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. Runyon to Mr. Olney.
September 21, 1895. (Received October 9.)
Sir: Referring to the Department’s telegraphic instructions of the 5th instant, I have the honor to transmit herewith a copy of a note to-day addressed by me to the German Government, which constitutes a general answer to the various objections which have been made verbally and in writing to the Mutual Life Insurance Company of New York, and to its business methods, and to be, sir,
Your obedient servant,
Mr. Runyon to Baron von Rotenhan.
Berlin, September 21, 1895.
The undersigned, ambassador, etc., of the United States of America, acting under Instructions from his Government, has the honor to present again to his excellency Baron von Rotenhan, acting secretary of state for foreign affairs, the subject of the action of the Prussian authorities in prohibiting the Mutual Life Insurance Company of New York from doing any new insurance business in Prussia after the 1st day of September instant. The object of the undersigned herein is particularly to bring to his excellency’s attention the request made by the company to be permitted to do new insurance business under its concession by confining such business to the issuing of policies with annual participation in the profits. The regulation of 1890, paragraph iv, pl. 8, translated into English is as follows:
“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 of life insurance, 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 [Page 444] for division among them), it must not carry on the various tontine groups in one common fund, and separate a part 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 those tontine insurances.”
The company has declared its inability to comply with that regulation for the reason which is stated at length in the memorandum which the undersigned had the honor to submit to the foreign office heretofore, and to which he now again refers. Briefly stated, the reason is that the company does not do and has not done business on what is called the tontine plan, and that to require it to make reports such as the authorities have by the regulations demanded in accordance with the tontine system is to require that which is impossible unless the company could convert itself retroactively as well as prospectively into a tontine company, which is impossible. The company, in view of such declared inability, stated its readiness either to conform to the regulations so far as its business system would allow or to make such changes in its business in Prussia, in view of the regulation, as would not operate to its serious detriment elsewhere. In accordance with this declaration it submitted, on the 9th of July last, through this embassy, to the imperial foreign office a suggestion of a general regulation, which, while it would in nowise affect the regulation of 1890, would enable the company to have to a certain extent, at least, the benefit of its concession and of its great expenditures on the faith of it. It was in the form of an order that any company which does not comply with the provisions of the above regulation of 1890 should issue no policies in Prussia, except with dividends to be payable annually, and that a company issuing such policies shall in its statements showing the amount of its surplus always state that only those policies which are in force at the time of striking the balance shall participate in the future dividends from the accrued surplus.
The undersigned understands that the request (for the suggestion amounted to that) was regarded by the authorities as objectionable on two grounds, first, that it came too late, and next, that it was merely the formalization of propositions as to how the conduct of the business of the company in Prussia might be arranged so as to comply in the most feasible manner with the regulation in regard to tontine business; and it was therefore rejected, the company being informed by a decree of the minister of the interior, of the 14th of August last, that its concession would be declared canceled on the 1st of September, and that the proposition of July 8 (that just referred to) had not caused the minister to change the decision (the withdrawal of the concession) which had already been communicated. It does not appear to the undersigned that there was any ground for holding that the proposition came too late, especially seeing that it was submitted five days before the expiration of the extension of time (to the 25th of July) which had been granted; nor does it appear to him to be too late to consider and allow it now. As to the other objection, which is in substance that the proposition was intended as a means of avoiding compliance with the regulation of 1890, the request of the company in making this proposition was not for a modification of the regulation of 1890 to enable it to conduct insurance business on the tontine plan, but was for the adoption of a regulation which in effect would prevent any life insurance company from carrying on its business of insurance in Prussia on the tontine plan except under the regulation of 1890. This, it will be observed, is in nowise in contravention, nor is it even a modification of the regulation of 1890, but it leaves that regulation in full force, and is a general provision applying to ail life insurance companies. Under it the company would still be enabled to carry on its business in Prussia, but only in conformity with the regulations of the Government, and on the plan specified. And here it seems quite proper to state that it is alleged by the company that its methods of insurance and of keeping its accounts were all investigated by the authorities before the concession was granted (which was November 16, 1886), and that in the granting of the concession those methods were approved; and it also alleges that there has been no change in those methods from that day to this, a period of nine years or thereabouts. The circumstances under which the concession was granted, the inquiries which were made, and the circumspection which was exercised by the Government before it was granted, the expenditures which were made by the company on the faith of the concession are stated in a brief and general way in the memoradum before referred to.
The company declares that it has in all things complied with every regulation except the particular regulation of 1890 as to the tontine business, with which, as before stated, it declares it impossible to comply, for the reason given. It alleges that under a regulation of 1891, which required that one-half of all premiums collected by the company in its business here be invested in German securities, it has so invested the large sum of 2,250,700 marks. It may well be assured, that in making such investment, as well as in the large expenditures the company has made in and for the establishment of its business in Prussia, and in the building for its offices in the city of Berlin, it acted upon the conviction that there was no ground to apprehend [Page 445] that the concession would be withdrawn without due regard to existing equitable considerations in its favor, nor without due regard to the principle of international comity, a principle which, it may be remarked, is well illustrated in the freedom and equality with which foreigners and foreign corporations are permitted to extend their business operations to and carry them on in the United States. The undersigned very respectfully solicits the attention of his excellency to this subject with a view to the repeal of the decree of the 14th of August last, canceling the concession of the company. The undersigned has been informed that, as additional ground for the cancellation, certain objections are made by the authorities to the accounts of the company, to its valuation of its assets, and to some of its expenditures in the conduct of its business. But he is not informed whether these matters have all been brought to the attention of the company or its representatives. He may be permitted to suggest that they should not be regarded as ground for any adverse action against the company, at least until it shall have had notice of the complaint or objections and full opportunity to be heard in reference thereto.
As to the objection that in its statement of its assets its stocks and bonds are put down at their market value, and not at their cost to the company, the undersigned is informed that the company has offered to obviate (and perhaps has already done so) this objection by stating in its reports not only the market value, but the cost of those assets also. And as to the objection that real property bought in by the company at sale under foreclosure of mortgage held by it thereon is put down at a valuation of the justness whereof the Government has no means of judging, the undersigned has been informed that when the application for the concession was under consideration the company tendered itself ready to furnish, and did in fact furnish, all information to the Government which the latter desired, and that the Government requested that the Imperial German minister at Washington examine into and report upon the condition of the company, and he did so, and his report was acted upon favorably by the Prussian authorities, and that the method of valuing such properties was the same at that time as it has been ever since. Moreover, he is further informed that the company has in reference to this, as in regard to every other matter connected with the operation of the company, sought to have the Government examine into them by its own experts, to be sent to the United States for the purpose, or to be appointed there, and has offered to pay not only all the expenses of such experts and of the examination by them, but, if permitted to do so, to pay the experts compensation for their services also, and that this offer, which is still open, has not been accepted. He is also informed that a complete statement or list, in detail, of all of those properties, with a description of the premises and separate appraisals of the land and buildings, with the volume and page of the official record of the deeds for the land, is annually transmitted to the insurance department of the State of New York and to the proper offices of other States where it is required, and is there open to public inspection, and that certified copies thereof may be obtained.
It appears that an official examination of the company, showing its condition at the beginning of this year, has recently been completed by the superintendent of the insurance of the State of New York, and that a certified copy of his report thereon has been transmitted to the Prussian authorities. This examination was, it is said, the work of about eighteen months. It dealt with and passed upon the assets of the company, its loans on real-estate security, its safeguards, its medical examinations, its business in foreign countries, its income and disbursements, its method of keeping its accounts and of doing its business, and the character and standing of the company. On the subject of property bought in by the company at foreclosure sale the superintendent reports as follows: “The company’s method of dealing with this class of property illustrates its wise conservatism, and has my approval. The cash value of this real estate is in the aggregate more than it represents on the company’s books and statements. While the department in this report can not recognize prospective increase of value as an element of appraisals, it is yet the opinion of the superintendent, founded on the detailed returns of the experts whom he has employed, that the valuation is one which in the aggregate no probable event in the future will reduce, while circumstances are likely to arise which will materially increase it.” The undersigned has the honor to send herewith to his excellency a copy of the report. He very respectfully presents the subject of this note to his excellency for consideration in all its aspects by the Prussian Government and by the imperial authorities also, so far as the latter may have jurisdiction or cognizance of the subject in the premises, and suggests in so submitting it that there is ground for the belief that the necessary result of the action complained of would, as the matter stands, be to give to the beneficent principle of comity above alluded to, to which it is the interest of all nations to maintain, a restricted and uncertain operation, which is, of course, to be deprecated.
The undersigned, avails himself of this occasion, etc.,