154 BRITISH LIFE ASSURANCE, 1914-1918 
not; but in any case the action was a significant one, and 
deserves to be recorded. It was also in accordance with common 
sense. The argument underlying it was this. Probably no 
British subjects regarded the default of the British Government 
as a possibility worth considering. If they had they would 
not have trusted it with their money. There was no likelihood 
that any Life Assurance Company would be so hard pressed 
as to have to sell these particular securities at a loss before their 
redemption date. Hence it might safely act as suggested. 
Along the same lines of reasoning may be noticed a method 
of valuation which is adopted by several important Companies 
in the general matter of securities redeemable at fixed dates. 
It consists in what is known as the ‘amortization’ plan. 
Assuming that there is perfect confidence in the security, 
an appropriate sinking fund is set up. By this method (to quote 
the paper (referred to in Chapter IX supra) by Mr. H. Brown, 
whose description for conciseness and accuracy cannot be 
improved upon) ‘the book values of redeemable securities 
bought at a price higher or lower than the redemption price 
are gradually, by means of a sinking fund, reduced or increased 
to the redemption price by the date of redemption, and the 
values so adjusted are used in the balance sheet instead of the 
current market values’. 
On the whole, what may be said of such a plan is that it 
presents nothing unreasonable. It is improbable, however, 
that a Company would actually divide profits except up to the 
line of surplus shown by actual Stock Exchange values. 
There is, however, another and more important question 
which arises in the same connexion. It concerns the whole 
subject of depreciated securities. These, as pointed out in the 
previous chapter, differ essentially from the other losses by the 
war. The question is, what do losses by depreciation really 
mean ? The adage of the financiers of an older day is suffi- 
ciently familiar. ‘ Write investments down. Never write one 
up.” It is undoubtedly a counsel of perfection. What has to 
be asked is whether, when dealing with the results of a world 
catastrophe such as the recent war, unprecedented in its