THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

RATIO-BY TERRITORIAL AREAS

-INVESTED ASSETS TO POLICY RESERVES

LEGEND

UNDER 100%

100%-200%

200%-300%

300%-400%

OVER 400%

WEST SOUTH CENTRAL 549.62%

Our national growth, gentlemen, has been speeded by combining the financial resources of the older sections of the country with the development potentials of another part of the country.

Mr. KEATING. What does that black area of Texas mean?

Mr. SHANKS. Well, sir, that means that that is the area where we are putting the greatest amount of money in relation to our premiums and reserves. Could you give that figure, Mr. Smith?

Mr. SMITH. Over 400 percent of the policy reserves-that is the investable part of the premiums from this area that are being invested. The CHAIRMAN. In other words, instead of siphoning off the policyholders' funds and having them concentrated in Newark, you take those funds from a given area and put them back in that area; is that correct?

Mr. SHANKS. That is correct. Mr. Chairman, you will notice that the white areas are the Northeast around New York and New England, and it extends over to the Middle Western States. Those are the areas, the older areas with surplus funds. We get the premiums there. We are not able to find investments there. We try to invest all we can, of course.

The CHAIRMAN. How does that system work? Does it work well? Mr. SHANKS. It works very well, indeed. You notice we take the money that we get in-it goes from the East to the West. You notice that Texas gets the highest percentage. The West gets more money than we take out of the West.

Texas gets much more money than we take out of Texas. The Southeast gets much more money than we take out of there, and that Middle South section also gets much more money than we take out.

Mr. KEATING. With all that money going down South from the Prudential Insurance Co. that eliminates the need of so much Federal money going to the South. [Laughter.]

Mr. SHANKS. I assure you that it helps.

Mr. BRYSON. I only wish we got the per capita Federal money you get.

The CHAIRMAN. Mr. Shanks, does this system work well, as you say? Mr. SHANKS. It works extremely well, and I do not believe that it can be handled with such facility by anything except a national company. I am making the point that that is one of the advantages of a national company such as ours in the insurance field.

The CHAIRMAN. Have you regional offices in those areas?

Mr. SHANKS. We have a regional office which is our Western Home Office in Los Angeles, which covers 11 Western States. Mr. KEATING. When did you open that?

Mr. SHANKS. We opened that a year ago in November.

The CHAIRMAN. And is Prudential the pioneer in this idea of decentralization?

Mr. SHANKS. There are other companies. The Metropolitan, for instance, has a western office.

The CHAIRMAN. Not to the extent that you indulge in this decentralization, is it?

Mr. SHANKS. I do not know, Mr. Chairman, to what extent they had given authority to the West, but I do know as far as we are concerned, we have given ample authority so that the people in the West can devote themselves to the interests of the West and can

carry on all the functions that are necessary in the home office there. They operate, however, within our national framework. They are all one company. They have the benefits of our research, of our lower overhead, and of the funds from the East.

May I say that already this year we have transferred not one cent back from the West to the East, but we have transferred well over $100,000,000-actual transfers from eastern banks to western banksshowing the flow of investment funds out there.

The CHAIRMAN. I think it might be well to state, if my memory serves me correctly, the representative of the Metropolitan Life Insurance Co. testified that it makes all its loans in New York. Do you make all your loans in New York?

Mr. SHANKS. We do not make all of our loans in New York.

Mr. KEATING. And do you not know that the Metropolitan does not make all of its loans in New York?

The CHAIRMAN. No, no, no; makes it at the New York office. It does not make it only in New York.

Mr. KEATING. Well, now you know that the Metropolitan has mortgage loans and farm loans all through the United States.

The CHAIRMAN. They are determined in New York.

Mr. SHANKS. Mr. Keating, the Metropolitan does a Nation-wide business in investments and what not, just as we do.

Mr. KEATING. Just as you do.

Mr. SHANKS. That is right.

Mr. KEATING. But they do not operate substantially different from the way the Prudential does, do they?

Mr. SHANKS. I think that we specialize in our regional investing, I believe, more than they do. I would like to explain that to you if I may, but please do not misunderstand me.

I am not bringing the Metropolitan in this, because I am not well enough acquainted with their methods, but they do an excellent, a wonderful Nation-wide business and a Nation-wide investing. That I know.

Mr. BRYSON. Your company is not in any manner connected with the Metropolitan?

Mr. SHANKS. Oh, no. We are competing from start to finish. The CHAIRMAN. How many regions are there? We want to get it in the record.

Mr. SHANKS. Regions?

The CHAIRMAN. You might read for the record what these regions

are.

Mr. SHANKS. The 11 Western States is one region, and then there is the West South Central, which is the black area, which is another region, and the Southeast. Perhaps you had better read those, Mr. Smith, the South Atlantic

Mr. SMITH. East South Central, South Atlantic, New England, Middle Atlantic, East North Central, and the West North Central The Mountain States are grouped together with the Pacific. And down below here are the percentages of the investable premium income, the reserves allocated showing the figures. And attached to the statements, I believe, Congressman Celler, is a photographic copy of this map, so it is available for the record.

Mr. SHANKS. As I pointed out, gentlemen, this is one of the important economic advantages of a large national company, the channelling of funds from the surplus areas to the areas of great and growing development where those funds are needed, and also I want later to refer to some case histories of farm families. We are a great farm lender.

I want to refer to our activity during the depression when we were able to get them back to the people get the farms in shape where they could make money with them.

We are not limited by any particular geographical area. We provide capital in a variety of forms for expansion and modernization of business and industry. We enable families to buy and build homes and to own and operate farms.

The Prudential has more than 265,000 mortgage loans. Over 95 percent of them are on homes and farms scattered throughout every States and Canada, and their average is less than $8,000. That average including all of our big loans is less than $8,000.

The businesses which we have helped finance are a complete cross section of our economy. They include practically every type of business in every part of the country. They range from stockyards to the cosmetic industry, to abrasives, to television, from clocks to shipping, covering the whole field, including the great oil producing and refining companies and also the corner filling stations.

In the food industry they range from the producing farms, from the processing and distributing companies, and to the individual retail grocery store. The Prudential has followed the definite policy of spreading its investment as widely as possible throughout the United States and Canada.

Mr. KEATING. In other words, your loans have not been limited, apart from mortgage loans, to just large offerings.

Mr. SHANKS. Oh, no, indeed. We have made a very special effort as a matter of good business to get small loans.

Mr. KEATING. I am interested in your statement about the corner grocery store.

Mr. SHANKS. That is right.

Mr. KEATING. Having loaned sums to them. How small a commercial loan would you make?

Mr. SHANKS. Well, we will make a small commercial loan. As a matter of fact we had one commercial loan of $4,000 that we approved for a young man to start himself in the garage business. But unhappily he did not take it up. We approved it, offered him the money, but he did not take it up. I guess he got it from his family or in some other way.

We have many under $25,000, and many from $25,000 on up. Now those are industrial commercial loans.

The vehicle used for those small loans is the mortgage loan, because that is the best, most convenient and the quickest vehicle. But that is a loan which is made taking into account the credit of the business. In other words, it is not just a mortgage loan on a piece of brick and mortar. It is a loan which takes into account the credit of the business.

Mr. KEATING. The value of the real estate is not the sole criterion in determining the amount of the loan?

Mr. SHANKS. That is correct. In other words, it is a true business loan.

Mr. KEATING. But you are not allowed to invest in preferred or common stocks, are you?

Mr. SHANKS. We are allowed to invest in common stock. We do some investing in preferred stocks. We can buy common stocks if we have a sufficient dividend record on them, but we do not as a matter of policy buy common stocks. We do preferred, however.

The CHAIRMAN. Does the law of New Jersey permit the purchase of preferred stock?

Mr. SHANKS. Yes.

The CHAIRMAN. To what extent?

Mr. STONE. Two percent of our assets in the stock of any one company and provided the stock does not normally have any voting power, there is no limitation as to the amount. We could buy an entire issue of preferred stock, for instance.

Mr. SHANKS. We do not, however, buy much of it. One reason is of course, that we are qualified to do business in New York and have to very largely meet the requirements of the New York statute in that respect.

Mr. KEATING. Is New York about as rigid as any of the States in their requirements?

Mr. SHANKS. That is correct, they are, but New Jersey is also very rigid. It just varies somewhat.

In addition to our home office staffs at Newark and Los Angeles, we maintain 47 branch offices to provide what we call "all purpose lending," and those are spread throughout the United States and Canada.

We have our skilled men in those offices. We have spent considerable time training them. We also have men circulating in all the towns and cities outside of that particular city whereby they bring the services whether it may take the form of a mortgage loan, a debenture or bond issue, to these people.

These offices handle real-estate purchases, all types of mortgage lending on homes, apartments, farm loans, ranch and grove loans, loans on commercial and industrial properties, and in addition they work in conjunction with our bond department in carrying business financing to the very doors of industry, and that is true whether it is the large or the small man. We want it.

Now this "all purpose lending" program brings our lending service, as I said, right to the borrower, where the borrower with our man can work out the type of financing, the amount of financing that he wants and needs, without having to go to some financial center which may be away from home.

Now a large organization can send people to financial centers and so can some small ones, but a lot of them cannot, of course, and we want that business so we go out after it.

I have mentioned earlier how the farmers have been aided in improving their land. I want to say, gentlemen, that many farmers today are on their farms because of the assistance the Prudential was able to give them during the depression years.

I have brought with me two books showing photographic and other