The expenses of management are rela tively trifling when the office has obtained a large amount of business, but they bear heavily on young offices during the first years.
The division of the profits (so called), that is, the method of returning to the assured the surplus of their premiums, with their accumulations of interest, has been the subject of much Offices have adopted very different modes of proceeding in this respect : some keep this surplus for the older members; some divide it by addition to the policies made annually, or at periods of five, seven, or ten years; some apply it in reduction of premiums as fast as its value is ascer certained. Most, or all, of the methods followed by the offices seem to be fair, that is, they make the chance of surplus the same for one member as for another, at least of those who enter at the same age: if there be any thing inequitable, it arises when the premiums are disproportioned at different ages, so that the surplus is differently levied upon different classes of members. Leaving this however, we shall proceed to enquire what may be the probable amount of surplus in an office charging premiums made from the Car lisle Table at three per cent., with twenty five per cent. added, taking the most favourable suppositions. Let the mor tality be no greater than that in the table, let there be no expenses of management, and let the office be able to net four per cent. compound interest. Then we find that the office is in reality charging for the following sums, under the name of 100/.; that is to say, all the preceding suppositions being correct, the office might undertake to pay the following sums in stead of the 1001. minimum which they do really guarantee. The sums are only roughly put down, within a pound or thereabouts.
Age. £. Age. E. Age. E.
20 166 35 157 50 148 25 163 40 155 55 144 30 160 45 152 60 141 There is an inequality here which arises from the supposition of the office gaining a greater interest than was sup posed in its tables; and it is obvious that the young assurer must make that excess of interest more beneficial to the office than the old one. Consequently where an office realizes some of its surplus by excess of interest, there is equity in giving the one who entered young somewhat more than the one who entered later in life. But this has never been the principle
on which any office made its divisions: some distinguish those who have been a long time in the office from those who enter newly, and the greater number of those so distinguished must have entered younger than the greater number of the undistinguished; but the intention of the office has no reference to age at entry, but only to time of continuance.
The true method of determining the actually existing surplus must have some connection with that which would be fol lowed if the company wished to break up, dividing its assets fairly among the assured. Let us suppose the stock of the company, all that it actually has or could realize, to be worth half a million, and that the premiums which the existing contributors would pay are valued at another half million, while the claims of these contributors are valued at 750,000/. Consequently there is a million to meet 750,0001., or 133i/. can be given for 100/. Now suppose that instead of breaking lip, the office wishes to know how much it can afford to give in payment of a claim of 1001. The first question is, how did this surplus arise f—the office has in pos session or prospect 250,000l. more than what is estimated to be absolutely ne cessary. If this surplus really arose out of the natural operation of the premiums, &c., it is clear that the office is now in a condition to pay 13311. for 100/. Sup posing this done for the current year, the valuation of the next year will point out what alteration, if any, is necessary. This mode of division is the safest in the long run, because any excess in one year will be compensated in future years. Another mode is to divide the surplus of 250,0001. among the existing policies, in equitable proportions; and a third is to consider it as advance of premium on the part of the existing contributors, and to diminish their future premiums as if they had actually made such advance. It is not however our present purpose to extend an article already longer than we had in tended it to be, by entering into a length ened explanation on this point.