THE normal course of business in an established Life Office proceeds, not automatically indeed, but upon established principles well understood by the trained staff in each department. But there is one branch of administration constantly requiring the anxious attention of the directors, namely, the investment of surplus funds.

In the early years of the Scottish Widows' Fund, when the directors were restricted to the purchase of Government stocks and loans on heritable securities, they were constantly beset by the difficulty of finding investment for even a few thousand pounds—a difficulty frequently referred to in the reports of Mr. Patrick Cockburn, the Society's first actuary. This embarrassment became more pressing as the Society's surplus funds increased, and as new Life Offices, under similar restriction as to investments, came into the field. Relief was found by gradually and prudently obtaining power to extend the range of investment to foreign and colonial subjects.

No such difficulty exists at the present day. What Lord Milner has aptly described as "the scramble for capital" on the part of States, corporations, and commercial undertakings has thrown open a wide area for safe investment; and a large portion of the funds of the Scottish Widows' are lodged in foreign and colonial stocks and railway bonds, most of them redeemable in 20, 30, or 40 years.

This competition among borrowers has occasioned a rise in the rate of interest which, combined with certain political and social conditions, has brought about a considerable fall in the prices current for "gilt edge" securities. Consequently, such a Society as the Scottish Widows' Fund, which is in its nature exempt from any risk of being obliged to realise any of its securities under financial stress, and which has very large surplus funds to invest every year, is in a position to take full advantage of a temporary depreciation in the price of desirable stocks.

In one respect the character of the business transacted by the Scottish Widows' Fund Society, in common with that of Life Offices in general, has been undergoing a remarkable modification during the last quarter of a century. In the original prospectus of the Society, published in 1814, no provision was made for endowment assurance (that is, for policies providing for the payment of sums assured upon arrival at a fixed age or in the event of death before reaching that age), although there was a table of premiums payable on behalf of children between the ages of two and eleven years inclusive for sums assured payable only in the event of their reaching the age of 16, 18, or 21. As time went on, the rules of the Society were extended to provide endowment assurances in the modern form ; but it was long before much advantage was taken of them. So late as 1888 the blue-book published by the Board of Trade in that year, including the latest returns of all Offices, shows, in the case of ordinary as distinguished from industrial life business, that, while the total amount of whole life assurances was about £400,000,00o, endowment assurances amounted only to about 426,000,000, or about 61 per cent of the whole life business. Ten years later, in 1898, whole life assurances had increased to about £460,000,000, and endowment assurances to £104,000,000, or about 22 per cent. In the latest blue-book (1913) endowment assurances are shown to have swollen to more than £300,000,000, bearing a proportion of 62 per cent of the whole life assurances.

The Scottish Widows Fund Society has shared with other Offices in the full effect of the growing preference on the part of the public for endowment, as against whole life, assurance. In 1887 the amount of endowment assurance in our Office was only about 4 1/2 per cent of the whole life business, whereas at the present time it bears the proportion of 40 per cent.

In this movement may be recognised a notable departure from the primary motive of the founders of the Society, which was, not to assure benefit to a member during his life, but to enable him to secure provision to his widow or other representatives after his death. While the directors of Life Offices have to fulfil the requirements of those who seek admission as insurers, it is open to doubt whether the preference recently shown for endowment is, in all cases, to the real advantage either of the policyholders or the Offices. It is, indeed, quite consistent with sound principles of thrift that an individual should take out a policy which shall mature at an age when he may expect his capacity or opportunity for active work to diminish or cease, such policy also forming a provision against early death. But many of these endowment policies are effected to mature at the prime of life, or even earlier, whereby assurance is divested of that altruistic element which has always been reckoned its chief virtue. It ceases to be a sacrifice for the sake of a person or persons for whom the insurer feels it to be a duty to provide, and becomes little more than a mere prudential investment. Of course it will be, or at least should be, the purpose of an insured person to make such investment of the sum received on a mature endowment policy as may secure all the benefit which would ultimately have accrued on a whole life policy; but, as has been observed above, the difficulty and risk attendant upon the investment of a few hundreds or thousands by a private individual are very much more considerable than in the case of a powerful society, dealing annually with large surplus funds and having at command the best actuarial experience, competent valuators, and a practised clerical staff. While the convenience and, in certain circumstances, the prudence of endowment assurance must be admitted, it would seem that, in the majority of cases, the policyholder would be better advised to spend the amount he can afford in premiums in insuring for a larger sum, secured on a whole life policy, than he can obtain for the same premiums on an endowment policy maturing in middle life; or, at least, to arrange for the endowment to be payable at a period of diminished capacity for work.

It has been shown above how nebulous and vague were the standards for calculating life interests at the beginning of the nineteenth century. Halley, de Parcieux, and others had rendered good service to the community by proving the necessity of basing any system of annuities and life assurance upon a calculated scale of mortality; but all their tables soon proved to be actuarially untrustworthy; and at the time when the Scottish Widows' Fund was founded the Northampton Table was the one most in vogue. This table had been compiled by Dr. Thomas Price from the parish registers of All Saints, Northampton, for forty-six years, 1735 - 1780, and, following the example of most other offices of good standing, the directors of the Scottish Widows' based their calculations thereon, assuming 4 per cent as the rate of interest on money.

At the very time when Dr. Price brought to a close his observations in Northampton, Dr. John Heysham began an independent investigation of a similar kind upon the parish registers of St. Mary's and St. Cuthbert's, Carlisle. His scrutiny covered a period of no more than nine years among a population of only 8000 souls; but it was so carefully conducted that in 1815 Mr. Joshua Mime was able to frame upon the data collected a table of mortality differing considerably from the Northampton Table, and corresponding more nearly with what was to prove the subsequent experience of assurance companies. Accordingly, at the end of 1864, the directors of the Scottish Widows' Fund proposed the substitution of the Carlisle Table on a 3 per cent basis, for the Northampton Table on a 4 per cent basis, which, being unanimously agreed to at a general meeting of the Society, became part of its constitution. At that time, however, the council of the Institute of Actuaries, in co-operation with the Association of Managers of Scottish Life Assurance Offices and the Faculty of Actuaries in Scotland, were engaged upon an investigation of the material accumulated through the experience of Life Offices, with the view of ascertaining the exact average mortality among assured lives, that is, upon lives selected as being in normal health.

Statistics were obtained from the returns of ten English and ten Scottish Assurance Offices, and upon the data so accumulated tables were framed by the Institute of Actuaries and published in 1869. [The experience of the Scottish Offices, besides being included with the general report, was separately dealt with, arranged and tabulated by Mr. James Meikie, with the intention of illustrating the effect of carefully selecting lives for assurance. The Scottish report was published in 1869.]

These tables were again revised, and what are known as the British Life Tables were published in 1893 under authority of the Institute of Actuaries (England) and the Faculty of Actuaries (Scotland). They are founded on the latest experience of mortality among assured lives and annuitants, and according to these tables the Scottish Widows' Fund calculates all assurances other than survivorships and all annuities.

In valuing assurances the Society distinguishes between policies which have not been in force for five years, and those of five years' duration and upwards. The effect of this is to strengthen reserves.

It is inevitable that the managers of an institution which has conducted business over the period of one hundred years, involving separate transactions with many thousands of individuals, should have been brought into relation with manifold phases of human nature. It is the more remarkable, therefore, that the books of the Scottish Widows' Fund should reveal very few traces either of the seamy side of life or of controversy over the settlement of claims.

As regards the latter, on three occasions only has the Society carried a dispute before the Law Courts, and on each occasion it was successful.

Of crime there has occurred no more than enough to give relief to the uniform sunny prospect. James Maybrick, whose murder in 1889 aroused such a painful interest, was insured with the Society for £500. On the other hand, Lamson, insured for £1000, was hanged for murder on 28th April 1882. In both these cases, as in two or three others of a similarly sinister kind, the claims arising on the policies have been settled at once.

Losses through fraud have been exceedingly rare, the most remarkable and most recent case being that of a man named Von Scheurer, who in June 1883 effected insurance with the Society for £2000. His death was reported as having taken place in Paris on 6th November following, certified as being caused by galloping consumption (Phthisia galoparnte). After special enquiry had been made in Paris, the claim was admitted and paid to an unmarried woman giving the name of Juliana Metz von Bankfalva, who produced a deed dated 27th September assigning the policy to her.

It then turned out that Von Scheurer was insured in various offices for sums amounting to £13,800. Nothing more was heard in the matter until 1887, when an informer turned up, declaring that Von Scheurer was still alive, and offering to reveal his hiding-place for the sum of 1000 francs (£80). The French Government took up the affair, when it was proved that Von Scheurer had found a man in very poor circumstances in an advanced stage of pulmonary consumption, persuaded him to go for treatment to the house of a certain physician with whom he (Von Scheurer) was well acquainted, where the poor fellow died. It appears that this doctor was in the conspiracy from the beginning, for he made out a certificate of death in the name of Von Scheurer.

Meanwhile Von Scheurer had taken up his abode in Vienna, where he assumed the names, first of De Salis and then of Ropers, under the latter of which he went through a form of marriage with his accomplice Juliana Metz, notwithstanding that he had a wife living. When the pursuit became hot he committed suicide, after writing to the highly respectable firm of solicitors who, all unconscious of his true character, had managed his affairs, protesting that he was the true culprit, that Juliana Metz was his victim and had acted out of love for him and under threat that he would commit suicide if she held back. She paid for her devotion to this rascal by undergoing a sentence of four years' penal servitude for fraud; and when she regained her freedom she made the best reparation in her power. Von Scheurer or Ropers had left all his property to Juliana by will; she waived her claim to it, allowing it to be handed over to the assurance companies which her paramour had defrauded. The proceeds sufficed to recover for them about fifty per cent of their losses.

Members of the Society sometimes disappear and their policies lapse. In such cases the utmost diligence is exerted by the Society to recover traces of them and to find their representatives. Among the lives lost in the Titanic disaster only two were insured with the Scottish Widows', a bandsman for £100 and a valet of one of the passengers for £200.

In closing this brief review of the origin and progress of the Scottish Widows' Fund Life Assurance Society, it may be observed that, founded primarily as a philanthropic undertaking, and, as such, prefacing its first business meeting by an invocation of Divine aid and favour, it has developed into one of the chief financial institutions of the realm, whereof it may surely be said in the words applied in another connection by Lord Macaulay "It is sound at heart; it has nothing of age but its dignity, and its strength is still the strength of youth."

PROSIT!