt as to the ultimate advantage of doing so, or incur the serious loss, which, under the most favourable circumstances, must attend the abandonment, or the sale of a policy." The Committee expresses its concurrence in the opinion given by some of the witnesses, that the publication of accounts has hitherto tended to mis- lead, rather than to inform the public ; and, in deal- ing with this part of the subject, it recommends that it should be imperative upon every company to make such a statement of its assets and liabilities, and of the nature of its accumulated stock, &c., as should set forth its actual condition, beyond all doubt. In the month of September following, Dr. Farr, the head of the Statistical Department in the Registrar-General's office, who had given very valuable evidence before the committee, again re- turned to the subject, and, in a letter addressed to the Registrar- General, and published in the twelfth Annual Report, he suggested additional reasons, of great weight, for a reform in the system under NECESSITY OF LEGISLATIVE INTELIFEKENCE. 13 which Life Assurance Offices had hitherto been conducted, especially in the preparation and publi- cation of their balance-sheets. We have now entered into the year I860, but the duty which Mr. Wilson emphatically described as one which " it would be criminal in the highest degree" for the Executive not to take some step to discharge, has not been performed. Has the obligation to " protect the best and most deserving class of society" against the mismanagement or frauds of designing or incompetent persons, who contrive to gain their confidence, and to command the custody of their moneys, to the enormous extent- stated, and for one of the most sacred and beneficent objects which parents can propose for their children has this obligation ceased to exist ? This cannot be pretended. On the contrary, it has become more imperative than ever, inasmuch as the evil has assumed larger proportions than at any anterior period of time. 14 III. GEOWING IMPOETANCE OF LIFE- OFFICE EEFOEM. Mr. Wilson stated that between 1844 and 1853, 90 life associations had ceased to exist; and this he urged although, I think, erroneously as one of the strongest reasons for legislative inter- ference. But what is the fact with reference to the five years that have since transpired? Between 1853 and 1859, no fewer than 129 life offices expired. Therefore, if Mr. "Wilson's argument were worth anything in 1853, it is worth much more in 1860, the number of offices failing having increased above 150 per cent, during the latter period of time. But this is not the worst feature of the case. An office may cease to exist, without entailing any immediate loss, whatever may ultimately take place, upon either share -holders or policy-holders, as they may both be transferred to, or become amalgamated with, some other office or company. The case is worse, when the proved insolvency of a company leads it into " That Serbonian bog where armies whole have sunk" the Court of Chancery. Now, taking the nine years 1844 to 1853, and the five years, 1853 to 1859, we find that, whereas the number of life-companies winding up in Chancery during the former period was but 'few, the number during the latter period LIFE COMPANIES IN CHANCERY. 15 was thirty-seven *. The increase is 530 per cent. ; and there are five more candidates for the winding- up powers of the Court f! * The following are the Companies now winding-up in the court : Amazon. Athenaeum. Birkbeck. British & Foreign Reliance. Caxton. Colonization. Commercial and General. Cosmopolitan. Counties Union. Deposit and General. Era. General Live Stock. General Commission. General Indemnity. Home Counties. Hull and London. Independent. Justice. York and Lancashire Guarantee. London and County. London Mercantile. London and Westminster. Mercantile. National Alliance. Merchant Traders. Nelson Sea-Voyagers. Newcastle-on-Tyne. Oak. Observer. Parental. Port of London. Protestant. Sea, Fire, and Life. Security. Tontine. Universal Provident. London. t Anglo-Australian, British Provident, Times, Mercantile Guarantee, and Solvency Guarantee. 16 IV. AMALGAMATIONS AND TEANSFEES OF LIFE POLICIES. One of the expedients for postponing this un- enviable appearance in the least popular of all courts, is that of amalgamation, or, as it is some- times called, the transfer of business a process which requires to be noticed, as it will help to throw some light on more than one of the existing companies. To such an extent has this practice been car- ried, within the last few years, that several gentlemen, who may justly be regarded as pro- fessional amalgamators, have made it the source of very large profits, and have secured, in many cases, life annuities of several hundreds a year. The old maxim, ex nihilo nihii fit, is, in this busi- ness of amalgamation, utterly refuted ; for, when a business is proved to be so bad and profitless in some instances, so ruinous as to be incapable of being carried on, it becomes a mine of wealth to the skilful gentlemen, who, from within and without, transfer it to the nursing of some other company. An advertisement that is just now appearing in the Times and other papers will show how the first step in this business is sometimes taken, al- though it is not often that it is made so public a matter : " A COMPANV, possessing a large Capital, is di-sinnis <>t' Prn- AMALGAMATION OF OFFICES. 17 CHASING the BUSINESS of a LIFE ASSURANCE OFFICE, and will pay liberally for the business of a good and sound standing. Retiring allowance to officer by way of compensation for loss of appointment six years' salary in cash, and a small annuity. None need apply, unless with real name and address. The strictest con- fidence and security will be observed. Direct, in the first instance, to SECURITY, 159, Packington Street, Lower Road, Islington, N." In a letter which appeared in the Daily Telegraph, the other day, it was stated that a meeting was about to be held, to promote the junction of an old office, long retrogressing, and one of a more recent stand- ing. For the 20 paid-up shares of the former, it was proposed to allow only 8 per share to the holders, whilst the secretary was to receive 800 a year for life, or 10,000 down, and the gentleman who managed the amalgamation, 4,000. It is well known, amongst gentlemen who are connected with life offices, that there are some ten or a dozen of the fortunate persons, who have been concerned in handing over the business of one office to another, now rejoicing in the possession of life annuities varying from 400 to 800 a year, as the reward of their skill and integrity, all paid out of the funds contributed by the policy-holders in the absorbing office. You, of course, look in vain for any intimation of these payments in the annual balance-sheets ; but, if you could analyze the items which go to make up the sums which stand as "annuities" on the credit side, and Avhich are supposed to be annuities purchased of the office, these lucky persons would be found amongst the recipients of those large sums ! 18 AMALGAMATION OF OFFICES. The transfer of the Monarch Life-Office to the London and Liverpool was completed in the latter end of last year, by the division of 4500, amongst the gentlemen who had so admirably managed the business of the former, that it could no longer be carried on ! The following extract from the minute- book of the Monarch board, p. 228, is given in Mr. Matthew Forster's " Statement of Facts." It is a gem, the more worth preserving, inasmuch as it is seldom that the outside world can get a glimpse of such precious things : Extract from the Monarch Minute Book, page 228. " At a meeting of the directors of the late Monarch Assurance Company, held at the office of the Liverpool and London Insurance Company, in the Poultry, " Present, " Sir JOHN MUSGKOVE, Bart., JOHN HUMPHREYS, " C. S. BUTLER, JOHN LAURIE, " J. G. HAMMACK, Sir F. G. MOON, Bart., " EDWARD HUGGINS, WILLIAM SCHOLEFIELD, FRANCIS WITHAM, " The deed of amalgamation was laid on the table, and the solicitor stated that he authorized the board to sign the same. * " It was arranged that a sum of ten guineas should be reserved for Messrs. Walter and Byron, the committee men. " It was arranged and agreed to by Mr. Boult, that the balance at the Union Bank of London should be retained to meet the solicitor's costs, and a sum of 136, to which the directors con- sider themselves entitled for the attendances between the 30th of September and the 31st of December, 1857. " The claim thus made by the directors, if not acceded to by the Liverpool and London Board, shall be referred , to Mr. Scrimgeour for decision. " The solicitor stated that he had received a letter of credit for THE MONARCH, AND THE LONLUN MUTUAL. 19 4500, 2000 of which was ordered to be handed to Sir John Musgrove. " It was resolved, " That the division of the 2000 should be as follows: " 300 to the chairman. " 350 to Sir F. G. Moon, Bart., " 350 to J. G. Hammack, " 250 to J. Humphreys, and 150 to each of the remaining five directors. " That a letter be signed, authorizing the Union Bank of London to transfer the balance in their hands to the credit of Sir John Musgrove, Bart., and Swinton Boult, Esq. " Cheques were signed for 12,526 4 3,021 11 3 2,965 10 6 " The deed of amalgamation was then executed, the several conveyances and assignments of freehold and landed property with reversions, and transfers of stock, were signed by the trustees then present, and the solicitor was instructed to procure the due execution of the same deeds and documents by the remaining trustees. " It was arranged that, after providing for the solicitor's bill of costs out of the funds remaining in the Union Bank, the balance should be appropriated to the payment of the two several sums of fifty guineas each, voted to Mr. Alderman Wire and to Mr. Clement, at the last general meeting of the board, on the 22nd of September, 1857." The view taken of these transactions, when they happen to become known, is seen in the case of the London Mutual, which became amalga- mated with the Jfo0rfe, in the course of 1858, and the seven directors of which received, as " compensa- tion," out of the funds of the Eagle, the sum of B 2 20 AMALGAMATION OF OFFICES. 4000, being 571. 7s. Sd. each, with a promised annuity of 135 to the chairman. The affair was brought into the Rolls Court by one of the policy- holders in the London Mutual, and the Master of the Rolls, after animadverting upon the transaction, but saying that he would " refrain from making any se- vere remarks " upon it, ordered the money to be refunded, in favour of the members of the London Mutual Society. It is not often, however, that this part of the business of an amalgamation transpires. The thing is snugly and skilfully managed by the professional undertakers, who reap the reward of their sagacity and silence in the immediate receipt of considerable sums, and, not unfrequently, in the securing of a per- petual annuity. What we are more immediately concerned in ascertaining, however, is, the way in which these amalgamations affect the absorbing body whether for good or for evil. We can readily see how a grocer or an innkeeper can sell his business to an incomer, and the transaction be profitable to both parties. But it is not always so with a business in policies. Every existing policy is charged with its obligation ; and it is only by the husbanding and profitable employment of every premium paid upon it minus only the " loading " for expenses and profits that the obligation can be ultimately dis- charged. What is to be said of an amalgamation in which the incoming company or society has spent its pre- miums, or a large portion of them, the absorbing company not only taking its policy obligations, but BRITISH COMMERCIAL. " compensating " directors, managers, secretaries, and professional amalgamators for helping them to the bargain ? Take the case of the British Commercial, just amalgamated with the British Nation, and about which happy junction, I find the Insurance organs, the Post Magazine and the Insurance Gazette, are congratulating, in extravagant terms, the fortunate share-holders and policy-holders of the British Nation.* Or, I may refer to the Age, which has been amalgamated with the English and Irish Church. This company was established in 1851, with a paid-up capital of 9000 ; and, for two or three years, all was stated to be going on in the most satisfactory manner, considerable profits being made, and large prospects opening to the company. In 1856, how- ever, the year in which a bonus had been promised to share-holders and policy-holders, no skill or in- genuity could suffice to carry the false appearances any further. The company had received on shares, debentures, and policies, 39,116, and for annuities, 1389; making, in the whole, 40,505. The whole sum of the premiums, said the report of the directors, " is undoubtedly expended;" and "the capital paid up is also expended;" but then came that fine expedient so familiar to life offices ; " the outlay is compensated for by the excess of value on income over liabilities from policies issued," to the extent of 3319, "which," add the directors, * See page 34. 22 AMALGAMATION OF OFFICES. " stands in favour of the company, and which is applicable to future bonuses, for policies entitled to participate in profits to the extent contemplated by the deed." I shall have something to say about the mode in which these apparent surpluses are got, and what is their real worth, as an asset, by-and-bye. My object now, is merely to show the condition of a company which was then endeavouring to effect an amalgamation with one which has since got into the winding-up department of the Court of Chancery (the Birkbebk^ and failed to effect it, only because the BirJcbecJc was "constantly foiled" in its re- ciprocal advances the Age managers " withholding the accounts and documents which were absolutely necessary to the conducting of the business, and by unnecessary delays and factious obstacles." How much the English and Irish Church company is likely to get out of a business which was so pros- perous while it existed alone, it is difficult to conceive. Let us just glance at the London Mutual, one of the ten or twelve societies absorbed in the Eagle, as already stated. It appears, from the Keport presented to the seventh annual meet- ing, in July, 1857, that the annual income from premiums was 16,511. The preceding year was stated to be one of " great and signal pros- perity " to the society, and the chairman said that the members might "certainly believe there was no life association, of their age, in the City of London, that had attained the pecuniary and honourable position which they now occupied." LONDON MUTUAL AND EAGLE. 3 This was said, in face of the fact, that, of the whole sum of the premiums received up to the end of December of the preceding year, with policies out, amounting to 756,082, there was left towards meeting these claims no more than 27,050, in- cluding 1,722 in hands of agents, and 15,85(5 out in loans*. The condition of the society was brought under the notice of the directors, in a most elaborate report, drawn up in April, 1856, by Mr. B. W. Hickling, one of the board, who concluded his statement by saying " Look to it, gentlemen ; I tremble for you. So sure as water finds its level, will this unsound policy find you out, and lead you to discomfiture." The board, however, resisted all his efforts to reform the policy upon which the board was acting, and in which they were supported by Mr. Jenkin Jones, the eminent actuary. The consequence was, that Mr. Hickling and another director resigned; and the rest of them, after struggling on for a short time, effected an amalgamation with the Eagle, received 4,000, with the promise of two or three annuities, for the admirable work they had performed, and ultimately appeared in the Court of Chancery, where they re- ceived a reproof for their reprehensible conduct, and an order to disgorge the money they had improperly received. The Eagle, however, keeps its hold upon the carcase. * The London Mutual resorted to the extraordinary expedient of giving CO per cent, to its " superintendents of agents," on all policies obtained in their districts, in addition to the usual com- mission to the agents ! 4 AMALGAMATION OF OFFICES. The Mentor is another of the companies which have been amalgamated with the Eagle, and it was even in a more desperate condition when the union took place than the London Mutual was. The Mentor was established in June, 1848, and, up to the 31st of December, 1854, it had received in premiums, deducting what it paid for re-assurances, the sum of 34,473. This sum stood on the debit side of its accounts; on the other, appeared expenses, 26,212 ; losses by life claims, 10,869 ; leaving a deficiency of 2,670, with policy risks outstanding to more than 300,000. But, in addition to its policy liabilities, the company was so largely in- debted, that there was a balance of only 5,527 left out of its paid-up capital of 16,000. I might advert to the amalgamation of many other companies, which, after having reached a bankrupt condition, have been taken into existing companies, whose receipts they swell, and thus help to make an impression on the public favourable to the business of the office. It is beyond all doubt, however, that, in many cases at least, the favourable appearance thus given to the absorbing office has been a deceptive one. Its income has been swollen by the addition of the premiums which it has thus obtained, but to say nothing of the large sums given, as " compensation," to retiring directors, bonuses and annuities to dis- placed secretaries and others, and honorariums to pro- fessional amalgamators all of which come out of the funds of the company which takes the business its OFFICES AMALGAMATED. liabilities have been increased far beyond what the increase of premiums will discharge. In some instances, policies of the absorbed offices have been in existence for twelve or fourteen years, and they have been taken up at the same premiums as when first issued, with the promise of the bonus which must come out of the full premiums paid by the insurants in the absorbing office. It is c[iiite clear that such a system as this cannot last. The day of reckoning may be postponed by various expedients, as long as new business, to a large amount, flows into the office ; but, sooner or later, as Mr. Hickling warned his brother directors of the London Mutual, " So sure as water finds its level, will this unsound policy find you out, and lead to discomfiture." The following list, although not complete, for want of an authentic record of such transactions, will afford a pretty good idea of the extent to which this process of amalgamation or transfer has been carried, within the last few years, and of the rich harvest of " compensations " and pecuniary hono- rariums it has yielded. The BRITISH PROVIDENT absorbed the Diadem and the Anglo- Australian (which had previously ab- sorbed the Accumulative). The British Nation absorbed the four. The ENGLISH AND FOREIGN absorbed the Marylebone. The National Alliance absorbed the English and Foreign. The Sovereign absorbed the National Alliance. 26 AMALGAMATION OF OFFICES. The BANK OF LONDON absorbed the Falcon. National Provincial (which had previously absorbed the Anchor"}. Merchants* and " ( Tradesmen's. The Albert absorbed the live. The CITY OF LONDON absorbed the County Mutual County (Hertford). J? ,, Protestant (which had absorbed the National Friendly}. Deposit $ General. ,, Absolute. Observer. ,, ,, Achilles. j, ,, London Mercantile. The ./& absorbed the whole. The PEOPLE'S PROVIDENT absorbed the Industrial. Prince of Wales. ,, Athenceum. ,, ,, United Mutual. ,, United Service. ( United \ Guarantee. The European has absorbed the seven. The BRITISH PROTECTOR absorbed the New Protector. The Sovereign absorbed both. The COMMERCIAL absorbed the English and Cambrian. General Indemnity. The English Widows' 1 has absorbed the three. OFFICES AMALGAMATED. 27 The ENGINEERS' absorbed the Universal Provident. Age. ,, Householders^. The English and Irish Church absorbed all three. The LONDON AND COUNTY absorbed the Oak. f General Live ( Stock. The C0w/' 0/ Chancery has taken the three. The HOME COUNTIES absorbed the BirJcbecJc. The Whittington absorbed the Home Counties. The ALBERT has absorbed the Beacon. National Guardian. ,, Anchor. ( Merchants' and \ Tradesmen's. Times. l?ara of London (which had previously absorbed the Falcon and the Merchants' and Tradesmen's], The MITRE has absorbed the Cambrian. Hope. JBgis. The FAMILY ENDOWMENT has absorbed the Empire. The KENT MUTUAL has absorbed the English Provident. The BRITISH NATION has ab- ) >, -, n > 7 sorbedthe \BntishPromdent ,, General Accident. Phoenix. ,, British Commercial. 28 AMALGAMATION OF OFFICE^. The EAGLE has absorbed the Palladium. Protector. ,, Mentor. ,, ,, Indisputable. London Mutual. ,, 67% of London (which had absorbed 8. See p. 26). Albion. .4//m7. The LAW PROPERTY absorbed the Era. The ERA, now in Chancery, absorbed the Saxon. The ST. GEORGE absorbed the London and Continental. The LONDON LIFE absorbed the Commercial fy General. The NATIONAL INSURANCE OF SCOTLAND absorbed the United Deposit. The SOVEREIGN absorbed the Safety. ,, British Protector. ,, National Alliance (which had absorbed the Marylebone and the English and Foreign}. The WATERLOO absorbed the Magnet. The VICTORIA absorbed the Legal and Commercial. The NEW EQUITABLE absorbed the Medical, Legal, and General. The NATIONAL GUARDIAN absorbed the Official and General, and Commercial and General. The LONDON ASSURANCE absorbed the Asylum. The LIVERPOOL AND LONDON \ London, Edinburgh, absorbed the ) and Dublin. ,, Australasian. ,, ,, North of England. ,, Monarch. f Bank of London and ,., National Provincial ( (Fire business). HAZARDOUS PRINCIPLES OF AMALGAMATION. The PROVIDENT absorbed the Westminster Society. The GENERAL absorbed the British Amicable. The BRITON absorbed the Brunswick. The PIKENIX absorbed the Catholic Laiv Life. These Amalgamations, or Transfers of Policies, have all occurred since Mr. "Wilson moved for the Select Committee, in 1853! Permit me, Sir, to conclude this part of my subject by the testimony of an Actuary*, as to the unsound and hazardous principles upon which these amalgamations are generally made : " The terms upon which transfers of this kind are made, be- tween one young company and another, are frequently of the most remarkable description. A strange notion appears to pre- vail amongst many of them, that, for a life business of seven, eight, or even ten years' standing, a year's purchase may safely be given ; and that, for one four or five years old, a year and a half or two years' purchase is not excessive. The actual process is beautifully simple. The business of one office, A established, say, five years is taken by another office, B (the latter being, perhaps, in anything but a flourishing condition), and, as the purchase-money for such business, B, takes the whole of A's debts, or such portion of them as will absorb in their payment the entire premiums receivable upon A's policies for a year and a half or two years, supposing none of them to lapse. The trans- action is based upon no correct principle or calculation whatever, the terms above mentioned being regarded as axiomatic truths. A feverish anxiety is manifested to grasp at an increase of income, without a due consideration of the price which it will ultimately cost. The tacit assumption is generally made, that none of the policies will be forfeited. This point, however, should not be * Mr. Samuel Younger, in a paper in the " Assurance Magazine," " On a Method of Testing the Solvency of an Assu- rance Company," &c. 30 AMALGAMATION OF OFFICES. disposed of so summarily ; it evidently claims particular attention, for, even when the business of an office is transferred to another of longer standing, a considerable number of policies will in all probability be abandoned before a year has elapsed that is to say, many of the assured, whose policies were in force at the time of the transfer, will not pay a i single premium to the purchasing company. Thus, not only will the anticipated increase suffer diminution, but the latter office will be open to the risk upon these policies, for a certain period, without receiving any com- pensation for the liability. It would be easy to account for the many lapses, by considering the shock which persons connected with these institutions must sustain when they find the society in which their savings have been invested unable to continue busi- ness : how are they to know but that the office to which their policies have been transferred will be the next to fail ? " In justification of the excessive prices to which allusion has been made, a comparison is frequently instituted between the annual income which the business about to be purchased will produce, and the sum which such an income would cost a recently- established office to obtain. Such comparisons, it is plain, can have no bearing whatever upon the matter. The results to which they lead sufficiently condemn them, for neither this nor any other argument can be sound which proves that a greater sum may be given for a business than a careful valuation shows it to be worth." V. QUESTIONABLE CONDITION OP LIFE OFFICES. Astounding as is the fact, that, within a short period, 223 offices out of 426 have gone, it is not calculated to so forcibly impress the minds of reflecting persons, as are the position and prospects in some cases full of doubt, in others, hopeless be- yond all doubt of the 153 offices that have sur- vived the crash and ruin which have involved the rest. Some of these offices, after having swallowed up a shoal of the small fry, now stand before the public swollen to enormous dimensions, counting their annual incomes by hundreds of thousands and their monetary obligations by mil- lions ; and it seems to be in proportion to the mag- nitude of the figures by which these incomes and obligations are represented that the prosperity and safety of the office are insinuated. This is a delusion which it is most desirable to dissipate; and, if the Legislature stand aloof, and the Government be remiss in its duty as protector and guardian of " the most deserving class of society," it becomes the duty of all who see the peril which is " looming in the future " to call public attention to the fact, and thus prevent, as far as may be, the extension of the mischief impending. The income of an insurance company furnishes no 32 QUESTIONABLE CONDITION OF LIFE OFFICES. test of its safety. An office receiving bnt 5,000 a year may be in a much sounder condition than one which receives 50,000 in the same space of time. Every 1, received as a premium, represents a pro- portionate and fixed amount of obligation. A striking, and, to many, a very painful proof of the false appearance which an office may assume, and successfully wear, for many years, has been furnished in the case of the Asylum Life Office. The company was established in 1824, and had a Directorate including the names of three East India directors, a Bank of England director, and other gentlemen of high position in the commercial world. Down to the year 1854, it was doing a considerable business, and, apparently, a profitable one. Its clear annual income was nearly 50,000 ; its exist- ing policies, at the close of the year 1853, amounted to 1,250,000 ; its shareholders, each of whom had paid 12 per share, had an addition made of 18 per share, and, for some years, received a dividend of 5 per cent, per annum upon the whole sum. Bonuses, varying from 1 to 10, were added to the dividends, and then a fixed bonus of 2 was an- nually paid, as well as a bonus, at the so-called quin- quennial division of profits; the total average of dividend and bonus being about 3. 18s. per annum per share, upon which, as I have already said, only 12 had been paid. There were, in point of fact, all the indications of a thriving and wealthy office. The resident director took his salary of 2400 a year, while the directors annually divided amongst them the moderate sum of 2000 ! Thus, every- THE ASYLUM. 33 thing went on with satisfaction to everybody. Shareholders, directors, manager, accountant, clerks the whole rank and file of the office were basking in the sunshine of popular favour, and of Fortune's smiles. Suddenly and unexpectedly, however, a new light penetrated into the arcanum of the esta- blishment, and discovered it to be in a condition of utter bankruptcy. The policy-obligations, as I have stated, were a million and a quarter ; the accumu- lated fund, towards discharging these obligations, was 100,000; and it was ascertained that the outgo was nearly 10,000 a year more than the income. To meet this desperate state of things, after a searching investigation by independent actua- ries, it was recommended that a call of 75 per share should be made ; and the call was made accordingly the last 5 being called up a short time since. The consequence, I need hardly add, is not only disastrous, but ruinous, to many of the un- fortunate shareholders. Clergymen, widows, and other persons of limited incomes, had invested the principal portion of their property, upon the repre- sentations made of the sound and prosperous con- dition of the company, believing that they should thereby derive an income, which, added to that they received from other sources, would enable them to maintain their position in society. The burst- ing of the bubble has reduced many of them to a condition little above that of absolute poverty ; and, for some of them, appeals have been made to the charitable public. The business of the company has been swallowed c 34 QUESTIONABLE CONDITION OF OFFICES. up by the London, and the chairman of the Board of directors received, in the form of a piece of plate, " a slight testimonial for his long-continued and very valuable services " ! ! ! Another instance of this deceptive character of a financial statement, was furnished, last year, in the British Commercial, now amalgamated with the British Nation. In December, 1857, the company advertised its available assets, at 181,657 ; but, in the following June, another valuation was made, with a view to amalgamating with the Albert, and the assets were put down at 151, 544. This extinc- tion of one-sixth of the entire funds of the company, did not escape notice, and Mr. Sprague, who had made the second valuation, was put forward to explain the cause of the difference of 30,000. It was easily done. Mr. Sprague' s predecessor, in valuing, had not allowed for claims in process of payment or other liabilities, his object being to make out a good case for the company; whereas, Mr. Sprague's object was to ascertain the real facts, for an immediate transaction with another company. It turned out that the British Commercial, which had been in existence for nearly forty years, and was advertising a capital of 60,000, and a flourishing business, required a fund of 120,000 for meet- ing its existing policy-claims, and that this reduced its capital to 31,000. During some time, the British Commercial had been paying 8 per cent! to its shareholders ; and, in 1854, the directors recom- mended that a reversionary bonus should be de- clared of 35 per cent., per annum, on all the BRITISH COMMERCIAL. 35 premiums paid by policy-holders, on the profit scale, during the preceding seven years. So difficult is it to get at the actual condition of an office. As a witness to the truth of this state- ment, let me cite what Mr. Sprague says about this British Commercial. " The late managing director, in whom the directors had the fullest confidence, in making the reserve for the liability of the company under its policies, proceeded upon principles which gave a reserve less than any prudent or competent Actuary would consider sufficient. These principles, he states, were fixed by the directors at the outset of the company, and have been uniformly acted upon. The result has been, that the company, throughout the whole of its existence, has presented a fallacious appearance of greater prosperity than was really the case; and larger dividends have been paid to proprietors than the state of the company would properly justify." * There is no conjuration in life insurance. A life office undertakes to receive deposits as a banker does, with this difference in its obligations, that whereas the banker is responsible for the return of the deposits only, the life-office undertakes to in- vest the deposits, minus a per centage for manage- ment, at interest, and to return them, with their accumulations, at a future time. It matters not that the several investors, or their representatives, will not receive precisely the same proportion ; the office is responsible for the return of the whole sum ? * The shares of the British Commercial, which were hawked about at sixpence each, and many of which might have been had for nothing, are now taken by the British Nation at twenty-five shillings each ! Verily, the shareholders of the British Nation ought to congratulate themselves on the amalgamation. c 2 36 QUESTIONABLE CONDITION OF OFFICES. with only the reduction already spoken of, to the aggregate body of contributors or depositors, al- though some of them, or their representatives, will receive a larger amount than others. What the public is interested in knowing, there- fore, and what the policy-holders should insist upon knowing, is, not merely what sum is received by an office as premiums, but what sum it has accumu- lated, and has safely, as well as profitably, invested, in order to discharge the obligations which the re- ceipt of the premiums has imposed upon it. Now, how many of the 153 existing offices put the public, whom they invite to entrust their money to them, or the policy-holders who have already done so, in possession of this important information ; or how many of them are in a condition to do so? Turning to the Post Magazine Almanac for 1860, I find 147 offices, out of the 153, with advertise- ments, more or less lengthy, inviting the confi- dence of the public, and the establishment of mone- tary relations with them. Of the 147, only EIGHT give anything approaching such a statement as I have spoken of. How far the information they give is satisfactory, will by-and-by be seen. In the meantime, it should be noted, as a striking fact, that sixty -nine seventieths of the offices refuse to admit the public into their confidence, by an inge- nuous disclosure of the state of their affairs, al- though they ask the public to rely so implicitly upon their word as to trust them with money for investment and management ! It is next to impossible not to believe that there SUSPICIOUS RESERVE OF LIFE OFFICES. 37 is some reason for this reserve, especially when we find every species of ingenuity exhausted in render- ing life-office appeals to the public attractive. Some state the amount of their annual incomes ; some add the amount of their accumulated funds ; some the number of policies they have issued; but only 8, out of 147, state what is almost the only thing of importance to be known namely, the extent of their monetary obligations to those whose contribu- tions they have received, and the means they have of discharging them. The fact is a very striking one, and suggests very grave suspicions. But, perhaps, the offices practising this reserve, give to their share-holders and policy-holders the confidence they withhold from the world ? This may be the species of reward reserved for those who have exhibited the virtue of an implicit reliance on their solvency, prudence, and judgment. I now propose to inquire whether that is so. 38 VI. DELUSIVE BALANCE-SHEETS OF LIABILITIES AND ASSETS. I have examined report after report of the life offices, and I find them all, more or less, barren as to the only species of information necessary to help one to form a judgment of the actual position and prospects of the company. Take the first that comes to hand, which is THE LONDON EQUITABLE. DIRECTORS The Right Hon. Thos. E. Headlam, M.P. ; Col. H. M. Clifford, M.P. ; H. F. Jadis, Esq. ; Walter Jones, Esq., M.D. ; Frederick Allen, Esq. ; Rev. John Ross, M.A. ; John Topham, Esq < MANAGER R. L. Pilkington, Esq. LIABILITIES. To guarantee fund 4,101 Sundry accounts 1,225 7 3 Balance in favour of the society 2,610 2 11 7,936 10 2 ASSETS. By sundry securities .. 6,181 13 10 Casli at bankers' 1,718 10 8 Cash in hand . 35 16 8 7,936 10 2 There is not much information to be got out of such a statement as that ! But, turning from the balance-sheet to the directors' report, we find it stated, as a " convincing proof of the onward pro- gress of the society," during the last five years, that it has increased the total amount assured to 104,640; and that its yearly income is 4,050, in the management of which, including 600 as claims on policies, the sum of 3,087. 12s. Sd. is KENT MUTUAL AND SCOTTISH WIDOWS'. o9 spent ! I need not pause to further analyze such a statement as that. Here is THE KENT MUTUAL. TRUSTEES Sir James Duke, Bart., M.P., and Alderman ; Major-General Carmichael, C.B. ; Lieutenant- Colonel Fawcett, J.P. ; William Squire Plane, Esq. DIRECTORS John Thomas King, Esq. ; Edward Smythe, Esq. ; Isaac Belsey, Esq. ; Gabriel French, Esq. ; Edward Hawkins, Esq. ; Henry Edward Murrell, Esq. ; Simon Rood Pittard, Esq., A.K.C. ; William Squire Plane, Esq. ; Hugh Russell, Esq. ; George Carrick Steet, Esq., F.R.C.S. AUDITORS James Edmeston, Esq. ; Joseph Hood, Esq. ; Alexander Robertson, Esq. ; J. E. Saunders, Esq. SOLICITORS Messrs. Norton, Son, and Elam. ACTUARY AND MANAGER W. Howell Preston, Esq. ' The ninth annual statement, for the year ending the 25th of March, 1859, gives- Present value of premiums 322,341 Present value of sums assured .... 295,924 Balance in favour of the society . . . 26,417 How the balance is got, we are not told ; but it is, beyond doubt, by valuing the gross premiums though the fact is suppressed. It is really too much to ask any one to believe that there is any real balance on the policies, in favour of the company. The next report that turns up is that of one of the leviathan societies ; viz. : THE SCOTTISH WIDOWS' FUND. PRESIDENT The Right Hon. the Earl of Rosebery, K.T. VICE-PRESIDENTS Sir William Gibson-Craig, Bart. ; the Most Noble the Marquis of Dalhousie, K.T. ; the Most Noble the Marquis of Tweeddale, K.T. ; James Moncricff, Esq., M.P. 40 DELUSIVE BALANCE-SHEETS. ORDINARY DIRECTORS Isaac Bayley, Esq. ; Sir Adam Hay, Bart. ; John Cadell, Esq. ; James Tytler, Esq. ; Thomas Leburn, Esq., S.S.C. ; George Bell, Esq. ; William Wilson, Esq., C.S. ; Wm. E. Aytoun, Esq.; Henry Cheyne, Esq., W.S. ; Alexander Thompson, Esq., W.S. ; Thomas Constable, Esq. ; Alexander Shank Cook, Esq. ; Thomas G. Mackay, Esq., W.S. ; Lewis A. Wallace, Esq. ; Archi- bald D. Cockburn, Esq. ; William James Duncan, Esq. MANAGER Samuel Reileigh, Esq. SECRETARY Wm. Lindesay, Esq. I wish I could say that it supplied the informa- tion which the policy-holders have a right to look for, and to possess. There is no statement of liabili- ties included in, or appended to, the report; and, as I sent to the office for this, as well as for a copy of the report, and received the latter, only, it is but rea- sonable to infer that there is no such statement. The following are the only items of account which the report contains : Annual revenue ... 422,090 16 1 Eealized capital . .- . 3,341,010 16 6 There is not a syllable touching the policy liabilities ; but, in the course of a speech made at the last annual meeting, by the Hon. Bouverie Francis Primrose, we learn that their present value is 7,000,000. THE CONSOLIDATED. DIRECTORS William Blanford, Esq. ; Thomas Bull, Esq. ; John Bury, Esq. ; L. V. Claye, Esq. ; H. J. Gibbins, Esq. ; Samuel Gibbins, Esq. ; Henry Simpson, Esq. ; DaVid Taylor, Esq. ; E. D. Shirtliff, Esq. SOLICITORS Messrs. John and George Barnard. SUPERINTENDENTS OF AGENTS Mr. W. T. HANNAH ; Mr, William ' Palmer. ACTUARY AND SECRETARY I). MacGillivray, Esq., F.S.S. THE CONSOLIDATED. 41 This company was established in 1846, and the following is the statement of affairs laid before the thirteenth annual meeting, in December last : " The number of new policies issued, and the amount assured, have been greater during the past year than in any preceding one; and, contrasted with the year ending September, 1858, will stand as follows: 1st. Policies issued to September, 1859 430, assuring 127, 300, and yielding an annual income of 3,452. 2nd. Policies issued to September, 1858 309, amounting to 104,300, and yielding an annual income of 2,950 ; to which must be added the sum of 510, received as single premiums for purchase of immediate annuities. " There have been claims, during the past year, on nine poli- cies, assuring, with bonuses, 2,771. 2s. 2d. a smaller sum than has been paid in any of the three preceding years, showing a rate of mortality unusually favourable to the company. " After deducting lapsed and surrendered policies, there re- mained in force, at the 30th of September last, 1,479 poli- cies, assuring 420,174, and yielding an annual revenue of 12,075. The gross premiums received on lapsed Policies amount to 26,886 17 11 The gross claims paid during the past thirteen years amount to . . . 20, 249 12 7 Leaving a surplus, to stand against future claims, of . 6,637 5 4 " The securities at present in possession of the company amount to 59,007. 13s. 4d. n The following is the only balance-sheet appended to the report : 42 DELUSIVE BALANCE-SHEETS. Dr. Cash and Stamps in hand, at Sept. 30, 1858 . . 2,083 9 6 Assurance Premiums received, viz. : 1. For Renewals 8,403 18 5 2. For New Assurances . . . 3,503 6 3 11,907 4 8 Cash invested with the Company during the year . 1 7,082 5 6 Repayment of Loans, with Interest thereon . . 30,203 15 10 61,276 15 6 Cr. Office Expenses [specified] 3,817 11 Re- Assurance 234 19 6 Commission 561 6 6 Claims during the Year .... 2,749 2 Reversionary Bonus thereon . . 22 2 2,771 2 2 Purchase Price of Policies sur- rendered , 237 8 9 3,008 10 11 Annuities paid 90 2 Interest on Capital Stock and Deposits .... 2,144 3 9 Repayments of Sums invested with the Company 11,048 6 6 Invested on Securities during the year .... 39,166 10 Cash and Stamps in hand at Sept. 30, 1859 . . 1,205 15 5 61,276 15 6 There is not much fault to be found with this statement ; although it would be satisfactory to know in what sort of " securities " the funds, amounting to 39,166. 10s., are invested, this, with 1,205. 15s. 5d., " cash and stamps in hand," being all there is, to set against the obligations of the com- pany ; i.e., 420,174, life policies; 17,082. 5s. M. THE GLOBE. 43 cash invested with the company ; and, say, ,900, for annuities granted. It will be seen that the company has received, as premiums on lapsed policies, .6,637. 5s. 4c?., more than it has paid on policy claims, during the thir- teen years of its existence ! THE GLOBE. DIRECTORS Thomas M. Coombs, Esq. ; William Chapman, Esq. ; George Carr Glyn, Esq., M.P. ; Boyce Combe, Esq. ; William Dent, Esq. ; J. W. Freshfield, Esq., F.R.S. ; John Bankes Friend, Esq. ; Robert W. Gaussen, Esq. ; Robert Hawthorn, Esq. ; John E. John- son, Esq. ; Richard Lambert Jones, Esq. ; Robert Locke, Esq. ; Nathaniel Montefiore, Esq. ; Sheffield Neave, Esq. ; Fowler Newsam, Esq.; William Phillimore, Esq.; W. H. C. Plowden, Esq.; Sir Walter Stirling, Bart.; William Tite, Esq., M.P., F.R.S. ; T. M. Weguelin, Esq.; R. Wcstmacott, Esq., F.R.S. ; Josiah Wilson, Esq. ; Benjamin G. Windus, Esq. AUDITORS Alexander Mackenzie, Esq. ; George Saintsbury, Esq. SECRETARY William Newmarch, Esq. This is one of the " old "-offices, and, as a person passes along Cornhill, its spacious and costly build- ing invites attention, and suggests that the interior must exhibit a busy scene, in the large amount of business daily transacted, and that the profits realized must be very great. It was established in 1803, and had a million of paid-up capital. The Board of Direction consists of twenty-three gentle- men, amongst whom are found some of the best names in the City of London. If wealth and busi- ness-habits combined in the persons of directors, in conjunction with an enormous capital, could furnish any guarantee for the skilful and profitable manage- ment of a company, and its consequently prosperous 44 DELUSIVE BALANCE-SHEETS. career, it would undoubtedly be found in the Globe Insurance Company. I was naturally desirous of looking into the affairs of a company possessing so many advantages, and advertising the appropriation of large bonuses, out of its profits, to the policy-holders; but the diffi- culty of obtaining the means of doing this has been almost insuperable. The powers given to the Board of Directors by the special Acts of Parliament they have obtained, are very large, and it has exer- cised them in almost their fullest extent. Neither share-holders nor policy-holders are empowered to examine the accounts, by the appointment of audi- tors; and, up to 1856, I believe, the directors au- dited the accounts, as well as received and expended the money ; that is to say, it was done by the execu- tive officers, who really managed the company. One result of this mode of looking after the accounts was the system of embezzlement carried on by Watts, throughout a period of twelve years, to the extent of ,68,000, and first discovered in 1850. In the year 1856, however, the directors were induced to yield a point, and permit, as in all well- regulated companies, the auditing of the accounts by two gentlemen appointed by the proprietors. The accounts for 1856, and the four preceding years, were passed under their review ; and it is to be presumed that the same thing has been done with each succeeding year's accounts. These accounts, however, are carefully kept out of public reach. I believe they are not printed even THE GLOBE. 45 for circulation amongst the proprietors. It must strike people, at first, as something strange, that the accounts should thus be kept out of sight by the directors, while they invite us, as they do, to effect insurances with them, on the representation that their company fulfils, " in an eminent degree, those conditions of SAFETY and SEAL ECONOMY, apart from which Life Insurance is a source rather of danger than advantage," seeing, as they properly observe, that, " from the peculiar nature of insurance busi- ness, a high apparent prosperity may be maintained for twenty or thirty years, in spite of the disappear- ance, during that time, through the operation of disproportionate expenses, and otherwise, of nearly the whole resources of the undertaking." The only statement of accounts of the Globe, which I have seen, is that for 1854; and, if it may be taken as a sample of what is annually read to the proprietors, and which they are permitted to look at, but not have a copy of, they are not likely to get much satisfaction out of the privilege thus generously conceded to them by the directors. The "charges" for the office, in this statement, are 19,306. 19s. 2J., with an addition of 788. 6s. M., as " losses;" making together, 20,095. 5s. 6d. The salaries, wages, and pensions to retired officers, and the engine establishment, amount to 12,531. 10s. M. The total " charges," as I have said, amount to 20,095. 5s. 6r7. Let us see what amount of busi- ness is done for this, and the profit it brings to the office. 46 DELUSIVE BALANCE-SHEETS. The Premiums received on account of fire poli- cies, deducting a charge of 6,648. 19s. 5^., for commissions, is 66,502. 14s. 2c/., the Losses by fire are 66,811, 2s. 5d. ; the balance against the office being 308. 8s. 3d. The life Premiums amounted to 49,932. 7s. 7<, deducting commissions, &c., the Policy claims to 77,629. Os. 7rf. ; giving a balance against the company of 27,696. 13s. If to these two sums be added, " Foreign agents' commissions and expenses," 1,986. 16s. Id., we get a total loss, on the Life and Fire business, amount- ing to 29,683. 9s. Id. ; to obtain which, the " charges" are 20,095. It also appears, that, while the Dividends and An- nuities paid amounted to 63,390. 14s. 8d., the dividends, interest, &c., received was 61,222. 6s. 9d. ; leaving, against the office, a balance of 2,168. 7s. lie?., which gives the total loss, on the life and fire policies, investments, &c., 31,851. 17s. The only abatement I can find in this, will arise out of " Bills receivable," 6,473. 3s. lid.- " Sun- dry agents," 6,655. 17s. 6d. ; and " Credit Poli- cies," 147. 15s.; making together, 13,276. 16s. 5d. This will leave the difference between receipts and expenditure, 18,575. Os. 7d. But to this there remains to be added the ex- penses of conducting the business, exclusive of com- mission to agents, already charged ; and these amount to 20,019 ; thus swelling the loss to 38,670. 19,<;. 9rf. ! Thus it is that the Globe is " fulfilling, in an emi- nent degree, those conditions of SAFETY and REAL THE BRITISH EMPIRE. 47 ECONOMY, apart from which Life Insurance is a source rather of danger than advantage" ! It seems not to have been without reason, that Mr. Jno. Frederick Stanford, of Portland Place, a large pro- prietor, refused to serve on the board of direc- tion, because he saw no hope of being able to obtain an alteration in the management of the com- pany, which would, he believed, "leave the share- holders no other alternative than to follow the example of other unfortunate and mismanaged com- panies, by negotiating with some flourishing insu- rance company to amalgamate and unite with them ; nor that the shares, once at <151. 3s., should have fallen as low as 89 ! THE BRITISH EMPIRE MUTUAL. DIRECTORS John Gover, Esq. ; Robert J. Millar, Esq. ; C. Bennett, Esq. ; P. Bunnell, Esq. ; J. R. Burton, Esq.; R. Cartwright, Esq. ; Henry Cooper, Esq. ; B. W. Gardiner, Esq. ; W. Groser, Esq. ; G. C. Lewis, Esq. ; D. Pratt, Esq. ; J. Sanders, Esq. AUDITORS G. W. Burge, Esq. ; T. Gladwish, Esq. SOLICITORS Messrs. Watson and Sons. SECRETARY Mr. James Inglis. This society was established in 1847, and the re- dort for the year 1858, comprised the following facts : Income 58,388 Sums assured 1,650,555 Accumulated fund .... 151,807 This is an extremely meagre statement, but it is the only one I have been able to procure. It shows that the assets are about 9i per cent, of the sums assured a very small proportion for a company 13 years old, and having " a large paid-up capital." 48 DELUSIVE BALANCE-SHEETS. THE UNITY. DIRECTORS j Sir William C. Dalyoll, Bart. ; * James A. Durham, Esq. * Robert Garland, Esq. ; * Thomas Carlyle Hayward, Esq. ; * Thomas Hill, Esq. ; J Albert Francis Jackson, Esq. ; f Major Martin Mulkern ; J Edward Tayloe, Esq. ; + Thomas Vaughan, Esq. ; * Thomas Wheat- ley, Esq. AUDITORS William Hop wood, Esq. ; John Smith, Esq. SOLICITOR Thomas Tayloe, Esq. MANAGER AND SECRETARY Thomas Gray, Esq. SUB-MANAGER Henry Thomson, Esq. ACTUARY J. B. Haycraft, Esq. * Directors of the Fire. f Directors of the Life. % Directors of the Fire and Life. This company was established in 1854, and com- menced business in January, 1855, with a body of 2,037 shareholders, a subscribed capital of 309,308, and a paid-up capital of 77,334. Its projector and manager, Mr. T. H. Baylis, apparently made up his mind to try what could be effected by the adoption of a bold, and what was at the time decried by many as an extravagant and a reckless course of policy. Instead of dribbling away considerable sums during a long course of years, for the pupose of creating and establishing a business, Mr. Baylis, following the example of some of the most successful advertisers of the day, expended a large portion of the sub- scribed capital in bringing his office into public notice ; and the result seems to have justified the anticipations he formed of it. Between January, 1855, and January, 1856, the number of policies issued was was 1,251, producing annual premiums amounting to 12,393. To this was added the pre- miums receivable by the Trafalgar, then amalga- mated with the Unity, making the total income pre- mium of the first year, 37,497. In the seventeen THE UNITY GENERAL. 49 months ending May, 1856, the new. business amounted to 1,769 policies, insuring 546,232, and giving a premium income of 17,590. A more suc- cessful experiment could scarcely have been made, by a spirited and judicious expenditure not of the premiums received by the office, which belong to the policy-holders, and should be held in trust for them, but of the capital, the legitimate use of which is in the obtaining and conducting of a profitable business. Capital thus sunk cannot fairly be said to be lost. At the annual meeting in 1856, a dividend of 5 per cent, was declared on the paid-up capital, and a bonus to the policy-holders seems to have been justi- fiably promised to the insurants in 1857. Since the establishment of the UNITY, about 120 life offices have gone to pieces, the wrecks of 30 of which are knocking about in the Court of Chancery, with what prospect to the share-holders the records of that all-devouring court may foretell. The UNITY, however, has maintained its ground, and although it has not, under its present management, paid either share-holders' dividends or policy-holders' bonuses, it has promised both during the course of 1861. I have been unable to obtain a statement of the affairs of the company, up to the close of the year 1858, but I see, by the report made to. the annual meeting in July last, that the annual premiums amounted to 35,831, and the reserve-fund to 66,731. This, of course, affords no data for estimating the condition of the company, 50 DELUSIVE BALANCE-SHEETS. EQUITABLE. TRUSTEES George H. Barlow, M.D. ; James Copland, M.D., F.R.S. ; Sir James Duke, Bart., M.P., and Alderman ; Sir Charles Hastings, M.D.,D.C.L. ; Richard Partridge, Esq., F.R.S. ; John Propert, Esq. DIRECTORS George H. Barlow, M.D. ; W. Tyler Smith, M.D. ; George Chapman, Esq. ; Richard Jebb, Esq. ; Thos. B. Jones, Esq. ; W. J. Little, M.D. ; Samuel Richards, M.D. AUDITORS John Brown, Esq. ; George Carew, Esq. ; R. H. Parkinson, Esq. ; C. R. Rowland, Esq. INSPECTOR or AGENCIES Mr. Percy Sewell. SOLICITORS Messrs. Bell, Steward, and Lloyd. ACTUARY AND SFXRETARY Frederick Bigg, Esq., F.G.S. This company was established in 1851, and its last statement of accounts is up to the end of the year 1858. It is exceedingly meagre, however, and will not at all help towards ascertaining the condition of the office. We have Receipts (in- ; Expenditure . . 25,324 14 eluding balance j Investments brought forwd. (including 17,340 171)50,762 11 2 j value of lease lOOO,andhalf credit prems. 3,909) 25,437 17 2 50,762 11 2 50,7G2 11 2 The premiums amount to 31,533. 12s. Id., and the expenditure to 25,324. 14s. Why do not the directors state the amount of their outstanding liabilities? It would appear, from the balance- sheets of income and expenditure, that there is good reason to conceal it ! LIVERPOOL AND LONDON. 51 THE LIVERPOOL AND LONDON. TRUSTEES Thomas Brocklebank, Esq. ; Adam Hodgson, Esq. ; Samuel Henry Thompson, Esq. DIRECTORS IN LIVERPOOL Joseph Christopher Ewart, Esq., M. P. ; George Grant, Esq. ; James A. Tobin, Esq., &c. SECRETARY Swinton Boult, Esq. DIRECTORS IN LONDON Sir J. Musgrove, Bart. ; F. Harrison, Esq. ; Wm. Scholefield, Esq., M.P. DIRECTORS IN MANCHESTER Samuel Ashton, Esq., &c. RESIDENT SECRETARY Pv. A. Kennedy, Esq. DIRECTORS IN SHEFFIELD George Wilton Chambers, Esq. ; John Carr, Esq. RESIDENT SECRETARY Joseph Turner, Esq. DIRECTORS IN SCOTLAND Wm. McEwen, Esq. ; R. Steele, Esq. RESIDENT SECRETARY David Steward, Esq. This company, which was established in 1836, is for the insurance of life and from loss by fire. I have to notice its financial statements in relation to the former department only. Some information as to its general position and proceedings will be found at page 97. The paid-up capital of the company is said to be 188,702, and the following is stated to be the condition of the life business, for the year ending 1858 : Premium In- come 121,411 10 9 For Annuities 17,267 14 Policy Claims . 53,660 11 9 Annuities 15,111 13 3 There is no statement as to the outstanding policy liabilities in the report ; * but the directors * But see the Table in page 89. 52 DELUSIVE BALANCE-SHEETS express themselves as being well satisfied in finding that the policy claims of the year were only 53,660. Us. 9r/., while the total premiums were 12 1,411. 10^. 9J., and they promise a valuation of assets and liabilities this year. How far such a valuation will be of any real use in determining the condition of the company may be gathered from the following passage in the " Statement of Facts," recently published by Mr. Matthew Forster, until lately a London director : " The Company has done a large Life business, on tables framed on the novel and, as far as Mr. Forster can discover, the unique principle of giving fixed bonuses without reference to profits, or whether there is any profit at all, either for the Com- pany or the insured. And the time for making a decennial valuation of the Life and Annuity business having arrived, Mr. Boult proposed that the liabilities of the bonus Life business should be estimated on a principle which Mr. Forster deemed erroneous. Mr. Boult proposed that the bonus additions guaranteed to be added periodically to the policies, should not be taken into account, and provided for in the valuation. Mr. Boult attempted to justify this strange proposal on the plea that these guaranteed bonuses were liabilities contingent on future circum- stances an excuse equally applicable to deferred and contingent annuities in fact, to every kind of Insurance. However, Mr. Forster, not liking to trust entirely to his own judgment in such a matter, plain as the case appeared to be, resolved to seek the opinion of professional actuaries of eminence on the sub- ject, and caused a case to be submitted for the opinion of Mr. Tucker, of the Pelican Office, and Professor de Morgan, of the London University, who entirely agreed with him, as did other actuaries whom Mr. Forster consulted in a less formal manner ; whereupon, and the views of Mr. Forster being pressed, Mr. Boult took the valuation out of the hands of the London Board altogether, although they had, by special agreement with the LIVERPOOL AND LONDON. 53 Liverpool Board, the entire management of the Life business, with exception of its funds. Mr. Forster, therefore, fears, from the steps taken, that a report may be laid before the shareholders giving a fallacious estimate of the real liabilities of the Company, particularly as Mr. Forster understands that the actuary substi- tuted for Mr. Tncker is the gentleman whom Mr. Boult originally employed to frame the bonus table, the accuracy of which a correct valuation is calculated to test. " A question arises upon this, whether a man who could pro- pose such a mode of valuation, which, but for Mr. Forster's interference, would have been carried out, is a fit person to have the management and control of an Insurance Company. Mr. Forster has no doubt, however, now that Mr. Boult's influence over the London Board is secured, that he can obtain the assent of a majority of it to any mode of valuation he thinks proper to adopt. But as Mr. Forster was removed soon after this trans- action, he has no means of knowing what has since been done." The answer which the board of directors has put forth to this statement about the valuation of the company's liabilities is worthy of notice, inasmuch as it furnishes a specimen of what is evidently too prevalent in life offices that are animated by a desire to assume an exaggerated appearance of wealth. That any actuary should have been found to sanction such a mode of valuation as that which it is alleged the Liverpool Board and their manager insisted upon, may seem marvellous to those who have not looked into these matters, and found that there is no difficulty in getting the sanction of some of these gentlemen to the most preposterous and perilous things. It must be obvious to everybody, that a "fixed" bonus that is, a bonus absolutely purchased by the insurant, as a part of his policy, and devolving the like obliga- 54 DELUSIVE BALANCE-SHEETS. tion on the company selling it as the issue of the policy does is a liability which the company cannot get rid of, otherwise than by a discreditable act of repudiation \ that being so, it has no alternative but to include it in the valuation of its liabilities. But here is the company's justification of their mode of valuation : " In ordinary cases, each Insurance Office giving bonuses to its assured, ascertains by periodical investigation the profit derived from the business, and apportions to each policy-holder the share of that profit which, by an arbitrary rule of its own, is adjudged to belong to him. It is clear that, in the same circumstances, a given rate of premium, no matter to what office paid, will yield the same result, and that if that result be found by experience to be so much profit beyond the actual sum insured, it is not difficult to determine what proportion of that profit an office can afford to guarantee with the same confidence and certainty that, for a smaller premium, it guarantees a sum without bonus, payable at death." The passage I have marked in italics points out the difference between the fixed bonuses of the Liverpool and London, and the contingent bonuses of all other offices. The former contracts to give a bonus, absolutely and of a certain amount, without any knowledge as to whether there will be profits to give it out of, or not ; the latter ascertain their profits, or profess to do so, and then assign their bonus. But I am not now concerned with the vicious principle of these " fixed " bonuses, but only with a company which undertakes to give them, and excludes their amount from the estimate of its liabilities ! But then and it is but just to the directors that the fact should bo made known LIVERPOOL AND LONDON. 55 they have obtained from Mr. Nelson "a long and able report " in favour of Mr. Boult's plan of pro- cedure ! This report should certainly be published, and go side by side with Mr. Nelson's " long and able report " in favour of the International, which is passed under review in a subsequent portion of this letter.* Mr. Forster adds the following to his other state- ments : - " Again, with respect to the management of the company: it* presents all those characteristics of individual irresponsibility and concealment which are ever the sure forerunners of disaster in public companies, but which, in this case, a change of management and system may yet avert. But to effect that change, the reins (to use the language of Mr. Brocklebank) must be held with firmer hands. Boards at Manchester, Glasgow, and Sheffield have been recently established by the Liverpool Directors, on the same principle as the London Board now recognizes, and the members of those boards, who are also advertised as directors, are sitting in the same condition, equally ignorant of the company's accounts and affairs. Boards established on such a principle are not boards of DIRECTION, but mere agencies, and the members serving on them are not DIRECTORS, but agents to invite and collect business. It is a mode of enlisting confidence which ought not to be en- couraged either by shareholders or the public. " The Company has been established twenty- three years, doing a considerable business in Life Assurance and Annuities, yet the Liverpool Directors will not venture to contradict Mr. Forster when he states that they have never invested one shilling of their funds in public securities, or in landed estate, to meet the distant claims of the policy-holders and annuitants, some of which will not fall due till half a century hence. Bricks and mortar and railway shares are not the securities in which life and annuity funds ought to be invested. t" * See page 69, et seg. t See page 97. 56 {DELUSIVE BALANCE-SHEETS. THE MITRE. Early in January last. I applied to this office for a copy of its annual report, and statement of accounts. In reply, a prospectus, only, was forwarded, accom- panied by a note from the secretary, stating that a copy of the report was not to be had. I have taken some trouble to find a recent record of the condition of the company, but in vain ; excepting that, at the annual meeting in June, 1859, the shareholders rejected the report presented by the managers, and appointed auditors of their OAVU, to inquire into what appeared to be the very unsatisfactory con- dition of the company ; and that the auditors were denied, by the managers, the means of discharging the duty to which they had been appointed by the shareholders. Under these circumstances, it is more than ordinarily difficult to determine what the con- dition of the Mitre is; but it is stated, in the " Insurance Gazette," that, during the period 1846 to 1855, the expenditure had considerably exceeded the whole of the premiums received upon policies, the holders of which are, therefore, left to take care of themselves, or to rely upon the contributions of the shareholders ! The Mitre has been dis- puting the claims that accrue upon policies. The last case I have seen, occurred, a few weeks since, on a policy for <1,500. The cause was set down for trial, and was duly called on but had just been settled ! THE CROWN. 57 THE EUROPEAN. PRESIDENT The Right Hon. Thomas Milner Gibson, M.P. DIRECTORS H. Wickham Wickham, Esq., M.P. ; John Cheetham, Esq. ; James Davidson, Esq. ; John Field, Esq. ; Charles Forster, Esq., M.P. ; Richard Francis George, Esq. ; H. II. Harrison, Esq. ; Thos. C. Hayward, Esq. ; John Hedgins, Esq. ; Thomas Y. McChristie, Esq. ; James Edward McConnell, Esq. ; John Moss, Esq. ; Charles Wm. Reynolds, Esq. ; Richard Spooner, Esq., M.P. ; Joshua Proctor Brown Westhead, Esq., M.P ; H. Wickham Wickham, Esq., M.P. ; Thos. Winkworth, Esq. MANAGER AND SECRETARY William Cleland, Esq. This company was originally the " Industrial and General," then " The People's Provident," but, having obtained the business of some four or five other companies, and lastly that of the European, an office established in 1819, and finding that its own designation u seriously impeded the acquisition of new business," it adopted the name of the company with which it last allied itself ; and we gather from the report for the year ending Dec. 31, 1858, that : The annual revenue is ... 105,600 11 2 Cash and invested assets, in- cluding share capital . . 220,780 - 9 2 There is not a word about the sum of the policies outstanding, and we are unable, therefore, to form any judgment as to the financial position of the company ! THE CROWN. DIRECTORS William Whitmore, Esq ; Octavius Ommanney, Esq. ; John Chapman, Esq. ; Charles Chippendale, Esq. ; J. C. H. De Colquhoun, LL.B. ; Edward James Daniell, Esq. : Edward Hamilton, Esq. ; George Hankey, Esq. ; George H. Hooper, Esq. ; Lieutenant- Colonel J. A. V. Kirkland ; James Mitchell, Esq. ; John Nelson, Esq. ; Park Nelson, Esq. ; Charles Spencer Perceval, Esq. ; William Wilson, Esq. 58 DELUSIVE BALANCE-SHEETS. AUDITORS Binny Colvin, Esq. ; Henry Whitmore Harrison, Esq. ; George Sparkes, Esq. SOLICITORS Messrs. Boys and Tweedie. .. INSPECTOR OF AGENCIES A. J. Corbett. This company has been in existence for thirty-four years, and it thus sets forth its position, and its claims to public confidence The sums assured 2,424,888 The annual income is 115,847 The cash and investments amount to 847,665 The sums paid on policies exceed . 1,115,000 The bonuses added to policies . . 320,180 What the proportion between the sums assured, and the realized and prospective funds may be, we have not the slightest intimation, in either adver- tisement or reports, and it is utterly impossible that either the public or the insurants should be able to form any judgment upon it. The next report that comes up is that of THE COLONIAL. Those who desire to do so, may ascertain, with tolerable accuracy, the state of this company's aifairs at the end of its thirteenth year. Here is the statement: Assets 330,045 19 3 Liabilities 264,028 10 11 Annual premiums . . 85,634 3 6 The assets and liabilities are, of course, inclusive of the present value of the sums insured under existing policies, and of the premiums receivable upon them. THE COLONIAL. 59 But it is obvious that a mere statement like that here put forth would be of little value, if an explanation were not given of the principles upon which it rested. A false life-table may be used in the calcu- lation ; a higher or a lower rate of interest may be assumed ; and the deductions made from the gross premiums to provide for office expenses and contin- gencies may be inadequate for the purpose. And no company which pretends to give a full and fair state- ment of its position, and, at the same time, withholds information on these points, is worthy of public confidence. The COLONIAL escapes this censure. We learn, from the last report, that the returns of the Eegistrar- General for England, the table of Indian mortality on which the company's original calculations were based, and other special tables, founded on observations and researches as to the in- creased risk in the countries where the company is transacting business, have been used, the company having proved the soundness of these data. The rate of interest has been taken at 3 per cent, on the class of assurances participating in the profits, al- though 3| per cent, has been assumed, as the return of the smaller class of assurances, without profit; while the " loading," or per centage, added to the original or net premiums, has not been included in the valuation. We have, also, a statement of the moneys and in- vestments constituting the assets of the company a statement scarcely less indispensable than that of the principles on which the valuations have been made ; so that those who are interested may be able 60 DELUSIVE BALANCE-SHEETS. to form a judgment of the soundness of the founda- tion on which their property rests. It may he thought that 33,000 is a very small proportion to he invested in Government securities, out of the large sum of 330,000. But the fact is not concealed. THE EAGLE. TKUSTKKS Lord Batemaii; Robert Cheerc, Esq.; Charles Thomas Holcombe, Esq. ; Richard Harman Lloyd, Esq. ; Win. Jas. Max- Avell, Esq. ; Ralph Charles Price, Esq. ; the Hon. E. T. Yorke, M.P., and other gentlemen. DIRECTORS Charles Bischoff, Esq. ; John White Cater, Esq. ; Charles Chatfield, Esq. ; Thomas Devas, Esq. ; Sir James Buller East, Bart., M.P. ; Nathaniel Gould, Esq. ; Robert Alexander Gray, Esq. ; William Augustus Guy, M.D. ; Charles Thos. Holcombe, Esq. ; Richard Harman Lloyd, Esq. ; Thomas Boddington, Esq. ; Joshua Lockwood, Esq. ; James Murray, Esq. ; Sir W. G. Ouseley, K.C.B., D.C.L. ; W. Anderson Peacock, Esq. ; Ralph Charles Price, Esq. ; Philip Rose, Esq. ; George Russell, Esq. ; Thos. G. Sambrooke, Esq. ; Captain L. S. Tindal, R.N. ; the Right Hon. Sir John Young, Bart. AUDITORS Thomas Allen, Esq. ; Wm. H. Smith, Jun., Esq. ACTUARY AND SECRETARY- Charles Jellicoc, Esq. This company is not entitled to the commendation just bestowed upon the COLONIAL. The report of the directors, for the year ending 1859, is as meagre and unsatisfactory as it could well he framed, and defies all attempts to ascertain the real condition of the company, which has greatly enlarged its dimensions, within a recent period, hy the absorption of other companies of a somewhat questionable character.* The total income is set down at . . 361,541 The value of the sums assured . . . 4,013,211 The value of the assurance premiums, 3,109,681 The realized assets (including 30,000 of agents' (!), and other balances) . 1,853,744 * See na;p 28. THE EAGLE. 61 "We look in vain for any intimation of the prin- ciples on which the estimate of the company's policy- liabilities has been calculated, or the value of its future premiums determined ; while the statement of investments may be taken as a model for all com- panies who desire to exercise great reserve, and, at the same time, to induce a belief in the minds of the unreflecting, that they are quite ingenuous and com- municative. Of the million and a half of funds, which 'are invested, " fixed mortgages and life inte- rests " are jumbled together, as absorbing nearly a million and a quarter, and " other securities," what- ever they may be, upwards of 107,000. It is not to be overlooked, that, while the premium income of the company is 281,890, the expendi- ture, including claims under policies, and policies surrendered, is no less than 303,794. . Nor is it to be overlooked, that the EAGLE is made up of materials of a very heterogeneous and questionable description. Like Nebuchadnezzar's image, it is partly of iron, partly of clay, and partly of brass ; before it can be determined how much of silver and gold enters into its composition, we must know forbidden knowledge at present ! of what the Promoter, the Palladium, the Mentor, the Abso- lute, the Observer, the Alfred, the London Mutual, the Indisputable, the Albion, the Deposit and General, the Achilles, the Protestant, the National Friendly, the Absolute, the Observer, the London Mercantile, the City of London, were composed, for these all enter into the composition of the giant Eagle. DELUSIVE BALANCE-SHEETS. ' SCOTTISH EQUITABLE. PRESIDENT His Grace the Duke of Buccleuch and Queensbury, K.G. VICE-PRESIDENTS The Right Hon. Lord Grey ; Sir Graham Graham Montgomery, Bart., M.P. ORDINARY DIRECTORS!. Whitefoord Mackenzie, Esq., "W.S. ; Robert Chambers, Esq. ; George Lorimer, Esq. ; John Crombie, Esq. ; J. Hall Maxwell, Esq., C.B. ; George E. Russell, Esq. ; John Watson, Esq. ; Alexander Cassels, Esq., W.S. ; David Douglas, Esq., W.S. ; John Bruce, Esq. ; Thomas Scott Anderson, Esq., W.S. ; John Hutton Balfour, Esq. MANAGER Robert Christie, Esq. SECRETARY William Finlay, Esq. The report of this society, laid before the twenty- eighth annual meeting of the members, is one of a very satisfactory description, for the fulness and particularity of the information it contains. It not only gives the full particulars of all the assets and liabilities ; but the rate of mortality, and the rate of interest employed in valuing the outstanding risks and receipts, are also stated. I have already said something as to the importance of information on both these points, in valuing the assets and liabilities of a life office ; but the effect of using different tables of mortality, and assuming different rates of interest is so strikingly shown in a table prepared by Dr. Farr, and given in the 12th Eeport of the Eegistrar-General (p. Ixiii), that I transcribe it here, in order to impress it the more strongly on the reader's mind, as well as to show how important it is, that a company which desires to in- spire public confidence should see that its actuary, in his report of the liabilities and assets, affords infor- mation on both points embraced in the table. VALUATION OF ASSETS AND LIABILITIES. Sums Insured, 10,033,325. Valuation by English Table. Valuation by North- ampton Table. 3 per Cent. 4 per Cent. 3 per Cent. 4 per Cent- VALUE OF SUMS ") INSURED / 6,503,789 2,927,789 5,752,401 2,695,542 6,704,929 2,772,149 5,982,107 2,560,619 VALUE OF FUTURE ) PREMIUMS . . . . / DIFFERENCE* 3,576,000 3,056,859 3,932,780 3,421,488| Here, as will be seen, a company, valuing by the English, table, at 4 per cent., will make its apparent assets 519,141 more than if it valued at 3 per cent., and 356,780 more than if it used the North- ampton table, at 3 per cent. All that is insisted on here, however, is, that we should be told what table is used, and what is the rate of interest. There is one item in the balance-sheet of liabili- ties and assets of the Scottish Equitable, which suggests a few remarks, in reference to the state- ments made by other offices. On the Or. side of the sheet stands the following entry : Present value of contributions or premiums of assurance receivable by the society, after de- ducting 2J per cent, for expense of collection . . 1,572,911 The reason for this deduction is obvious: the estimate of the present value of the future sums * The society should possess securities of this value, and, in addition, say one-fifth of the value of the premiums. It may be necessary to add, that this table refers to the Equitable risks, not to the Scottish Equitable. 04 DELUSIVE BALANCE-SHEETS. payable on existing policies is made on the gross amount of the premiums, from which is deducted the reserve for future expenses and profits on existing policies. It may, at first sight, appear that 2| per cent, is an inadequate deduction for such a purpose ; but it is stated that the valuations have been made by the Northampton table, ai the rate of 4 per cent. ; and, inasmuch as that table shows a larger rate of mortality than actually takes place, the calculations made from it overstate the present value of the sums contained in and payable by policies, while, it is further obvious, that, from the same cause, the present value of the contributions or premiums re- ceivable is understated. This will at once be seen by reference to the table on the preceding page, in which the results of valuing by the English and the Northampton tables are respectively given. The reserve of 2 J per cent., therefore, gives a very wide margin, and understates the present surplus in favour of the society. No company should be trusted, which does not proceed thus, or in some equivalent manner, in making an estimate of its obligations and resources ; and there can be no reason to believe that the sound and honest process has been adopted, if the fact is ignored in the published statements of the company. The line that divides solvency from insolvency is as easily passed over in an insurance office as in any other mercantile establishment ; and, there is evi- dently in them as strong a desire to " tide over " a bankrupt condition, or to postpone the evil day of a VALUATION OF ASSETS AND LIABILITIES. fi5 winding-up. as the most unscrupulous trader could exhibit. To serve such a purpose, the false valua- tion of policy obligations and of future premiums, is at once the simplest and the most effective mode of proceeding. By this means, a company hopelessly insolvent, may be made to appear in possession of an enormous surplus. A glance at many of the published statements of existing offices, some of them doing a large business, will justify me in offering a few further remarks on the subject. A life premium, as stated by Dr. Farr (Keg. Gen. 12th Eeport, p. xxxviii.), is made up of two por- tions ; the net premium, which, by hypothesis, will pay the policy and the charge, or, as it is generally called, the " loading," which provides for expenses and contingencies. Now, to introduce or include the value of the loading, which is probably 30 per cent., or more, of the gross premium, as an asset, is in that degree to overstate the assets ; unless an equivalent sum be entered on the opposite side of the account. Mr. J. J. Downes, an actuary, who was examined before the Parliamentary Committee of 1853, speaks very decidedly on the subject, and very clearly shows the result of the false mode of proceeding. "I have seen it stated in published reports," he says, "that a clear divisible surplus of so much remains; but I infer, from the practice of the office, that they do not believe that to be the fact, because they state a divisible surplus to a large amount, and recommend a division to a smaller amount. Now, if the office, 66 DELUSIVE BALANCE-SHEETS. has an actual surplus, and declares it to be a surplus, they may safely divide it, unless they give very good reasons for withholding a portion of it. And, if they give a sufficient reason for withholding a portion of it, then, I say, in their judgment, such a surplus does not exist, and ought not to he stated." "And," he adds, " If I were to make a valuation on that principle" that is, valuing the gross premiums " I should show a surplus exceeding half a million of money in the hands of our society, beyond the sur- plus actually realized; and if I were to say, ' There is half a million of money profit,' the members would say, c Let us divide it ; if you have that surplus, what reason have you for not dividing it ? ' f Why, it is a surplus that may come : supposing that you were in a condition to commute your premiums, for the whole term of life, into present assets, and to put the amount to your credit in the account, then we should have the further surplus of half a million to divide; but, until it is brought there, such a surplus does not exist.' ' Mr. Higham, another eminent actuary, places this fallacious and unjust mode of procedure in a very striking light. He says : " The sum assured is valued, and put on one side of the account ; the claim of the company to receive premiums is valued, and put on the other side of the account; and thus the latter is made out to be larger than the former: conse- quently, a policy which the company would pay money to cancel, appears in their balance-sheet VALUATION OF ASSETS AND LIABILITIES. 67 as a valuable asset that is to say, the same docu- ment is a valuable property to the grantor and the grantee Allow me to suppose the case of a bank, making up its accounts. It owes to its depositors 1,000,000; it has in hand 900,000 ; it puts down as an additional item of assets, profits, we will say at the rate of 10,000 a year, valued at twenty years' purchase : by that means, it makes its assets 1,100,000 against 1,000,000 of liabili- ties, and the result is stated to be. a surplus of 100,000." I will only add, that another authority, Mr. S. Ingall, states, that, in his opinion, next to an impro- vident expenditure, "the valuation of the gross premiums is the most dangerous practice that can be resorted to in an assurance company, and is gene- rally .adopted in offices where there is a deficiency of assets." In point of fact, these " assets," as they are called, may never be realized : they exist upon paper, and may never have any other existence. The author of the " Insurance Guide " puts this in a very clear way: " The actuary who so prepares a valuation " that is, by estimating the value of the future gross premiums payable upon existing policies knows full well, that, while he is anticipating the profits upon all the existing policies, up to the full extent of their possible currency, not more than one- half of them will run on to maturity Let us take the first five hundred policies issued by the " Economic " Office, and see what had become 68 DELUSIVE BALANCE-SHEETS. of them, at the end of thirty years. Here are the figures : Dead 149 Purchasedbytheoffi.ee. . . . 118 Lapsed . . 86 Term expired 28 In existence ........ 119 500 Now, assuming that all the 119 existing policies became claims by death a circumstance not very probable, seeing that of the 381 ceasing to exist in that period, only 149 were discontinued by death assuming, we say, this to be the case, only 268, or just over one half of the entire number observed upon, will have emerged by death ; so that, by taking credit for an annuity equal to the margin of the premiums, for the whole of the life, you take more than can possibly be realized. Dr. Fair (12th Keport of Eeg. Gen. p. xxiv.) mentions an office that had expended nearly the whole of its premiums, and had no stock, or very little, but which, nevertheless, advertised a profit of some such sum as 96, 000, which was probably the capitalized value of the charge on the future pre- miums ; and, in order to put this paradoxical result in a clear and striking light, he gives the following hypothetical case : " The value of the reversion of .1,000,000, on the lives of persons aged 35, is 446,750. The net annual premium to in- sure 1,000,000 on the same lives, is 23,519. Assume that the premiums which the insurants have engaged to pay are THE INTERNATIONAL. 69 charged to the extent of 25 per cent., and amount to 29,399 ; then, the present value of these annual premiums is, 558,437. Allowing no deduction for expenses, the profits of the office which has granted the policies are, by the said method, 111,687, although it has received, as actual premium, only 29,399!" The force of figment could no further go, but it is notorious that it goes quite as far in many of the offices of the present day. The most notable instance of this, simply because it has made the most noise, is to be found in THE INTERNATIONAL. DIRECTORS Edmond Sheppard Symes, M.D. ; John Elliotson, M.D , Cantab., F.R.S. ; Henry J. Hodgson, Esq. ; John Moss, Esq. ; John Symes, Esq. ; Joseph Thompson, Esq. SECRETARY Alexander Richardson, Esq. CORRESPONDING SECRETARY Augustus Blondel, Esq. AUDITORS Professor Wheatstone, F.R.S. ; Professor J. R. Young. ACTUARY W. S. B. Woolhouse, Esq., F.R.A.S., F.S.S., &c. ASSISTANT ACTUARY Barker "Woolhouse, Esq. BANKERS Messrs. Glyn, Mills, and Co. SOLICITORS Messrs. Gregory, Gregory, Skirrow, and Rovvcliffe. In the state of Massachusetts, U.S., there is a Board of Insurance Commissioners, appointed by the legislature, one duty of which is to calculate the existing value, on some day in every year, de- signated by them, of all outstanding policies of life insurance, in companies authorized to make in- surance on lives in that commonwealth ; and to re- port 1 thereupon to the legislature ; and, in order thereto, all companies making insurance upon lives, or their agents, are required to furnish to the com- missioners an attested statement, certified in due 70 DELUSIVE BALANCE-SHEETS. form, setting forth the number, date, and amount of each policy, and the age of the insured at the period of its date. The International has a branch in this State ; and, in the month of June, 1859, the commissioners presented to the Senate and House of Eepresentatives at Boston, " a Supplement to their Fourth Annual Eeport,'' in which they say, " In the Eeport in relation to Insurance Companies, which we had the honour to lay before you, previous to your adjournment, it was stated that the Interna- tional Life Assurance Society, of London, had made the other returns required by section 252 of the Acts of 1856, but had not furnished the data re- quisite for the valuation of their policies, as re- quired by section 10, of the said chapter, and by chapter 107, of the Act of 1858 ; and that, in con- sequence of this, the operation of its agents had been suspended, till such time as it should fully comply with the law. On the 26th of May, its agent filed in this office a duly attested statement of the data of all its policies outstanding on the first of November last ; " and they proceed to say, that they have carefully computed the indebtedness, or natural liability, of the society on each policy at that date, according to " the Combined Experience," or actuaries' rate of mortality, assuming interest at 4 per cent, per annum, and they give the results in a series of tabulated particulars, which exhibit a balance against the society, amounting to no less a sum than 1,075,624 dollars ; or 222,236, instead of a large balance in its favour, which was the re.- sult of the valuation made by the society itself. THE INTERNATIONAL. 71 The animadversions which the Beport of the Commissioners appends upon this state of things, are worthy of notice, not so much with reference to the International, as with reference to life insurance companies in general. The Commissioners' say : " An insurance company which issues whole-life policies, either at simple or equal annual premiums, is, in fact, a savings' bank, which takes money in trust for a certain purpose, and to be drawn out at certain times contingent in detail, but calculable as to the average. It is not faithful to that trust, if it does not reserve from division, or appropriation as profits, at least the net value of its policies, calculated at the minimum of interest on its investments. This is the most imperative law of life assurance, demonstrated by theory, and confirmed by experience, and no company can violate it and escape ultimate bankruptcy, unless it be by some course of successful gambling and trickery. Any company situated like the one under consideration, which has let a million of dollars too much leak through its sieve, must either seasonably replace the funds, or its policy-holders must be defrauded by it to that amount. They may be frightened into forfeiting their policies at once ; and in, that case, their loss is immediate and certain; or they may go on putting more money into the sieve, and, in that case, their loss will be more remote and greater." Assuming that the gentlemen having the direction of the company have been misled by the way in which their executive officers have misrepresented their affairs, the Commissioners express a hope that the shareholders will, on learning the true state of the case, either repair the defalcation, or do justice to each policy-holder by equitable surrender or re- assurance. In the mean time, they strongly advise policy-holders not to forfeit their policies by non- payment of premium, but to pay the premiums, not 72 DELUSIVE BALANCE-SHEETS. in cash, but in notes of hand, which the society would find it difficult to collect, if they took the dishonest course. They then proceed : " A candid consideration of the documents on file in this office, and of others which have been offered and rejected as unsatis- factory, compel us to conclude that there are parties connected with the parent office in London who have endeavoured to deceive the people of Massachusetts, and have succeeded in deceiving a large body of respectable shareholders in England, making them believe that the society has been earning large profits, while it has really been squandering sacred funds, and that receiving handsome dividends out of the premiums, for the use of a guarantee capital, which should long since have become needless, is a perfectly legitimate business." And, after adverting to the respectability and re- sponsibility of the members of the local Board of the American branch, and expressing a hope that they will use their powerful influence to protect from loss, and relieve from all anxiety, the hundreds of persons in the State who have taken policies from the society, on the strength of such names, rather than from their own conviction of its merits, they thus wind up : . " The general agent of the International Insurance Society, of London, having now fully complied with our statutes, both as to returns and the payment of the taxes, which were reported as delinquent, there is, in our opinion, no law to prevent the society from operating further in this Commonwealth; and in this opinion we believe we are fully sustained by that of the. Commonwealth's legal adviser. If the company in question had been chartered in this Commonwealth, we have no doubt that the Supreme Court, on proper application, would either compel the stockholders to repair the fund, or wind up with an equitable THE INTERNATIONAL. 73 division. We would respectfully suggest, that some further legislation is necessary to protect our citizens against the operations of foreign life assurance companies, which are in a condition similar to that of the International, and would recommend the passage of a law requiring such as do not possess sound assets, equal to the net value of all their policies, before doing any further business in this Commonwealth, to deposit in trust with the Treasurer and Receiver-General, to be held for the benefit of policy-holders who are citizens of Massachusetts, and always thereafter to keep so deposited, cash investments of the sort prescribed in chapter 252, section 14, of the Acts of 185G, equal to the net value of all the policies held by said citizens, and requiring the general agent to furnish annually to the Insurance Commissioners a duly attested statement of the data of all such policies." To be silent under so damaging an exposition of its proceedings and position, and so severe a condem- nation of them, was, of course, impossible ; and the International has, accordingly, put forth an exculpa- tory statement two statements, in fact, for Mr. W. S. B. Woolhouse, their actuary, has prepared one, which has, at all events, the merit of brevity, and Mr. F. G. P. Neison has prepared another, which can lay claim to no such distinction. The object of these gentlemen is to show, and they evidently believe they have succeeded in doing so that* the Commis- sioners, whom they declare to be " unacquainted with the mere elementary principles of numbers," and to " misapply the simplest laws " of the art, are alto- gether at fault in their valuation of the society's assets and liabilities, and that their Eeport is, from beginning to end, a series of the most ludicrous blunders.* * When Mr. Neison employs this sort of depreciatory Ian- 74 DELUSIVE BALANCE-SHEETS. It is to be noted, however, that Elizur Wright, the first Commissioner, is one of the profoundest mathematicians in the States, and has won a high special reputation as the constructor of a valuation- table at 3 and 4 per cent, on the basis of the " Combined Experience,'' extending it for all ages, for years, months, and days ! I am not going to arbitrate between these learned pundits, nor should I have referred to the contro- versy at all, but in further illustration of my argu- ment, as to the great uncertainty which attaches to the statements and financial condition of many, even / / of the largest, and apparently most prosperous offices, and the necessity there is for a more satisfac- tory exhibition of their affairs, before they can entitle themselves to the confidence of the public. How far the commissioners of Massachusetts may be wrong in their valuation of the International '$ assets and liabilities, I know not ; but it is certain that the Society's defenders are greatly wrong ; and guage, in speaking of men of undoubted attainments, and of a high reputation, in the department of science to which they have devoted themselves, it is difficult, if not impossible, to banish from one's mind 'the fact, that Mr. Neison has himself made some extraordinary exhibitions of actuarial accuracy. No longer since than 1858, he was found, by Mr. Jenkin Jones and Professor De Morgan, to have made two or three startling blunders, to the extent of many thousands of pounds, in valuing the assets and liabilities of the General Annuity Endowment Association, the con- sequence of which was, that the Association was on the high road to ruin, and was only stayed in its downward career, by deter- mining to pay annuitants 16 a year, instead of upwards of 20, which, had Mr. Neison's blunders not interfered, they would have been entitled to. THE INTERNATIONAL. that they tend, by their mode of dealing with the question at issue, and the obvious erroneousness of the results they bring out, to increase our distrust in all such published statements. Let me call your attention, Sir, to two or three items in these official statements. 1. Mr. Woolhouse gives the pre- s, d. sent value of the Society's liabilities at ...... 1,061,858 4 11 Mr. Neison gives it at. . . 980,39616 2 The difference between them being 81,461 8 9 The one gets a surplus of . . . 44,189 8 9 The other gets asm-plus of . . . 130,593 16 It requires some degree of assurance to ask us to confide in the statements of gentlemen who thus treat the sum of upwards of 86,000 as of no value. It is hardly worth while to inquire into the way in which this discrepancy arises, except to show upon what contingencies a true statement of the assets and liabilities of a life office rests, and how commonly some of them are overlooked, and thereby the whole statement vitiated. The difference between Mr. Woolhouse and Mr. Keison arises chiefly out of the circumstance, that the latter wholly overlooks, as liabilities, the two sums of 79,608 paid-up capital, and 320. 11s. Qd. bonus on shares, which the former very properly sets forth.* These two items make up the sum of * In his report of 1853, Mr. Woolhouse says, " The paid-up capital should always appear in the annual debtor and creditor 76 DELUSIVE BALANCE-SHEETS. 79,928. 11s. 9d., the remainder of the difference arising out of the variance in their valuation of the sums assured, and of the premiums receive- able. 2. Mr. Neison repudiates the Commissioners' estimate of the indebtedness of the society, on the ground that they have used a false table of mortality in valuing the policies ; and he occupies considerable space in urging his already published objections to the " Experience " tables, which the Commissioners have used. But this is really an attempt to throw dust in the eyes of the public ; and it suggests, by the way, that an office having nothing to conceal should state which life-table it employs in making its valuations. Had this been done by the International, the Massachusetts' Commissioners would have escaped one of the many imputations which Mr. Neison so freely puts upon them, of having " refused to deal with real facts, and sub- stituting for them mere hypothetical and fictitious inventions." I know nothing of the value of the " Experience" table, as a table of mortality ; but I do know that actuaries of as high standing and character as Mr. $"eison himself, are entirely at issue with him. But, leaving the actuaries, at whose mercy we seem entirely to be, to settle that question amongst themselves, I offer only one remark upon the attempt Mr. Neison here makes to rescue the statement of the society, as so much owing to shareholders, being the amount of 2. 10s. paid by them on each share to which they have respectively become entitled." THE INTERNATIONAL. * 77 i International from the position to which the Com- missioners have reduced it ; and that is this, that the use of the Experience Table, in making the valuations, was in favour of the society, and not against it, as Mr. Neison would have us believe. Dr. Farr, who is allowed to be one of the highest authorities on the finance of life insurance, thus speaks of the result of using the "Experience" or the " Carlisle Table :- " The Experience and Carlisle Tables, which are used in most of the offices, some preferring one and some the other, underrate the net premium : in valuations, they understate the value of the nums insured, overstate the value of the premiums, and, consequently, underrate the amount of stock which an insurance society should have under investment, to meet its engagements" Registrar- General's Tivelfth Report, p. xi. So much for the complaint, that the Commissioners, in using the Experience table in their valuation, have overstated the assets which the International should have to meet its engagements. 3. Mr. Nelson's gravest charge against the Com- missioners, however, and which he handles at great length, with the evident view of depreciating their character and destroying the value of their report, is one which, if sustained, would no doubt go far towards accomplishing this object. The charge is, that, in valuing the future premiums, the Commis- sioners have deducted 33 per cent, from the gross premiums, that being the loading on the original or " net " premiums, when the policy-holder partici- pates in profits, and 20 per cent, when he does not. " It will be found," says Mr. Neison, " that, according- to 8 DELUSIVE BALANCE-SHEETS. their own showing of taking the loading on the profit policies of 33 per cent., and the others at 20 per cent., it will yield an average loading of exactly 31*02 per cent, on the whole-life policies in the aggregate; but, the deduction of 33 percent., actually made by the Commissioners, is equivalent to an original loading of no less than 49*25 per cent The loading being, according to their own admission, 31*02 per cent., it is obvious that a deduction of 23*68 per cent, from the gross premiums will produce the original premiums, and, if the Commissioners had understood their own principle, this is all they should have deducted from the present gross value of the future premiums payable under the policies The difference between 33 per cent, and 23*68 per cent, of the gross value of the premiums, is no less than 84,242. 14s. 3d. It is much to be regretted that a man of Mr. Nelson's acquirements and reputation should have committed himself so grossly and irredeemably as he has done in this representation, especially when he had unmistakeable evidence of his mis-statement. " The Commissioners have evidently deducted 33 per cent, from the gross premiums," he says, although in so doing they must have " misapplied the simplest laws of numbers." Surely, some evidence should have been offered, to sustain so grave an allegation ; but we look for it in vain. There is no evidence of it to be found in Mr. Neison's Eeport, although nearly one half of it is occupied in descanting on the assumed fact, and in ringing the changes on the incompetence of the Commissioners, whose blunder, he says, " any ordinary clerk would have been careful to avoid." Mr. Neison was not left to the necessity of con- jecturing, as he has done, what the Commissioners deducted in discounting the premium assets of the society. The Commissioners had told him, in so THE INTERNATIONAL. 79 many words, what they had done in that way, and had shown him, that, instead of having deducted more than they were entitled to do, they had deducted less. They were entitled to deduct 23-68 per cent., says Mr. Neison, in order to reproduce the original premiums ; but, instead of deducting that, they de- ducted only 20 per cent. ! Here is the proof: After noticing Mr. "Woolhouse's valuation of the present worth of all the future premiums payable on policies, the Commissioners observe : " To this. he should have added the present value of the pro- bable expenses and sums to be divided to policy- holders and share-holders. A provision is made for expenses and dividends, by adding to the mathema- tical premium what is called a loading, which, in case of the International, is 33 per cent, when the policy-holder participates in profits, and 20 per cent, when he does not. "What, then, can be fairer," say the Commissioners, " than to assume that twenty per cent, of the future premiums may be considered loading, and will be used up otherwise than by pay- ing the ultimate claims on the policies ? The pre- sent value of this loading will, of course, be equal to one-fifth of the present value of the gross premiums. "We may, therefore, reconstruct the balance-sheet,'' &c. Mr. Neison had not overlooked this paragraph, for he pretends to quote it; but he misquotes it, and evidently not without a purpose. His words are " The Commissioners, evidently blind to this simple prin- ciple, have actually deducted 33 percent., and thus violated 80 D-ELUSIVE BALANCE-SHEETS. their own principle in valuing only net premiums. That you may have no misgiving as to this fact, it is only necessary to read the six lines in continuance of the last quotation from p. 14 of their report, which is a deliberate statement, that, because the loading* is 20 per cent., or one-fifth, so also must the deduc- tion be one-fifth j whereas, the true deduction, to restore the original premium, should be only one-sixth part of the gross premiums." A more impudent attempt at imposition you, Sir, and Mr. Neison must forgive the expression- was never made than this is. The Commissioners do not say that the loading of the original premiums has been 20 per cent., or one-fifth ; on the contrary, they say it has been 33 per cent, on participating policy premiums, and 20 per cent, non- participat- ing premiums which, says Mr. Neison, yields an average loading of 31-02 per cent.; and, the original premiums having been thus loaded with 31-02 per cent., the Commissioners ask what can be fairer evidently meaning more liberal towards the society than to consider that 20 per cent, of the future premiums may be considered loading, which proportion only they proceed to deduct ; whereas, Mr. Nelson admits that they were entitled to deduct 23 68 per cent. ! Surely, I might, with some propriety, appropriate Mr. Nelson's own language, and say, " After the disclosure of the preceding error, you may, perhaps, consider it unnecessary that I should extend my ob- servations on the Eeport any further, and that I should proceed at once with my own valuation of the assets and liabilities of the society. It is, how- ever, important to allude to one or two other ques- tions raised in the Eeport." THE INTERNATIONAL. 81 4. Ill handling the Commissioners' proposition for dealing with the " loading " of the " net " premiums, as a provision for " expenses and dividends," Mr. Neison turns aside to discuss the question of ex- penses, as attendant upon a life insurance company, wherein he furnishes another evidence of that eager- ness to establish a case which so often conceals from a partisan some of the consequences of his own rea- soning. " A small portion only of the expense annually incurred by a life-office," says Mr. Neison, " is occasioned by nursing the already acquired business. There is an excellent practical illus- tration of the expenses actually necessary to continue an exist- ing business, in the case of the various Indian funds, the pen- sions of which are paid in England, to the extent of nearly halt' a million sterling, yearly. To superintend the payment of these pensions, there is needed a much greater amount of care and attention than is necessary for the renewal of premiums by a life-office j and yet the London agents of these funds are con- tent to do all that is required, for an allowance of one per cent, on the disbursements." If this reasoning has any significance, it is to lead to the conclusion, that a reserve of one per cent, only, with the additional allowance that will be necessary to pay the commission on such of the renewed pre- miums as pass through the hands of agents, is all that should be reserved out of the margin of the "net" premiums which the " loading" affords. But, if that is to be the only reserve, what is to be- come of the bonuses which the International and other societies promise, as a temptation to the public to insure lives in their offices ? The smaller the reserve, the larger is the present surplus divi- F $2 DELUSIVE BALANCE-SHEETS. sible amongst the existing policy-holders. If the reserve is but just sufficient to defray the expenses and pay the agents' commission, it is quite clear that nothing will be left for future division, as bonuses. The International bonuses are to be con- tinued, however, and the existing policy-holders, as well as the new ones, are to participate in them ; so that, after having absorbed all their own available surplus, the existing policy-holders are to have their full share of the surplus which will arise out of the premiums of the new insurants ! It does not seem to me that Mr. Neison is doing the right thing to bring new business to the office whose cause he pleads ; but that is not my concern. I have only to protest against the doctrine laid down, as to the mode of dealing with the fictitious surplus which is got by valuing the gross premiums instead of the net, and the limitation of the reserve for future " expenses and dividends." The injustice involved in Mr. Neison's doctrine is strikingly exposed in Mr. Sang's "Essay on Life Assurance " : " By setting the present value of the premiums due by the members against the present value of the sums assured to them, we estimate as present profit all that is yet to be realized during the currency of their policies; and a balance so struck does not exhibit the present state of the society's affairs, but the whole profits prospectively to accrue from its current transactions. If, then, the free fund [or surplus] so brought out, be set apart and distributed in any way, there will be left no prospect of fur- ther profit from the transactions of the present members, who are then put in the same position as if they paid only net-value premiums. Were no new members to enter the society, no fur- thor bonus could ever be declared ; and hence, if the present bo THE INTERNATIONAL. 83 to share with the. new ones in any future profit, that must go to deprive the new comers of any part of the surplus payments. If valuations, on this principle, be accurately conducted, the new entrants ought to divide, exclusively, the whole of any future bonus." The author of the " Insurance Guide," who quotes this passage very felicitously, adds, "If an office proceeds to a distribution of such imaginary or pros- pective profits, it requires no great penetration to discern that a great injustice must be inflicted on the future members. It was the contemplation of such an occurrence that led the author of "Life Assurance, its Schemes," &c., to exclaim, ' possibly the representatives of those few members who were so fortunate as to die during this halcyon period would reap the advantage of the unworthy trick which had been played : " If 'twere then to die, 'twere then to be most happy ; " while, on the other hand, the representatives of those members who might unfortunately live some few years longer (thus contributing more largely to the so- ciety's funds), might consider themselves fortunate if they obtained from the wreck, even the bare amount originally assumed. 7 ' But, leaving these points, let me now inquire : 5. What is the actual state of the International, according to the showing of the two actuaries who have been engaged in making out its case ? I have already stated, that Mr. "Woolhouse puts down the value of the liabilities of the society at 1,061,858. 4s. lid., or 81,461. Ss. 9d. more p 2 84 DELUSIVE BALANCE-SHEETS. than they are set down at by Mr. Nelson ; and that, while the former makes the surplus 44,189, the latter makes it 130,593. Mr. Woolhouse's surplus is the true one, sup- posing his statement of liabilities to contain every- thing it should contain ; if there is anything omitted, it will proportionately affect his surplus. It has already been shown, that the most eminent actuarial authorities concur with the suggestions of common sense, in laying down the principle, that, in estimating the value of the future premiums re- ceivable on existing policies, the "net" premiums only should be valued ; unless in valuing the gross premiums, which are "charged" or "loaded" to provide for the expenses of the office, bonuses, and such contingencies as are not provided for in the " net " premiums, the liabilities or debit side of the account is charged with a sum equivalent to the "loading." That both Mr. Woolhouse and Mr. Nelson have valued, not the net, but the gross premiums, is be- yond all doubt. The former gives the gross annual premiums at 69,528. 9s., and then states the " pre- sent value of premiums receivable on assurances " at 910,297. 10s. 2d. There is no actual statement as to whether the value of the net or of the gross pre- miums is the value given ; but the fair inference is, that it is that of the gross annual sum just mentioned, viz., 69,528, especially when it is found to agree so nearly with Mr. Nelson's " present value," which is, beyond all doubt, that of the gross premiums. In truth, Mr. Nelson not only avows that it is so, THE INTERNATIONAL. 85 but he boldly asserts the propriety of such a valua- tion. His reasoning is a curiosity in its way, and I here transcribe it. He says : " Let us, however, consider whether a valuation of net premiums is really that which, in justice, was required, or which is sanctioned by practice. Calculations intended for the public security do not require to be made in the analytical forms, which may be needed for the regulation of many of the internal affairs of a company; but still, it is well known that many of our wealthiest, largest, and undoubtedly best-established offices, even for the adjustment of their own interests, as among the members themselves, as well as with the public, have always valued the gross premiums, and still continue to do so. It is held that the whole of the premium is as completely and entirely the property of the society as a part of it, and there is as much right to calculate on receiving the one as the other/' Such a mass of confused and fallacious reasoning, it has seldom fallen to my lot to read: The public security may not require " analytical forms," but it requires a fact to rest upon, and not a fiction, which Mr. Neison gives them, and seeks to justify, by the authority of " many of our wealthiest, largest, and undoubtedly best established offices," which he avers are in the practice of doing the same thing. How far such a statement, coming from such a quarter, may tend to increase the public confidence in even the " wealthiest, largest, and best established offices," I shall not undertake to determine. Mr. Neisonmust settle that question with those " leading actuaries of the day who are in the largest practice," and whose reports he professes to have lying before him, " in all of which the gross premiums are valued and treated as contingent assets." 86 DELUSIVE BAL'ANCE-SHEETS. I need not multiply the unanswerable reasons which have already been given, against the adoption of this false and delusive practice ; but I must add a passage from the Commissioners 7 Beport, which shows what has been effected by it in the service of the International Society itself. The Commissioners say " Regarding it only as the prophecy of common sense, that future expenses and dividends should be about the same as the past, our insurance laws, since 1854, have required a net valuation, in order to compare the assets of a life insurance company -with its liabilities Under this law, the International returned its assurances on the 1st of December, 1855, as 12,206,680 dollars, and the computed present net value of all its policies as 166,065, while its total assets were 855,506. It is a legitimate subject of marvel that any educated actuary should suppose such a state- ment not too good to be true. ! " We are now in a condition to turn to Mr. Nelson's balance-sheet of liabilities and assets, and supplying its deficiencies from Mr. Woolhouse's corresponding valuation, and the suggestions of common sense and the requirements of justice, to see how much reliance is to be placed upon such an exhibition of the financial condition of a life-office. Deduction of 23-68 per cent, from present value of the gross premiums . 217,523 Liabilities omitted by Mr. Nelson, and supplied by Mr. Woolhouse ...... 79,928 297,451 Deduct Mr. Woolhouse's surplus ... 44,189 Balance against the Society . . . c253,262 THE INTERNATIONAL. 87 I have dwelt, at some length, upon the case of the International, not because I have any desire to damage that society by again calling attention to the position in which it stands, but because, as I have already intimated, it furnishes very striking evidence of the present unsatisfactory mode of estimating the liabilities and resources of a life-office, and which we now have the authority of Mr. Neison for saying is that adopted by " those leading actuaries of the day who are in the largest practice," and by "many of our wealthiest, largest, and un- doubtedly best established offices." * While such a practice exists a practice by which, in a single office, according to the testimony * " Since these remarks on the International were written, there have appeared answers to Messrs. Woolhouse and Neison's Report, by Professor Pierce, Mr. Romans, and Mr. N. G. De Groot, all eminent actuaries in tho United States ; and they confirm, in the most demonstrable way, the view I have taken of the unsoundness and delusive character of the English atituaries' replies to the Boston Commissioners. Mr. De Groot, after exhibiting, in several ways, the absurdity of relying upon a valuation of the gross premiums as an asset, says " This method of valuing in gross, which I believe to be a dangerous error, has been acted upon by too many companies, both in the United States and in England, and appears to be the chief source from which arise those excessive dividends, diminished reserves, amalgamations, and assessments, of which the English assurance journals have long been a familiar expose. I trust it will never receive favour in the United States from our best insurance life establishments. The artifice of discounting the margins, cannot be employed without discredit j it is deceptive to the policy-holders, and is unfair towards the present insurers, who are thus led, without knowledge, to undertake the burdens of their predecessors." 83 DELUSIVE BALANCE-SHEETS. of its own actuary, more than half a million of as- sets beyond those in even a possible existence could have been made to appear nobody can tell whether an office is in a solvent condition, or whether, in spite of enormous investments, large dividends, and frequently declared bonuses, it is not in a state of hopeless insolvency, " keeping open its doors only by a disreputable system of gambling and trickery." A very careful examination of the reports and balance-sheets of a large number of the existing offices leads to the inevitable conclusion, that, if they are not absolutely unsafe, there is an absence of all proof of their safety. Conducted as they now are, no one can tell whether a life assurance company whatever the external marks of prosperity may be is trustworthy or not. It may have built a mag- nificent stone palace, and have its liveried servants, and files of clerks and accountants, and all the other indications of wealth ; but no human being can tell what its condition really is ; and the chances are that it does not itself know. I have drawn up the table on the following page, for the purpose of comparing a few of the offices, as to the relation that exists between their liabilities and their assets^ The comparison cannot fail to excite surprise, by the extraordinary diversity it makes apparent. PROPORTION OF ASSETS TO LIABILITIES. 89 NAME OF OFFICE. Date of Esta- ' blish- ment. Sums Assured. Realized Assets. Per Centage of Assets to Liabilities. Premium Income. 1807 1815 1825 1825 1830 1835 1835 1836 1836 1836 1837 1838 1843 1845 1846 1848 1850 1851 1852 1853 9,396,333* 14,069,666* l,529,396f 6,378,753t l,178,003t 6,708,066* 3,125,017f 3,686,633* 4,247,033+ 1,771,899 2,184,303f l,553,619f 2,032,441* 827,342 420,174f 3,793,533* 773,166* 1,051,100* 722,106 3,520,000* 1,853,744 3,341,010 806,183 1,684,000 374,551 1,755,685 848,457 1,033,616 816,503 320,085| 192,397 305,737 286,497 94,916 59,007 184,610 44,223 25,438 IT 14,249 220,780 19f 471- 52f 26f 31f 26J 27 28 WJ 18& 8| I9| 12-g- H| U 4? i 2* 2 61 281,890 422,090 45,036 '276,000$ 46,415 201,242 67,646 110,599 121,411 77,274 69,528 . 61,000 68,002 22,880 12,075 113,806 23,315 31,533 21,605 105,600 Scottish. Widows' Fund National Provident ... Liverpool and London , . ! star Consolidated Kent Mutual . . . New Equitable . ... * These offices do not give the amount of the sums assured. I have got it by assuming the average of the premiums to be at 3 per cent. f These are the sums given by the offices. % I have included in the sums assured, 200,000 for fire-risks, which is a low estimate. I have deducted from the assets, 188,422, for paid-up share capital, and 188,422, for annuities payable by the office, valuing them at ten years' purchase, 151,110; together, 339,532. This is the gross income. I could not obtain the premium income, alone. || The realized assets are stated to be 362,045, but this includes proprietors' fund, 41,960. IT The capital has all disappeared. 90 ASSETS AND LIABILITIES. The older the office, the greater should be its assets in proportion to its liabilities. Offices of the like should show a like proportion between the two. But what are the facts which this table exhibits ? The Eagle , which is now 43 years old, shows the proportion of its assets to its liabilities to be 19f per cent., while the University, which is only 35 years old, shows a proportion of 52f per cent. ; that is to say, while the Eagle has only 13. 13s. 4d, towards payment of each 100 it has insured, the University has 52. 13s. 4d. The National Provident, which is 25 years old, has 26. 3s. 4J. towards payment of every 100 insured, whereas the International, which is of nearly the same age, has but 8. 15s. A glance down the fifth column of the table will show how the case stands, in the several offices enumerated ; and it cannot fail to suggest very grave considerations to all who have an interest in any of those which form t the great majority ; for, although the realized assets do not in themselves measure the ability of the office to ultimately pay its policy obligations, inasmuch as the premiums still to be received on account of the several policies will be taken into the account, there should be a certain proportion of good assets in hand, equivalent to the actual present value of all the policy obliga- tions at that epoch of time when the liabilities are estimated. In fact, this would be the price the offices ought to pay to purchase the cancelling of every policy engagement. It should be borne in mind, that the third column gives only the sums insured ; if we could ASSETS AND LIABILITIES. 91 add to these the bonuses appropriated to them by some offices, and promised by others, those sums would be enormously increased, and the dispropor- tion between them and the figures given in column five become relatively greater. The Standard, for example, doubles the amount of a policy in about thirty years, and the Rock does the same ! On the other hand, a considerable reduction should be made in the assets of some of the offices, on account of proprietors' capital and annuities pur- chased of the office and payable by it. Thus, for example, the Liverpool and London, whose realized assets are stated to be 1,156,035, includes in that sum what it has on account of annuities granted, amounting to .15,111 a year, and paid-up capital amounting to 188,422. Taking the annuities at ten years' purchase, these make together 339,532, which reduces its clear assets to 816,503, and makes the proportion between them and the liabili- ties 17^ per cent., instead of 27f per cent., which they would appear to be on the face of the balance- sheet. Several other companies in the table are subject to a reduction of their assets, as stated, on account of share capital ; but, as they ignore the amount paid, they have the benefit of it in the esti- mated proportion of their assets to their liabilities. This analysis of the proportion existing between the liabilities and the assets of the offices, neces- sarily suggests a thought as to the market price borne by the shares in some of them. A company paying a dividend of 30 per cent, to its share- holders, on their investments, will, no doubt, attract 92 ASSETS AND LIABILITIES. investors, although it may be in an extremely ques- tionable position, and be paying its dividends, not out of profits, but out of capital ; but it can scarcely be believed that the shares in such a company would sustain themselves, for any great length of time, at a high premium, or they can be thus upheld by other means than a skilful but covert management of the market. Let me ask you, sir, to turn to page 58, and then say how it is that the Crown shares, with 5 paid, fetch 19. Ids. ; to page 60, and say how the Eagle shares, with 5 paid, fetch 6. 5s. ; or why the Legal and General shares, with 2 paid, realize 6 ; how the Gresham shares, with 1 paid, fetch 2. 10s. ; or the Minerva, with 2 paid, realize 5. 10s. ? These are amongst the mysteries of the monetary world ! 93 VII. QUESTIONABLE INVESTMENT OF STOCK There is another thing appertaining to the safety of a life insurance company or society, suggested by the balance-sheets, scarcely less important than the statement of the amount of stock which the so- ciety has to set against its obligations ; that is, the form or description of property in which that stock exists. It is not in always omitting to inform its policy- holders, and the public whom it invites to become policy-holders, fairly and honestly of the amount of stock it has, realized, and to be realized, to discharge its liabilities with, that the great majority of life offices are culpable, and expose themselves to just sus- picion ; it is, chiefly, in omitting to state specifically, in what their realized stock consists. If a life insur- ance society could say, we have such an amount of realized assets, and it consists of government stock and other equally safe and readily convertible secu- rities ; and here is the sum of our obligations, nothing more satisfactory could be desired. There would, in that case, be no ground for doubt, no room for suspicion, as to the means actually pos- sessed, whatever there might be with regard to those still in futuro. But how many societies, out of the existing number, make any such disclosure, and thus avoid the suspicion of having invested some, perhaps much of their money stock all of which is necessary for the discharge of their policy- 94 QUESTIONABLE INVESTMENTS OF STOCK. obligations in questionable, if not in absolutely unsafe securities ? Scarcely any of them make the disclosure. Per- mit me to take two or three, by way of specimen : I take up the balance-sheet of the Eagle, and all the information I find there, on this head, is this : Amount invested in fixed mort- gages and life interests . . . 1,206,484 Ditto decreasing mortgages* . . 156,801 Ditto Beversions 61,478 Ditto funded property and Go- vernment annuities .... 162,847 Amount invested in other securities 107,021 Advanced on the company's policies 82,101 In the Metropolitan report, I get : Government securities and gua- ranteed bonds (specified) . . 95,116 * It is much to be feared that large losses will be sustained b} r many companies who invest the greater portion of their funds on mortgages of leasehold and freehold estate. It is easy to say that land and houses cannot melt away, but it is not easy to show that they must realize the full sums advanced upon them. To say nothing of legal difficulties, as to title, or as to alleged charges, which interfere with the mortgagor's right, although such disputes are constantly brought under our notice in the news- papers, there is the chance, in many cases, not a very remote one, of a large depreciation in the value of a property. The Globe, for example, has nearly 160,000 locked-up in what are called the " Harviestown " and " Cheltenham " estates, which, it is said, cannot be sold, unless at a large sacrifice, and have been, for years, returning less than 3 per cent, interest. It is stated, by gentle- men having large interests in the company, and who have investi- gated its affairs, that the loss upon these two estates has been from 2000 to 3000 a year. THE LONDON EQUITABLE. 95 Bailway and other debentures 209,042 On mortgage 431,407 Life Annuities 2,173 On Policies . 72,051 Beversionary interests .... 13,181 The Legal and General gives : Specified descriptions of stock 267,722 On mortgages 683,733 In the National, we find : Specified stock and rent-charges 84,441 Loans secured by mortgages, bonds, and debentures . . 246,269 The London Equitable sets forth only one item, in addition to its cash, viz. : By sundry securities .... 6,181 I need not multiply these specimens of the loose and unsatisfactory way in which the nature of the investments is stated by the majority of the offices, nor of the right which policy-holders and share- holders have to ask for more satisfactory informa- tion. As to those who are at present neither the one nor the other, they can take care of themselves. It will be their own fault, if they advance their moneys to be disposed of by gentlemen who think it no part of their duty to let them know what they are doing with it, or how far it may be in safe-keeping. JSTow and then, and by accident, we get an inkling of the way in which the funds are employed, and of the sort of security on which they depend.* * I have been informed, upon undoubted authority, that one company has a considerable sum on mortgage on an evening newspaper ! 96 QUESTIONABLE INVESTMENTS OF STOCK. At the annual meeting of the County Fire-Office, in March last, it was stated * that the balance of loans to one of the trustees was not yet paid off, but was expected to be paid in a few months. These extraordinary loans, to the extent of 134,000, took place in 1842 and 1845, and were the subject of a Chancery suit, about the year 1848. The proceedings were abandoned, on condition that the whole loan, principal and interest, should be paid off in four years. This promise has not been kept, and the losses arising from the loans have been large. A director once stated the loss at 5,000 ; but it is believed to be much more, for the interest has been very irregularly paid, and the arrears of interest, during the years 1851, 1852, and 1853, exceeded 5,000. The pertinent question was asked at the meeting, "Who looks after the payment of inte- rest, when a director borrows ? But no reply was obtained, and a shareholder moved the following re- solution : " That the directors be requested to see that care be taken in the liquidation of the loan from the County Eire Office to J. A. Beaumont, one of the trustees, that no loss arise from arrears of interest, nor that any expenses be incurred in consequence of this loan not being paid off, as promised at the general meeting, held on the 15th of February, 1848 ;" but the resolution was not carried. Some discussion then took place on the question of loans upon shares. On one occasion, a director who was put up for re- election was objected to, on the ground of disqualifi- cation, because he had borrowed money on his * See Post Magazine, March 19, 1859. LIVERPOOL AND LONDON. 97 shares ; and the following resolution was submitted to the meeting, but was not carried : "That, inas- much as the practice of lending money on the secu- rity of the shares of the County Fire Office dimi- nishes the security of the assured, the directors are requested to give notice to all borrowers on such security, to repay the amount advanced, and to re- port to the next annual meeting." The question of the County Fire Office thus holding and dealing in its own shares was next mooted, and it was con- tended that it diminished the security of the assured, and was not keeping faith with the public. It was answered, that it was desirable to have shares to sell or distribute among influential gentlemen in the counties. This was .not deemed satisfactoiy, and the following resolution was moved, but not adopted : "That the directors be requested to take such steps as they may consider equitable and most advan- tageous for disposing of all the shares now held by this association, and that, in future, the practice of buying or holding shares by the company be dis- continued*" That such a check as the publication of a full and detailed account of a company's investments is really necessary, comes out very clearly, also, in the revelations which have just been made, in conse- quence of a rupture in the directorate of the Liverpool and London Insurance Company. The publication of a " Statement of Facts relating to Mr. Matthew For- stcr's removal from the London Board " of that company, and of a " Reply of the Board of Direc- tion " to that statement, has been followed by a meet- G 98 QUESTIONABLE INVESTMENTS OF STOCK. ing of the shareholders, called together to pronounce their judgment on the case, as between the bellige- rent parties, and they have referred the questions at issue to the investigation of a committee, which will, it is presumed, by and bye, report, although their report will be valueless, since Mr. Forster refuses to accept the committee, on the ground of its having been unfairly nominated. In the meantime, certain facts, quite germane to the question in hand, have been, beyond all doubt, established, by the admission of the board of directors themselves ; namely, that they have sustained considerable losses through invest- ments in South-Eastern Eailway shares, and that, among their investments are shares in the Bank .of Liverpool, for the liabilities of which, in case of acci- dent, every share-holder and policy-holder partici- pating in the profits of the Liverpool Insurance Com- pany would be responsible to his last shilling and his last shilling's worth. It also appears, that of their total accumulated funds, amounting to 1,156,035, no more than 23,700 is invested in British Government securities ; while 163,000 is on loan on railway shares, 300,400 is invested in New York, Canada, and Australia, and 165,000 is sunk in buildings. In the city article of the Times, of December 21st, 1859, these and many other facts and circumstances pertaining to the company, were noted and com- mented upon, and I transfer the following passage to these pages, as likely to have much more weight than anything I could write : " Apart from any considerations on that head [the appointment LIVERPOOL AND LONDON. 99 of the committee of shareholders], it is to be remarked, that it is a new principle to invest the funds of insurance companies in Ame- rican and Australian securities, joint-stock banks, and railway- shares ; and that it would be no justification of such a course, even if, in the midst of their career, the Liverpool Company had hap- pened to purchase the Burra Burra mine, and been enabled to declare a dividend of 1000 per cent. Mr. Forwood thinks that shareholders should stand by men who have been lucky, and Mr. Ewart pleads a crisis and a French Revolution, as an excuse for the consequences of dangerous investments. In like manner, the Bank of the United States attributed all its losses to a failure of the European grain crops, and the Western of Scotland to the refusal of the Bank of England to re-discount for the bill-brokers. There is always some " unexpected " catastrophe to account for things of this sort, but from which Consols and good real estate generally escape. It is also to be asked, whether it is according to precedent, that, after a solicitor has, for years, been favoured with a good business, for every item of which he has been fully paid, he should receive "compensation" from the pockets of policy-holders, when it happens that there is no more business to be given to him; and, lastly, whether it is honest to parade influential persons as directors who are not allowed to have any knowledge by which they can protect the interests of those to whom their names act as an allurement? There is no wish to give an unfavourable colour to the proceedings of the Liverpool Company, and it is open to them to furnish any argument, or plea, they may deem expedient; but these things must be strictly looked at, even though they may occur among gentlemen whose names, to use the expression of one of the shareholders, are " household words in Liverpool, for integrity and uprightness of conduct." If there are any impartial financiers, bankers, or actuaries who concur in their system, let them boldly proclaim it. If none but interested shareholders can be found to do so, the public, even at the risk of being charged with envy, will probably adhere to the old-fashioned impressions hitherto current on such subjects." One other thing to be noticed, as to the invest- 100 QUESTIONABLE INVESTMENTS OF STOCK. ments of the Liverpool Company, is this, that they would, in all probability, never have been made known, had it not been for the conflict between Mr. Forster and the Board. The statement, now that we have got it, goes forcibly to show, as I have already sug- gested, the propriety of requiring from every life insurance society's managers, a similar statement, as a check upon so improvident and reckless an employment of moneys that should be sacredly preserved as a future provision for widows and fatherless children. REQUISITES IN A BALANCE-SHEET. 101 VIII. WHAT THE FINANCIAL STATEMENT OF A LIFE OFFICE SHOULD COMPEISE. It cannot be pleaded that the offices are unaware of the just dissatisfaction which the present mode of preparing their accounts creates, or that they do not know the particulars they should include, in order to render them satisfactory. The report of the Parlia- mentary Committee of 1853, was very explicit upon these points. The Committee urges that it should be made imperative upon every company to make a complete investigation into its affairs, at least once in five years ; and show a correct valuation of its risks and liabilities, and of its assets to meet the same ; and, further, that, in each intermediate year, between such periodical balance-sheets, or valuations, there should also be registered a statement, contain- ing authenticated information on the following par- ticulars : " The amount of receipts during the year, for premiums on policies. " The amount of expenses, during the year. " The number and amount of new policies issued. " The total number and amount of liabilities on all current policies. " The total amount of premiums receivable on the same. " The whole amount of capital ; distinguishing the manner in which it is invested : O?Mt^l.'SK(Ot<^OeCO5OeCO-^JOOClOO'-'5O'-1(MTt<'-<'1O-HOOOsrr?!- -.: S c l^l ^-^^^^ssss^^^^^sssssss^sssss^s^sss^^ssss* |S ,^'rt^fl-ip .*_ __ __________ _ * 3^ o M 5 * ^>'^'o * S ' -' - h 'h. "' " .-- - .-- 5 HS'O'^'W -fen BD tc ' i - -^^HJE-J -p;' W H H ^ ^ W ^ *" b. !? 125 Tt< O peq s -g e PI O 00 Tfri <*< O O * O O O C5 CO CO I O* OJ O5 00 C5 I t- OO * CO CO O OO CO OO O OO CO O> M CS OO OO CS C5 O5 W ^H GC CO CO i-l O5O CS c CO 5OOO-*OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO i a I DOOO^HCOOOOOOCOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO " "^ s I" s I t- o ' : S3 ?i a H '^ H 126 SECURITY OF A LIFE OFFICE. A similar report of the policies and investments is made by Dr. Farr, at the close of every month, and to each report as it ' is periodically pub- lished, certificates, in the following form, are appended": " I certify that the foregoing is a true account of the first 40 Consols life policies effected with the l Consols Insurance Associa- tion.' " 8th November, 1859. (Signed) GEORGE SCOTT, Actuary. " We certify that we have this day invested 309 4s., pur- chasing 320 15s. lOd. Three per Cent. Consols, in the names of the trustees of the Consols Life Insurance Fund, and have handed over to them the stock certificates. " 9th November, 1859. (Signed) SMITH AND SON, - Sworn . 7, Bank Chambers, Lothbury, } Brokers. " We certify that we have received stock certificates for 320 15s. lOd. Three per Cent. Consols, ' in trust' for the insurers in the ' Consols Insurance Association,' according to the provisions of the Deed of Settlement and the Deed of Trust, "llth November, 1859. (Signed) T. SOUTHWOOD SMITH, - THOMAS MANN. / Trustees." This, as far as I can see, contains all that is ne- cessary for a full and intelligible statement of the actual condition of a company, and affords all the security a policy-holder can desire for the safe- custody of his interests, and the discharge of the policy-claim, whenever it may fall due. Nor should I omit to notice the fact, that the policies of this company are free from the ambi- CONSOLS INSURANCE POLICY. 127 guities which have been noticed in many others, and which have given rise to some very disgraceful at- tempts to deprive the insurant's fatherless family of the provision that had been made for them. Here is a copy of the policy : " CONSOLS INSURANCE ASSOCIATION. "Chief Offices, 429, Strand, London (W.C.). " CLASS I. Whole Life Policy with Profits. POLICY. No. CLASS I. Date. 1000. 1859, Wt h July. | CONSOLS INSURED ... Premium due every year on the "I IQthdayofJuly. j 588 15 Age next Birthday. 30. " CHARLES HARRISON, of Cavendish Square, in the County of Middlesex, Esquire, aged 30, having lodged documents at this office, affirming that he is at this date in good health, and having paid his first annual premium of Fifteen pounds, " We promise to pay, subject to the conditions specified at the back of this policy, five hundred and eighty-eight pounds of Stock in the Three per Cent. Consolidated Annuities, to his legal repre- sentatives, three months after satisfactory proof has been furnished of his decease ; " Provided that he shall, so long as he shall live, pay into this office, or to its authorized agents, on the tenth day of July, or within thirty days following of every year, the annual premium of fifteen pounds. 188 CONSOLS INSUEANCE POLICY. " We also promise to pay to the said CHARLES HARRISON, or to his order on demand, the Consols in deposit to the account of this policy, on his surrendering the same with his last renewal receipt. " Signed on behalf of the Consols Insurance Association, this tenth day of July, 1859, .Director. Director. _, Managing Director. " Consols insured, 588. Secretary. " NOTICE. " If this policy is used as a security, the Renewal Receipt should accompany it. The Renewal Receipt shows the exact amount stand- ing to the credit of this policy in Consols, up to the date of the last payment. " Conditions under which this Policy is issued. " This policy is issued on the express understanding that the Consols Life Insurance fund of the said association, the Consols capital stock of the said association, and the capital funds and property of the said association remaining unappropriated and at the disposal of the directors, shall alone be liable to meet all claims in respect of this policy, and that no share-holder of the association shall be personally liable upon this policy, or bound to do anything more than to pay to the said association the amount due from him upon his shares in the association. " This policy and the insurance thereby effected will become void, and all claim on the association will cease " 1 . If the party whose life is insured shall go beyond the limits of Europe without having paid such extra premium as the directors may require. " 2. If he shall enter upon, or be engaged in any active military or naval service. "3. If he commit suicide. "4. If the amount in deposit be permanently withdrawn. " The life ceases to be insured if the premium be not paid within CONSOLS INSURANCE POLICY. thirty days after the day within-named for its payment, but in no case can the deposit, as stated helow, be forfeited. " Privileges of the Holder of this Policy. " 1. He is entitled, during the continuance of the life insured, to the sum in deposit, according to the table below ; and if this be not withdrawn by him, the current premium for the time being having been punctually paid, his legal representatives are entitled to the sum insured three months after proof of death. "2. He may exchange this policy for another, which will cover the risk of foreign climates, and of military and naval service. " 3. Should the person insured commit suicide, his representa- tives are entitled to the sum then in deposit to the account of the policy. " 4. Should he discontinue ttie payment of the fixed annual pre- mium as it falls due, his life ceases to be insured, but he can either withdraw the amount in deposit, or have a new policy for the sum, which that deposit will insure, whatever may then be the state of his health at the time. "5. The payment of these sums is guaranteed by the subscribed capital of the society . " 6. He is entitled to his share of the surplus stock. " 7. He is entitled to eight-tenths of the profits arising from the investment of the premiums and deposits in Consols, the whole of this being divisible among the policy-holders. "8. He can have access to the books to ascertain the security of the policy. " 9. He will receive an annual audit sheet, showing the assets of the society invested in Consols, and the amount so invested, to the account of this policy." It is right that I should add a list of the directors and other office-bearers of this company : VICE-PRESIDENTS AND TRUSTEES OF THE CONSOLS LIFE INSURANCE FUND The Right Hon. Lord Keane ; the Right Hon. "W. F. Cowper, M.P. ; Lord Claud Hamilton, M.P. ; Captain Leicester Vernon, R.E. M.P. ; Dr. South-wood Smith ; Thomas Mann, Esq. AUDITOR OF THE CONSOLS LIFE INSURANCE FUND Dr. Farr. I 130 CONSOLS INSURANCE POLICY. DIRECTORS John William Williamson, Esq. ; Major James Adair ; Henry Clark, Esq., M.D., F.S.A. ; Nicholas Dennys, Esq., F.G.S. ; Peter Morrison, Esq. ; Frederick M. Wells, Esq. ; the Rev. William Bean ; Henry Wm. Fuller, Esq., M.D. ; John David Barry, Esq. ; Lawrence Lawrence, Esq. MANAGING DIRECTOR Thomas II. Baylis, Esq. AUDITORS Messrs. Coleman, Turquand, Youngs and Co. SOLICITOR E. Benham, Esq. STOCK BROKERS Messrs. Samuel Smith and Son. ACTUARY George Scott, Esq., F.I. A. 131 XII. CONCLUSION. There is no public man more competent than yourself, Sir, to see the reasonableness of that expec- tation of legislative interference on behalf of policy- holders, which they have entertained for some years past. The interests at stake are very large, and the future condition of many families is dependent upon them. Two measures have been submitted to Parliament, one in 1857, the other in 1858, with a view to cany out the recommendations of the com- mittee of 1853. They were both lost; and it re- mains for the Government of. which you, Sir, are so distinguished a member, to give those recommenda- tions effect, by Legislative enactment. I trust that we may not be disappointed in the re- liance we have in you. In the mean time, I have, I hope, urged a suffi- cient number of considerations to make some im- pression upon all those who have any interests bound up in existing life societies ; as well as upon those who may contemplate the investment of any portion of their incomes in such societies. With very few exceptions, all is doubt and uncertainty as to their condition and safety. The rule is conceal- ment, mystification, and deception. You turn to one of their advertisements,' and find a statement as to the income of the office, which is large, and to the accumulated funds which are large, also; but of the liabilities which this income and these funds have RESPONSIBILITY OF DIRECTORS. to cover, nothing is said. You then turn to the society's report, and imagine you have there got the ' desired information ; but a moment's inspection un- deceives you. Assets and liabilities, indeed, you find stated; but how they are ascertained, and whether they are accurate or inaccurate, neither you nor any one else that has not been engaged in pre- paring the statement, can possibly tell. The large sums that seem to be indicative of wealth and safety, may be the indications of insolvency and ruin ; and this uncertainty must remain as long as the present system continues. One very simple means of showing, to even the most inexperienced in figures, the solvency of an office, would be a statement of the sum total of all the premiums received upon the existing policies^ no matter how long the policies may have been in force. If the office has not, in good securities, at least one-half of this amount (it should have somewhat more), it is, to the extent of the deficiency, insol- vent. If, then, so simple an empirical rule can be taken as ,a test, why, in the name of common sen'se, do not the offices furnish the public with the means of supplying it ? It is not to be doubted that the Directors of the life-offices of the United Kingdom, as a body, com- prise many of the most respectable, intelligent, and estimable men in society; but neither is it to be doubted that they are, with very few exceptions, far from being alive to the heavy responsibility they incur. Their mere names are often the means of inducing persons to invest their savings with RESPONSIBILITY OF DIRECTORS. 133 them ; and, always, their names are taken to be a guarantee for the well and honestly conducting of the offices committed to their charge. How much, however, as a rule, do they know of the real con- dition of the establishment they are supposed to Conduct? The history of many offices that have been broken up, and not less, I regret to have to add, the condition of many offices still in existence, and wearing a descent, if not an affluent, aspect, proves, beyond all dispute, that directors are, in multitudes of cases, as ill-informed of the real state of the affairs under their charge, as are the people who have no means of looking into them. Where men have nothing to gain by misrepresentation, it is difficult to believe that they can be conscious parties to it ; but that imposition is practised, and to an enormous extent, by life offices, will, unfortu- nately, admit of no denial. As a duty to themselves, not to insist upon what they owe to those who confide in them, Directors should get rid of the imputation which now deservedly rests upon them. They place themselves in the hands of persons, some of whom are incompetent, some of whom are crafty and self- seeking, and in them they confide, that everything, should go on as it ought to do. They would be greatly shocked by discovering that many of the establishments of which they are so proud are in a state of hopeless bankruptcy. But it is a fact, never- theless. They may 'doubt it, upon my mere state- ment, but, if so, their duty is an obvious one. They should assure themselves, beyond all question, that it is not so. They should no longer confide in 134 RESPONSIBILITY OF DIRECTORS. managers, secretaries, and actuaries " all honour- able men " no doubt, but, as many know to their cost, fallible, and not unfrequently misleading. If I were the director of a life company, I should never believe I was safe, nor the interests committed to my charge justly dealt with, unless I saw at least 50 per cent. it should be more of all the premiums the office had received, safely and profitably in- vested, to meet the policy claims on account of which they had been paid. I believe it to be the duty of every board of directors to see that this is the case, as to the funds of their respective offices. They should not any longer consent to remain in the dark ; or, if they are afraid of the light, they should be forced into it. A 'public audit, or, if need be, a prohibition to do further business, if the assets were not adequate to meet the liabilities, as the law is in the United States, would, I believe, effect a wonderful revolu- tion in the insurance world, and relieve the anxieties of many a parent, whose money the offices have, while they withhold the means of determining its safety. It is reasonable to presume that no office whose condition is sound, would leave a doubt upon the fact, when it has in its own hands the means of removing it ; and, when we find that out of nearly 160 offices there are but two or three which do so, the conclusion forces itself upon the mind, that a reason exists for the omissioh. What the legis- lature will do, if anything, to bring about a better state of things, remains to be seen. In the mean- time, the public have the remedy in their own hands. CONCLUSION. 135 If an office will not so state its condition, that every- body may understand it, nobody should enter its doors. It is not trustworthy, and should be treated accordingly. In this letter, I have confined myself to a few of the offices, only by way of sample. I have an abundance of materials for similarly dealing with others, which I propose forthwith to do. In the meantime, apologizing for this intrusion on your valuable time, but earnestly requesting your atten- tion to the facts and considerations I have brought under your notice, I have the honour to be, Sir, With great respect, your obedient Servant, WILLIAM CARPENTER, P. S. Should I have inadvertently fallen into any errors in the preceding pages, which is not very unlikely, considering the way in which many of the financial statements passed under review are made out, I shall be most happy to correct them in a Third Edition. J. CT,AVTON, Printer, 17, Bouvcric Street, London. WESTERN MANCHESTER AND LONDON AND METROPOLITAN COUNTIES fife ESTABLISHED 1842. CHIEF OFFICES : 3 PARLIAMENT STREET, LONDON, AND 77 KING STREET, MANCHESTER. The following Return of the Causes of Death of persons assured by this Society, has been printed for the information of the Agents, and others interested. The Directors hope that it will serve to convince the Agents of the great advantage the Society may derive from care on their part in reporting to the Head Office every particular which can be ascertained as to the family and constitutional history of lives proposed for Assurance. To 31st JANUARY 1863. l SS388S8S C<1 1O 1O 00 rH i t " iH O O ti. I*! 00 OOO O C. C.CO t-rH CO IO O CO rH (M O5 001O O ^ O ^ 00 02 W r-ic<)ai-4< Q T-HOOCOCO ^ COOO CO IO r- ( i^Jt-COt-COcOOi OOJt^lOOSCOrHlOCOfNrHtH CO <^ J>- O J>- CO - < O 1C O O i i i rH rH r-l ( S88 2i K5 02 ^ J5. -P S "S rt o "^ O 02 S Q Hs "3 iPsi S g^ 3 S 3 > o o ^3 P> ^3 -g ^|^J O DOO^lOCOCiOOCiT IrHCiCOtMCiOrHJ^rHOOrHCJ r>rHJt-OOCOOC^OOOT-iCOOOqOOCOOO(MCOOOq-L HrHGO^rlOOOOC^lOOO rHCOCiCiCiOOC~ O 1 iO O^ rH C^l OrH l>-rHlO iil I sla 8 itials of Name. so d PQ ^"^ al^ ^ 02 CO CO ; O rd -3 ft _- .S S a s ^ ^ S H^ M 38S rH rH rH SOOOOOOrHOCOi-OOCqcO CD *O CD iO CNJ rH CD CD ^1 CD CO CD rH Cq rH rH lO -^ rH rH O Jt- Cq rH 3 8 g Dover Richmond Innkeeper Bazaar Keep Gentleman Female Female ion Master Baker S Hotel Keepe Merchant Pilot & t* A cq (ij O B !H OD 02 W ^ W CO 3 o Q so fcD PH T^ eS 1 1 1 1 1 f [""") Qj f^J ^. ^^ ^, ^^ BO O O JO O O J>- O O O O IO rH C^ rH CO rH rH rH -b- f. iiil 3 II ^ f 1-1 ^ co~ rH 11 ^ W ^ rH CO crt Manchester Ostend Leeds Fitzroy Square Westminster Peckham Dover Residence. tilt til Iw3 1 M |S Birmingham te S r^H H <1 ft o 3 tf 5 0-4 Blacksmith Lieutenant, R. 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Eminent Seal Engraver Livery Stable Keeper Female Gentleman Timber Merchant Lieutenant, R.N. Stable Keeper Wife of an Ironmonger Stone Merchant Captain, R. N. Agent Lieutenant, R.N. 1 Widow Housekeeper 33 fe O W . ^ 02 . ^ ^ H^ W ri^gd J * ft W . M H . pQ (-5 l~5 . 1^5 Q O K^ hi 1 O (M 00 . .t CO CO "H^ O CO !>. i>- CO CO 1O CO -^ 1C lO CO CO IO O "HH C5 i>- Tfl IO ^O *O CO CO CO s 9 - 1O CO CO C^l O O CO O Tt< CO O g w (N 00 O rH rH C^ rH rH IOCNIO^ g SSS^SSSo cs ggg rH rH 3 3 Cq CiOO flf rH CO rH rH rH , Il&l'llll |1||O| ^ M Oa ! e fe: i 02 3 ommercial Road Todmorden Liverpool Liverpool Richmond erine Street, Strand 1 O IS .P ^D.SP.^.S 3 f> III g.^O ^3 O rd ^ i ^ ? J M Q H 1 d 1=1 a t> S c s a M -g 1 1 a a e -^iD^gj^^cS!^ ^i ^ ^i ^ o "8 000 .2 ^ cj ^ Is ^ ^"^ ^ rH -2 . i ^ ^ . 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