It is probably true to say that during the past two decades the most perplexing and important of the problems, with which those responsible for the management of Life Assurance Companies have been called upon to deal, has arisen from the investment side of the business rather than from the commercial and actuarial sides. On the whole, the investment policy followed has so far emerged successfully from the searching tests imposed upon it by the events of recent years but the future remains obscure and there are many lessons still to be learned.

Life Assurance Companies, by the very nature of their business, are compelled to interest themselves in the problems of long-term investment, and it is worth while, therefore, to enquire whether the ordeal through which they have passed has revealed any defects in the present machinery of long-term lending and investing or in the basic principles which have heretofore governed investment policy.

It is remarkable how little attention has been given to this subject. In the past thirty years, only two papers on expenses have been submitted to this Institute, one written by C. H. Maltby over twenty years ago (J.I.A. Vol. XLIX) and the other by J. Rietchel (J.I.A. Vol. XLIV) five years earlier.

We probably know less about expenses than about any other factor in our daily work. No doubt the chief reason for this apparent neglect is the fact that in the past we have had comfortable surplus margins in our premium rates. To-day we are calculating rates on much narrower margins as to interest and mortality, and a study of the expense problem, therefore, appears opportune.