USA > Vermont > The Lake Champlain and Lake George valleys, Vol II > Part 30
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Bennington County has four independent banks. Two of these are located at Bennington, one at North Bennington and one at Man- chester Center. The largest of these is the First National Bank of Bennington, with resources of $3,095,000. All four belong to the Federal Reserve System.
Clinton County has four banks, two at Plattsburgh, one at Keese- ville and one at Ellenburg Depot. The largest, of course, is the Platts- burgh National Bank and Trust Company. All four are members of the Federal Reserve System, but one is a State institution. There is not today an independent bank of any variety anywhere in Grand Isle County.
Because of the general nature of the banking business, our finan- cial institutions are extremely sensitive to economic conditions. Dur- ing the recent depression, when the entire Nation and much of the civ- ilized world was groping in darkness and despair as it searched for the 1920 variety of Aladdin's Lamp, banks everywhere were hard hit. The bank moratorium of 1933 brought our financial system to a com- plete standstill. Most institutions in this area, being found upon examination to be in a healthy condition, were soon allowed to open their doors for resumption of business. A few were in no condition to open at all; while in some communities readjustments took place. In Poultney the Citizens National Bank was liquidated in 1934, but at the same time there was formed the Poultney National Bank to meet the business needs of that community.
There can be no question but that for over a century banks and bankers have played an influential part in the economic development of this area. By their control of credit, carrying with it a veto power over projects deemed unwise, our banking institutions have more or less blazed the trails through the economic wilderness, and shaped the course of civilization in these parts. Bankers are human beings and are therefore prone to err sometimes, especially as they are pri- marily dealing in terms of an unknown future. They have made unwise investments, particularly in early times. On the other hand
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mistakes have been few and far between. The banking institutions of this area seem to have been conducted generally on a sound, con- servative basis. Considering the comparative youthfulness of this section, so far as settlement is concerned, many of our banks have had an extremely long history. They have weathered all kinds of eco- nomic storms and been steered safely through uncharted shoals. Many of the reorganizations were solely for adjustments to new legislative acts and were not symptoms of financial instability. Being aware of the sudden economic changes that have always been char- acteristic of this area-whether in the realm of agriculture, indus- try or transportation-the surprising feature of our banking develop- ment is the longevity of our institutions and the comparative paucity of failures. Vermont and rural New York have often been pub- licized as centers of conservatism and this truth has been reflected in the history of our banks. This is generally not a standpat conserva- tism, however, but is the variety that looks before it leaps. Once we decide what road to take, it is apt to be a truly progressive one, and it is followed with courage and conviction. The process is sometimes slow but it is more certain. Although our slowness has been publi- cized, our ultimate success is not so well known. We are reputed to be conservatives and doubtless are; but at the same time when actual results are considered we have been primarily leaders, not followers. This has been amply demonstrated in preceding chapters. This pecu- liar mixture of conservatism and progressiveness that characterizes the people of this area is nowhere better exemplified than in the his- tory of the development of our banks.
CHAPTER XIX
Insurance
In this day and age when most business is more or less standard- ized and highly centralized the average citizen frequently finds the complicated financial structure of large corporations to be beyond his understanding. Although vaguely conscious of the importance of such companies, his lack of comprehension often leads him to the point where his interest in them is purely impersonal and formal. This seems to be particularly true in the insurance field. To begin with, he generally possesses a policy, but after attempting to wade through the technical legal wording, still does not know what it means, being forced to trust solely in the reputation of the insuring company. He generally knows what a dividend is, particularly if he receives one, but he understands only vaguely just a few of the factors involved in determining the amount of it. Such matters as proper capitaliza- tion, adequate surplus and forms of corporate organization are, as a rule, foreign to him. Why a company should suddenly divide into sep- arate segments with the same officers in each component part is a mystery, as is also the need of a holding company. In spite of his lack of comprehension of the work and structure of insurance organizations, however, the average citizen should not make the mistake of losing his interest in them because, in the area covered by this research, the history of the development of insurance is an extremely interesting and also a spectacular story. Too few people are aware of this. It con- stitutes one of the most unusual features in the evolution of this section.
The first form of insurance to make its appearance in either State was marine insurance in New York, but this was not of particular value to this particular area. Here insurance was rather slow in developing and in all Vermont no company or permanent agency is known to have existed prior to 1825. In that year the Ascutney Fire
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Insurance Company was formed, while in 1826 Middlebury was made the headquarters of the Vermont Fire Insurance Company. In 1838 we find the beginning of an epidemic of county insurance organiza- tions. Life insurance was a later phenomenon and it has been said that before 1850 it was harder to locate a man with a life policy than it was to find a four-leaved clover. The early life policies were gen- erally issued by fire and marine insurance, and also trust, companies.
Much has already been said about the chaotic conditions existing a century ago in other economic fields. Wherever we have looked we have found very little regulation in the public interest, sudden and unexplainable change, and high mortality, whether we consider trans- portation, minerals, or other industries. Yet nowhere does there seem to have been as much chaos as in the field of insurance. In our five New York counties as late as 1858, according to French's "Gazetteer," we find at least thirteen obsolete companies as compared with but two survivors, the Dividend Mutual at Glens Falls and the Northern New York Mutual at Plattsburgh. Of one hundred and sixty-seven joint stock fire insurance companies in New York in 1870, only twenty-nine were in existence by 1914, and some of these sur- vivors had been forced to reorganize. Nor was this situation typical merely of this section; for of the two hundred and one companies involved in the Chicago fire of 1871 only thirty-nine were doing busi- ness in Illinois thirty years later. New companies were continually being formed to take the place of bankrupt corporations, but they swiftly followed the path of their predecessors.
At first there were no restrictions whatever in the insurance field. Some companies carried reserves adequate for meeting losses on out- standing policies, but most of them did not do so. There was, of course, no standardization of rates, and the concerns with small reserves to maintain had the advantage of cheaper policies. Insur- ance, therefore, was a decidedly risky enterprise. No one cared to invest considerable sums of money, with the result that most com- panies were small mutuals, and these led a mushroom existence.
These concerns usually had a plan whereby they issued policies on a part cash and part premium note consideration; dividing the busi- ness into two distinct classes, hazardous and extra hazardous, or "First Class" and "Second Class'-keeping separate accounts in each class. Being mutuals the profits resulting from the company's activi-
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ties were to be divided among the policy-holders, but the same was also true of the losses. Profits, however, were few and far between; with the result that policy-holders generally shared in their com- pany's losses but rarely in profits. Because of the lack of adequate reserves a large fire was frequently enough to force a concern out of business. The mortality was so high that there was actually more danger of a mutual failing than there was of a building burning- without stretching the truth at all.
In addition to the unreliability of insurance companies another factor that limited the number of policies sold was of a religious nature. Many of our ancestors seem to have felt that if their build- ings burned it was an act of God who thus vindictively punished them for their sins. Insurance, therefore, was an attempt to thwart the will of the Almighty and was contrary to religion.
The only life insurance companies in the eleven counties of west- ern Vermont and northeastern New York are dead ones. There can be no advantage in trying to resurrect them. In fact, there are today only two live organizations of any description in this area. One of these is the Vermont Accident Insurance Company of Rutland, a firm organized in 1900 that is licensed to do business in Maine, New Hampshire and Vermont. In 1938 its admitted assets were $39,324, its capital was but $10,000, net premiums written totaled $41,880, while it paid dividends of $400. The second is that combination of companies at Glens Falls, collectively known as the Glens Falls Group. This is the only major insurance organization in the eleven counties. The startling and unusual development occurring at Glens Falls affords a unique and peculiar contrast with the uniformly discourag- ing story of the other companies. Here we find a business of Wall Street proportions flourishing on the edge of the Adirondacks-a fact which, of itself, is a source of astonishment. Since the Glens Falls Group so dominates the insurance field of this area, let us con- sider its history in detail.
Far back in 1849, approximately ninety years ago, the Glens Falls Mutual Dividend Insurance Company was incorporated, and in 1850 it formally organized. The fact that it prospered where others failed was due in large measure to its founder and dominant figure for forty-one years, Russell Mark Little. It seems not to have been uncommon for ministers and school teachers to interest them-
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selves in insurance as a means to supplement their extremely meager income. Mr. Little was of this group, originally having been a Meth- odist preacher. As time went on he was to disprove the theory that clergymen inevitably make poor business leaders. His religious inter- ests were to color his insurance career throughout. In the first place his personal integrity and proven honesty retained the confidence of policy-holders in the company at a time when mutuals were crash- ing all around. He used great care in selecting agents to repre- sent him in other communities, interviewing them in person. Usually he called first on the local Methodist clergyman and hired him, if possible. Frequently he interrupted his insurance labors to hold prayer meetings and to preach temperance sermons. Never did he allow personal financial considerations to sway his convictions. As late as 1888 he refused definitely to have his salary raised from $3,000 to $3,600 on the premise that "no man is worth more than $3,000 a year."
In a period of frenzied finance in the insurance field, Little was conservative and sure. While most firms paid little attention to a sur- plus, the Glens Falls firm poured large sums back into the surplus fund. Although business was carried on under the usual mutual plan of part cash, part note, no policy-holder was ever assessed on his note. In the fifteen years of its existence as a mutual company it paid out about $200,000 in losses and accumulated a surplus of $95,000 besides pay- ing for its own office building, erected in 1859. In this matter it showed unusual caution. Fearing that, if the business did not prosper, an office building would be difficult to sell, the directors decided to construct it in such a way that it could be easily converted into a dwelling.
Although the Glens Falls Mutual Dividend Insurance Company continued to be a highly successful enterprise it was reorganized in 1864 as a joint stock company because mutual companies, as a class, had by that time sunk extremely low in public favor. Its new charter was under the name of the Glens Falls Insurance Company. At first it had a paid in capital of $100,000. Its march to success continued and between 1872 and 1901 it multiplied its assets by six and its net surplus by fifty-two. At all times conservative business practices were followed.
One of the company's Pennsylvania advertisements in 1867 announced, "Farm risks, only, taken," which is interesting in view of
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the present unprofitableness of farms. The remainder of the notice is also interesting. "It is liberal. It pays damages by Lightning, whether fire ensues or not. It pays for live stock killed by Light- ning, in barns or in the field. Its rates are lower than other com- panies of equal responsibility." The last statement is particularly interesting in view of the standard rates in force today. By 1873 the types of policies written were extended, for aside from farms and village dwellings they included blacksmith shops, bridges, "open, free; covered, free, and toll"; breweries, country stores which were charged higher rates if rags were stored, carriage and wagon shops, carpen- ter shops, canal warehouses, livery stables, malt houses and tin shops. In 1868 agents were directed "not to insure quarrelsome men, or men who were on bad terms with their neighbors," while in 1872 the con- servatism of the officials was demonstrated again by the decision that "We have reluctantly concluded to authorize our agents to issue per- mits by endorsement for the use of steam power for threshing because we fully appreciate the hazard we assume." Two years before the great Chicago fire, the hazard existing there was realized by the com- pany, which decided not to renew policies, with the result that at the time of the fire in 1871 only one policy was left, this having been written on a church for a five-year period. The church was valued at $4,000 and this constituted the only loss in this city to the Glens Falls concern. Other fires also weathered in the last half of the nine- teenth century raged in Baltimore, Boston and in Glens Falls itself.
Of much greater concern to the company and its future, however, was the San Francisco earthquake and fire of 1906. The Glens Falls firm was not only the first to make a payment to the unfortunate and needy victims, but was also the first of all the companies to settle its indemnities in full. Within six months after the fire all claims were paid, reaching the huge total of $997,000. This swift action being taken, while many other concerns were seeking to evade payments or attempting to reach an agreement on a flat percentage reduction, won for the Glens Falls Insurance Company a national reputation and a par- ticularly strong position on the Pacific coast. In spite, however, of the huge losses suffered at San Francisco the firm still had assets of $3,- 949,386 and a net surplus of $1,888,052.
Tremendous prosperity ensued in the years following. The com- pany's gross assets increased to $5, 105, 505 in 1910 and to $10, 107,334
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in 1921. Its capitalization increased to $500,000 in 1912, to $1,- 000,000 in 1919, to $2,500,000 in 1924, to $4,000,000 in 1927 and, finally, to a maximum of $5,000,000 in 1929. By this date, the aggre- gate assets of the Glens Falls Group reached $35,000,000. In 1909 dividends paid were 115 per cent; in 1910, 120 per cent ; while in other years payments also reached fantastic heights.
One of the interesting characteristics of the company has always been the length of service of the officers, which has made for con- tinuity of policy. Thus it was that, in 1920, when the Glens Falls firm was preparing for the greatest expansion in its history, there stepped into the presidency Egbert W. West, a man who had entered the company's employment far back in 1874 when he was eleven years of age. At first his main duty was the care of cuspidors, in an age of prodigious tobacco chewing, and his annual salary was the unusual sum of fifty dollars. Step by step he climbed the ladder of success until he found himself at the head of a huge corporation. He con- tinued as president until 1929, when he became chairman of the board of directors, which position he still retains. He was succeeded as president by Frank M. Smalley, who had been associated with the company since 1906 and who today remains the executive head.
The first major expansion of the 1920's was the acquisition in September, 1923, of the majority of the capital stock of the Com- merce Insurance Company, of Albany, which now became known as the Commerce of Glens Falls. This was a successful firm which had been in business since 1859 and which, when acquired by the Glens Falls Insurance Company, had a cash capital of $400,000, gross assets of $1,273,333, liabilities less capital of $384,670, and reported a surplus to stockholders of $888,663. Four years later, in 1927, a third cor- poration, known as the Glens Falls Indemnity Company, was created to sell automobile liability, and casualty policies. In 1929 two addi- tional firms were brought into being, the Glens Falls Investing Corpo- ration, and the Commerce Casualty Company. The latter was intended as a running mate for the Glens Falls Indemnity Company, but was merged with it in 1932. Thus today there are four concerns which comprise the Glens Falls group consisting, in the order of their crea- tion, of the Glens Falls Insurance Company, the Commerce Insur- ance Company, the Glens Falls Indemnity Company, and the Glens Falls Investing Corporation. The consolidated statement to stock-
C & G-47
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holders for all companies showed capital and surplus totaling $12,414,- 442.45 as of December, 1938.
The Commerce Insurance Company has grown considerably since its acquisition in 1923. The 1939 edition of the Spectator Fire Index lists its paid up capital as $1,000,000, its total assets as $4, 169,968, its total income as $1,511, 141, losses paid as $636,935 and cash divi- dends paid as $100,000. Its premiums for 1938 reached a total of $1,416,638.44, including $996,069 for fire, $298,052 for motor vehicles, and smaller amounts for tornado, sprinkler leakage, riot, earthquake, hail, ocean marine, and inland marine categories. Among its assets it reported $1,897,517 for bonds and $1,576,344 for stock, the remaining classifications being comparatively small. Its under- writing profit was listed as .5 %.
Let us now return to the Glens Falls Insurance Company, which we left in 1929 with a capitalization of five million dollars. This was sliced in half in 1932; but the corporation gave cash dividends of 16% in 1930-31 and 32% in 1933-37, while in 1936-37 there was an additional "melon" from the Glens Falls Investing Corporation. Cash dividends paid in 1938 totaled $800,000. During that year its total assets were $19,129,672, over half of which consisted of stock ($10,389,299), while bonds amounted to $4,518,681. It paid losses of $2,999, 129 and had a total income of $7,285,016. Its premiums, totaling $6,697,815.01, consisted of fire ($4,008,597), motor vehicle ($1,146,430), ocean marine ($668,608), inland marine ($432,678), tornado ($395,322), and also sprinkler leakage, riot, earthquake, hail and aircraft. Its underwriting profit was reported as 2.2% .
The most important development, however, has been achieved by the Glens Falls Indemnity Company. In twelve years, most of which have been featured by business depression generally, this youth- ful firm has outstripped its famous predecessors, its premiums in 1938 reaching a total of $6,886,845.80. The chief source of premiums was auto liability ($1,981,396), followed by workmen's compensation ($1,427, 112), and by liability ($1,039,502). Others consisted of acci- dent, fidelity, surety, plate glass, burglary and theft, health, P. D. & Coll., Auto P. D., Auto Coll., U. S. corn loans and steam boiler varie- ties. The Glens Falls Indemnity Company is licensed to do business in all states in the Union. Among the seventy-five leading stock, mul- tiple line companies in the entire Nation in 1938, it ranked thirtieth
GLENS FALLS INSURANCE COMPANY
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from the top in net premiums written. In this same group it was number thirty-five when assets were compared. These totaled $II,- 218,960, over half of which ($6,278,293) was from amortized bonds.
The vast business we find in Glens Falls today all developed from the tiny mutual formed by the Methodist parson of ninety years ago. Some of the reasons for this unusual transition have been indicated; others have not. We have referred to the long service of its leaders, providing for continuity of policy-the present chairman of the board of directors having served under the original founder. We have men- tioned various incidents indicating the sound, conservative financial rules followed. Emphasis should be placed on the matter of the sur- plus, which seems to have been almost an obsession with the original directors. It was indeed fortunate that the company was wise enough to get out of Chicago before the Great Fire there. In addition, there can be no question but that the rapid and liberal settlement of claims after the San Francisco fire was of tremendous importance. Although we have praised the business ability of two or three of its leaders, it should be recognized that the company throughout its history has been singularly fortunate in the selection of personnel, from top to bottom. One reason for the rise of the Glens Falls Insurance Company has not even been remotely suggested. Sometimes a firm has so many policies on property in its home city that, if a major fire breaks out there, it may be forced into bankruptcy. This has never been true of this particular company because, since the earliest days of its existence, it has been so large in proportion to the size of the community- whether a village or a city-that the amount of business done else- where has always been more than enough to counterbalance any pos- sible losses in Glens Falls.
With all due respect to the large centers of corporate finance, a small city would seem to possess certain advantages as the home of such an enterprise. Here a large company stands out, conspicuously exposed to the public gaze, rather than dwarfed into insignificance by gigantic competitors. Its personnel is fully conscious of being in the local limelight. This is an added incentive to individual achieve- ment. The important place held by such an organization in the busi- ness life of a relatively small city also brings with it a healthy sense of community responsibility, which does the concern no harm. It was Julius Cæsar who, centuries ago, declared that he would rather be first in a small Iberian village than to be second in Rome.
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The insurance companies have contributed much to Glens Falls. Their unusual prosperity has been partly responsible for the high per capita wealth found here, and all the indirect advantages resulting from it. In the second place, they have contributed more than their share of community leaders. Third, they have carried the name of their home city to all parts of the United States and beyond. It is impossible to estimate the value to Glens Falls generally of the good will won on the Pacific coast by the rapid and generous settlement of claims resulting from the San Francisco earthquake, but it undoubt- edly was enormous. Similar favorable advertising has been given the city elsewhere. Today this huge insurance organization faces the future with confidence, "a vast financial institution remote from the beaten tracks of finance, reaching across the nation and across the seas in the world-wide scope of its affairs, centering a business of Wall Street proportion in the Monument Square of Glens Falls" (Jo Leonard -"Knickerbocker Press," November 17, 1929.)
CHAPTER XX
The Press
From the very beginning of our history the press has exerted a tremendous influence on the development of this region. At first newspapers were brought in from older settled communities, but it was not long before printers began to penetrate into the new settle- ments. Since those early days great and profound changes have taken place in all phases of this business, but the influence of the press has always been great regardless of decades considered.
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