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As these funds are growing at the rate of about 8 per cent a year, it is important that the public should understand the indispensable part which they play in the life assurance business. At present we are often criticized for holding them, and even some of those who are well disposed towards us are inclined to think that our resources are far larger than they need be. My own office therefore issued a publication a few years ago entitled Our Policy-And Yours to give the policyholder an explanation of this subject. Large funds are held by a life office, we explained, to meet commitments to policyholders, but these funds are different from the reserves of an ordinary business undertaking which are put aside to meet essential requirements, such as maintenance of machinery and stocks, and as a protection against bad times. The life office funds are the amount of money estimated to be necessary and actually held to pay the full sums assured as and when they become due, provided that this money is kept invested at a satisfactory rate of interest. Their essential role can be illustrated by relating the premiums received and the payments to members in successive periods. For example, if a number of whole-life assurances are taken out at age 40, payments made by the life office as deaths occur during successive periods of ten years will normally follow the
pattern of the diagram on page 94, in which the premiums received and the payments made during each period are shown in white and shaded rectangles.