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Surplus How and when Apportioned

It was reserved for American companies to revive and establish the name "dividend," to reintroduce and popu larize the distribution of surplus in cash and to perfect and exemplify a just and equitable system of distribution.

The contribution plan became at once popular in the United States and has been employed by all American companies, though sometimes with modifications so great as to render it almost unrecognizable. The most com mon modification has been to distribute excess interest upon the reserves according to the amounts of the re serves and all other profits in proportion to the loadings on premiums. Another, to distribute practically all the gains in the same form as excess interest, in which case about all that remains of the contribution plan appears to io8 be such veneration for the name as influences one not to acknowledge that it is discarded.

The original contribution plan made no provision for apportioning accretions of surplus from forfeitures, but it was long ago modified so as to distribute such surplus in proportion to the values which are subject to forfeiture, thus adhering to the distinctive principles of the plan. Gains or offsets because of surplus, forfeited by death, in like manner appear, according to the principles of the contribution plan, to be properly apportionable in propor tion to the "costs of insurance," which are the measures of each policy's contribution to pay the death claims of others.

Mr. Homans furnished a further formula for distribut ing profits by the "contribution plan," which may be put as follows : Margin from loading: compute the salvage of actual expenses and contingencies as a percentage of the aggregate loading, and apply the same to loading on the individual premium. Salvage on cost of insurance :

compute the salvage of actual net death losses gross death losses, less the reserve as a percentage of the ag gregate net costs of insurance for the same period, and apply it to the cost of insurance under the individual pol icy. Gain from excess interest : compute the excess of investment gains over the interest required to make good the reserves as a percentage of the aggregate reserves and apply this percentage to the reserve of the individual insurance. To this may be added : Accretions from forfeitures by lapse and surrender : compute the aggre gate forfeitures as a percentage of the aggregate values liable to forfeiture, and apply to the value of the indi vidual policy liable to such forfeiture. Salvages and gains from forfeiture of surplus at death: compute the aggregate forfeitures as a percentage of the aggregate tabular costs of amounts of insurance equal to the sur 109 plus thus subject to forfeiture, and apply to tabular cost of insurance of an amount equal to the surplus, thus subject to forfeiture, in case of the individual policy.

Elizur Wright invented a system of determining the surplus earnings of a policy according to the principles of the contribution plan, which is illustrated in his book "Savings Bank Life Insurance," by means of an indi vidual account of the following character : Age 25. Death or 5o. Annual premium: gross, $32.91; net, $28.68.

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insurance, contribution, plan, death and forfeiture