Recovery rate

“ And I think the President, through his budget, demonstrated that we're willing to account for the possibility that more money might be needed, but I wouldn't go so far as to delineate some amount because we understand that. I think if we take, as Congress has done, on a recovery bill and take some necessary steps to get the economy moving again -- look, I think in some ways a rising tide lifts all those boats because the losses sustained by an insurance company that has many investments, that goes directly to the health of that company. ”

“ But, however instructive these details, it may be well, to avoid confusion, to sum up the whole process in the statement that the annual premium is a device to collect a larger amount than the death-rate in the earlier years of insurance, and to use these over-payments, improved at compound interest, to meet the deficiencies which arise in later years. The premium and reserve are so nicely adjusted that they are strictly equitable for the living as well as the dying at every year of life. ”

“ The CRS Report suggests a way to take account of both that likelihood and the related “decay” in a work’s commercial viability: Find the annual decay rate that corresponds to the percentage of works that become commercially unavailable in any given year, and then discount the revenue for each successive year accordingly. ”

“ Why There Is a Surplus: Three Sources of Gain When the company applies these hypothetical rates to tho actual business of insuring lives, however, the situation changes. It finds that the scheme does not work with quite the precision anticipated. It discovers that the deaths do not occur quite as the mortality table provides; that the interest rate earned is not always three per cent; that the expenses do not always amount to the same sum as the loadings. ”

“ When the same rate of interest is employed, any divergence in the ratios of the annuity-values will of necessity be due to differences in the rates of mortality.
A prevailing fallacy in the popular mind, which has grown out of the practice of net valuations, is the inference that the average technical reserve represents the value of the individual policy. Each risk is properly assumed at its probable or average value at the time. ”

“ Cost of operation constantly is compared with fixed charges, the interest with the capital investment. Expensive improvements on railroads, the straightening of curves, the tunneling of mountains, the reducing of grades, the replacement of lighter by heavier rails, have been made possible by a fall in the rate of interest. A fall in the rate of interest disturbs the equilibrium that has been arrived at, between the cost of operation, the amount paid for wages, coal, etc., and the income on permanent investment. ”

“ We have now touched upon most of the distinctive features of life insurance that interest the general reader, and but little remains to be said of the general management. It has been shown that next in importance to the collection of premiums is the accumulation of a reserve, which must earn at least the minimum rate of interest assumed as the basis of calculation. This is no easy task in the present condition of the money market, and exceptional skill, prudence, and forethought, are required to secure safe and profitable investments. ”

“ The return should be reasonably sufficient to assure confidence in the financial soundness of the utility and should be adequate, under efficient and economical management, to maintain and support its credit and enable it to raise the money necessary for the proper discharge of its public duties. A rate of return may be reasonable at one time and become too high or too low by changes affecting opportunities for investment, the money market and business conditions generally. ”

“ Part I. is theoretical. The tables of mortality are given, and we are shown how from these are obtained the expectation of life, and—assuming a given rate of interest the net premium and the reserve—or, as the author prefers to call it, the trust-fund deposit. The theory of annuities is discussed in a series of problems; and the mechanism of the commutation tables—those working-tools of the actuary—is explained.
Part II. is devoted to the discussion of such practical considerations as: the general management of companies; stock and mutual rates; the various plans of insurance ”

“ Under any given table of mortality a valuation at a low rate of interest will produce a larger net liability—will Effects of different data. require a higher reserve to be made by the office against its future engagements to the insured—than a valuation at a higher rate. The effect of different assumptions in regard to the rates of mortality cannot be expressed in similar terms. A table of mortality showing a high death-rate, and requiring consequently large assurance premiums, does not necessarily produce large reserve values. ”

“ The depression must for a long time be felt by many.
We need only point out that, in the United Kingdom, the percentage of persons in receipt of relief during the year 1881 was 3 per cent. in England and Wales, 2.6 per cent. in Scotland, and 11 per cent. in Ireland, [20] involving an expenditure at the rate respectively of 6s. 3d., 4s. 6d., and 3s. 9d. per head of population.
Obviously, the relatively greater cost of relieving the poor in Great Britain is due to the more expensive character of the support afforded, and to the very heavy sums paid for salaries and other establishment charges ”

“ Each man's adjustment is, of course, somewhat rough, and dependent largely on the accident of the moment; but, in the long run and for a large number of people, the average rate of turnover, or what amounts to the same thing, the average time money remains in the same hands, will be very closely determined. It will depend on density of population, commercial customs, rapidity of transport, and other technical conditions, but not on the quantity of money and deposits nor on the price level. ”

“ With good management, a favorable death rate, and very low expenses, some of them have provided protection at very low rates for many years. Others have failed with disappointment and disaster to the older members. Still others are struggling with difficulties that presage dissolution. Many now have some form of reserve accumulations, and some have so improved their methods that they closely resemble reserve companies. The assets of all the assessment companies are now $1.37 per $100 of insurance in force, while the legal reserve companies have $22.66. ”

“ The gross premiums in reserve insurance are, for the purpose of safety, fixed at a figure larger than the expected cost of the insurance, and normally the earnings from interest are higher, the mortality is lower, and expenses are less than those on which the calculation of rates is based. From the excess of income resulting, the company sets aside a surplus and then divides the rest among the policyholders. ”

“ It is part of the cost of the human machine.
“Repair is the course of partial reconstruction, replacement, or [Pg 90] renewal of worn or of injured portions, after the necessity therefor becomes apparent, and, unless brought about by accident, the need for the process is brought about by the failure or inability of maintenance, and also of up-keep, wholly to arrest the progress of decay by age or continued use. Provisions to preclude accident or to cover the cost of its results are part of the cost of repair. Health insurance of employees is a repair cost paid in advance.” ”

“ Minimum allocation.—The Secretary shall adjust the allocations under subparagraph (A) for any calendar year for each State to the extent necessary to ensure that no State receives less than 0.9 percent of the national recovery zone economic development bond limitation and 0.9 percent of the national recovery zone facility bond limitation. ”

“ In the computing office it is often necessary to check the field figure of depreciation by the use of tables of fixed annual depreciation, but it must be borne in mind that mortality tables of any form are based on a system of averages. The actual depreciation on rail, for instance, varies greatly; the conditions of traffic, curvature, gradient, rolling stock, and various local conditions tend to shorten or lengthen the life, so that the personal opinion of an experienced man on the ground is likely to be much more nearly correct than the arbitrary application of a rule of averages. ”

“ The Government readily admits that the present level of § 404 (b) premiums is not needed to cover current foreseeable losses. Indeed, losses have never exceeded investment income. The high premium rate is for the purpose of establishing a Primary Reserve, to cover conceivably serious losses in the future. When the Primary Reserve reaches a level deemed sufficient, no premium payments will be required at all. ”

“ I started, however, with the simple notion that rates must be reduced,—but soon came to the conclusion that such reduction might be carried to a considerable extent not only without loss to the revenue, but with positive benefit; that a larger reduction might be made without loss, and a still larger without drawing upon the surplus beyond a reasonable extent. ”

“ Starting May 8th, agencies must provide monthly financial reports providing obligations, expenditures, and other financial data by Treasury Account, vendor, and award number, as well as information on allocations of mandatory and entitlement programs by State, county, or other appropriate geographical unit. (see Section 2.5) • Award Transaction Data Feeds. Starting on May 5th, agencies must provide all Recovery Act assistance transactions (primarily grants, loans, and loan guarantees) in the standard format currently provided to USASpending.gov. ”

“ The Administration is committed to investing Recovery Act dollars with an unprecedented level of transparency and accountability so Americans know where their tax dollars are going and how they are being spent. The guidance issued today contains critical action steps that Federal agencies must take immediately to meet these objectives and to implement the Act effectively. Of particular note, the guidance addresses Federal agency requirements to provide spending and performance data to the “Recovery.gov” website. ”

“ Such a policy, however, could not be continued with constantly diminishing net income. The downward tendency in the rate of return was caused in part by a hardening of the rate structure through a more inflexible policy of public regulation, in part by steadily increasing costs of wages and materials, and in part by the greater difficulty of finding means through economies and new operating methods of overcoming increasing costs. ”

“ The establishment of a rate for a regulated industry often involves two steps of different character, one of which may appropriately precede the other. The first is the adjustment of the general revenue level to the demands of a fair return. ”

“ If premiums are collected at the beginning of the year and losses are paid at the end of the year, and if interest can be earned meantime at the rate of 3-1/2 per cent, the natural premium for a one year term policy is about $8.64, that being the present worth of $8.95 due a year hence, interest being 3-1/2 per cent. ”

“ A distinct reserve for a single policy is inconceivable. To recognize it is to deny the first principle of insurance. The average amount by which the reserve of a company must be increased, because of the existence of policies of a given class, is to the actuary an important fact, and is commonly accepted as his best guide in the distribution of surplus. But a popular theory has seized upon the assignment of this average sum to each policy, in the technical shorthand of the actuary, and holds that it is in each case the special property of the owner of that policy. ”

“ By the saving in life and health, through the continuance in earning power of men, whose lives would otherwise have been cut short, he estimated that the expenditure of the £1,900,000 for the 11,000 persons, by the addition often years' earning power to the heads of families, brought in a return of £4,600,000, and urged these facts as showing the pecuniary advantages accruing to the nation from sanitary improvements which led to decreased death and sickness rates. ”

“ Authority to make necessary adjustments to data and collect needed data.—In determining the size of the caseload of a State and the expenditures of a State for basic assistance, non-recurrent short-term benefits, and subsidized employment, during any period for which the State requests funds under this subsection, and during the emergency fund base year of the State, the Secretary may make appropriate adjustments to the data, on a State-by-State basis, to ensure that the data are comparable with respect to the groups of families served and the types of aid provided. ”

“ Moreover, those who consider mainly the future annual income which their savings will yield them, are usually more concerned with its absolute amount than with the ratio it bears to the amount they must save in order to acquire it. For this reason, as has been often recognized, they may save less when the rate of interest rises, since a smaller quantity of savings will insure to them the future annual income they desire to obtain. There is no need to be dogmatic upon any of these points. The psychology of saving is both complex and obscure. ”

“ Now, you will understand that by recovery measures I mean measures which work no change in the economic system. They are emergency measures designed to support the system during the depression, but do not interfere with its operation, and do not, of course, contemplate any modification or correction in it. Recovery measures of the proper kind minimize the dangers and ameliorate the hardships incident to the depression. They also stimulate the movement toward recovery. ”