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VOTERS OF GEORGIA, RE AD AND RER EA D AN ADDRESS TO THE TEXAS WELFARE COMMISSION Houston, Texas, April 16th, 1912. To the Texas Welfare Commisson. In response to your request for information concerning the operation of the Robertson insurance law, we respectfully submit the following in answer to your inquiries, taking them up in the order named: First---Why did various outside life insurance com panies withdraw from Texas rather than submit to pro visions of that law? Second--What are objectionable features from their standpoint? In answer to these questions we submit the following quota tions : “The Robertson aet became effective July 12, 1907. and pm vuies that every life insurance company ‘shall as a condition ot its right to do business in this state invest and keep invested in 1 exas securities a sum of money equal to at least 75 per cent of the aggregate amount of the legal reserve set apart and appor tioned Io policies of life insurance written on the lives of citizens of this state.’ “Rather than comply with the provisions of this law the following companies have withdrawn from the state: Columbia National, Boston. Mass. Des Moines Life, Des Moines. lowa. Equitable Life, New York. N. Y. Fidelity Mutual. Philadelphia. Pa. Germania Life. New York. N. Y. Home Life, New York, N. Y. Manhattan Life. New York. N. Y. Massachusetts Mutual, Springfield. Mass. Mutual Benefit Life. Newark, N. J. Mutal Life of New York, N. Y. National Life. Montpelier, Vt. New York Life, New York. N. Y. Northwestern .Mutual, Milwaukee, Wis. Penn Mutual. Philadelphia. Pa. Prudential, Newark. N. J. Reliance Life, Pittsburg. Pa. Security Mutual. Bingham, N. Y. Travelers' Insurance Company. Hartford, Conn. Union Mutual, Portland. Maine. Washington Life, New York, N. Y. Wisconsin Life, Madison, Wis. “As far back as the records of this department extend, it is shown that some of these companies were doing business in Texas in 1880. Others were admitted from time to time down to 1904, when the last one was granted a permit to enter this field. The ag gregate amount which these outgoing companies have collected from the people of Texas in premiums from the time that they entered \ until their recent withdrawal, is $68,662,913.42. And the aggregate amount that has been paid back in losses by these companies is $22,449,408.89- a difference of $46,213,504.53.” —Extract from the official report of Hon. R. T. Milner, commissioner of agriculture, in surance. statistics and history, to the governor. August 31, 1907. “The bill, as originally drawn, required the deposit within the state, of the securities in which the companies were required to in vest their reserves. Upon the suggestion being made that this de posit requirement would work a sacrifice of the policy holder;’ in terest because of the heavy additional ad valorem tax burden, which., under the constiution and laws of the state such deposit would en tail. th’e bill was amended so as to provide that the commissioner of insurance and banking should have the power to waive any re quirement of the law upon a showing that the enforcement of such requirement would work a sacrifice of the policy holders’ interest. With this amendment the bill was passed by the legislature, received executive approval and became the law. Immediately,2l of the larger companies, which had for years transacted a majority of the !if< insurance business of the state, announced their purpose to withdraw from the state, and did discontinue writing new business shortly prior to the date when the law became effective, the most of them announcing in published statements and in circular letters addressed to their policy holders that they* were forced to take this action bv reason of the enormous tax burden which would be im posed upon them, ami through them upon their policy holders by compliance with the deposit requirement, making no mention of. or referent.' to.-the provision of the law I hat this, or any other of its requirements might be waived upon a showing that its enforce men! would sacrifice the policy holders interest. More than 25 com panies remained in the stale and have continued to transact busi ness. A number of large companies having heavy Texas reserves applied for a waiver of the deposit requirement, showing, upon the hearing of their application, that compliance with that requirement would subject them to excessive taxation, and in all such cases this requirement was waived. Many companies, having small I exas reserves, could and did comply with the deposit requirement with out the additional tax being burdensome. When the commissioner of insurance and banking waived the deposit requirement as to the companies applying for such action, the officers of companies which had withdrawn from the state immediately announced that thev could not return, notwithstanding this action, for the reason that the policy of the state insurance department upon this question might be changed at any time by a change in the incumbency of the office of commissioner, ami that they could not afford to risk the uncertainty as to whether there would continually be in office a com missioner who woidd waive the deposit requirement. In his an nual report for 1908. the commissioner of insurance and banking recommended that the deposit requirement should be repealed by the legislature of 1909, and the author of the law. who had been re elected to the legislature, publicly announced his purpose to intro duce a bill effecting that amendment of the law, and this was rec ommended bv Governor Campbell in his message to the legislature. Thus, the issue was definitely and permanently narrowed to the question whether life insurance companies collecting life insurance premiums from citizens of the state, to be invested somewhere, and wherever they might be so invested in safe securities which would bring the best rate of interest obtainable, and which the companies admitted could be invested as advantageously within the state of Texas as elsewhere, should be required to invest a fair proportion of the reserves so collected from Texas citizens in I exas securities. Immediately upon it becoming apparent that the deposit require ment would be entirely repealed, the Association of Life Insurance Presidents, representing the companies which had withdrawn from the state, in convention in the city of New York, adopted a resolu tion. in which they ‘respectfully urged all companies which retired from Texas on the enactment of the law to unite in demanding the repeal of the compulsory investment feature. I his ‘demand.’ made by the representatives of foreign corporations, upon the legis lature of a state, within whose borders they desired the privilege of transacting business, was not acceded to, but was met by the Texas legislature which convened in January of this year, passing, by overwhelming vole of both house®, a bill, again introduced by THE ATLANTA GEORGIAN AYD NEWS. SATURDAY. JULY 27. 1912. Judge Robertson, repealing the deposit requirement and re-enacting the law as thus amended, making the sole and unconditional ye quireemnt that life insurance companies shall invest and keep in vested in Texas securities 75 per centum of their Texas reserve. “Os the 21 companies which withdrew from the state when the law* became effective, two have returned. The withdrawal of these companies, which for years had written a major portion of the life insurance business of’the state, caused the total of new’ life insurance written in the state for 1908 to fall to $48,000,000. as against $64,000,000 in 1906; but, nothwithstanding this tact, there has been already a notable increase in the life insurance investments made within the state and an especial increase in the volume of such investments in real estate mortgages. ’Hie 21 companies which withdrew from the state w’hen the law’ became effective, according to their sworn statements, had invested at the end of 1906 in Texas real estate mortgages, all told, less than $1,000,000. while the com panies transacting business in the state during 1908 invested under the operation of the law’ during that year in Texas real estate mort gages more than $2,000,000, and it is safe to say that during 1908 the investments in Texas securities of all forms by life insurance companies were much larger than during any previous year in the history of the state, and under the mathematical law of increasing reserves these investments are certain to increase largely in volume year after year. It is also apparent that the overwhelming majority of the people of the state are entirely satisfied with the situation as to the life insurance facilities now’ afforded them. There are today 45 life insurance companies transacting business in the state, pos sessing assets amounting to approximately $250,000,000, many of them being strong, clean, young companies organized under the law’s of Texas and other states of the South and West; but. there are also a number of older and larger companies continuing to transact business in full compliance with the law, the four largest, possessing assets amounting to $16,000,000. $20,000,000. $68,- 000,000 and $92,000,000. respectively. There has been no complaint that any citizen of Texas has been unable to obtain all the life in surance desired and of the kind desired since the law became effective. “It has never been contended by the opponents of this legisla tion that life insurance companies could not invest the required pro portion of their Texas reserves in Texas securities, both safely and profitably. On the contrary, the representatives of the companies which quit the state when the law' became effective have avowed that but for the passage of the law they would have made Texas investments largely in excess of those which it required, and that they stand ready whenever it is repealed to return to the state for the transaction of life insurance business, and to make investments in Texas securities even in excess of those w’hich the law requires, and representatives of these companies have repeatedly suggested the enactment, in substitution for the present law, of one imposing a heavy penal tax upon the gross premium receipts of companies failing to make the required investments. There is thus presented the phenomenon of these great life insurance companies bitterly opposing and resenting their being required by the laws of the stale of Texas to do that which they say they w*ould cheerfully do, but for the fact that it is required by law. The injustice and the im position of requiring a corporation or an individual to do that which it avows its readiness to do but for the requirement, must be largely sentimental and psychological. The gist of all the arguments which have been presented against such legislation is that the managers of life insurance companies, being the administrators of great trust funds, cannot properly submit to any compulsory laws controlling their investments and that a proper sense of their responsibility to their policy holders will not permit them to delegate, even to the legislature of a sovereign state, their freedom to exercise their own judgment in the investment of the reserves belonging to citizens of that state; that life insurance investments should be controlled alone by natural laws as interpreted and applied by a company’s directors; and that compulsory investment legislation is an unwise and unwarranted innovation.’’ —Extract from address of the Hon. Thos. B. Love, commissioner of insurance and banking, before the Trans-Mississippi Commercial Congress at Denver, Colo., delivered August 18, 1909. • Third --To what extent have life insurance com panies been organized in Texas since passage of that law? There were five Texas life insurance companies, w’ith total as sets aggregating $974,276.38, and with a total outstanding insurance of $18,030,730, transacting business in the state when the Robertson bill became a law. On December 31, 1911, there were 19 Texas life insurance companies transacting business in this stale, with com bined assets of approximately $10,500,000, and outstanding insure anee aggregating more than $116,000,000. Fourth-- Is there any difference between the attitude of Texas companies and outside companies under Texas laws---if so, wbat? We understand that this question was framed with the idea of developing whether the Robertson law affects the business of Texas companies and outside companies alike. The Robertson law affects the business of Texas companies and outside companies in exatcly the same way except in the matter of taxation. The basis for taxing home companies is fixed by the following statute: “Insurance companies incorporated under the law’s of this state shall hereafter be required to render for state, county and municipal taxation all of their real estate as other real estate is rendered, and all of the personal property of such insurance companies shall be valued as other property is valued for assessment in this state in the following manner: From the total valuation of its assets shall he deducted the reserve, being the amount of the debts of insurance companies by reason of their outstanding policies in gross, and from the cemainder shall be deducted ftie assessed value of all real estate owned by the company and the remainder shall be the assssed tax able value of its personal property. Home insurance companies shall not be require to pay any occupation or gross receipt tax.’’ (Acts Thirty-first Legislature, chapter 108, section 25.) Texas companies are now paying taxes al the rate of approxi mately $85,000 per annum. On all premiums collected in other states, Texas companies are taxed at various rates up to 2 1-2 per cent. The bases fortaxing outside companies is fixed by the following stat ute; “Each life insurance company not organized under the laws of this state, transacting business in this state, shall on or before the Ist day of March, 1910, and annually thereafter, make a report to the commissioner of insurance and hanking of this state, w’hich re port shall be sworn to by either the president or vice president and secretary or treasurer of such company, and which shall show the gross amount of premiums collected during the year ending on De cember 31 preceding from citizens of this state upon policies of in surance; and each such company shall pay annually an occupation tax equal to 3 per cent of such gross premium receipts; provided, that w’hen the report of the investment in Texas securities, as de fined by law. of any such companies as of December 31 of any year, shall show that it has invested on said date as much as 30 per cent, of its total Texas reserves, as defined by law, in promissory notes or other obligations secured by mortgage, deed of trust or other lien on Texas real estate, the rate of occupation tax shall be reduced to 2.6 per cent, and when such report shall show that such company has so invested on said dates as much as 60 per cent of its total Texas reserve, the rate of sucJi occupation tax shall be reduced to 2.3 per cent, and when such a report shall show that such company has so invested, on said date, as much as 75 per cent of its total Texas reserve, the rate of such occupation tax shall be reduced to 2 per cent; provided, that all such companies shall in any event make the investments in Texas securities in proportion to the amount of Texas reserves as required by law. Such occupation taxes shall be for and on account of the business transacted within this state dup ing the calendar year in which such premiums were collected or for that portion thereof during w’hich the company shall have transact ed business in this state while this aet was in force and effect.” (Acts TWrty-first Legislature, First Called Session, chapter 3, sec tion 1,) This act reduced taxation against outside companies because prior thereto they had been paying 2 14 per cent. During 1911 Texas companies collected about $3,500,000 pre miums, and are paying taxes as above shown of approximately $85,- 000 per annum. On same amount of premium income outside com panies would have been required to pay $70,000 taxes on the 2 per cent basis. Fifth---Statistics concerning aggregate capitalization and resources of Texas companies. The aggregate resources of the 19 Texas companies on Decem ber 31st, 1911, was approximately $10,500,000, Sixth—Satisfies concerning amount of business tn Texas now carried on by outside companies and by Texas companies. The amount of business now carried by outside companies nsA now doing business in Texas is not available, because the companies that withdrew’ have made no report of such business since 1907. The amount of insurance in force with these companies on December 31st, 1906, this bping the date of the last annual statement before the withdrawal of the 21 companies named, was $262,818,590.80. The premiums collected during 1906 on this business amounted to $8,648,- 885.78, The insurance in force with outside companies now doing business in Texas, and who consequently make reports, was on De cember 31st, 1911, $104,841,200.88, as shown by following certificate from the commissioner: AMOUNT OF INSURANCE IN FOROE ON TEXAS LIVES DE OEMBER 31, 1911, IN OUT-OF-STATE LIFE COM PANIES (LEGAL RESERVE). Company. s Amount of Insurance. Aetna, Hartford, Conns 7,169,999 13 (a) American Central, Indiapanolis, Ind 2,657,264 42 American National, Lynchburg, Va 610,600.00 Bankers’ Reserve, Omaha, Neb 1,114,000.00 (b) Bankers’ Life, Des Moines, 10wa... 14,660,600.00 Capitol Life, Denver, Colo 1,236,408.00 Central Life Assurance Society, Des Moines, lowa . 174,200.00 (c) Colorado National, Denver, Colo Continental Assurance, Chicago 2,000.00 Federal Life, Chicago, Di 313,173.00 (a) Franklin Life, Springfield, 11l 4,781,467.00 Great Western Life, Kansas City, Mo 3,129,720.00 Hartford Life, Hartford, Conn 4,801,200.00 Home Life, Oklahoma City, Okla 270,000.00 (a) International, St. Louis, Mo 632,470.00 Kansas City Life, Kansas Oity, Mo 10,424,902.78 (c) Louisiana National, New Orleans, La Manhattan Life, New York, N. Y 7,058,479.00 Meridian Life, Indianapolis, Ind 1,619,337.00 Missouri State, St. Louis, Mo 4,500,985.00 (a) National Life of U, 8. A., Chicago, 11l 3,092,067.80 (a) Northwestern National, Minneapolis, Minn 1,648,886.00 Occidental, Albuquerpe, N. M 676,080.00 Oklahoma National, Oklahoma City, 0k1a...- 106,500.00 (a) Pacific Mutual, Los Angeles, Cal- 8,028,968 00 Pittsburg Life and Trust, Pittsburg, Pa- 5,786,288.00 (a) Protective Life, Birmingham, Ala 619,500.410 Prussian, Berlin, Germany (re-insurance) 1,210,118.40 Reliance, Pittsburg, Pa 1,574,090.00 Reserve Loan, Indianapolis, Ind 1,186,250.00 Security, Richmond, Va H 994,396.00 (c) Southern National, Louisville, Ky . (a) State Life, Indianapolis, Ind Union Central, Cincinnati, Ohio 8,942,726.00 U. S. Annuity and Life, Chicago, 11l 176,020.25 Volunteer State Life, Chattanooga, Tenn 1,597,381.00 $104,841,200.90 (a) Including all business written during 1911. (b) Including assessment insurance in force before company changed to legal reserve. (c) Figures not available. T hereby certify to the foregoing as a correct list of the amounts of insurance in forec on Texas lives, December 31st, 1911, in out-of state life companies (legal reserve), as these amounts are shown in the annual statements submitted to me by these companies. Given under my hand and seal of office this 23d day of April, A. D. 1912. (Sea 1) Commissioner* Os course to this amount should be added the business remaining in force wHh the companies that withdrew from the state in 1907. This can only be estimated, as they make no reports to the depart ment. They have written no new business since they withdrew, ami after making due allowance for terminations we believe that they still have sufficient business here to justify us in stating that the total amount of business in force by outside companies at. this time is approximately $300,000,000. Seventh—Statistics concerning investments in Texas securities by outside companies and Texas companies. At the time of the passage of the Robertson law, the 21 com panies that withdrew had loans in Texas aggregating $906,732 and bonds amounting to $14,028,116, principally old first mortgage bonds 7