Papers Relating to the Foreign Relations of the United States, With the Annual Message of the President, Transmitted to Congress December 2, 1895, Part I
Mr. Uhl to Mr. Runyon.
Washington, June 4, 1895.
Sir: Referring to my telegram of the 6th ultimo, I inclose herewith for your information a copy of the memorial addressed on the 31st ultimo to the President by Mr. Richard A. McOurdy, president of the Mutual Life Insurance Company of New York, in relation to the present situation of that company in Prussia.
From the memorial it appears that the company was granted a concession in 1886 to do business in Prussia, in pursuance of which and in the confidence of maintaining a permanent relation in that country, it established a main branch in Berlin, invested $400,000 in the purchase of a building, and incurred large expenses in other transactions incident to the opening of a large business in a foreign country; that since the date of its establishment in Prussia there has been no alteration in the methods of business or in the forms of policy employed by the company; that, complying with new requirements that have been in the meantime imposed, it has made a deposit with the Prussian Gov eminent of more than $500,000 worth of Prussian consuls, representing [Page 429] one-half of all its receipts from its Prussian business; that it has made every effort to conform to the wishes of the Prussian Government as to its reports and every other detail connected with its methods. It further appears that certain conditions are now sought to be imposed with which it is impossible for the company to comply, and, as a consequence of such noncompliance, the company is threatened with summary expulsion from Prussia.
However clear may be the strict right of each State to determine the conditions on which it will permit foreign corporations to carry on business within its jurisdiction, there prevails in such matters a comity which it is the interest of all nations to maintain, and which is well illustrated in the freedom and equality with which foreign corporations are permitted to extend their operations to the United States. There is ground for the belief that the necessary result of the course lately adopted by the Prussian authorities in respect to the Mutual Life Insurance Company would be to give to the beneficent principle of comity a restricted and uncertain operation. Under the circumstances, the President is of the opinion that the subject is one proper for presentation through the present diplomatic channels, for consideration in all its aspects by the Royal Government of Prussia and by the Imperial authorities as well, so far as the latter may have jurisdiction in the premises.
The requirements of the Prussian Government of which the company complains are particularly set forth in the memorial.
It is desirable that the difficulties under which the company is now laboring in Prussia should be fully comprehended and equitably adjusted, and to that end you are instructed to use your good offices.
Mr. Emory McClintock, the actuary of the company, expects to be in Berlin about the 20th of the present month, and you are authorized to confer with him in regard to the matter under consideration. It is suggested that you defer the presentation of this subject to the German Government until the arrival of Mr. McClintock.
I am, etc.,
Acting Secretary
Mr. McCurdy to the President.
The Mutual Life Insurance Company of New York,
May 31, 1895.
The President.
Sir: As president of The Mutual Life Insurance Company of New York, I beg leave to lay before you, with a view to obtain the friendly interposition of our Government in behalf of an imperiled American interest, a statement as to the embarrassing and uncertain position into which this company has suddenly been forced in the Kingdom of Prussia by the recent action of the authorities of that country.
In presenting this petition, I beg to point out that we are not invoking the aid of our Government for the purpose of obtaining any privileges other than those which we now enjoy, or of overcoming legal requirements to which we are justly liable. Our appeal to you is simply for what we claim to be justice and fair treatment.
In the various foreign countries in which this company prosecutes its business it has always pursued the same policy as that which it has followed at home—of complying cheerfully with the local laws and regulations, seeking only equality of treatment, and relying upon its own enterprise, the advantages it offers to the insuring public, and its own high reputation for the increase of its business. It is asking at the hands of the Prussian authorities only the same tolerance as is extended in [Page 430] the United States to the many foreign corporations which are now engaged in the transaction of business in this country.
It is nearly nine years since this company entered into business in Prussia, under a concession or license issued by the minister of the interior of that country on the 16th of November, 1886. Before granting this concession, the Prussian Government made an exhaustive examination into the charter and the by-laws of the company, and into its methods of business and financial standing. For this purpose there were furnished to the Government, in addition to its charter and by-laws, the company’s statements for the years 1884 and 1885 legalized by the Imperial German consul, the company’s instructions to general agents, forms of all policies in use by the company, a paragraph making the policies subject to the Prussian law, the phraseology of which was prescribed by the authorities, and an allegation of domicile in Berlin; also a full and complete power of attorney to the general manager to make all contracts of insurance binding by his signature in Berlin, premium rate books, and explanation of policy contracts and application forms for all classes of policies; and the same were submitted to the privy councilor, Von Forch, for his approval.
Formal application for the concession was lodged with the minister of the interior on August 12, 1886, although the preliminary application for obtaining the same had been made in the previous April, and negotiations had been pending during the entire interval. After the formal application for the concession to the Government, the secretary of the interior made inquiries of the minister of foreign affairs as to the standing of the Mutual Life. The minister of foreign affairs then applied to the ambassador of the German Empire in Washington for further information concerning the company, and finally, on November 16, 1886, the concession was granted.
Thus it appears that while the Prussian Government was informally considering our application for a concession for between three and four months before the same was formally applied for, which application manifestly would not have been formally made unless the impression had been conveyed to our representatives that the same would be granted, the officials of the Prussian Government consumed a further period of, upward of three months in satisfying themselves as to the propriety of our contract obligations and the standing of the company before the concession was finally made.
It is fair to presume that the Prussian Government exercised in this matter due deliberation, and made most careful examination before deciding upon its action.
Believing that the concession so granted was a thing of value and of enduring quality, and reposing Confidence in the good will of the Prussian Government, my company, in conformity with the conditions imposed upon it, established a head office in Berlin and proceeded to incur a very considerable expense for the general establishment of the business in the kingdom. In similar reliance upon the good will of the Government, and in the permanency of its concession, it thereafter purchased a lot of ground, with a suitable building thereon, in Berlin, at a cost of $400,000, for the transaction of its business. Indeed, although the company had previously, and has since, been doing business on a large scale in Great Britain, France, Austria, Italy, Belgium, Holland, Denmark, Norway, Sweden, and other European countries, it chose its Prussian branch as the one best fitted for this mark of confidence, and up to this day it owns no office building in Europe other than that in Berlin.
The company also constituted agencies in various parts of Prussia, with much trouble, and at considerable expense, such as naturally and necessarily attend the opening of transactions with a great foreign people, transactions prospectively large in total volume, though of small amount individually, and therefore numerous and widely distributed.
It should be observed at the outset that in the prosecution of this particular business the outlay falls most heavily on the first and earlier years. Agents are compensated by a comparatively large commission on the first annual premiums and by a diminished commission on those of subsequent years, usually for a limited term, while the premiums of later years are generally free from any expense beyond a small banker’s charge for collection. In other words, the continued payment of premiums through a series of years at a diminished cost serves to recoup the company for the large initial expense of procuring the business, and it is essential that these subsequent premiums should continue to be so paid to effect that result. If, therefore, the company is forced to abandon its business, its initial outlay is wasted and can never be recovered.
In our own country, where the character and standing of the company is well known, few preliminary expenditures are necessary. The agent is supplied with a few blank forms and explanatory documents, and that is all. His compensation flows from his success in obtaining business and is greater or less in proportion to his success or failure.
But in countries foreign to us, where this company is the foreign company, and the insuring public must be educated as to its character and standing before any business can be obtained, the preliminary expenses are vastly enhanced. The agent [Page 431] must be compensated by a fixed salary pending the actual beginning of successful effort. Offices of a character suitable to the dignity of the company, which here are unnecessary, must be rented and furnished. Other expenses of installation, in the nature of allowances for advertising, traveling, and miscellaneous outfit, must be incurred, all of which add to the charge which must be refunded by the future continuance of the payments of the insured.
While, therefore, even in our own country a sudden interruption to or stoppage of the business would entail appreciable loss, indeed, in a foreign country such an interruption or stoppage works an enormously increased and, in fact, irreparable injury. It may be asked why do we as a mutual company thus go abroad for our business, when, if average results were to be anticipated, the foreign business, costing more at the beginning, would be less advantageous than that which we do at home. The answer is that, owing to the different social and economic conditions which prevail respectively in old and comparatively new countries, the degree of persistency of payment is greater in the older countries than it is in the relatively new countries, and it is the knowledge of this fact and the reliance upon this trait of the older civilizations which justifies the greater initial outlay. But by so much the more is it essential that the business in the older countries should be unhampered and unrestricted.
By a certain clause in its Prussian concession, the company was required to submit to the Prussian Government, for approval, every alteration which might be made in its charter or by-laws, before acting on such alteration in Prussia.
In obedience to this requirement, the company in 1891 submitted to the Prussian Government for approval two changes which the trustees had made in its by-laws. These changes were, (1) that the appointment of agents of the company was vested in the president instead of, as formerly, in a committee; and (2) that the office of general manager, necessitated by the large increase of the company’s business, was created.
It will be observed that these changes were purely administrative and were designed merely to increase the company’s efficiency. They in no wise affected its policy or the principles on which it conducted its business. These remained precisely as they were five years previously when the company was licensed to enter Prussia, and in the intervening time the company’s business had exhibited that steady and healthful increase which has characterized its whole existence of more than fifty years.
In dealing with these simple administrative amendments of the by-laws, the Prussian authorities first manifested a change of attitude toward the company, and began to make exactions which have been multiplied and hardened till the company now finds itself suddenly threatened with expulsion from Prussia unless it complies with a late requirement which it is impossible for it to perform.
The Prussian Government approved the changes in the by-laws, but only on condition that the company should in the future invest one-half of its receipts in Prussia in Prussian consols, which should be deposited with the Government, and which should not be disposed of without the consent of the minister of the interior.
Had the company been required in 1886 to invest half the receipts of its Prussian business in Prussian consols, which bear low rates of interest, it probably would not have entered Prussia; but, having incurred all the expenses and having devoted so much time, trouble, and applied skill to the establishment of its business there, having entered into binding contracts with agents, solicitors, and inspectors for terms of years running into the future, and having made other obligations, all of which it was bound to fulfill whether it remained in Prussia or not, it was confronted with the alternative of yielding to an unwelcome condition or of abandoning and sacrificing the work of years and its incidental expenditure.
There was no logical connection between the changes made in the company’s by-laws and the new requirement on which their approval by the Prussian authorities was made conditional. But, as the result of the connection artificially established between them by the authorities, The Mutual Life Insurance Company was placed in the position of being the only foreign company in Prussia upon which such a requirement was imposed.
To the representations made by our general agent at Berlin as to the injustice of this proceeding, the Prussian Government responded by extending the requirement to all foreign life insurance companies, and by exacting compliance with it on pain of expulsion, though the original terms of the requirement were modified by permitting investments to be made in German Government bonds as well as Prussian consols. But a prayer for permission to invest in mortgages prescribed for the investment of the moneys of minors—the equivalent of what is known in this country as the funds of executors and trustees—was denied; and the foreign companies were thus placed at a disadvantage with the home companies, which are allowed to invest their moneys in such securities as they may consider most desirable and most productive.
While in case an asset should fall in market value below its cost, the company would inevitably and properly be compelled, not only by the Prussian Government but by every other State and national authority, to quote it at its market value, it [Page 432] seeing quite incongruous that where the value rises the company should be denied the credit of it.
Though this company, without any change in its character, or its conduct, was thus subjected to a new and onerous requirement; for the reasons stated, it reluctantly decided to comply with the order, and deposits of Prussian securities were accordingly made, which have been increased from year to year till the sums now invested and thus placed beyond the control of the company amount to more than $500,000, all of which was invested upon the faith of the Prussian Government and as an inducement to it for its continued permission to transact our business in the realm.
On the 8th of March, 1892, the minister of the interior issued a new decree which required all annual statements of life insurance companies to be made in a particular form and in great detail, and which, while it purported to operate on German and foreign companies alike, operated generally to the disadvantage of the foreign companies and in some respects especially to the disadvantage of this company.
In this decree the Prussian Government embodied a rule which permits no item in the assets of a company to be stated above its original cost. No reason for this requirement has ever been presented beyond the fact that it is a Prussian rule. But, though the small German companies can readily comply with it with little or no inconvenience, it operates most unjustly against this company. As I am informed and believe, the German companies invest largely in securities as to which there is rarely any considerable increase in value, owing to the greater plethora of money in financial centers and the more fully developed condition of the countries in which such securities are issued. In case of a moderate advance in value, it is easy for them to sell such securities, realize in income the difference between cost and sale, and by a simple repurchase again enter them upon their books at their enhanced value; and for this they obtain credit in their reports to the Government. But in a country like this, the United States of America, there is a constant output of new securities based upon enterprises and activities in process of development. The enormous extent of the country, and the demand of its people for new railroads and extensions of existing lines; for public improvements, such, for example, as the erection of court-houses, the building of jails, waterworks, schoolhouses, city halls, bridges, railway termini, and electric installation, both for illumination and traction, secured by town, county, corporate, and municipal obligations, create a constant market for money to be used for investment; and these investments, if carefully and judiciously made, rise often very greatly in value and constitute a large proportion of the profit of the investor. There is no parallel to this state of things on the Continent of Europe. And yet; the Prussian Government, because there is no parallel there, deprives this company of the legitimate result of its conservative foresight under conditions peculiar to its own country, and compels it to publish to the world that its assets are worth only their cost when the daily quotation of every stock exchange disproves the statement.
This company holds securities to the value of many millions of dollars, a large portion of which were purchased years ago at prices much lower than those at which they could be sold to-day in the open market; and neither the extent of the company’s business, which necessitates the seeking of new investments for its increasing funds, nor sound business principles would admit of its selling old and approved investments and reinvesting the proceeds merely for the purpose of swelling the cost value of its assets.
The company has now been compelled in three annual reports to comply with this highly unjust and injurious requirement. With the exception of Prussia, there is no state or government within whose jurisdiction this company does business which requires it to make only a partial statement of the actual amount of its assets and thus to publish what is in fact a libel upon itself.
But there is in the decree a paragraph which, though properly not applicable to this company, the authorities have sought to apply to it, but with which the company has not complied because it was impossible to do so; and for its failure in this regard the company is threatened with expulsion from Prussia. To this feature of the case I now beg to invite your attention.
The paragraph in question (paragraph 8, Article IV) is as follows:
“Gewährt eine Gesellschaft ihren Versicherten Antheil an dem Gewinne nach dem sogenannten Tontinensystem—(hierher gehören insbesondere alle diejenigen Systeme der Gewinnvertheilung bei Todesfall-Versicherungen, bei welchen der auf eine bestimmte Versicherungsgruppe fallende Gewinn während einer Periode von mindestens drei Jahren angesammelt wird und am Ende der Periode auf die dannhoch bestehenden Versicherungen der betreffenden Gruppe zur Vertheilung gelangt)—so darf sie die verschieclenen Tontinen-Gruppen nicht in einer gemeinsamen Masse verwalten und aus dieser Masse bei der planmässigen Vertheilung der Gewinne aus den Tontinen einen Theil ausscheiden; sie ist vielmehr verpflichtet, in jedem Rechnungsjahre alle diejenigen Tontinen-Versicherungen, welcher einer und derselben Tontinengruppe mit gleicher Gewinnansammlungs-Periode angehören, als eine gesonderte Einrichtung [Page 433] zu verwalten und für jede solche einzelne Tontinengruppe im Jahresberichte jedes Rechnungsjahres getrennte Nachweise über folgende Punkte zu veröffentliehen,” etc.
“If a company secures to its policy holders participation in profits according to the so-called tontine system (to this belong particularly all those systems of participation in profits insurance against death, by which the profits accruing upon any given insurance group are accumulated during a period of not less than three years and belong at the end of the period to the surviving policies of the group in question for division among them), it must not carry on the various tontine groups in one common fund and separate apart from this fund when the time arrives, according to the plan, for the distribution of profits from tontines; but it is, on the other hand, obliged, in each calendar year, to carry on in a separate account all these tontine insurances.”
Taking this paragraph simply as it stands, the natural construction of it would be that its object was to compel companies doing a tontine business to keep and publish their accounts in accordance with their system. The Mutual Life Insurance Company, however, is not and never has been a tontine company, and to require it to make reports such as the Prussian authorities have demanded of it, in accordance with the tontine system, is to exact what is impossible, unless the company could convert itself, retroactively as well as prospectively, into a tontine company, which is also obviously impossible.
The tontine system is peculiar and complicated. Under it, all policies issued in a certain year, receiving dividends after ten years, form one group. Those issued in the same year, receiving dividends fifteen years from date, form another group, and so on. The next year a new set of groups is started, and account is in every case taken of each group as if such group composed a separate company. If as to one group there are unusual expenses or an unusually heavy mortality, the surplus arising in that group is greatly diminished, and the dividends to the survivors of the group are correspondingly small. On the other hand, if in any group the expenses are small or the mortality is slight, the dividends in that group become correspondingly great.
This is the tontine system as known to the few German companies which practice it.
The essential peculiarity of this system, which is necessarily disclosed in its bookkeeping, is that a separate set of accounts is all the time kept running against every so-called group in existence.
The system pursued by the Mutual Life Insurance Company is essentially and totally different. No policies are made forfeitable as on the tontine plan, as that plan is understood in this country, and no separate accounts or funds are kept running for any class of policies.
The system pursued by the Mutual Life Insurance Company is that of distributing annually among the policy holders who are entitled to receive dividends an amount of the surplus appropriated for the purpose by the board of trustees. Many of the company’s policies issued in its earlier years are entitled to receive dividends annually. Some, issued by special agreement at reduced rates, receive no dividends whatever. Others, again, by special agreement, receive dividends once in five years, while others receive their first dividend at the end of a period of ten, fifteen, or twenty years from the date of the policy, and annually or quinquennially thereafter. Each policy holder on entering has his choice among these different methods, as to which no change has been made since a period prior to the granting of the concession by the Prussian Government.
When the amount of the dividend during the coming calendar year has been fixed by the appropriation of the board of trustees, the actuary ascertains, first, what policies are entitled to participate in that year. This list comprises, first, those receiving annual dividends; secondly, those receiving quinquennial dividends, and dated five years since, or at some earlier period measured by a multiple of five; thirdly, those receiving their first dividend after ten years, dated ten years since, and so on. It is the duty of the actuary to deal with each policy entitled to a dividend in accordance with the well-known contribution plan for the division of the surplus, introduced by this company in 1863 and since adopted substantially by all American companies, as well as by various companies in foreign countries. Under this plan, account is taken of all the circumstances affecting each policy since the last period at which it received a dividend (or since its date if no dividend has yet been received) and an estimate is made of that portion of the company’s divisible surplus derived from the premiums of the policy during the period in question. Since in any given year there are many policies which are not entitled at that time to a dividend, there is necessarily at all times in the hands of the company a large volume of undistributed surplus. This is the well-known and long-standing system of dividends pursued by this company.
Under this system the basis of distribution is the individual policy. Each policy issued by the company constitutes a separate contract with the holder, which the company is legally bound and abundantly able to perform, according to its terms. There are no separate groups into which policies are segregated for purposes of [Page 434] special profit and special risk apart from the other policies of the company, and in respect to which separate accounts must consequently be kept running. It necessarily follows that the company can not formulate a report on the tontine plan.
Indeed, the very terms in which the paragraph in question is couched would exclude this company from its operation if it were not for the peculiar parenthetical clause, which, as it is construed by the Prussian authorities, would seem to have been designed for the specific purpose of making the requirement as to tontine companies applicable to a nontontine company, such as The Mutual Life Insurance Company, merely on the ground that the latter, though it has no tontine groups, issues policies on which dividends are postponed for a period of three years or upward. In other words, so incongruous is the requirement in its application to this company that it has not been possible to express it except in terms which arbitrarily impute to the company a system wholly different from that on which its business is actually conducted.
It should be apprehended that two principal factors enter into the application of the science of life insurance. These are the law of the average duration of human life deduced from tables showing the number of individuals living and dying at each age, and the law of the accumulation of money at compound interest during a long series of years. This company maintains that the best, if not the absolutely and solely true, realization of the workings of the law of the average duration of human life, results from spreading the experience of the company over the largest possible number of lives in being, in which it is in direct antagonism to the tontine practice, which limits the observed lives to the aggregate of the numerically small number forming the separate classes. This company also maintains that the best, if not the absolutely and solely true, realization of the law of the accumulation of money at compound interest, results from such accumulation for the longest periods of time practicable, in which it is also in direct antagonism to the practice of the tontine system sought to be applied, i. e., the distribution of surplus after periods of three years and upward.
It is to be noted, therefore, that the Prussian Government threatens to expel this company, first, for not doing what it can not do, and second, for not doing what, if it could do it, could only be done by a violation of the principles of which it is the most staunch upholder and advocate; while it must be assumed that the Prussian Government in granting its concession fully comprehended both these underlying principles of its business. It is impossible even to suggest that the experts employed by the Government in its long and minute examination did not understand. But, notwithstanding this presumption, the matter has been repeatedly explained to the Prussian authorities, and was fully covered in the company’s annual report and balance sheet of 1893.
However, there seemed to be a disposition on the part of the authorities, while admitting that this company could not make such a report as is required of tontine companies, to insist, in spite of all explanations, upon calling some of the forms of policy used by this company “tontine insurance” and the company offered, although for the reasons stated not favoring that class of insurance, from a day to be fixed by the Government, to issue only policies with annual distribution periods. And lastly, the company offered to permit an expert, duly authorized by the Prussian Government for the purpose, to visit its head office, to examine all its books in New York, to submit every record and document to his inspection, to pay all his expenses, and, if the same should be considered admissible by that Government, to pay such expert a suitable compensation for his services.
As these various offers remained unanswered, the company concluded that if it had not finally satisfied the authorities the matter had been dropped and that it would not be subjected to further exactions.
But on the 27th of April last the company was astonished to learn, by a cable from its general manager in Berlin, that the Government had suddenly demanded the resignation of its concession within a fortnight, on pain of expulsion from Prussia.
To this notification the Company responded that it would not retire from Prussia voluntarily; that it had not, since entering that country, changed its methods of business; that it had, to the best of its ability, endeavored to comply with every requirement and wish of the Government; and that if the Government desired to drive it out it must itself take the step of canceling its concession.
Since that time, through the kindly intervention of our Government, the Prussian authorities have extended the period of grace till the 15th of July next.
From the facts above detailed there is too much reason to apprehend that the Mutual Life Insurance Company will be expelled from Prussia on the date last mentioned, unless the Government of the United States shall interpose to prevent it. It is not my intention to impute to the high officials of the Prussian Government a conscious unfriendly purpose toward this company as an American institution; but it is clear that the spirit of Opposition displayed by home companies, and not infrequently finding expression in the native press, is at least partly responsible for the [Page 435] difficulties which this company has encountered in its late dealings with the Prussian officials. Indeed, I am informed that persons interested in home companies have counseled the Government, in the character of experts, as to the demands which have been made upon this company; and, while these persons have by no means always concurred in their opinions, it is to the erroneous advice given by some of them that may doubtless be ascribed the insertion in the paragraph which has been quoted, from the decree of 1892, of the parenthetical clause which, as interpreted by the Prussian officials, has the effect, against which this company has always protested and must continue to protest, of placing it in the category of companies that maintain separate groups for which separate accounts are kept running.
In this relation it is proper to advert to the fact that the insurance departments of the various States of this Union have for many years made the following inquiry of each company: “Does your company issue any policies in which the tontine principle is to be applied in making dividends thereon?” To this inquiry this company has responded annually as follows: “No policies are made forfeitable, as on the tontine plan. No separate funds or accounts are kept running for any class. When, at the end of a distribution period, a share of surplus is allotted to any policy, all equities are considered.” This response has always by every State been accepted as a correct statement of the company’s system, with which the officials are, of course, entirely familiar.
As before set forth, to establish a life-insurance business in a foreign country, requires a large proportion of expenditure at the beginning, a part of which must necessarily prove to be a dead loss unless the business as established is permitted to continue. The contracts of a life-insurance company endure through many years, and facilities must be afforded to policy holders for carrying out all transactions connected with their policies. For this reason, although this company has in force in Germany to-day insurance amounting to about 71,000,000 marks, and is probably doing more business than all the German companies together, yet its business up to the present time can not be considered as ultimately profitable, unless it shall be supplemented by additional business in the future, to be secured by the staff of agents established and trained since the inception of our work in that country.
The Mutual Life Insurance Company has not assumed to question the strict legal right of the Prussian Government to cancel its concession in that country. It thoroughly comprehends the situation. Like other corporations, it can not claim the right to enter into and remain in foreign countries against the will of the Government. But it respectfully urges that there are elements of justice and equity in its cause which can not be disregarded without seriously impairing that comity under which approved and reputable business associations of foreign origin are permitted to continue in business in the United States as well as in other countries. However clear and express may be the strict right of expulsion in such cases, it ought not to be exercised except upon reasonable grounds and with a due regard to the interests of those who have, on the faith of voluntary concessions, been led to invest their means in the full and justifiable expectation that, so long as they should continue properly to conduct the business which they were licensed to engage in, they would not meet with any governmental prohibition.
If for this just and salutary principle there shall be substituted an arbitrary rule of action, promotive of no other object than the exclusion of American life-insurance companies, it is not difficult to foretell that the results will be very far reaching and will not be confined to one branch of business.
Let me also point out another consideration which should, in my judgment, lead the Prussian Government to a more considerate course of action. If this company be forced out of Prussia a stigma will be cast upon its reputation, not in Prussia alone but in all the other countries of the Continent. In Prussia the sole fact of our exclusion will forthwith sow doubt and distrust in the minds of those already holding our policies and these will be surrendered in great numbers wherever they are held by healthy subjects. These will seek new insurance elsewhere, but the impaired lives, which can gain no such indemnity in other companies, will persist. This change in our membership must abnormally increase the death rate, while depriving us of the contributions of the healthy members toward sharing the losses—a participation which is fundamental in all conceptions of the business. Again, it will be still necessary for us to maintain business offices and clerks and agents for the collection of the premiums on these antecedently issued policies and to pay the death claims as they thereafter mature. Our expenses will, therefore, not be materially diminished, and these, added to the greatly enhanced ratio of death losses, may produce a most disastrous and wholly undeserved effect on the general business of the company.
I think it possible, moreover, that there is one view of the case which has not yet received the consideration of the Prussian minister of finance. Under the requirement of 1891, above cited, one-half of all the premiums collected by the company must now be invested in German securities. Since that date the amounts so invested have reached the considerable sum of 2,250,700 marks, and in the natural course of a [Page 436] continued business the same must go on in an increasing ratio. The Government has thus forced this company to become a constant purchaser in its own markets of its own securities. Is it the policy of the finance minister to drive out of those markets such a purchaser?
The gravamen of our complaint is this: Lured by the granting of a free concession for the transaction of business in Prussia, after the thorough and protracted examination of all our methods, exercised by the Government authorities, we went to great expense and serious expenditure of time, skill, and effort to establish that business on a basis of anticipated permanency, which alone could make it profitable to the membership of the company at large. Lulled into security by the apparent friendliness of the Government, we invested our money on a like anticipation in a costly building in Berlin, which, if we are excluded from Prussia, will be useless for our purposes, and must be disposed of as best we may. Yielding to administrative pressure of an arbitrary and illogical nature, we made large investments in German securities, which we should have refused to make then and there had the Government at that time disclosed any purpose to make further exactions, and have placed those securities in the custody and control of the very authorities which now, in effect, destroy their only value to us by seeking to drive us from the country.
Had the Prussian Government intimated when it was considering our application for a concession that any such exactions would be made, we should have withdrawn our application. We can not believe that that Government fully apprehends or has maturely considered what we hold would be the great and unmerited injury its contemplated course will inflict. We do not believe it to be inconsistent, either with its dignity or with its reputation as one of the most enlightened Governments of the civilized world, to review this whole matter considerately and dispassionately, and to ask itself the question whether there is anything in the conduct of this company since its admission to Prussia to compel resort to so harsh and drastic a measure as some of its officials, unquestionably through an imperfect apprehension of the case, have sought to subject us to.
In conclusion, I beg to say that the specific relief which the Mutual Life Insurance Company desires at the hands of the Prussian authorities is the modification of its decree of 1892 in two particulars, as follows: (1) Either the suppression of the parenthetical clause in paragraph 8, of Article IV, or such an interpretation of it as will not ascribe to the company a system of insurance which it does not follow; (2) a modification of the requirement by which the company is compelled to make only a partial statement of the actual value of its assets.
In the hope that our Government may be able efficiently to intervene in the present case in behalf of the important American interest which this company represents, I have the honor to be, sir,
Your obedient servant,