234 ON MUTUAL ASSURANCE, 



method some general results may be obtained as to the effects of 

 more favourable rates, and of loading. I cannot within the limits 

 of this paper enter fully into this part of the subject, but can only 

 state some results in a very general form. The contributions 

 to surplus from a very high rate of interest are larger in propor- 

 tion to present values from older and from paid up policies, than 

 from ordinary policies of short duration. The reverse is the case 

 with respect to profits arising from loading and from low rates of 

 mortality ; the contributions from these sources from policies of 

 very short duration, being larger in proportion to their present 

 values, than from older or from paid up policies. The losses 

 which might be occasioned by high rates of mortality would be 

 in the same proportion. There is a greater proportional profit on 

 the newer policies, but, at the same time, there is a greater risk. 

 According to the method of distribution which I propose, the 

 younger policies would under such fa vo arable circumstances re- 

 ceive less, and the older ones more, than they had contributed ; 

 and the general effect would be that, until a member attained to 

 the average age, his bonus additions would be less than an equi- 

 valent for his contributions to surplus ; but afterwards the balance 

 would be in his favour. This would be the case in an old society 

 with policies existing of all ordinary durations. 



None of these results respecting contributions, according to 

 my view of the matter, afford any argument for or against the 

 method of distribution which I advocate. I have stated them 

 merely for the purpose of explaining the reason of certain effects, 

 which that method produced at the recent investigation of the 

 Australian Mutual Provident Society. The circumstances of that 

 Society are wholly exceptional, and T believe unprecedented. 

 The rates of mortality during the past five years have been un- 

 usually low, and the profit from this source upon policies of short 

 duration, although not very considerable, is large in proportion 

 to their present values. The method, therefore, of dividing the 

 surplus in proportion to present values, has in this case operated 

 favourably to the older and more valuable policies. Under 

 ordinary circumstances, where there is the usual proportion of 

 old and of new policies, this would not have produced any very 

 marked effect. The business of the Australian Mutual Provident 



