Rate of profit after taxes on stockholders' equity in all 1. Annual rate of profit after taxes (effective rate For the four quarters ended June 30, 1959 June 30, 1959 in 10.55% 10.35% The foregoing information is based on Quarterly Financial Reports for manufacturing corporations prepared jointly by the Division of Financial Statistics in the Federal Trade Commission and the Section of Economic Research in the Securities and Exchange Commission, published by the Government Printing Office and sold by the Superintendent of Documents. The Quarterly Financial Report issued September, 1959 states that it is based on a sample of 6,755 manufacturing corporations with assets under $5,000,000 and 2,845 manufacturing corporations with assets over $5,000,000, or a total sample of 9,600 corporations which would be about 7-1/4% in number of active manufacturing corporations filing income tax returns during the fiscal year ended June 30, 1957, the latest year for which the Internal Revenue Service has published such information. 2. Net profits after income taxes (effective rate 41.5%) per $100 of total capital accounts, for insured commercial banks in the United States: The foregoing information is set forth on page 198 of the Annual Report of the Federal Deposit Insurance Corporation for the year ended December 31, 1958 which states that sources of data consist of annual reports filed with the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System or the Federal Deposit Insurance Corporation. More than 95 per cent of all banks in the United States were participating in Federal deposit insurance at the end of 1958 and deposits in the 13,365 insured banks totaled $242 billion. 3. Annual return after taxes allowed in public utility rate cases based on decisions by commissioners in 1958 and part of 1959: 1958 Fair value rate base (21 cases 5.91% 6.22% 5.68% 6.07% The foregoing information was published on page 38 of the publication "Public Utilities Fortnightly" dated January 7, 1960. Recapitulation of proposed adjustments (excluding return on Per bushel (cents) Average reported direct operational cost excluding rapid depreciation and excluding indirect costs such as quality deterioration, shrinkage and return on capital investment (except for 0.1 cent interest paid on borrowed investment capital) per United States Department of Agriculture tables released in February 1960 Additions: Restoration of rapid depreciation factor eliminated in tables released in February 1960 Provision for increased out-of-pocket costs and other Provision for margin of error in survey sample Provision for effect on costs of decrease in percentage Provision for shrinkage and damage Pro-forma adjusted costs, excluding return on investment *Information not available for suggestion of proposed amount. GRAIN & FEED DEALERS NATIONAL ASSOCIATION GRAIN DEALERS MUTUAL INSURANCE COMPANY Western Department 1905 Harney Street March 2, 1960 Mr. John M. Hayes, Vice-President Transport Indemnity Company 5300 South Pulaski Road Chicago 32, Illinois Dear Jack: The Underwriters Committee reviewed the question of providing coverage which would indemnify a warehouseman for deterioration in quality of stored grain, for the loss in grain handling, and for seizure of contaminated grain by the Pure Food and Drugs Authorities. It was the consensus of the Committee that no rate could be sufficiently high to cover these hazards at a profit to the insurance carrier. That is, when I speak about a rate being high enough, it would be a rate which would be acceptable to the insuring public. The Committee decided unanimously that the providing of coverage against deterioration in quality was also an almost impossibility. The upshot of the whole meeting was that the Committee declined to recommend that these types of coverage be written. One of the member companies represented on the Committee has had a very unsatisfactory experience on what was thought to be quality business on one of the phases of the coverage, that is, seizure of contaminated grain. Yours very truly, RNC:M /s/ R. N. Coffey Assistant Western Manager EXHIBIT C - 2 You will recall that I advised you that Bob Coffey would present our proposal to the Underwriting Committee for the Grain Association. I enclose herewith his reply of March 2nd and you will observe that it is the consensus of opinion of the committee, that no rate could be sufficiently high to cover these hazards at à profit to the insurance carrier. It is to be realized, of course, that one could promulgate a rate which would be absolutely prohibitive, to accept these real perils inherent in the warehousing of grain. The risks that you and your associates in the industry are assuming are considered to be extremely dangerous and the Grain Dealers Mutual and their associates who are the acknowledged experts in grain insurance, have declined to assume the risk. The alternative market which we have explored is that of Lloyds of London. The reaction was that they would not care to consider this matter on the basis of a direct placement and they have advised us that our only probable chance of making a placement in the London market was on the basis of a re-insurance contract for an acknowledged expert in the field of this insurance in the United States. The acknowledged experts have declined and, therefore, the probabilities of obtaining re-insurance in the London market are remote. We sincerely regret our inability to be of any assistance to you. Pursuant to our conversation of this morning, I wish to confirm that there is interest in the grain storage industry in the establishment of a market for certain perils and hazards imposed upon the grain storage industry by the Uniform Grain Storage Agreement. This matter has been discussed with Mr. Al Laybourn of Simpson, Laybourn, Miller & Stark in particular and it is apparent that the industry is interested in receiving quotations for an insurance policy to indemnify the warehouseman against the risks of 1, Deterioration in Quality, while in storage, 2, Seizure by Pure Food & Drug Administration on any grain while in storage or when loaded out of storage if found to be actionable under the Federal Drug, Food and Cosmetic Act, 3, Loss of grain in handling in excess of 1/8th of 1%. We have discussed each of the perils set forth above and the nature of the foreseeable exposure. It is to be realized that should a market be established that each risk would have to be underwritten on an individual basis with due credence being given to A, the integrity of the operator, B, the facilities of the operator, and C, the demonstrated operating procedures of the operator. I understand that you folks will be having a meeting in Chicago next week and that you will present this problem to your associates with the view of establishing a market if at all possible. It might well be that you will require a participation by the assured, or alternatively a stipulated deductible with relation to the number of bushels stored with a participating agreement in excess of the deductible. EXHIBIT C-1 |