CHAPTER XXXVII

FINANCE

MONTREAL BANKING AND INSURANCE BODIES

I. BANKING: HAMILTON’S PLAN FOLLOWED BY THE FIRST BANK OF THE UNITED STATES IN 1791--1792, THE ATTEMPTED CANADA BANKING COMPANY AT MONTREAL--DELAY THROUGH AMERICAN WAR OF 1812--1815, RENEWED AGITATION FOR A BANK CHARTER FOR MONTREAL--1817, THE FIRST BANK OF MONTREAL WITHOUT A CHARTER--ITS FIRST OFFICERS--OTHER BANKS FOLLOW--THE QUEBEC BANK--THE RIVAL “BANK OF CANADA”--THE BANK OF BRITISH NORTH AMERICA--MOLSONS BANK--THE MERCHANTS BANK--BANQUE JACQUES CARTIER, PREDECESSOR TO BANQUE PROVINCIALE--THE ROYAL BANK--THE BANQUE D’HOCHELAGA--THE MONTREAL CITY AND DISTRICT BANK--BANKS WITH HEAD OFFICES ELSEWHERE--MONTREAL BANK CLEARINGS WITH CANADIAN AND NORTH AMERICAN CITIES.

II. INSURANCE: THE PIONEER FIRE INSURANCE COMPANY OF CANADA--THE “PHOENIX”--THE “AETNA”--IN THE FIFTIES AND SIXTIES--THE GREAT FIRE OF 1854--LATER COMPANIES. A. LIFE INSURANCE: THE PIONEER COMPANIES--THE SCOTTISH AMICABLE AND SCOTTISH PROVIDENT COMPANIES. B. MISCELLANEOUS INSURANCE.

I. BANKING

THE RISE AND DEVELOPMENT OF THE BANKS OF MONTREAL[1]

As Montreal has been for many years the financial center of the country, a considerable part of Canada’s banking history is contained in the story of the formation and growth of the city’s representative banks.

It is well known that there was no joint stock bank existent in British North America one hundred years ago.

The first attempt was not made in Canada until 1792 when, after the conclusion of the Revolutionary war, Montreal’s commercial importance was increased through the settlement of the United Empire Loyalists in Upper Canada.

Until the Loyalists came, there were only a few scattered military posts in Upper Canada. The new settlers began to clear the land and grow crops. Then, as now, the greater part of the produce exported by the provinces was sent to England; and the greater part of the imports came from the American colonies. The imports came by the Lake Champlain routes. So Montreal handled the inceased exports and imports caused by the settling of the Western province.

In connection with this trade, and with the other business of the city, banking operations were required. These were transacted by the English merchants. They took money on deposit, made advances, and issued due bills which served as currency.

All the writers dealing with this period of Montreal’s history lay much stress on the troubles caused by the lack of circulating medium. It should be remembered that the habitants in Lower Canada had suffered great losses from the issues of paper money during the French régime. Their experience with this paper money caused them to hoard gold and silver and to distrust paper promises to pay. Their attitude towards the first bank notes is said to have had a considerable influence in making the banks hold strong reserves against issues of notes. The currency of the country then consisted largely of French, Spanish and Portuguese gold coins.

In his “Early History of Canadian Banking,” Professor Shortt has shown that banking in Canada represented the development of ideas emanating from Alexander Hamilton, the great American statesman. In 1791 the first Bank of the United States was formed, on a plan constructed by Hamilton. This bank performed very valuable services for the young Republic; and it contributed most importantly to the development of industry and trade. But it was a private concern; and in its work of caring for the business of the country, it committed the crime of earning satisfactory profits for its proprietors. Even in that early day “the people” exhibited a strong propensity for putting out of business any public corporation which had the temerity to earn good profits in serving them. In the case of the Bank of the United States, its end was probably hastened by the fact that the greater part of its capital stock had been purchased by investors in England. At any rate, in 1811, after twenty years of operation, its affairs were liquidated.

In 1792, the year after the Bank of the United States was formed, an attempt was made to launch the “Canada Banking Company,” which was to receive deposits, issue notes, discount bills and keep cash accounts with customers. Professor Shortt says the idea of the bank is supposed to have been originated and worked up by Montreal merchants. The official notice in the Quebec Gazette is signed by Phyn, Ellice & Inglis, a London firm, and by Todd, McGill & Company, and Forsyth, Richardson & Company--Montreal merchants, who were customers of the London firm. The Canada Banking Company was to have its head office in Montreal and branches at Quebec and other places. The two Montreal firms here referred to had a large share of the trade with the Upper Canada settlers.

This scheme fell through. Mr. James Stevenson says in his work that the promoters succeeded in forming a private bank of deposit; and in Sir Edmund Walker’s book it is stated that the company did issue notes, but they doubtless had a very limited use.

Upon the failure of this project, the Montreal merchants proceeded to develop and extend the business of private banking carried on by them in connection with wholesale trade. They gave credit for supplies, issued due bills, accepted orders drawn by one party on another, etc.

In 1808, while the first Bank of the United States was still in active business, steps were taken to organize the “Canada Bank.” A bill was introduced in the Legislature providing for a capital of £250,000 currency ($1,000,000), the shares being of the denomination of £25 currency ($100). This bank was promoted by a combination of citizens of Montreal and Quebec. It was to have twenty-four directors, twelve from Montreal and twelve from Quebec. Although the Legislature rejected this bill, it was printed at the time of introduction. Professor Shortt states that he had the opportunity of examining it and comparing it with the charter of the Bank of the United States.

“Allowing,” he says, “for the necessary changes required to adapt the American charter to Canadian conditions, the bill reproduces in a very literal manner every essential feature of the American Act.” The bank provided for in the bill was naturally on a smaller scale than that of the United States. Then he gives in parallel columns the full number of articles, sixteen in each case, applying to the Canadian bank and the American bank. On perusing them it is quite easy to see that the idea or plan was taken bodily from the United States and changed only so much as to make it applicable to Canada’s position.

This new banking scheme formed the subject of much discussion, in the Legislature and outside of it, for several years. The big merchants of Montreal and Quebec had not abandoned their plan, and were no doubt working for its accomplishment when in 1812 war broke out between the United States and Great Britain. The war served to put an end for the time to the projects for a new bank. The various writers dealing with this stage of Canada’s history appear to agree in their statements that the maintenance of considerable bodies of British troops in Canada served to make business prosperous for the producers and merchants. The troops consumed large quantities of produce, which was purchased by the Home Government at famine prices. Consequently, exports of produce tended to decline. One authority says that about the only exports passing down the St. Lawrence at this time were bills of exchange.

During the war the currency troubles were largely removed, too, through the issue of the army bills. These bills were issued at first in denominations of $25 and upwards bearing interest and in the denomination of $4 not bearing interest. Afterwards bills of the denominations of one, two, three, five, eight, ten, twelve, sixteen and twenty dollars were added to the non-interest bearing issues. The large interest-bearing bills could be converted into small bills not bearing interest; and the small bills could be converted into large bills subject to interest. The rate of interest was 4 pence per £100 per day. Bills were redeemed at the option of the commander in cash or bills on London at thirty days’ sight at the current rate of exchange.

While these army bills were in circulation there was plenty of currency available for carrying on the country’s business. The total outstanding on March 27th, 1815, was £1,249,996. After the close of the war, the issues were rapidly redeemed. A year later, in April, the outstandings had been reduced to £197,974. At the end of 1820, all bills had been retired. Their cancellation brought back the currency troubles in an aggravated form; and the merchants and citizens redoubled their efforts to secure authorization of a bank which would transact, deposit exchange, and discount business, and issue notes to serve as circulating medium.

Even before the army bills were withdrawn and cancelled, the agitation for a bank was renewed. Early in 1815 a motion was introduced in the Lower Canada Legislature to resolve the House into a committee of the whole to consider the establishment of a bank. This came to nothing. At the next session sundry Montreal merchants petitioned for incorporation as a bank. The dissolution of the House on 28th February, 1816, put an end to the bill which was framed to give effect to this plan. It was put in again when the new House assembled; but before it could be passed the House was prorogued. Then, to quote Professor Shortt, “The merchants of Montreal, who had been chiefly interested in the attempts to get a bank charter, feeling, no doubt, that the sympathy of the business community was with them, and that it would be a pity to lose another year with no more certainty of success, * * * decided to start the bank _without a charter_. Accordingly, on May 19, 1817, the articles of association of the Montreal Bank were adopted, and the corporation proceeded to organize.”

The founders of the bank had their articles of association published in The Montreal Herald, May 22, 1817. Our authority states that he was not able to discover any copy of The Herald for that date. But he found that the Quebec Gazette, exactly one week later, on May 29th, copied from The Herald an editorial item commenting on the new enterprise thus:

“In the first page of this paper the articles of the Montreal Bank Association are laid before the public. Such an establishment has always been a favorite with this journal, and we cannot but congratulate the community on the prospect of a wonderful change for the better in the agricultural and mercantile pursuits of this province. The articles of this most laudable association, so far as we are enabled to judge from practical experience in our younger years, and from much reading, are drawn up with great judgment and wisdom, and seem extremely well calculated for our local position. We forbear making any remarks on the subject for the present, further than that we wish the establishment the utmost success in all its bearings.”

These original articles of the Montreal Bank, according to evidence collected by Professor Shortt, were without doubt adapted from the proposed charter for the Canada Bank, drawn up in 1808; and as we have already seen, the articles of the Canada Bank were almost literally copied from the charter of the first Bank of the United States. Just a few months before the Montreal Bank articles were signed--in January, 1817--the second Bank of the United States was organized. If more evidence is required to demonstrate that our banking system was originally founded on the United States model as then existing, it is supplied in the statement that one of the officers of the newly created Montreal Bank was sent to New York to study the methods of the American institution, and that one of the first officers of the Montreal Bank was an American experienced in United States banking.

The names of the first officers are given as follows: President, John Gray; cashier, Robert Griffin; accountant, H. Dupuy; first teller, Mr. Stone.

The directors, appointed the first year after organization, were: John Gray, George Garden, John Forsyth, Horatio Gates, James Leslie, George Moffat, F. W. Ermatinger, David David, Austin Cuvillier, John McTavish, George Platt, Hiram Nichols, and Charles Bancroft.

The Montreal bank directors and officials continued to press for incorporation. They did not, however, finally secure it until May 18, 1822, when the Royal assent was given to the bill passed by the Legislature for the purpose.

The following resumé of its history may be given:

The Bank of Montreal opened for business on Monday, 3rd November, 1817, in premises in a building belonging to the Armour estate, situated on St. Paul Street, between St. Nicholas and St. Francois Xavier streets, with a paid-up capital of $350,000.

In the year 1819 the capital was increased to $650,000, and in the following year to $750,000. In 1829 the capital was $850,000; in 1841, $2,000,000; in 1845, $3,000,000; in 1855, $4,000,000; in 1860, $6,000,000; in 1873, $12,000,000; in 1903, $14,000,000; in 1905, $14,400,000; in 1912, $16,000,000.

In the first full year (1819) of the bank’s operation, a dividend was paid at the rate of 8 per cent per annum, and since then (with the exception of the years 1827 and 1828, when the bank did not pay any dividend), the annual dividends have ranged from six per cent to sixteen per cent (or say, a dividend of 12 per cent, with a bonus of 4 per cent), according to the earnings. But of late years 10 per cent per annum has been the rate paid, with a bonus of 1 per cent in April, 1912.

After 8 per cent had been paid as dividend in 1819, a balance of $4,168 remained on hand, and was laid aside as a _rest_. From that date of small beginnings the rest has steadily grown. In 1825 it was $30,780, going down to $12,064 in the following year, and then up again to $107,084 two years later; in 1830 it stood at $31,360. Five years later it stood at $80,660, reaching $197,828 in 1837; in 1840 it showed $89,480; in 1850, $120,192; in 1860, $740,000; in 1870, $3,000,000; in 1880, $5,000,000; in 1883, $5,750,000; in 1884, $6,000,000; in 1900, $7,000,000; in 1908 $12,000,000; and now it stands at $16,000,000, and there are additional undivided profits amounting to $696,463.27.

In 1903 the Bank of Montreal purchased the assets and business of the Exchange Bank of Yarmouth. In 1905 it acquired the People’s Bank of Halifax, in the same way, and in 1907 the People’s Bank of New Brunswick at Fredericton was also acquired in this way by the Bank of Montreal.

In 1906 the Ontario Bank having intimated that it was in difficulties and would have to suspend, the Bank of Montreal assumed all its liabilities, and it was subsequently liquidated without loss.

In 1863 the Bank of Montreal was appointed Banker in Canada for the Canadian Government, and on 1st January, 1893, Mr. E.S. Clouston being general manager at the time, the bank became their financial agent in Great Britain, also.

On 4th December, 1911, Sir Edward Clouston resigned the position of general manager and was succeeded by Mr. H.V. Meredith.

Other banks followed the establishment of the Montreal Bank.

Next year, 1818, a company of Quebec merchants organized the Quebec Bank. On March 17th the articles were ratified and on the 18th the books were opened for subscriptions to the stock. On September 16, 1822, the Royal assent was given to the bill incorporating this second bank. Less than two months after the Quebec Bank’s articles were signed a company of “speculative Americans attracted to Canada by the prosperity of the war period,” entered into articles of association under the name of Bank of Canada. This bank was formed in Montreal to compete with the Montreal Bank. It started with a capital of £300,000 as against the Montreal Bank’s capital of £250,000 and the Quebec Bank’s capital of £150,000. Royal assent was given to its bill of incorporation on September 16, 1822, the same day as the Quebec Bank’s bill was signed.

The charters of these two banks followed the lines of the charter of the Montreal Bank. The Bank of Canada passed out of existence in a few years.

These were the first three chartered banks to be started in British North America. Upper Canada was not far behind in the matter of organizing a bank. The Bank of Upper Canada got its charter in 1821. In 1820, the Bank of New Brunswick was incorporated; in 1825 the Halifax Banking Company started as a private bank; in 1832 the Bank of Nova Scotia was chartered. Soon several other banks were started in Upper and Lower Canada and in the Maritime Provinces.[2]

In 1837 the banks experienced very stormy weather. There was a great panic in the United States followed by general suspension of specie payments. Also business in Canada was completely disorganized by the rebellion. In May, 1837, the Lower Canada banks suspended specie payments. In the Upper Province the banks continued to meet their liabilities in specie until March of the next year. Specie payments were resumed in the United States and in Lower Canada in June, 1838; but in November another outbreak in the Lower Province necessitated a second suspension. Finally, payments were resumed in Lower Canada in June, 1839, and in Upper Canada four months later. That represents the last occasion on which the Canadian banks have suspended specie payments. For seventy-three years they have stood up, in fair weather and foul, meeting all demands in specie or its equivalent. The American banks have suspended generally on four or five occasions since 1837.

Of the banks now having head offices in Montreal the Bank of British North America is the next to appear on the scene. This institution was formed in 1836 by “British capitalists interested in the prosperity and commerce of the North American colonies,” to quote from “The Canadian Banking System,” by R.M. Breckenridge. The nominal capital was £1,000,000 sterling; and £690,000 of the capital paid up and utilized in the business of the bank in America. The connections of the British Bank were in both Upper and Lower Canada, New Brunswick, Nova Scotia, and Newfoundland. The bank was obliged to procure legislation from each province or colony. This legislation or authorization was secured in 1837 and 1838.

Doctor Breckenridge mentions that the Nova Scotia Act recites that the bank had introduced into that province the system of cash credits and of allowing interest on deposits, usually known as the Scotch system of banking. As it was difficult to operate the bank under authority of so many different provincial statutes, the directors secured a Royal Charter in 1840. In granting it, the British Government stipulated that the capital of £1,000,000 should be fully paid up and that no notes under one pound currency should be issued. This charter also limited the liability of the stockholders to the amount of their subscriptions. The Bank of British North America thus had a wider territorial scope than any of the other banks in Canada. It gradually increased its power and influence; and in 1867, when the Commercial Bank was about to fail, we find that the Bank of Montreal and the British were regarded as the two big, strong banks of the metropolis, able to bolster up the crippled institution if they found it advisable to put forth their strength.

The next bank appearing on the list with head office in Montreal is the Molsons. This charter was granted in 1855. The original capital was £250,000, authorized, of which £50,000 were to be paid in before the bank should begin business; and the whole amount was to be paid up in five years. The author of “The Canadian Banking System” says the Molsons, the Zimmerman Bank, the Niagara District, and the Eastern Townships came into the field “when the tide of sudden and remarkable prosperity which followed the Reciprocity Treaty of 1854 was beginning.”

The Molsons was one of the few banks to take advantage of the famous “Act to establish Freedom of Banking,” passed in 1850 by the Legislature of the Province of Canada. Banks taking advantage of this act were required to deposit with the receiver general provincial securities for not less than £25,000 currency, par value, as security for the redemption of their notes. The receiver general would then deliver to the bank an amount of registered notes equal to the amount of debenture lodged. The notes were marked “Secured by provincial securities deposited with the Receiver General.” This represented an attempt to introduce to this country the system of bond secured currency which had then been taken up in the United States. The Canadian Government’s action in this matter was prompted in part by the desire to improve the market for its issues of debentures. At that time the Government resorted to various devices for converting the resources of the banks to its own uses.

The Bank of British North America also took advantage of the provisions of the Free Banking Act as regards note issue. It is understood that the British did so in order to obtain the right to issue small notes.

The charter of the Merchants Bank of Canada was obtained in 1861; and it began on 9th May, 1864, with a capital of $100,000, Hugh Allan being the founder and first president. This bank operated as a local Montreal institution for the first four years, and in 1868 it expanded into an important branch bank through acquiring the estate of the Commercial Bank, which failed in 1867, the failure following closely after the closing of the Bank of Upper Canada. The bank thereby acquired a valuable connection in Ontario and placed itself in position to develop with the growth of that great province.

It is interesting to note that between 1867 and 1873 there was strong competition in the matter of increasing paid-up capital among the larger banks. The Bank of Montreal, the Canadian Bank of Commerce (which had recently been organized in Toronto) and the Merchants were particularly active in calling up new stock.

The bank return for 30th June, 1867, at Confederation, showed twenty-eight banks in existence with total assets of $80,772,834. And at the end of June, 1873, there were thirty-three banks, with assets of $168,519,746.

Among the existing at present Montreal institutions the Banque Provinciale ranks next to the Merchants in point of age, taking into account the fact that it is the successor to Banque Jacques Cartier. The Jacques Cartier was chartered in 1861, the same year as the Merchants.

Then comes the Royal Bank--its head office in Montreal--qualifying it for recognition as a Montreal institution. The great business now controlled by the Royal Bank of Canada had its beginning in Halifax in 1864. According to the “Historical Sketch” of this bank, by J. Castell Hopkins, a co-partnership institution called the Merchants Bank was established that year with J.W. Merkel as president and George Maclean as cashier. In 1869 it was transformed into a joint stock institution, and received a charter under the name Merchants Bank of Halifax. The capital was $300,000, the reserve fund $20,000, and total assets $729,163. In 1887 the bank opened a branch in Montreal, Mr. Edson L. Pease as manager. Since then the bank’s business in this city has rapidly increased. In 1901 the bank’s name was changed to Royal Bank of Canada, as the business had assumed nation-wide proportions. And on March 2, 1907, the head office was transferred from Halifax to Montreal. Mr. Pease had assumed the general management in 1900, and the establishment of the general manager’s office in Montreal dates from that year.

La Banque d’Hochelaga was organized by French-Canadian capitalists, and received its charter in 1873.

The story of Montreal’s banking institutions would be incomplete without a reference to the Montreal City and District Savings Bank. Although it does not belong to the list of chartered banks, the City and District, in the sixty-eight years of its existence, has taken a prominent and very useful part in the financial life of the metropolitan city. It now has fourteen branches in Greater Montreal; and its total resources are well above the thirty million dollar mark.

Also it should be remembered that various other banks, having head offices in other cities, have taken a very important part in the work of developing Montreal on the financial side. This is shown by the record of branch offices operated in the city. According to Houston’s Bank Directory for December, 1914, the banks with head offices in Montreal, and other banks, had branch offices in the city as follows:

BANKS WITH HEAD OFFICES IN MONTREAL

Offices. Banque d’Hochelaga (1874) 28 Bank of Montreal (1817) 17 Royal Bank of Canada (1869) 21 Molsons Bank (1855) 10 Montreal City and District (1846) 15 La Banque Provinciale (1900) 12 Merchants Bank of Canada (1864) 8 Bank of British North America (1836) 3 --- Total 114

BANKS WITH HEAD OFFICES ELSEWHERE

Offices. Standard (1873) 1 Bank of Toronto (1855) 8 Canadian Bank of Commerce 7 Dominion Bank 4 Quebec Bank (1818) 5 Bank of Ottawa 2 Imperial Bank of Canada 2 Union Bank of Canada (1865) 5 Banque Nationale (1860) 1 Bank of Nova Scotia 3 Sterling Bank of Canada 1 Home Bank 6 --- Total 45

The Bank of New Brunswick, established in 1820, the oldest of the list, existed until 1913 when it was merged with the Bank of Nova Scotia. The Canadian Bank of Commerce is the most important, the total of its resources having risen to an equality with the resources of the Bank of Montreal, and the number of its branches being considerably greater than the number of Bank of Montreal branches. The Commerce was incorporated originally as the Bank of Canada in 1858. From the beginning of Canadian banking, until a comparatively recent period, the Bank of Montreal occupied a dominating position in regard to the other banks. At Confederation the Bank of Montreal had roundly one-fourth of the total capital of the banks, and more than one-fourth of the total assets.

GROWTH THROUGH ABSORPTION

Largely by means of amalgamations, the Commerce and the Royal have improved their positions relative to the Bank of Montreal. The growth of these two banks has been phenomenal. Thus, taking the Commerce, the total assets in 1870 were $7,844,681; in 1880 they were $21,435,711; in 1890, $22,596,520; in 1900, $42,822,799; and in 1912 (September 30th), $242,172,114. Since the beginning of the twentieth century the resources have increased nearly six fold. In that period it has absorbed the Bank of British Columbia, the Halifax Banking Company, the Merchants Bank of Prince Edward Island, and the Eastern Townships Bank.

The Royal Bank’s phenomenal growth also dates from the end of the nineteenth century. As late as 1898 its total assets were but $12,681,664; in 1910 they were $92,510,346; and in 1912 (September 30th), they amount to $172,908,661. In the list of banks absorbed by the Royal are Banco de Oriente, Santiago, Cuba; Banco del Comercio, Havana, Union Bank of Halifax, and Traders Bank of Canada.

The Bank of Montreal, too, has absorbed several other banks; but it can be said that it has not augmented its resources in that manner to such an extent as its rivals have. In recent years its absorptions began with the taking over of the Exchange Bank of Yarmouth in 1903. Afterwards the People’s Bank of Halifax and the People’s Bank of New Brunswick were absorbed on successive occasions. And, of course, the Bank of Montreal acquired a considerable portion of the Ontario Bank’s business through its action in assuming the liabilities of that institution.

In order to show the recent progress of the Canadian banking institutions now in existence, the following table is given, comparing them in respect of total assets as at September 30, 1912,[3] and December 31, 1890. The banks are given in order according to amount of paid-up capital as at the end of 1890:

Bank. December 31, 1890. September 30, 1912. Montreal $ 47,978,000 $ 240,503,000 Commerce 23,061,000 242,172,000 Merchants 21,664,000 83,805,000 British 14,285,000 67,528,000 Quebec 9,030,000 21,343,000 Toronto 12,188,000 57,643,000 Molsons 12,186,000 52,958,000 Imperial 10,055,000 78,110,000 Dominion 12,407,000 73,607,000 Nova Scotia 8,911,000 66,982,000 Ottawa 5,534,000 50,310,000 Hamilton 6,719,000 47,695,000 Nationale 3,997,000 24,158,000 Union 6,419,000 66,985,000 [A]Merchants (Halifax) 5,849,000 172,908,000 Standard 6,052,000 39,758,000 Hochelaga 2,975,000 29,475,000 New Brunswick 3,070,000 12,676,000 [B]Jacques Cartier 2,841,000 12,115,000 ------------ -------------- $215,221,000 $1,440,731,000

[A] Now Royal Bank of Canada. [B] Now Banque of Provinciale.

This table shows at a glance the wonderful progress made by the banking institutions of the country. Although Montreal can claim only about one-third of these institutions as her own, in the sense that they have head office in Montreal, yet it is the case that the financial development of the city has been promoted by the growth of practically all of the banks.

Probably there is no other country in the world able to show such a record of advancement. In the case of eighteen banks with resources in 1890 of $215,221,000, the increase has amounted to $1,225,000,000, or nearly six hundred per cent, in less than twenty-two years. Counting in the new banks it can be said that the resources at present are seven times the resources possessed in 1890 by the eighteen banks appearing in the first list.

BANK CLEARINGS

The statistics of bank clearings at the principal centers also serve to illustrate the financial growth of Montreal and of Canada. In 1892 there were clearing houses in operation at four cities--Montreal, Toronto, Halifax and Hamilton. The total of exchanges for each city in the year ending August, 1893, was: Montreal, $602,180,723; Toronto (exclusive of the Bank of Toronto), $326,009,971; Halifax, $59,835,278; and Hamilton, $38,871,401. The grand total was therefore $1,026,897,373. Montreal thus had about sixty per cent of the total.

The following table shows how the clearing system of the city and of the country has developed:

Year Ending Clearings. May, 1902. December, 1911. Montreal $ 982,455,000 $2,370,487,000 Toronto 710,860,000 1,852,397,000 Winnipeg 155,506,000 1,170,763,000 Vancouver 49,675,000 543,484,000 Calgary 218,681,000 Ottawa 213,932,000 Victoria 29,071,000 134,929,000 Quebec 133,319,000 Hamilton 43,388,000 125,251,000 Edmonton 121,447,000 Halifax 91,545,000 88,194,000 St. John 40,734,000 77,328,000 Regina 73,032,000 London 71,534,000 Saskatoon 56,757,000 Brandon 29,430,000 Lethbridge 28,818,000 Brantford 27,806,000 -------------- -------------- $2,103,234,000 $7,337,615,000

In 1902 Montreal’s average daily clearing was about $3,270,000; and in 1911 it was $7,900,000.

The outstanding feature of this exhibit is the progress of the great cities of the West. In ratio of increase the Western cities far surpass the Eastern cities. Winnipeg, Vancouver, Calgary and Edmonton are rushing to the front. Of course, the growth of the clearings of these secondary centers serves to swell the clearings at Montreal and Toronto. Ultimate settlement of differences or balances at the smaller places is made by putting through drafts on the greater centers.

Montreal stands well up in the list of North American cities in the matter of bank clearings, her position being from seventh to ninth. But, when the clearings of a Canadian city are compared with the clearings of a United States city, it should be remembered that the existence of the branch system in Canada has a tendency, in some respects, to make our figures appear less. For example, the cheques and items drawn on or payable at the Bank of Montreal, Montreal, which the other branches of the Bank of Montreal receive each day, do not figure in the daily clearings. Each institution clears within itself every day a very large aggregate of transactions.

The banks of Canada originating from Montreal now have an international reputation. The greatest financial institutions and the most famous financiers of Europe and America regard our leading banks as worthy of their respect. Our banks have established their branches in the United States, Mexico, the West Indies, Newfoundland, and in England and France; and they do useful work in all those countries.

II. INSURANCE

A. FIRE

The Phœnix Fire Company, established in Montreal in 1804, was not only the first insurance company in Canada, but it was the first insurance corporation to leave England in search of business. It was founded by a company of merchants to insure their sugar warehouses, and being an innovation, most business houses in England up till then having been composed of partnerships, it was severely frowned upon by the “experts.” Seeing that many British firms were desirous of insuring their Canadian property it decided to establish its office here the better to be able to handle such policies. It soon found that there was a good field for its activities outside of English owned buildings and its Canadian office was a flourishing adjunct by the time 1811 was reached. It was destined to have the field all to itself until 1818, either because it had firmly entrenched itself during this time or because Montreal and Canada in those days offered a very unattractive sphere from an insurance point of view. The Phœnix in those early days won for itself a splendid reputation and grew to be recognized in the light of a bounteous institution by the people of Eastern Canada, and today it successfully holds its own against its younger rivals in the city, while in the country districts, where tradition probably counts for more, it is a household word and people insure with it for the not inadequate reason that their fathers and grandfathers did. The Phœnix Company not only introduced fire insurance to the rank and file among our Canadian people, but it encouraged the formation of fire fighting forces, itself donating engines, the city of Montreal being a recipient of one of these machines, which put it in possession of probably the first piece of fire fighting apparatus it ever owned.

In 1818 the Phœnix monopoly in Canada was challenged at Quebec by the Quebec Fire Insurance Company, which was established in that year in the Ancient Capital, its formation being the first practical effort on the part of Canadians to get a share of the lucrative business which must have been obtainable at that time for a corporation operating “on the ground floor” as it were. The second insurance office to be established in Montreal itself was the result of the enterprise of the Ætna Fire Insurance Company, a concern which had been constituted in Hartford, Connecticut, that birthplace of so many great fire and life institutions, in 1819.

These three companies seem to have practically parcelled up the business of Eastern Canada among themselves until the ’50s, their only rivals being several local mutual associations, brought into existence probably by Montrealers anxious to secure some of the wealth that was pouring into the coffers of the Phœnix, Quebec, and Ætna, but which were doomed shortly to meet a disastrous fate. In Upper Canada the British America, a Canadian enterprise, and a branch of the Hartford, had begun operations, the former in 1833 and the latter in 1836.

The epochal decades of the ’50s and ’60s saw a tremendous impetus given to the fire insurance business in Montreal, seven great companies commencing careers which have continued with uninterrupted success till the present day. In 1851 the Royal, the famous English Company, established itself here, as did the Liverpool and London and Globe, another great British corporation, while the Mutual Fire Insurance Company of the City of Montreal was inaugurated in 1859. This last-named concern changed its title to the Montreal Canada Insurance Company in 1904 and took out a Dominion license, having operated under its Lower Canada charter until that date.

In 1854 came a tremendous test for all the companies doing business here--the big fire which practically wiped out the whole of the east end of the city. The mutual fire associations, which had been eking out a more or less haphazard existence, were unable to meet the claims made upon them as a result of this fire and consequently died ingloriously, much to the advantage of the Phœnix and the Ætna, which settled every claim promptly, and liberally. The Royal, and the Liverpool and London and Globe were also called upon to pay a share of the losses of this great conflagration, which they did at once, though of course, their liability was very small compared to that of the older established companies.

The growth of Montreal’s trade and the increase of her population during the next decade are reflected in the eagerness with which British houses, which had hitherto done their Canadian business from home, decided to operate from this end. In 1862 the North British and Mercantile Company and the London Assurance opened head offices for Canada here, to be followed in 1863 by the Commercial Union, in 1867 by the Northern Assurance, and in 1868 by the Guardian.

The coterie of fire insurance companies then in existence seems to have been capable of absorbing all the new business that could be written quite easily because for fourteen years no other concern thought it advisable to enter the Canadian field. It was in 1882 that the next office was to be inaugurated, that of the Scottish Union and National, the Caledonian opening up here in 1883, while in 1886 another Canadian enterprise, the Manitoba Assurance, was founded here, its policies being guaranteed by the Liverpool and London and Globe.

After this the colony of insurance headquarters here was swollen at regular and short intervals as will be seen from the following list of newcomers between 1886 and 1911 (the nationality of the companies being given in parentheses):

Atlas (British), 1887; Insurance Company of America (United States), 1889; Phœnix of Hartford (United States), 1890; Queen (United States), 1891; Alliance (British), 1892; Law Union and Rock (British), 1899; Ottawa Assurance (Canadian), 1899; Home (United States), 1902; German American (United States), 1904; St. Paul Fire and Marine (United States), 1907; Yorkshire (British), 1907; Provincial (British), 1910; Royal Exchange (British), 1910; Continental Life (United States), 1910; Underwriters at American Lloyds (United States), 1910; and Union of Paris (French), 1911. Since 1912 three or four small fire companies have retired, but to offset this, others, to the number of six or eight, have entered the field.

A statistical table prepared in 1912 to show Montreal’s predominant position in fire insurance underwriting in the Dominion and its long lead on Toronto, which is the second city in Canada in this connection, follows:

Gross Premiums. Losses. Income. Expenses. Montreal Companies $14,335,000 $6,000,000 $14,657,000 $11,594,000 All Canada 26,867,000 3,912,000 9,333,000 6,596,000 Toronto Companies 7,767,000 10,936,000 26,699,000 21,833,000

Ins. in force. Assets. Cap. paid-up. Montreal Companies $1,360,720,000 $20,213,000 $53,363,000 Toronto Companies 717,000,000 5,985,000 15,140,000 All Canada 2,279,688,000 38,000,000 72,427,000

B. LIFE

The development of the life insurance business of Canada began in 1846 by the establishment in Montreal of offices by the Scottish Amicable and Scottish Provident Companies. After doing a fine business these two corporations relinquished their right to do new business in the year 1878. In the meantime, in 1847, the Standard Life Assurance Company, a Scottish institution, had entered the Canadian field, operating from a head office in this city, the Royal and Liverpool and London and Globe inaugurating life departments at the same time as they began to write fire insurance from their Montreal office in 1851. In 1857 the ranks of life companies here were augmented by the appearance on the scene of the Life Association of Scotland, though this concern has written no new business since 1878.

The period between 1860 and 1911 is punctuated at intervals with the advent of new life corporations in Canada, Montreal being selected as headquarters for most of them. In 1862 came the North British and Mercantile, and a year later the Commercial Union and London and Lancashire Life.

Eighteen sixty-five may be considered as a banner year for purely Canadian life insurance underwriting, for the Sun Life, that splendid monument to the genius of a number of Montreal men, was founded in this year. The same year witnessed the arrival of the Hartford Company of Connecticut in this city, this concern being followed the next year by the Ætna and Phœnix Mutual Life companies, and in 1868 by the Connecticut, these three last-named corporations also having their headquarters in Hartford. The Phœnix Mutual and Connecticut relinquished their licenses as far as new business was concerned in 1878.

The Equitable, having its head office in New York City, and the Union Mutual of Portland, Maine, also broke ice here in 1868, the North Western Mutual of Milwaukee coming in 1871 and deciding to do more new business in 1878. In 1887 the Germania of New York State, and the New York Life were attracted to Canada and to Montreal.

After this there was a lull in the formation of new businesses until 1907, when the Prudential Life Insurance Company of Canada was constituted, this company afterwards changing its title and selecting that of the Security Life. In 1908 the Prudential Life of the United States began to cater for Canadian business from headquarters here and in branches elsewhere.

The Phœnix, the doyen of fire insurance companies in Canada, decided to branch out into life, and launched a department to deal with this phase of underwriting in 1910. In this year the Travellers, a strong Canadian enterprise, was formed. Several others not mentioned also intervened.

Since the above there has been no retirements in life insurance, but four or five new companies have been added.

The following table indicates that Montreal holds the lead in life insurance activity in the Dominion in the same way that it does in the sister sphere of fire:

Gross Paid Total Premiums. Losses. Income. Expenses.

Montreal Companies $15,858,000 $6,793,000 $21,789,000 $13,240,000 Toronto Companies 14,435,000 4,900,000 18,414,000 7,791,000 All Canada 40,608,000 19,194,128 53,911,619 40,607,303

Ins. in force. Assets. Cap. paid-up.

Montreal Companies $344,573,798 $116,027,692 $18,551,510 Toronto Companies 292,366,595 76,829,479 4,308,024 All Canada 950,220,771 265,214,984 26,540,323

MISCELLANEOUS INSURANCE

To the Guarantee Company of North America, a Montreal concern, founded by local men and backed by Montreal capital, goes the palm for being the pioneer among guarantee institution in Canada. This company, whose standing is second to none in the world, was brought into being in 1851.

In 1911 the contribution of Montreal to the insurance activity of the Dominion was as follows:

Fire, 30 companies. Life, 26 companies. Miscellaneous, 16 companies.

For the sake of comparison, the figures for the same divisions of insurance activity in Toronto, which comes second to Montreal in Canadian business, are given. They follow:

Fire, 17 companies. Life, 17 companies. Miscellaneous, 21 companies.

In the whole of the Dominion the totals for these sections in 1911 were as follows:

Fire, 62 companies. Life, 49 companies. Miscellaneous, 51 companies.

Six Montreal and three Toronto life companies no longer take new business.

As against the one small branch office of the Phœnix in 1804, in 1911 Montreal could boast of possessing 141 offices devoted exclusively to the handling of insurance in one form or another, and eighty-three agents. No reliable and exact estimate of the actual number of people who are employed here by insurance firms and companies is obtainable, but it is safe to put it up in the thousands.

In fire insurance Montreal has been made the headquarters of many of those great British corporations who occupy an impregnable position in the world in fire underwriting, a number of American companies also handling their Canadian connection from this point. Several enterprises with a Canadian backing also operate from here, while every fire insurance concern in the Dominion of any importance is represented in Montreal by agents of influence or by special managers and staffs.

Canada has very largely assumed control of its own life insurance business, and Montreal financiers have always been to the front in developing this phase of underwriting. Those British and American corporations which have selected this city as a starting point for their Canadian ventures are among the most powerful in the world, and have materially assisted in placing Montreal in the first place among Canadian cities in the business done in life insurance.

Montreal can also show that it has always lead in that section of insurance enterprise covered by the term “miscellaneous” and which includes the writing of policies on automobiles, accidents, employer’s liability, plate glass, steam boilers, burglary, sickness, inland transit, sprinkler leakage, titles, live stock, hail, weather and tornado, etc.

To-day the bulked insurance business of Montreal institutions is probably the greatest of any one city in the world by reason of the fact that most of those influential enterprises which are split up and divided among a number of cities in Great Britain and the United States have concentrated their head offices for Canada in this city.

It is safe to say that next to the great banking and railway business done by local institutions more money is handled by the insurance companies than by any other group of enterprises.

FOOTNOTES:

[1] An article by H.M.P. Eckhardt has been mainly used in this chapter.--_Ed._

[2] One of these, the Banque du Peuple, established on July 11, 1835, has since lapsed.

[3] The statistics in the accompanying pages do not go, for the most part beyond 1912. They will suffice for comparative purposes. The rates of losses or gains will be found to be comparatively the same till 1914.