Calculating Gifts: George A. Huggins and the Conferences on Annuities, 1927-1959

Calculating Gifts: George A. Huggins and the Conferences on Annuities, 1927-1959

Part 3.2: A Gift Annuity Campaign Catches Fire - Annuity Bond Marketing
Article posted in Charitable Gift Annuity on 28 January 2015| comments
audience: National Publication, Ron Brown | last updated: 4 February 2015
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Summary

Ron Brown continues his series on the evolution of Gift Annuities as a mainstream giving tool.

By: Ron Brown

Marketing Charitable Gifts as Annuity Bonds   

Given the consumer demand for family financial security, it is not surprising that charitable fund raisers would piggyback on the success of commercial finance.  Use of investment terminology apparently began in 1831 with Yale College’s Annuity Bond with John Trumbull, the first reported gift annuity contract, which was created by the attorney Peter Augustus Jay and published in 1841, two years before the Bible Society’s first annuity in 1843.[1]

Peter Jay’s Annuity Bond terminology persisted: the Bible Society and most other charitable organizations in the opening decades of the 20th century energetically promoted the financial benefits of annuity bonds, focusing on the similarities rather than the differences between a gift annuity and an investment. 

For example, in 1905 the monthly magazine of the Baptist Home Mission Society included this blurb:

A BETTER WAY.  The Society will receive your money now, giving a bond for the payment to you during life if you so desire it.  Send for our Annuity Plan.[2]      

The Methodist Year Book for 1918[3] had a typical advertisement:

LIFE ANNUITY BONDS, prepared under expert legal advice and protected by the investments of the Board, are sold at liberal rates to those who desire to help the Board, but who require an absolutely sure income during life.

An advertisement by the American Sunday-School Union in 1921[4] was more aggressive, even stating (incorrectly, one hopes) that gift annuities “yield a higher income than ordinary bonds”:

The American Bible Society embraced without question the aggressive marketing of Annuity Bonds as investments.  The Society’s fundamental advertising strategy was set before Frank Mann’s arrival.  Here is an ad from the Bible Society Record in January 1919:[5]


Minutes of the Ways and Means Committee between 1919 and 1924 record no debate over the propriety of employing commercial advertising firms to sell Bible Society Annuity Bonds as if they were investment contracts. 

This Annuity Bond ad appeared in the Bible Society Record in December 1919:[6]


Like many charities, the Bible Society promoted gift annuities as an alternative to War Bonds, as in this ad from 1921[7]:

The most energetic and well-known advocate of annuity bonds as investments was deeply involved with the American Bible Society: Henry Albert Collins, “The Annuity Man.”

The Annuity Man: Henry Albert Collins

On June 15, 1920 Frank Mann reported to the ABS Ways and Means Committee that he had met with Mr. and Mrs. Henry Albert Collins, “who are devoting their lives to life annuities for religious institutions.”[8]  A popular author nicknamed “The Annuity Man,” Collins incorporated overt sales pitches for gift annuities in his novels, short stories, interviews, lectures, and pamphlets.  Collins was so influential, and his marketing strategy so typical of charities in the early 1900s, it is worth providing a few selections.  Readers unfamiliar with how charities used to promote gift annuities might be surprised to see the way we were. 

For example, in 1914 a regional Presbyterian school system in Mississippi published a 32-page pamphlet by Collins entitled After Many Days: A Story[9] designed as an extended conversation among four men on a train.  A passenger named David Gladden tells how he used part of an inheritance from his father to purchase an “Optional Life Annuity Bond,” which “contained the provision that in case my wife or I should ever need the income from this twenty-five thousand dollars, on demand the organization would pay us six per cent. annuity annually.”

Gladden suffers a series of financial shocks: his cotton mill fails; boll weevils destroy his crops; his wife requires expensive medical care.  After many years he talks with the organization that had issued his annuity bond, and learns he is entitled to receive back payments:

He asked me if we wanted all the earned and unpaid annuity to be paid to us, or whether we wished the accrued amounts to be added to the original twenty-five thousand dollars, and on this sum to draw the annuity as long as Mrs. Gladden or I should live.[10]

Mr. Gladden takes his deferred annuity payments as a lump sum, with which he buys a local bank!  He tells his travel companions that after nine years he has earned two hundred thousand dollars “because I took my wife’s advice and bought a life annuity bond that paid us large annuities after many days.”

One of the passengers listening to the story happens to be Dr. M.E. Melvin, Superintendent of the Correlated Presbyterian Schools of Mississippi (an actual person whose photo and contact information are printed in the pamphlet), who thanks Gladden for his testimonial and says “it will be a help to me in securing money on the life annuity plan for our schools and colleges”:

Thus far we have issued a few Life Annuity Bonds, all Immediate Bonds.  We are also ready and willing to issue Optional, Deferred, or Survivorship Life [two-life] Annuity Bonds.

Naturally enough, someone asks Dr. Melvin about his schools, and he gladly provides a full description of their mission and heartwarming anecdotes of poor but deserving students.  Mr. Gladden is moved to invest in one of Melvin’s annuity bonds. 

After Many Days includes applications of gift annuities that are quite sophisticated.  There was considerable flexibility for philanthropic planning in the years before state and Federal authorities recognized, taxed, and regulated charitable annuities.  A passenger wants to help the schools, but says all of his money is invested in real estate that is mortgaged, “so your plan will not fit my case.”  “On the contrary,” Dr. Melvin exclaims: we can accept and sell your property, pay off your mortgage, then provide you with an annuity based on the sale:

We have taken in trust some real estate at certain valuations, and with the assistance of the owner we have been able to find a purchaser for the property at the price named.  Then after paying the indebtedness on the property we issue an annuity bond for the balance of the proceeds.[11]

A fourth passenger asks Dr. Melvin for a private conversation, leading to an extended summary of the benefits of gift annuities, an application form, and “a sample of a Life Annuity Bond.”  He too is won over, and agrees to give an annuity.  Who could resist such a deal?  “Cast your bread upon the waters,” Dr. Melvin says, “and after many days it will come back to you buttered.”

Collins concocts a similar story in his novel Ice-Cream Alley.[12]  A wealthy widow tells the president of Endeavor College she does not trust her two sons to spend an inheritance wisely: “Riches have been a curse to them.”  After hearing the many benefits of annuity bonds, she agrees to transfer all of her securities and her real estate in trust to The Central Bank in order to purchase survivorship gift annuities for herself and her children.

In His Master’s Word[13], a pamphlet published by Otterbein College, Collins writes of a concerned husband and father who regrets learning about annuity bond investments so late in his life:

I wish I had understood this life annuity system when I was in the bank because many of our friends asked my advice about making investments and I could have suggested a better use of money than making investments in lands, mortgages, bricks and mortar.[14]

There is no pretense of novelistic license in the misleading claims made by Collins in his booklet for the Methodist Episcopal Church entitled Life Annuity Bonds[15], which begins with the headline “Add Years to Your Life”:

As people advance in years they are often burdened with the fear that their riches may take wings and fly away.  

Competent authorities estimate that in this country alone over a hundred million dollars annually are engulfed in the whirlwind of predatory finance.  Much money can be saved by the adoption of the life annuity system.  This is a much better way of disposing of money or property than by making a will . . .  Freedom from the business cares of life and an annual assured income adds years to the span of life.  It enables the annuitant to spend the sunset of life in comfort and peace.

The booklet lists seven “Objections to a Will” such as legal costs and uncertainty: “It puts responsibility upon others [i.e., trusting an executor to follow directions] which ought to be borne by oneself.” 

On the other hand, Collins enumerates 27 benefits of a Life Annuity Bond, such as:

(3) The fear is removed that the will may be broken, as is frequently the case   where there is enough money involved.

         (7) As Life Annuity Bonds are nontaxable, they are a preferred investment.

(24) Life Annuity Bonds oftentimes benefit the relatives more than by simply leaving them money which they may lose.

One page of the booklet is a sample Annuity Bond contract.  The piece ends with a strong assurance that gift annuities are more secure than money in a bank:

         Board of Foreign Mission Bonds are an Absolutely Safe Investment

During the past 50 years, 2,193 State and private banks have failed in the United States, involving a loss to investors of $110,625,555.69.  The Board of Foreign Missions has been in existence for nearly a century and has never failed to pay every dollar of obligation. 

Frank Mann found in Henry Albert Collins a kindred spirit of enthusiasm for gift annuities.  Their conversation was enormously helpful to Mann as confirmation of the course he had set for the American Bible Society.  He had his notes from the meeting with Collins typed and reproduced for the Ways and Means Committee in June 1920, and presented committee members with sample marketing materials written by Collins for other charities:

He [Mann] submitted for the Committee’s information a bound volume of the typewritten notes of the interview and also various annuity material which had been received from agencies suggested by Mr. Collins.  The interview was very profitable and furnished a fund of information to the Officers of the Society about annuities.

A contentious challenge to the aggressive emphasis on Annuity Bonds as investments would divide the Bible Society’s leadership five years later, when the financial stakes had become enormous.  The phenomenal success of its marketing cast a national spotlight on the fairness and accuracy of the American Bible Society advertising campaign.  To its great credit, leaders of the Society would rise to the challenge.  

Copyright:  This essay is copyrighted under the rules of Creative Commons Attribution 3.0 Unported License.  You are encouraged to redistribute the essays at www.giftplanninghistory.org if you credit me as the author.

Previous Articles:
Calculating Gifts: George A. Huggins and the Conferences on Annuities, 1927-1959
Part 1
Calculating Gifts: George A. Huggins and the Conferences on Annuities, 1927-1959 Part 2
Calculating Gifts: George A. Huggins and the Conference on Annuities, 1927-1959 Part 3.1

Upcoming Installments:

Part 3.3: A Gift Annuity Campaign Catches Fire - ABS Campaign
Part 3.4: A Gift Annuity Campaign Catches Fire - National Leadership



[1] Autobiography, Reminiscences and Letters of John Trumbull, from 1756 to 1841 (NY: Wiley and Putnam, 1841).  See Part 3 of my essay on Trumbull’s gift to Yale and the Annuity Bond and Indenture created by Peter Augustus Jay: http://giftplanninghistory.org/wp-content/uploads/2014/04/Part-3-of-3-Yale-gift-annuity-21-Apr-2014.pdf

[2] The Baptist Home Mission Monthly, Volume XXVII, No. 10 (October, 1905), page 400.

[3] Methodist Year Book for 1918, page 156.

[4] Record of Christian Work Advertising, Volume 40, No. 12 (December 1921), page 1090.

[5] Bible Society Record, January 1919 (Vol. 64, no. 1), page 31.

[6] Bible Society Record, October-November-December 1919 (Volume 64, number 10), page 186.

[7] Record of Christian Work Advertising, Volume 40, No. 12 (December 1921), page 1080.

[8] The author and his wife put their money where their heart was: “the Secretary [Mann] reported that Mr. and Mrs. Collins are proposing to purchase an [ABS] annuity bond of between $500 and $1500.”

[9] Published by the Correlated Presbyterian Schools of Mississippi (Jackson, Mississippi: 1914), copyright by Henry Albert Collins.

[10] This creative annuity payment arrangement is based on a once-popular deferred-dividend insurance plan known as a tontine.  See Roger L. Ransom and Richard Sutch, “Tontine Insurance and the Armstrong Investigation: A Case of Stifled Innovation, 1868-1905,” Journal of Economic History, Vol. 47, no. 2 (June 1987), pages 379-390.

[11] The Bible Society took gifts of real estate in exchange for annuities a step further than Collins.  At the first Conference on Annuities in 1927 Arthur C. Ryan, General Secretary of ABS, incorporated the Society’s real estate gift acceptance policy in his presentation: “Other property, including stocks and real estate, which is satisfactory to the Finance Committee of the board concerned may be accepted under a trust agreement to pay the donor or donors thereof the actual net income on such property, when and as accrued, with the understanding that the Society shall have the right to sell such property, and that when such property is sold the society will issue a single or a survivorship annuity agreement for the net proceeds received from the sale of such property at the rate of income paid to annuitants at the age of the donor or donors of such property at the time the sale of the property has been affected [sic].”  “Administrative Policy,” Annuity Agreements of Charitable Organizations (NY: Abbott Press & Mortimer-Walling, Inc.), Wise Public Giving Guide no. 18, page 25.   

[12] Ice-Cream Alley, A Novel (Peoria: J.W. Franks & Sons, 1918).

[13] His Master’s Word (Westerville, Ohio: Otterbein College, 1920).

[14] Several satisfied annuitants are quoted by Collins in an article for the Christian Philanthropist, “official paper of the National Benevolent Association of the Christian Church.”  One testifies that “Wife and I began giving on the annuity plan in 1899.  We consider it the safest and best investment a person can make.”  Reprinted under the caption “Pleased Annuitants” in the Northwestern Christian Advocate (Chicago: Volume LXIV, No. 29, July 12, 1916), page 688.

[15] New York: The Board of Foreign Missions of the Methodist Episcopal Church, 1916; copyright by Henry Albert Collins.

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