1094 LIFE ASSURANCE OFFICES. 
Offices which divide profits amongst the assured, in general charge 
comparatively high premiums, on the ground of rendering the company 
more secure : if, however, they value their policies by a table of mor- 
tality which would give a low scale of premiums, and appropriate their 
surplus according to such valuation, they place themselves in point of 
security in precisely the same situation as if they had originally charged 
the low scale of premiums; since the sum reserved, and the value of 
future premiums, amount together to just the present values of the annual 
premiums that would be charged by these low rates on the various lives, 
supposing new assurances effected at the time of the valuation. 
If the rate of interest and mortality be assumed as what will actually 
obtain, and the whole surplus be divided, the sum reserved by the com- 
pany, together with the future premiums to be received on the policies, 
will just enable them to discharge the various claims that will be made 
on them as the lives assured die off : it therefore follows that all the 
profits are anticipated, and that no future bonus can be declared but at 
the expense of new assurers. 
Another and important objection to this mode is, that besides antici- 
pating profits, it calculates as assets what should be considered as lia- 
bilities. An instance of this occurs in a statement of the valuation of 
the liabilities of an old-established office, in which, at all the ages below 
34, the value of the premiums appears by the calculation greater than 
that of the liabilities, causing the circumstance alone of these lives being 
on the books, without reference to any premiums paid, to count as a 
considerable sum in hand, although every policy that may be discon- 
tinued, the present value of the amount assured by which is not by the 
system of calculation equal in amount to the present value of the annual 
premium, will operate as a diminution of the assets of the company; and 
it is to be presumed that, according to the usual practice of offices, a 
consideration would be given for the surrender of the policy. 
By this system, if a life aged 20 had insured at the Equitable for 
£1000 just at the time of valuation, this circumstance alone would 
reckon as an addition of £140 to the assets, although the policy might 
be discontinued after the payment of one premium only ; and for thir- 
teen years without making any reserve on account of premiums paid, its 
existence alone on the office books would appear as cash added to its funds. 
From these considerations we think it will appear that, by valuing 
upon the same scale as that by which the premiums were calculated, 
a company adopts the prudent course of distributing the profits as they 
are actually realized : by adopting a scale which would give lower pre- 
miums than those charged, particular policies are considered as repre- 
senting a certain amount of capital which will be withdrawn from the 
assets of the company if the policy be discontinued, and the profits dis- 
tributed are not those which have been realized, but profits only which 
are anticipated. 
After ascertaining the surplus of a company, the next point to be