42 UNIVERSITY OF COLORADO STUDIES 



teen weil-known companies, on a 20-payraent life policy, issued at 

 age 35.^ 



§ 6. Dividends 



At age 35 a 20-payment non-participating policy (on which no divi- 

 dends are paid) costs, in round numbers, $31; that is to say, the com- 

 pany charges $4 per year for 20 years for expenses. 



A participating poUcy at the same age (on which dividends are paid) 

 costs about $37 per year; i. e., a loadmg of about $10. Deducting the 

 $4 for expenses, you see there still remains $6, which goes into the sur- 

 plus fund, to be returned, ultimately, as dividends. In some of the 

 companies this fund has grown to between sixty and eighty miUions of 

 dollars. Nominally this money is all returned to the surviving pohcy- 

 holders. The recent exposures in New York have shown how these 

 funds have been employed for speculative and various questionable 

 purposes. 



Dividends are actually paid to the policy-holders. Deferred divi- 

 dends should come from the following sources: savings in expenses 

 (which expenence shows are seldom made), interest earnings in excess 

 of the estimated 3^ per cent., return of the original overcharge, and 

 apportionment of the dividends of those who died. 



§ 7. Surplus 



The dividends deferred for twenty years have given rise to immense 

 accumulations of wealth in several of the companies. Although the 

 recent investigations have shown that it is unwise to allow the officers 

 to manage such large sums without an accounting until the expiration 

 of two decades, it must not be overlooked that the arguments which they 

 employed in building up the present system are plausible ones. 



First of all is the matter of safety. You doubtless remember the 

 panic of 1893. At that time one of the companies, at least, was prac- 

 tically insolvent, but has since recovered, and, to provide against a 

 similar contingency, has created a surplus of nearly $80,000,000. The 

 recurrence of the same state of affairs today might wipe out part of the 



« Some of these companies are on the 3 per cent, reserve basis, others on the 3J per cent, basis. In all 

 cases I have made due allowances for this in determining the percentages. 



