Business and Investment sidenote

The world of 1868, when the Metropolitan Life Insurance Company was born, was very different from the world we know today. There were no telephones in those days and no electric lights. The country had not yet been spanned by a transcontinental railroad. Records were kept in handwritten ledgers, and business letters were penned in longhand. The entire population of the United States was only about 37,000,000. The flag then carried 37 stars.

Canada at that time contained only 3,500,000 people. She had only one year earlier (1867) achieved Dominion status in the British Empire. The two countries, although their frontiers were expanding, were still largely rural. At the census of 1870, the American population living on farms and in country villages numbered about 30,000,000. Persons engaged in agriculture, forestry, and animal husbandry constituted half the total working population.

The War of the States, to be sure, was over, but the struggle had left in its wake a variety of national problems- not only political but also economic and social. The Nation was still feeling most of these with full force. For instance, greenbacks were still in circulation, and specie payment was not to be resumed until 11 years later. With the emancipation of the slaves, the labor problem reached a new phase. The Government of a now united Nation was anxious to offer its citizens fields for expansion, and through the Homestead Acts and subsequent land grants made thousands of farm acres available to pioneers.

To others more enterprising, new territories offered opportunity to exploit the resources of great plains and mountains. The primary need of the country was adequate transportation facilities, which were considered a key to further economic progress. However, all signs pointed to a great expansion ahead. The actual issues of the war itself had, for the most part, been settled. The country could now go forward to the fruitful destiny which its rich natural resources and its vigorous people promised.

Industry, commerce, and finance felt the new stimulus to surge forward. The business depression which immediately followed the close of the war proved short and was succeeded by a distinct upturn. By 1868 there was in progress a business revival which was to last five years. The Metropolitan was thus launched on a rising economic tide. Immigrants in large numbers were encouraged to come to add the work of their hands to the building of the country.

They made up a new working population, which took root, for the most part, in the cities. Crossroads were becoming towns almost overnight. Towns were swiftly growing into cities. A deeper sense of permanence colored the thoughts of the American people, who began to think in terms of a future, a home, family security. The United States was rapidly coming of age.

The class of wage earners was growing rapidly, a circumstance which, as we shall see, proved to be a determining factor in the development of the Metropolitan. As inventions multiplied and factories grew, women and children were employed in greater numbers. The acceleration of industry and of urban life accentuated the economic insecurity which many felt in their new environment.

City dwellers became conscious of the hazards of long working days, child labor, and industrial accidents. Mines and railroads and machines were being developed with consequent risk to human life. Health conditions in our cities were far from good. To provide a measure of security for this increasing urban population, life insurance and private health insurance (http://cheap-insurance-rates.com/health/) companies came into being.

The war decade of the 1860s gave opportunity for the great expansion of the life insurance and individual health insurance (http://cheap-insurance-rates.com/health/dallas.cfm) business. As a result, more than 100 companies were functioning by 1868. The New England Mutual and The Mutual Life Insurance Company of New York had already been in operation for 25 years.

In fact, when the Metropolitan appeared on the scene, there were already in existence organizations with such familiar names as the New York Life, the Equitable Life of New York, the Mutual Benefit of New Jersey, the John Hancock, the Aetna, and the Connecticut Mutual. By present standards none of these companies was large, yet in their day they were important economic enterprises. At the end of 1868 the largest of these, The Mutual Life of New York, had gross assets of more than $30,000,000 and insurance in force amounting to nearly $200,000,000.

The marked depreciation of urban real estate, farm lands, and bond values called for the rearrangement of the investment portfolio of Metropolitan Life Insurance Company.

President Ecker, with his long and varied experience in this field, addressed himself to the solution of this problem, made particularly difficult by the continued decline in opportunities for the profitable investment of insurance funds. Money was accumulating in the treasury because it was almost impossible to find proper investment channels.

Under these conditions and with a consciousness of civic responsibility, Mr. Ecker turned his attention to the field of moderate rental housing. .At the age of 70 he launched a building program unprecedented in social character and magnitude, to provide homes for persons of medium income in New York City.

He located a large tract in The Bronx, guided the planning of adequate buildings and services, and saw step by step the fulfillment of his hopes in the completion of a model community, Parkchester. By the early 1920’s, 36,000 people lived there, a splendid contribution to the moderate priced housing program of the city and the Nation.

Similar housing developments were undertaken under Mr. Ecker’s direction both in San Francisco and Los Angeles, and later in Alexandria, Va. Such building programs, without precedent in the United States for a private company, were recognized by national and private agencies as an important contribution to the housing problem in the period of war emergency.

At the same time, they served as an excellent investment field for the company. During the period of financial depression there were criticisms of every business; and the business of life insurance, homeowner’s insurance, and even automobile insurance in general and the Metropolitan specifically were not exempt.

Notwithstanding the splendid record of the major companies, various movements for investigating the life insurance business and health insurance providers were initiated in Washington. In 1938 the Congress of the United States responded to a message from President Roosevelt and included among the subjects to be investigated by the Temporary National Economic Committee certain investment phases of the business of life insurance.

The investigation was assigned to the newly created Securities and Exchange Commission. Those responsible for gathering evidence to submit to the T.N.E.C. lost no opportunity to seek out material for criticism in the business and directed much of their attention to the Metropolitan. The company took a firm stand in behalf of its policyholders and presented voluminous documentary evidence to show that it had conducted its many activities in the public interest, and that its size had not involved any abuse of economic; that its position as investor of trustee funds as prescribed by Statute precluded such power.

Nor had its size interfered with its effectiveness as a social organization. In fact, the company had increased in initiative and in service as it had grown. After the conclusion of the hearings, the comment of the Chairman of the T.N.E.C. was that the life insurance buisness had come through with flying colors.

The failure of the effort to find serious fault with the administration of life insurance in general is best evidenced by the character of the recommendations which were made by the Temporary National Economic Committee. These, for the most part, had to do with a number of suggestions as to modifications in the practice of State supervision. The impression made on the public by these hearings is to be measured by the fact that, during their progress and after their close, the amount of new insurance written by the companies and the lapse rate were exceedingly satisfactory.

This was particularly marked in the case of the Metropolitan, which in 1941 reached the total of more than $25,000,000,000 of insurance in force, issued more business in both the Ordinary and Industrial Departments than in several years past, and achieved in both departments the lowest lapse rates on record.

But if the insurance companies came through this Federal and other investigations unscathed, it must not be supposed that this business has been without its trials and tribulations. No human institution has ever sprung into perfection, like Athena from the head of Zeus; and the life insurance business has had its growing pains.

Early last century, life insurance companies and private health insurance, including the Metropolitan, were launched as purely competitive business ventures with the profit motive well in the foreground, entirely in keeping with the aggressive, individualistic spirit of the times. Naturally, contracts at the beginning were not as liberal as they are today. Agents frequently were poorly trained and did not fully measure up to the responsibility of their calling. As a result, insurance was sometimes written in amounts disproportionate to the family income, haphazardly distributed, causing high lapse rates and excessive expense and loss.

The marked depreciation of urban real estate, farm lands, and bond values called for the rearrangement of the investment portfolio of Metropolitan Life Insurance Company.

President Ecker, with his long and varied experience in this field, addressed himself to the solution of this problem, made particularly difficult by the continued decline in opportunities for the profitable investment of insurance funds. Money was accumulating in the treasury because it was almost impossible to find proper investment channels.

Under these conditions and with a consciousness of civic responsibility, Mr. Ecker turned his attention to the field of moderate rental housing. At the age of 70 he launched a building program unprecedented in social character and magnitude, to provide homes for persons of medium income in New York City.

He located a large tract in The Bronx, guided the planning of adequate buildings and services, and saw step by step the fulfillment of his hopes in the completion of a model community, Parkchester. By the early 1920’s, 36,000 people lived there, a splendid contribution to the moderate priced housing program of the city and the Nation.

Similar housing developments were undertaken under Mr. Ecker’s direction both in San Francisco and Los Angeles, and later in Alexandria, Va. Such building programs, without precedent in the United States for a private company, were recognized by national and private agencies as an important contribution to the housing problem in the period of war emergency.

Notwithstanding the splendid record of the major companies, various movements for investigating the life insurance business and health insurance providers were initiated in Washington. In 1938 the Congress of the United States responded to a message from President Roosevelt and included among the subjects to be investigated by the Temporary National Economic Committee certain investment phases of the business of life insurance.

The investigation was assigned to the newly created Securities and Exchange Commission. Those responsible for gathering evidence to submit to the T.N.E.C. lost no opportunity to seek out material for criticism in the business and directed much of their attention to the Metropolitan. The company took a firm stand in behalf of its policyholders and presented voluminous documentary evidence to show that it had conducted its many activities in the public interest, and that its size had not involved any abuse of economic power-that its position as investor of trustee funds as prescribed by Statute precluded such power.

Nor had its size interfered with its effectiveness as a social organization. In fact, the company had increased in initiative and in service as it had grown. After the conclusion of the hearings, the comment of the Chairman of the T.N.E.C. was that the life insurance business had come through with flying colors.

The failure of the effort to find serious fault with the administration of life insurance in general is best evidenced by the character of the recommendations which were made by the Temporary National Economic Committee. These, for the most part, had to do with a number of suggestions as to modifications in the practice of State supervision. The impression made on the public by these hearings is to be measured by the fact that, during their progress and after their close, the amount of new insurance written by the companies and the lapse rate were exceedingly satisfactory.

This was particularly marked in the case of the Metropolitan, which in 1941 reached the total of more than $25,000,000,000 of insurance in force, issued more business in both the Ordinary and Industrial Departments than in several years past, and achieved in both departments the lowest lapse rates on record.

But if the insurance companies came through this Federal and other investigations unscathed, it must not be supposed that this business has been without its trials and tribulations. No human institution has ever sprung into perfection, like Athena from the head of Zeus; and the life insurance business has had its growing pains.