MANAGEMENT OF AN INSURANCE OFFICE. 275 



actual statistics of an office, what its real condition 

 is. And here I must observe, that though in the con- 

 struction of premiums, a table of more than the real 

 mortality must be used, yet no such thing is absolutely 

 necessary in the valuation of its liabilities and assets. 

 Here truth, and not security, is the object ; and if by 

 any means a true table can be obtained, its results 

 should be calculated ; though I do not say that in the 

 declaration of profit, such results should be admitted 

 to their full extent. The most simple theoretical way 

 of conducting the process, is to ascertain the value of 

 every policy, as in page 218.; that is, to ascertain how 

 much should be given to the holder of each policy to 

 renounce his claim, the office also abandoning the future 

 premiums. When this- is done, it is obvious that the 

 office is not solvent, unless the assets arising from the 

 accumulations of former years be sufficient to pay the 

 values of all the policies, and thus to buy them all up. 

 Supposing the office able to do this, with a capital 

 remaining larger than would be necessary to create a 

 permanent fund for the expenses of management, the 

 surplus of that capital is profit. Otherwise, calculate 

 the present value of all premiums due to the office, and 

 also the present value of all claims to which it is liable. 

 To the former add the sum total of the assets of the 

 office, and to the latter add the present value of a per- 

 petuity equal to the expenses of management. Thus, let 



P = present value of all premiums. 



C present value of all claims. 



A = total assets of the office. 



M = present value of all expenses of management. 

 If then P and A together exceed and M together, 

 the office is solvent, and the excess is profit. 



On each of these items a few remarks may be made. 



(P.) All the parties who are of the same office age, 

 may have their several policies considered as one col- 

 lective policy, in respect of which the sum of the 

 premiums is paid as one premium, and the sum of the 

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