DIFFICULTIES MET IN WRITING LIFE INSURANCE IN CANADA’S PIONEER DAYS
BUSINESS & INVESTMENTS
A. M. ALLAN
WHEN Hugh C. Baker, a young Canaadian of twenty-nine years, traveled from Toronto to New York in 1847, a trip of one thousand miles by stage coach, saddle and stream, to secure the first life insurance policy ever purchased by a Canadian, the first sod was turned for the foundation on which was to be erected the great life insurance business of Canada.
In that year there were no life insurance companies in Canada, no postage stamps or telegraphic communication, and only a few miles of railroads connecting Montreal with St. John’s on the Champlain route to New York. Hence the trip by stage, saddle and stream.
On his return, deeply impressed with the need for life insurance in his own country, this young man gathered together a number of friends who pledged their moral and financial support and established Canada’s first life insurance company, The Canada Life,
Since that date the growth of life insurance in Canada has been phenomenal. In 1850 the Canada Life reported insurance in force amounting to $800,000, in 1923 there were upwards of 4,400,000 people insured for an amount totaling $3,347,740,081 throughout the Dominion.
These startling figures, in a country of 9,000,000 people, were not achieved without a great deal of labor and hardships. In the early days progress was slow because of the lack of means of communicrtion and the antipathy of the public. There were few road systems. In the settled sections transportation was by means of stage coaches but the farmer had to ride along forest trails to the mill carrying his grain in sacks. Toronto was not yet connected directly with Montreal by rail, in fact the main line did not come into existence until 1856. In 1850 there were only sixty-six miles of railroad in the whole of Canada.
Looked on With Suspicion
TN ADDITION to overcoming the diffiA culty of transportation, insurance men were faced with opposition and superstition on the part of the public. There was a suspicion of everything new and it was considered as flying in the face of providence to contemplate life insurance. Men were superstitious and women regarded the proceeds of a life policy as “blood money.”
There were other factors militating against the sale of insurance. Money could be invested in first mortgages paying eight, nine and ten per cent. Conservation of personal resources was the habit of the people. They had been bred in a thrifty school and had few extravagances. Their needs were simple and out of the little they earned, they managed to save a portion for their declining years.
However through lectures and other means a knowledge of life insurance and its benefits was gradually acquired and as the years advanced and as the insurance companies became better organized the early obstacles were overcome.
By 1868 there were twenty-three companies selling life insurance in Canada, of which one was Canadian, thirteen were British and nine American. Premiums paid that year, in all companies, amounted to $960,331. New policies totaled 3,990 amounting to $8,971,967. The total insurance in force was $29,577,188.
Government Supervision Inaugurated
THE Department of Insurance was established by the Canadian Government in 1875, and since that time insurance companies have been under direct supervision of that department and have required to make regular returns to the Superintendent of Insurance. When the department’s report for the year 1875 was published it was seen that total life insurance throughout the Dominion amounted to $85,009,204. The gross amount of insurance effected in that year totaled $15,074,258. Thirty years later in 1905
the net amount of insurance in force was $630,334,240, and the gross amount effected that year amounted to $105,907,336.
During the years between 1905 and 1923 life insurance business increased enormously. New companies have sprung up and some of the old have disappeared but the totals have piled up. In 1914 when the war broke out the assets of the life companies were $370,000,000, at the end of 1923 these had reached the stupendous total of $865,000,000. The income which was $73,060,000 in 1914, increased to $210,700,000 in 1923. Payments to policyholders increased during the period from $28,207,981 to $79,395,254. There were 1,837,602 policyholders in 1914 and 4,442,536 in 1923.
In 1914 there were twenty-seven Canadian companies selling life insurance, sixteen British and sixteen United States companies. In 1923 the figures were twenty-five Canadian, seven British and nine foreign. It will be seen that the number of operating companies decreased slightly in the interim.
In 1914 Canadian companies had $794,520,423 insurance in force, British companies had $60,770,658 and United States companies $386,869,397. The 1923 figures showed Canadian companies, $2,187,434,147; British $98,023,020, and United States companies $1,148,051,506.
Growing Extent of Insurance
THE early antipathy to life insurance in Canada no longer exists. It is regarded no more as “blood money” but as one of the great blessings of mankind. The Canadian purchases insurance because he regards it as the best and surest means of providing for his future and the safety and comfort of his dependents. As his resources and responsibilities have increased he has added to his investments in insurance. Fifty years ago a man in comfortable circumstances, who considered he was protected when he had a policy for $5,000, to-day is not satisfied until he has $25,000. The average man whose aim was to have an investment in life insurance of $1,000 now purchases $2,500. Fifty years ago, perhaps the largest policy did not exceed $25,000, to-day there are a number of men carrying several hundred thousand dollars of insurance and there is at least one individual protected by policies totalling $1,500,000. This is a remarkable achievement which has perhaps no parallel in any other phase of public or business life.
Canada Exports Insurance
ACTIVITIES of Canadian life com■ panies are not confined to Canada. They have developed a large export business in this commodity in every country of the world. Two Canadian companies, individually, sell more life insurance annually in Great Britain than any single British Company. Cheques for annuities and insurance claims are being mailed regularly to people in even the remote corners of the earth so that they reach their destination on or before the day on which they are due.
At the end of 1924 Canadian companies had $871,174,946 insurance in force in countries other than Canada. The total business effected during 1924 amounted to $164,150, 244.
These figures do not include fraternal societies. Fraternal societies have foreign business in force in life insurance amounting to $112,067,349, and premiums paid during 1924 in countries other than Canada totaled $2,047,327.
How Assets Are Invested
AS STATED, the assets of iife insurance companies operating in Canada are $865,000,000. This enormous sum is invested, under government supervision as follows: —• Government and municipal bonds, 53.94 per cent.; mortgages, 20.66 per cent. ; real estate, 2.70 per cent.; stocks of seasoned companies, 3.73 per cent.;
loans to policyholders, etc., 18.9 per cent.
It will be seen that the assets are invested primarily for security and in channels which make for the development of the country. The money goes back to the people for the building of roads and bridges, harbor improvements, power development, education, etc.
Canada is the second best insured nation to-day. The ratio of life insurance per capita is $400. In the United States the per capita ratio is approximately $500. The Canadian figures are based on a population of nine millions.
It is estimated, figuring on the basis of the percentage of increase during the past decade, that by 1933 Canada should have $12,000,000,000 life insurance in force.
Question—We wish to take out an insurance policy in order to educate our boy who is now six years of age. What is your opinion of the policies issued by the Imperial Life Assurance Company for this purpose? Do you think there is any better way to provide for a child’s education?—A. F. H., Calgary.
Answer—The Imperial Life Assurance Company of Canada is one of the strong companies operating in the Dominion, and as it is licensed by the Dominion Department of Insurance, and maintains the required deposits with that department for the protection of the policies itissues, it is a safe company in which to insure. The policies issued by the Imperial Life Assurance Company for the purpose of providing an education for children are excellent and highly regarded. We do not know of a better way in which to provide for a college education for children. As you no doubt know there are special policies for this purpose, at special rates. Rates for these policies can be had on application to the company.
Question—Can you tell me if the Postal Life Assurance Company of New York is licensed to do business in Canada? That is the financial standing of this company?—J. R. O., London, Ont.
Answer—The Postal Life Assurance Company of New York is not licensed to do business anywhere in Canada. As its name implies, it secures its business mainly through correspondence. It has no agents, and, so far as we can learn, has a license to operate only in the state of New York. The company, however, is well regarded and has total assets, or at least had in 1922, the latest report we have available, $10,180,000. The reserve in 1922 was $9,400,000. We would draw to your attention the danger of insuring in a company that is not licensed to do business in Canada. Should any dispute arise between you and the company it would be necessary for you to sue the company in its own country as you would have no means of collecting from such a company through Canadian courts.
Question—A client of mine in the year 189b took out a policy for $2,500 with the Security Mutual Life Association, now the Security Mutual Life Insurance Company of Binghampton, New York. The policy contains the usual provisions for increase of the premium should the experience of the company require it, and also provision for payment of dividends. The semi-annual premium at the time the policy was taken out was f26.25. The client received dividends for the first ten years, but since then the premium has increased, first gradually, but lately quite steeply, and the last premium calls for $7b-b5, semiannually. Can you give me any information as to the financial position of this company, particularly if there is a likelihood of further increases in the premiums, and if there is assurance of the policy being paid, providing premiums are paid until the death of the insured.—Barrister, Sask.
Answer—The Security Mutual Life Insurance Company, Binghampton, New York, has been operating as a Level Premium, old line, life insurance company, for twenty-five years. All policies issued during this period, with the exception of term policies, provide for level premiums. That is a premium set at a certain figure, calculated, without assessment, to carry the insurance to
maturity, or until, it becomes a claim. Previous to this time the company operated as an assessment company and issued a definite policy which provided for increases in premiums according to the mortality experience of such business. At present, we understand, the amount of old assessment business outstanding from which premiums can be increased, is small in comparison with the amount of old line business now in force. Your client, evidently, has one of the old assessment policies which provides for increase in premiums if the mortality rate demands it. The company is in good standing. According to the 1925 report, the total admitted assets are $13,733,503. The surplus to policy holders is $637,100 and legal reserves, as stated by the New York Insurance Department, are $12,462,5r3. In 1924, the company paid out to policyholders and beneficiaries, $1,954,956. It has paid out to policy-holders and beneficiaries, since its organization, $25,193,631. The gross rate of interest earned during 1924 was 5.80 per cent. Whether there will be a further premium increase on the assessment policies we are not in a position to state. There is no reason to doubt the policy being paid, providing premiums are kept up, as the company is in a sound financial position.
Question—I hold a number of debentures in Industrial Mortgage and Savings Company and I expect to be in a position to invest more soon. I should be grateful to you for your advice concerning the standing of this company at the present time.—G. H. T., Wisconsin.
Answer—The Industrial Mortgage and Savings Company of Sarnia, Ont., was established in 1889 and does the general business of a loan corporation. According to the annual report of the company for 1924 the total earnings for the year amounted to $192,540.18, which enabled the directors to add to the reserve fund $18,000, making the total reserve fund $495,000, which is getting well on to be equivalent to the paid-up capital stock of $635,000. Out of the total earnings has been paid interest on debentures of the company, as well as interest on deposits and dividends on the capital stock at the rate of nine per cent, per annum. The general turnover and earnings of the company have been materially increased during the year. The funds of the company are invested in mortgages and real estate, municipal debentures and government bonds. The assets are given at $3,215,504. Among the assets are $263,212.87 in Dominion and Provincial bonds, and $398,850.96 in municipal, school and rural telephone debentures. The company’s liabilities to the public amount to $2,056,531.
Question—Would you be kind enough to explain the meaning of the gold standard as set up by Great Britain recently? Does it mean that gold coins will again be in circulation in that country?—R. F. D., Halifax, N.S.
Answer—When asking for an explanation of the gold standard you have asked a big question and one which it is difficult to answer in the space at our disposal. Roughly speaking, it means that Great Britain is now on a basis whereby she will redeem her currency with gold. When a gold standard is set up it means that the country concerned is obliged to hold some portion of gold against the total note issue, or against the amount in excess of a permitted fiduciary issue. It does, not, however, mean that reversion to the gold standard will put the gold sovereign into circulation. If this were allowed to happen at the present time the consequences might be serious. According to the Rt. Hon. R. McKenna, it is estimated that before the war gold coins were in circulation in Great Britain to the value of over $120,000,000. To-day at the higher level of prices, the total, if the Treasury Note disappears, would certainly be over $200,000,000. This would create, says Mr. McKenna, a serious demand for gold which would raise its value. It would be a serious shock to the Chancellor of the Exchequer Continued on page 11
Continued from page 8 who would have to pay for it, and injurious to Britain’s trade, as it would immediately cause a fall in prices. The Treasury Note is nominally convertible into gold, but, according to Mr. McKenna, this provision of British law has in practice been only a pretence. One important condition of a true gold standard is that the country concerned should have freedom of export, so that when a demand is made upon it to pay its foreign obligations in gold it can do so without hindrance. The legal standard for gold coin in Great Britain and the Empire is 22 carat fine. Sovereign gold consists of eleven parts gold and one part copper; guinea gold, eleven parts gold and half part copper and half part silver. The standard gold coins have a market value as bullion, identical, or identical less a small seniorage charge with their value as coin. As you know gold is the standard of value used in all civilized countries. It has a definite value by weight which varies very slightly, if at all. There is not much more we can say here concerning the gold standard. It is an extremely complicated subject which can only be appreciated after an extensive study of finance, particularly international finance. The information given here, however, is all the information that the average man need have.
Question—Do you consider the Tretheway Tough Mining Syndicate a safe investment for a widow with three children? —R. A. J., Toronto.
Answer—The Tretheway Tough Mining Syndicate is a speculative proposition and one not suitable for a widow. The syndicate proposes to take options on mining properties in Northern Ontario with a view to developing them to a point where they can be sold. While there are undoubted possibilities in a venture of this kind, it can only be regarded as a speculation, and should not be considered for a moment by a woman, or by any investor for that matter, who has not funds with which to gamble. Our advice is to invest your spare funds in government or municipal bonds and leave the speculative issues to those who can afford to speculate.
Question—What is your opinion of Northwestern Utilities as an investment? Would you consider this for spare funds? —P.C.A., Edmonton.
Answer-—The Northwestern Utilities controls an important field capable of supplying Edmonton and surrounding towns with natural gas for a great many years. It has an exclusive franchise for supplying citizens with gas for domestic purposes. Its capitalization consists of $1,400,000, eight per cent, cumulative preferred stock, and 60,000 shares, of no par value, common stock. It has a funded debt of $4,000,000 authorized and $3,250,000 issued, first mortgage sinking fund gold bonds. The fixed assets of the company are valued at over $5,400,000. As the business has been expanding rapidly and the company has made large outlays for the main transmission line, the distribution system and pressure regulating stations, it will be in a good position to provide the increasing number of patrons with an adequate and cheap service. This is regarded as a good businessman’s investment.
Question—ƒ have inherited a legacy of between $18,000 and $20,000, the exact amount is not yet known. At present I am single but expect to marry next year. I am a railroad brakesman and my work is highly seasonal and irregular, and I have to make several moves every year to obtain work. I also fill in with ordinary labor jobs, from which I can count on $200 $300 additional. My earnings for a year average between $1,000 and $1,200. I am thirty years of age and healthy. How should I invest the money left me to obtain the maximum income consistent with security of capital? Can I purchase a good sound investment with absolute security that would yield better than the Government bonds? Would it be better to buy a small house or to pay rent? There seems to be some expectation of a rise in land values in Vancouver in the near future. Would house rental property be a good buy under the circumstances?—E. G. C., Vancouver.
Answer—Regarding your inquiry as to the best way in which to invest the legacy inherited by you, we would say at the outset, in view of the fact that
you are going to be married next year, that one of your first investments should be in life insurance. If you have not already done so, we would advise you to make this your first purchase. After you have secured your life insurance, your next investment should be in government bonds. Such bonds as you know are absolutely secure, and are readily marketed. When you have secured a reasonable amount of government bonds you are in a position to go after a higher yield. You will get this higher yield with reasonable safety in some of the well established public utility bonds and the bonds of well established industrial concerns. Our advice to you is to get in touch with a reliable financial house in your district. Such a house will advise you as to the best type of security to purchase in much the same manner as your banker would advise you. Where a person is likely to be doing considerable investing it is always wise to link up with a financial house of high standing. As to whether it is better to buy a small house or to pay rent is difficult for us to advise, as we are not conversant with the local conditions. However, in view of your capital, it might be advisable for you to buy a small house and in this manner you would be investing your money in a sound proposition. Whether house properties for rental purposes would be a good buy under the circumstances again depends on local conditions. If one could be sure that land values in your district were going to rise, one would be justified in considering such a proposition. However, you had better go cautiously in the matter and seek the advice of a reliable real estate company, intimate with your local conditions.
Question—Have you any information regarding the financial standing of the Stanstead Fur Farming Company? I am interested in this concern and would appreciate any information you may have on hand. What success has the company had in raising muskrats?—J. R., Montreal.
Answer—No financial statement of the Stanstead Fur Farming Company is available at the present time. All the information we can procure is that the company, during 1924, had a very good year; the manager states that it was the best year in the history of the company, and that they were not able to supply the demand for live mink for breeding purposes. The company does not raise muskrats. An attempt was made to raise them a number of years ago, but the management found it required too much territory in order to raise them in paying quantities.
Question—Do you think the .first preferred, sinking fund, cumulative shares of the Brantford Cordage Company would make a suitable investment for a person with spare funds for which he is not in immediate need? Is this a prior obligation of the company?—I. C. M., Belleville, Ont.
Answer—The first preferred sinking fund cumulative shares of the Brantford Cordage Company is the prior obligation of the company. There are no bonds outstanding. The net earnings after depreciation and federal taxes for the past five years have averaged $269,584.33, which is at the rate of 13.4 per cent, on the first preferred stock. The total net assets of the company are certified to amount to $2,517,832. The Brantford Cordage Company is a well established concern, having started business in 1901. The company owns three mills occupying seven and a half acres at Brantford, Ont. The business has steadily expanded until to-day it is one of the largest manufacturers of binder twine in the British Empire. This is considered an attractive offering in the industrial class.
Subscribers to MACLEAN’S MAGAZINE desiring advice in regard to Canadian industrial investments, or life insurance jrroblems, will be answered freely. Inquiries shoidd be addressed to the Financial Editor of MACLEAN’S MAGAZINE and a stamped, addressed envelope enclosed.
If you are asking in regard to insurance, please give full details of your own financial and family position, so that definite and individual suggestions can be given.