Analyzing Annual Statements and Expense Exhibits of Other Companies

Seminars were held with R. G. Espie acting as Chairman, assisted by Messrs. Harmon T. Barber, Joseph Linder and Norton E. Masterson. The Seminars were opened by the distribution of a set of inter-company premium, loss and expense statistics drawn from the insurance expense exhibits and distributed to management. This exhibit compares the results of the company preparing it with those of five or six other companies which appear to be reasonably comparable by reason of size and type of operation. A supplementary exhibit shows the comparable figures for three very large companies organized and operating on a somewhat definite basis. It was pointed out that these statistics and comparisons are subject to considerable shortcomings. They can be distorted by any one of a large number of non-recurring transactions or by sharp changes in type of operation. It was suggested that they could presumably be used only as clues to areas in which further investigation must be carried out. If the ratio for any one company differs noticeably from those of others, or if the trend in a series of such ratios over a period of years shows lack of conformity, it becomes necessary to spend the additional effort to try to find the cause for difference. There is a danger that explained consistency of the figures may conceal conditions which warrant investigation--mere conformity does not indicate that everything is all right any more than lack of conformity indicates that things are unsatisfactory.