One hundred thousand dollars Texas and Pacific La. Div. 5 per cent and $150,000 New York Gas Light, Heat and Power, 5 per cent bonds are deposited with the above bank as collateral. Disbursements Death losses and matured endowments: All death losses aggregating $442,608.29 and matured endowments, $126,357, paid in 1918, were examined and the vouchers traced through the cash book. These claims appear to have been promptly paid and the vouchers were in proper form. Annuities: Payments made in 1918 on account of annuities were checked from the contracts and vouchers traced through the cash book. The total of such items was $11,847.26. Surrender values: Surrender values, $332,807.20, paid or applied to purchase other insurance, etc., were checked from the surrender records to the papers and policies and the vouchers traced through the cash book. The company reported $31,690.32 as surrender values applied to purchase paid-up insurance and annuities. The correct amount is $36,726.84 with a corresponding reduction of $5,036.52 in surrender values paid in cash, etc. Premium notes voided by lapse: Four thousand five hundred and fifty-two dollars net premium notes voided by lapse were verified in the audit of the premium note account as reported on page No. 10 of the annual statement. Paid for claims on supplementary contracts not involving life contingencies: Payments on this account were checked from the contracts and vouchers to the cash book-total paid, $5,984.61. Dividends to policyholders: Dividends paid were checked from the policy claim papers or with vouchers paid direct from the home office. Commissions to agents: This item was checked in the audit of agents' accounts. The company corrected an error in disbursements for first year commissions made in 1917 by journal entry in 1918 by crediting first year's commissions. This is incorrect, as the actual disbursements for first year's commissions in 1918 per the financial statement are required for Schedule "Q." Accordingly, we increase disbursements for first year's commissions $50.99 to $22,587.83 with a corresponding item in income as a credit to profit and loss (first year commissions overpaid in 1917). Disbursements for agency expenses, salaries and commissions were checked in the examination of the agency accounts. All disbursements for legal expenses for the past five years were examined. Interest on bank loans is self-explanatory in view of the acquisition of $195,000 and repayment of $55,000 as borrowed money. All other home office disbursements were checked and vouchers examined in detail. Real estate: Assets The real estate holdings of this company on December 31, 1918, consisted of seven parcels of New York city properties, two of which have been acquired since the last examination. The cost or book and the market values are indicated in the following schedule: $68,314 18 Market over book value per company.... $83,564 18 The last two parcels above were acquired in 1914 and 1916 respectively by deed from the owners without foreclosure in satisfaction of mortgages held by the company. The following comparison indicates an increase of more than 100 per cent in the company's real estate investment since the last examination: The net income from rents in 1918 based on book value was 234 per cent on the company's market value, 22 per cent. The company's market value on the first five parcels above is the Department's appraised value of 1914. The market value taken on the last two items-acquired since 1914-is the Department's appraisal of such properties made on the mortgages held in 1914. Appraisal of the last two parcels made by the Insurance .Department in 1919 places the market value of such properties at $425,000 and $11,500 respectively, thus increasing market value of real estate over book value from $68,314.18 to $83,564.18. Abstracts of title and deeds for all properties held were examined and compared with the schedule of real estate. All vouchers for disbursements and items of income for the year 1918 were examined and checked to the books of the company and to Schedule A of the annual statement. All real estate owned by the company more than five years is held under certificates which expire subsequent to December 31, 1918, granted by the Insurance Department of the State of New York. The company posts all disbursements on account of real estate to one ledger account, viz.: taxes and assessments on real estate, etc. This required an analysis of this account in order to segregate the disbursements applicable to lines 31 and 32 of the financial statement. The company included in disbursements for expenses on the Fifth avenue building account, $24 rebate on rent of the Rite Form Corset Company which should have been deducted from rent income. We therefore deduct $24 from line 33-"Gross rents from company's property," and the same amount from line 31-disbursements for "real estate repairs and expenses other than taxes," as reported in the company's financial statement. Rents Real estate expenses unpaid were verified and the company's figure, $1,589.91, is sufficient to cover this liability. paid in advance amounted to $785.14 and rents due, $61.87. - One, Mrs. M. B. Mallaby, who occupies a part of the company's general offices, receives as agent a commission of 5 per cent on the rents collected on all but the Fifth avenue property — on which she receives 32 per cent commission. This is an eleven-story loft building and electric current, supplied to the tenants is billed to the United States Life Insurance Company by the Edison people. The company then bills each tenant with his share as shown by their meters. A commission of 311⁄2 per cent is deducted by Mrs. Mallaby on collections of these bills. Such collections in 1918 amounted to approximately $2,900. Mortgage loans: On December 31, 1918, this company owned eighty-five mortgages, first lien on real estate, totaling $2,243,000. Twenty-five mortgages, aggregating $304,250, or 13.55 per cent of the total mortgage investment, are guaranteed as to principal and interest by the Bond and Mortgage Guarantee Company at a charge of 12 per cent. In a few instances 1 per cent. The rates of interest obtained by the company on its mortgage loans are 5, 52 or 6 per cent, the average rate on December 31, 1918, being 5.24 per cent. The documents necessary for each mortgage, including extension and participation agreements, title and guarantee policies were examined, except in Loan No. 274, $90,000, deposited with the Insurance Department at Albany, for which a proper receipt was exhibited. Sufficient fire insurance to protect the company's interest in the properties was evidenced by policies in force, payable to the mortgagee, or guaranteed as in the possession of the Bond and Mortgage Guarantee Company. Since the last examination the company has added but two loans to its investment in mortgage loans. No. 1344, $2,000. Additional to old loan of $7,500, No. 656. No. 1345, $175,000. New loan on vacant Bronx lots. This item is guaranteed by the Bond and Mortgage Guarantee Company. Appraisals made by the Insurance Department of New York at the last examination required reductions for various amounts on fifteen loans. Loans numbered 1067, 1108, 1214, 1271, 1292, 1320 and 1321 have been reduced to or below the amount required. On Nos. 1270 and 1315 sufficient reduction has been called for in the extension agreements now in effect. Loan No. 1300 has since been taken over into real estate owned by the company. On loans Nos. 1068, 1204 and 1205 reductions called by the company to meet the Insurance Department requirements, not being met, the control of the properties is now in the company's hands by means of assignments of rents, etc. Income to date has not been sufficient to reduce the principals. Loans Nos. 848 and 849, the company required reductions of $2,000 each in 1914 to meet the Department's request, but no payments on account were received until November, 1917, when the company agreed to accept $100 on each loan on each semi-annual interest date. These two loans have been due since 1914 at $12,000, now reduced to $11,700 each. Reappraisals made in 1919 on the last five loans above noted require no reduction at this time. All items of interest received, past due or accrued, were checked from the data in the papers and in the mortgage loan ledger. Likewise the amount of principal outstanding December 31, 1918. All extensions and new loans made since 1913 were properly authorized by the finance committee. |