invest the difference-$989 a yearwith my company, we will guarantee to credit to your corporation account an average annual amount of $1,505 for 30 years."

He says, "Man, how can you do that?"

My answer is, "Let me show you," and then I refer to the illustration of "corporations should buy term and invest the difference . . . in permannent," which is shown on page 25.

I then explain the illustration in this way:

"Column (1) shows your Super 100 decreasing term insurance. Compare that column with Column (7) for each year.

"Column (2) is your premium for the Super 100 decreasing term-$300 each year.

"Column (3) is the $989 annual difference between the premium for our Executive 50 at age 30 ($1,289) and the $300 annual premium for the decreasing term.

"Column (4) is the guaranteed annual increase in corporate assets attributable directly to that $989 difference in premium, because your corporation will be paying the $300 each year in either case.

"Column (5) is the corporation's annual percentage of tax-free gain on the $989. Sir, your corporation will not and does not make that kind of annual percentage of tax-free gain on its own capital. To arrive at the percentages in Column (5), subtract Column (3) from Column (4) (except year one) and divide the $989 into that difference. For example, in year five, Column (4) is $1,254. Subtract the $989 difference, which leaves $265. Divide the $265 by $989, and the result is .268 or 26.8% return in that year on the $989.

"Column (6) is the corporation's cumulative asset.

"Column (7) is the Executive 50's net amount of death proceeds (the decreasing term insurance built in). To arrive at those figures, subtract Column (6) from the face amount. Again for year five, the face amount is $100,000, the cumulative asset in Column (6) is $5,634, leaving net death proceeds of $94,366 as reflected in Column (7).

"Now, I said earlier that we would guarantee to credit your corporation account with an average annual amount of $1,505 for the deposit of that $989 with my company each year. If you will divide the 30th-year cumulative asset figure in Column (6) $45,134 by 30 years, the result will

At the start of this article I indicated that I have been challenged on this illustration by a number of life underwriters, and invariably the challenge grows out of a misunderstanding of what it is I'm illustrating. We are not talking about compound interest-we are talking about a corporation's annual return on its capital! This concept is about corporations, not about personal investments. It has nothing to do with what individuals can do with their private funds placed in their investment programs. That's a different subject altogether. This is apparently where some people get lost-they attempt to relate the net annual yield on the $989 "difference" to compound interest.

Corporate owners and those whose responsibility it is to make corporate annual reports to shareholders are concerned primarily with the year at hand-the one year for which they must account. They think in terms of an annual percentage return on their corporation's capital for that year, and they think in terms of one year at a time. Of course, they make plans for more than one year, but when they think in terms of the profitability of the corporation, it is always in terms of annual profitability.

I am not naive enough to think that large corporations don't have investment income as well as income from sales, or that they don't consider compound interest on those investments, because they do. However, smaller corporations and closely held corporations seldom have investment income, and therefore their executives are not concerned with compound interest.

But whether they have investment income or not is beside the point; this illustration simply has nothing to do with compound interest. It is an illustration of a corporate net annual return on a capital asset-the $989 "difference," which the corporate head told me he was going to invest in the business.

Compare Profitability

It is important that this point be understood, because an accountant to whom this illustration is shown is likely to talk in terms of compound interest, and the life underwriter who

hopes to sell with it must be able to satisfy the accountant that no attempt is being made to compare this return with any form of long-term investment return; it is to be compared with the corporation's profitability, its return on its capital on an annual basis. Well, back to the presentation: After the corporate client analyzes all the columns for each year, he usually says, "Well, I'll be doggoned." and I say, "Me too!"

He agrees his corporation does not earn that kind of annual return on its capital, and I always point out again that for the $989 each year (because we fixed in his mind that he would be paying the $300 each year anyway) his corporation has available an average of $1,505 a year.

This concept and the illustration will answer the constant, "Our corporation is going to buy term and invest the difference." The corporate client will buy term with little or no delay, because of the great difference in premium, so I sell him the term with no argument. But I order the permanent policy as an alternate, and I take both policies to the delivery interview. I explain the term policy carefully, and I fix in his mind that his corporation will be paying the term premium-that's the key to this sale. Then I show him the illustration and the permanent policy, and he will exchange the term for the permanent.

the Back Page

An advertisement of the life companies of the Maryland American General Group presented regularly in this space for the inspiration and enlightenment of life underwriters everywhere.

AN

HOUR AGO I wrote a check in payment of the 38th annual premium on my oldest life insurance policy.

This event brought the policy into my thoughts, and suggested that even though good old #467,285 has already been the subject of discussion on this page, it might be timely to report again on the splendid services which it has rendered me across the years. For this policy. I feel, exemplifies life insurance in action, even though it has been only silently at work. No death claim has been paid, no disability income paid or premiums waived, no maturity or surrender value paid, yet Policy 367,285 has been constantly in action--serving to give peace of mind, serving as an investment fund, serving to encourage and indeed force me to save, serving to build my credit and my net worth.

And now it serves also to give a realistic view of life insurance property in being, which is much more meaningful than a picture of what a given policy will do in the future. There is, for most of us. far more good tangible meaning to the words, "Here is what this policy bas done, and this is what it is today," than in the phrase, "Starting today, this policy will do so-and-so for you in the years to come."

We are always at a disadvantage when we ask our prospective buyer to look ahead two or three or four decades or more, because the years of the future seem so remote. But the passing of time will convince him that they aren't!

It often strikes nic that the difference between looking ahead in life and looking back upon the years gone by is a good deal like looking at the road ahead through the "wrong" end of a telescope. and then using the right end of the glass to look back at the path already traveled. The telescope exaggerates the length of the miles ahead, and foreshortens those behind... and, similarly, life itself causes us to feel that the years ahead will be ages and cons in the coming. while the years gone by seem compressed into ever-decreasing length.

Thus it is casier to appreciate what life insurance can do by looking at a policy in being, and noting what it has done, than by talking about one yet to be conceived and delivered. Therefore I invite you now to look at a 37-year-old policy which seems to its owner to be nearer to 37 months in age, so speedily does time flash past.

POLICY 367,285. $5,000 participating whole life contract, was issued on December 4, 1929 to Benjamin Nelson Woodson, age 21, of Chicago, Illinois. The policy was payable to Grace M. Cook, Intended Wife of the Insured. Some seven weeks later, on the following January 25, it became payable to Grace Cook Woodson, Wife of the Insured, as it still is. The policy was applied for and dated the last day before age-change-the last day in all eternity when this particular applicant could buy life insurance at age 21-and it is interesting to note that this was " reason for action quite as impelling 37 years ago as it is today.

Now hear this. Policy 367.285 was bought less than six weeks after that historic Black Tuesday, October 29, 1929, when the stock market collapsed virtually in a single day and precipitated the Great Depression ... at a time when it seemed that the world had come to its end, when it seemed that the economic future of the nation was as black as the bottom of a well in the middle of the night, when it seemed that no financial promise could be made or trusted.

Yet Policy 367,285 made promises to me from which it has never wavered-even though it could not foresee the decade of depression which lay ahead, nor the decrease in interest rates almost to the vanishing point, nor World War II and Korea and Viet Nam, nor the inflationary increase in operating costs which would drive rents and wages and postage and printing and almost every other item of expense to levels then unimaginable.

For example, the policy promised me on December 4, 1929, that it would stand ready to pay me or lend me $2.319.70 on December 4, 1966. It promised to be ready to pay me or lend me $2,405,60 on that same day of 1967. The 47th-year values were ready and waiting when the date rolled around. The 38th-year values will be waiting for me on the coming anniversary if I want them.

And not so incidentally-the increase in value from 1966 to 1967 amounted to $85.90, which grew out of the payment, just made, of an

annual premium less dividend of only $60.26... which means that my cash value increased this year at the rate of $142.54 for each $100 deposited!

THE VALUES IN the intervening years have been in proportion, of course. They have grown without fail from year to year, and have served me times without number.

The markings on the policy tell eloquently of the several occasions when #367,285 has served me as collateral-prime collateral which entitled me to say to my banker (as I did say!) "I'm going to borrow some money" and not merely "I'd like to borrow some money.”

Each of those occasions was a profitable one. Once I saved an amount equal to a year's premium on the policy by using it as collateral to finance the purchase of a new automobile at bank rates instead of instalment rates. Later I made a substantial proht on the sale of our first home, when it came time to move, which we were able to buy in the first place only because of the guaranteed borrowing power which was ours. Still later it enabled me to take advantage of an investment opportunity which returned a profit greater than the entire amount I have deposited in the policy to this day.

So my total investment in Policy 567,285 is now a negative figure. that is, my policy's guaranteed borrowing power has brought me more than my total investment in the policy, and I still bare the policy'

THE PREMIUM RECEIPTS and dividend memos tell an interesting story. THE too. They show that my 47 dividends have averaged $24.84, ranging from an early high of $28.90 in 1932 to a low of $19.96 in 1950 and up again to a new high of $31.74 in 1966. Since the annual premium is $92.00, the net premium has averaged $67.17, or some $14.43 per thousand. This, interestingly, is just about the amount which would have bought a good guaranteed-cost policy in 1929, and is actually somewhat more than the outlay which would be required today ... which emphasizes the fact that life insurance is virtually the only commodity or service on earth which hasn't doubled its price in the past quarter century.

These facts also bear out what you and I and all good life insurance men know, namely, that there isn't enough difference vither way between good participating life insurance and good guaranteed-cost life insurance to hurt if it were stuck in your eye.

The important thing, as this actual history dramatizes, is not which you choose, but that you have one or the other!

In the case at band, it is of no earthly consequence to me whether this old friend which has served me so well for thirty-seven yours is participating or non-participating. (I knew thirty-seven years ago that the results couldn't be far apart, and they haven't been.) But it is of enormous consequence to me that the policy bus been mine-tbet | bare experienced this compulsion to save, that I have possessed this peace of mind, this growing and guaranteed asset, this unequaled and indeed uurivaled bit of collateral, this guardian of my family's welfare and my own!

Houston

Oklahoma City

Pittsburgh

Hawaian Life, Honolulu Patriot Life, New York

THIS ILLUSTRATION INCLUDES DIVIDENDS WHICH ARE BASED ON THE CURRENT SCHEDULE AND ARE NOT GUARANTEED.
THE FIRST YEAR DIVIDEND IS CONTINGENT ON PAYMENT OF THE ENTIRE SECOND YEAR PREMIUM.
UNDER PRESENT TAX LAWS, THE DEATH BENEFIT IS EXEMPT FRUM FEDERAL INCOME TAX.

4,347.00CR 56,960.00 9.078.00CR 14,479.00CR

66,288.00

73,981.00