The scope for papers on legal subjects to be read before this Institute is somewhat limited by the excellent series of Legal Notes, particularly on Case Law, which is a regular feature of the Journal. Perhaps that accounts to some extent for the scarcity of such papers in recent years. It may be however that it is increasingly felt, and I think rightly, that any paper, however accurately phrased, which purports to be a treatise on any particular point of law, can be regarded here only as an indication of the trend of the law which members of the Institute may or may not adopt in practice as they may be advised by those to whom they are accustomed to refer for a legal opinion.

The vitality displayed by the English Friendly Societies in face of the competition of the compulsory system of National Health Insurance is such as to justify the allocation to the societies of a reasonable part of the time which the Institute devotes to the study of problems of professional interest; and their claim for a share of our attention is strengthened by the fact that the day of the unqualified “valuer” has nearly passed, and that the work of advising the societies on the actuarial aspects of their relatively complex undertakings is now almost everywhere entrusted to Fellows of the Institute or of the Faculty.

The theory underlying this paper is that an office proposing to pay bonuses on the compound reversionary bonus system has calculated appropriate premiums according to the rates of interest and mortality which it was then anticipated would represent future experience and that the scale of premiums has not since been altered.

It is now almost seventy years since Sheppard Homans, then actuary of the Mutual Life Insurance Company of New York, described in a paper presented to the Institute (J.I.A. Vol. XI, p. 121) a new method of surplus distribution, devised by himself and D. P. Fackler. The new method was one which had been applied by them for the first time in the surplus distribution of the Mutual Life in 1863. That method, known as the Contribution Plan, has since been universally adopted in the United States and Canada and is thus the method of surplus distribution which is and for many years has been applicable to the larger part of the life insurance in force throughout the world. The method was not received with favour by British actuaries nor, except possibly in isolated cases, has it ever been applied in Great Britain. The methods of T. B. Sprague and T. G. C. Browne, while frequently referred to as “contribution” methods, are of a different character from Homans’ method and differ from it radically both in principle and in practical application.

A Net Premium Valuation is made when the sums assured and net premiums are valued at a given rate of interest and by a given table of mortality, and the net premiums are calculated at the same rate of interest and by the same table of mortality. Such a valuation leads to a reserve that starts with the net premium and ultimately reaches the sum assured for whole life assurances and endowment assurances; it cannot produce negative values unless the annuity value increases with the age, a case with which we are not concerned in this paper.

In his Presidential Address delivered in November 1910 Sir Gerald Ryan discussed at some length the policy and practice of amalgamation (J.I.A. Vol. XLV, p. 12), and went on to suggest that a useful purpose would be served if a paper were written by one of our Fellows on the theme of “Assurance Amalgamations.” Papers on the subject are to be found in the early numbers of the Journal, but as the last one dealing solely with amalgamations was written in 1858 it may be of interest to members if the matter is examined again in the light of the happenings in recent years. Other references have appeared in Presidential Addresses and papers of a legal character. Some of these expressed the opinion that the requirements of the Assurance Companies Act, 1870, were unworkable. For many years amalgamations of life offices have been governed by the Assurance Companies Act, 1909 (hereafter referred to as the 1909 Act), but it can scarcely be said that its requirements are easier to comply with than those of the 1870 Act. It is not surprising, therefore, to find that many of the transactions of the nature of amalgamations in recent years have been carried through by other means.