"Where and how does my money go?" is one of the natural questions of the premium payer which just now has especial emphasis put upon it by the holder of an endowment policy.

This must be answered upon the assumption that the company issuing the policy is operating legitimately to the interest of the investor. For instance, the first premium you pay in may be divided in half with the agent who wrote your policy -less than this is scarcely possible in the competition for business or in a less scrupulous company the agent may receive every cent of your first payment. But in any reputable company the man who at 35 years old takes out a twenty year endowment policy for $1,000, the annual premium on which is based on the actuaries' table of mortality and 4 per cent interest, will have his premiums distributed by the company's methods in the following manner through each of the twenty years of the policy, his annual premium being fixed at $48.32 and the fixed charge for company expenses standing at $4.52 of this premium:

935.92

901.74

866.03

789.60

766.17

565.96

461.33

653.72 346.28

With this table in detail, showing as a chief feature how the individual policy holder profits from his continuance of pre

mium paying to the end of the term, the question may be asked, Where does the company's money come from?

The primary source of income is, of course, the premium receipts from the policy holders. If the experience of a life insurance company showed that its expenses each year were exactly equal to the total of the items for expenses, and that its death claims were equal to the total of the contributions for death claims of all its outstanding policies, and that it earned interest on its reserve funds at the exact rate at which it is assumed it would earn interest in constructing its premium rates, the result would be shown in the illustration on the endowment policy above; the company would just be able to fulfill its contracts-pay death losses as they occurred and pay to the endowment policy holder the face amount of his policy, $1,000 at the end of the twenty year endowment period.

The experience of all legal reserve companies, however, shows that in practice the death losses are less than indicated by the mortality tables upon which the premium rates are established, and that interest earnings are in excess of the assumed rate of earnings. This salvage from the mortuary element of the premium and the excess interest earnings, together with any portion of the expense element of premiums not used for expenses, constitutes the principal secondary source of accretion to the companies' funds.

The experience of American companies shows that each policy's share of actual death claims incurred ranges from 85 per cent to 90 per cent of the item "For death claims" included in the premium. The savings out of the expense apportionment is practically nothing. The majority of the companies. operating in America in determining their premium rates assume that their future interest earnings will be at the rate of 3 or 3 per cent; no companies assume a rate higher than 4 per cent. During 1904 the average rate of interest realized by the seventy leading American legal reserve companies was 4.33 per cent. On the average, therefore, the rate of interest earnings was something more than 1 per cent higher than the rate assumed in constructing premium rates now in use.

The salvages on mortality and expense, together with the excess interest earnings, constitute the surplus funds of life

insurance companies; it is from this fund that dividends are paid.

During 1904 the American legal reserve companies increased their reserve funds from $1,978,166,083 to $2,168,468,541, being an increase of $190,302,458. In the same time they increased their surplus funds from $268,621,596 to $330,492,427, being an increase in surplus of $43,870,931. The assets-reserve and surplus-of all the legal reserve or "old line" life insurance companies on Dec. 31, last, amounted to $2,498,960,968.

The last few months have made the question as to where this enormous reserve and surplus fund of insurance companies is invested a pertinent one. A careful compilation of the investments of the ninety three regular and industrial old line companies of the United States shows that on Dec. 31, 1904, the investments were distributed as follows:

Real estate, $180,875,035; bonds and mortgages, $671,577,813; bonds owned, $1,067,027,851; stocks owned, $172,582,075; collateral loans, $42,715,261; premium notes, $19,300,755; loans on policies, $170,438,024; cash in office and bank, $104,027,124; net deferred and unpaid premiums, $45,879,455; all other assets, $24,636,705. Total, $2,408,960,968.

THE INSURANCE INVESTIGATION.

BY GILBERT E. ROE.

[Gilbert E. Roe, attorney, was formerly the law partner of Senator La Follette in Madison, but when the firm was dissolved upon Mr. La Follette's entrance into active public life, he removed to New York where he is at present practicing law. Mr. Roe has taken an active interest in public questions, especially in the insurance situation which he has investigated from the point of view of the insured.]

Life insurance, as generally conducted, and its evils and abuses are tremendous facts in our social and commercial and even political life with which we must deal now. With these facts, and not with theories, I purpose to deal in this discussion. I venture also to hope that I may show that the evils of life insurance now being revealed to the world are merely grafted upon it and not inherent in it; and that those evils may be easily, quickly and completely eradicated.

The first thing to do in entering upon any discussion of life insurance, is to free our minds from the idea that the business is mysterious or deeply complex. However much those interested in confusing the public regarding it may seek to give it that character, the principles of the business are simple and easily understood.

Life insurance is merely a method or plan by which the many help bear the burden of financial loss incident to the death of one. Life insurance conducted upon the mutual plan, merely means that a large number of persons combine and agree that upon the death of one of their number the survivors will pay to the beneficiary, designated by the deceased, a certain sum of money. As some one must collect and disburse the money, agents are appointed by the members or persons insured, who are charged with that duty, and these agents are called officers. The aggregation of persons so combined and agreeing is called a life insurance company or association. Surely there is nothing mysterious or beyond the ability of the average person to understand in this. Thus viewed, every person who takes life insurance insures not only his own life, but helps to insure the lives of all his associates.

As he knows that some of his associates are certain to die and receive the agreed amount of insurance before they have contributed a like amount to the common fund, he becomes a voluntary contributor to the benefits received by others, and to that extent he sows that others may reap. In another view, life insurance is no less beneficent, though in a sense selfish. It enables the head of the family to provide even after death for those dependent upon him during life. It enables all of us to furnish financial help to those who are the objects of our care, our bounty or our love, when death has deprived them of our service. The average life insurance policy is less than twenty-three hundred dollars in amount. The large majority of all premiums paid represent stern self denial on the part of those paying them. It is a story of comforts omitted and often necessities denied that the life insurance premium tells to the officers receiving it. Under these circumstances it surely is not too much to expect rigid economy and strict fidelity on the part of those whose duty it is to collect and disburse this money.

If I were to attempt to be strictly logical in the treatment of my theme, I should probably begin with a discussion of the excellent work done by the state legislative committee conducting the insurance investigation, and follow that with an analysis and condemnation of the evils which that investigation has shown to exist, and then propose a remedy for the evil conditions disclosed. A little reflection convinced me, however, that by this method I could only cover a small part of the field in the limits of the present article, and that I would be obliged to leave unsaid, for lack of time, the most important things to be said, on the subject; moreover, this method of treatment, which is the only one thus far accorded the subject that I have observed, has resulted only in confusing the public mind and rendering it less capable than before to deal intelligently with the momentous question presented.

Neither is it any part of my plan to indulge the very natural feeling of resentment against unfaithful insurance officials by calling them names. We can truthfully say of each leading life insurance official thus far investigated, as Anthony said of Cæsar: "But yesterday" his word "might have stood