Sun Alliance Group plc

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Sun Alliance Group plc

1 Bartholomew Lane
London EC2N 2AB
United Kingdom
(071) 588-2345
Fax: (071) 826-1159

Public Company
Incorporated: 1989
Employees: 15,076
Assets: £15.09 billion (US$24.36 billion)
Stock Exchange: London

The Sun Alliance Group represents the amalgamation of four separate British insurance operations, three of them companies and one a chartered corporation. All of them were prominent in the development of the British insurance industry. The most senior of the four, the Sun Insurance Office, retained its separate identity for almost 250 years until its 1959 merger with the most junior, the Alliance Assurance Company, founded in 1824. The other two members of the combination, the London Assurance Corporation and the Phoenix Assurance Company, date from 1720 and 1782, respectively. Sun Alliance Group, the holding company which replaced Sun Alliance and London Insurance in January 1989, is not an insurance company and the group is therefore no longer bound in law to observe those restrictions which prevent insurance companies from conducting non-insurance business.

SUN INSURANCE OFFICE

The Sun Fire Office, as it was originally known, was founded in 1710. Its founder was the eccentric Charles Povey, whose interest in astronomy may have influenced his choice of name. Financial considerations caused Povey to sell his interests in the concern to the 24 members of the Company of London Insurers in 1710. Thereafter Povey exercised no official control over the infant Sun Fire Office.

The Sun’s first decade gave little intimation of its future size and significance. A disparate and shifting body of managers, in the main lacking significant City connections, coupled with a limited number of staff and types of transaction, held back development. From about 1720, however, there occurred a series of events that were to help set the Sun firmly in the forefront of London’s fire offices: a complete reorganization of the firm’s capital structure; the appointment of the first of a series of able and honest men to the two principal positions of treasurer and secretary—Colonel Robert Dalzell and Thomas Watts; and a restructuring of the Sun’s management.

Control of the Sun’s affairs had originally been confined to two bodies—the general meeting of managers and, of more practical importance, the Committee of Management appointed from among them. From about 1720, the latter body took the important step of appointing subcommittees to conduct and report on particular aspects of the office’s business. By about 1730 there were four of these, each controlled by a manager and staffed by clerks. These subcommittees were the ancestors of the Sun’s modern departmental system.

The Sun’s managers were powerful, as shareholders exercized no control over their activities and were not permitted to see accounts, a state of affairs then typical of most British insurance companies and not remedied until the end of the 19th century.

The managers themselves underwent transformation during the decades after 1720. From this date we find them to be men of education, real ability, and social distinction, linked with Parliament, the City, the landed aristocracy, and, later in the century, with those entrepreneurs and magnates who engineered the world’s first industrial revolution. One such Sun official, William Hamilton—manager from 1809 to 1859, treasurer from 1846 to 1852—recovered the Rosetta Stone from the French in 1801, and in the next year saved the Elgin Marbles from shipwreck.

The period 1720 to 1790 was one of rapid expansion. By 1786 the Sun had a private firefighting force and over 120 agents in the provinces. By 1790 it could claim a dominant position among the nation’s insurance companies, with a gross premium income of over £100,000, much larger than that of its rivals, the Phoenix and Royal Exchange. The four decades which followed, however, were a time of stagnation. By the 1780s, risks had grown extremely complex, actual rates of loss had soared, and established ofices, like the Sun and the London, considered it necessary to raise premium levels again and again, especially on the extremely high-risk mills and distilleries that lined the River Thames in London and had begun to spring up across the land.

This situation was exploited fully by the numerous new insurance ventures that had been founded in response to the country’s growing need for insurance services and that now began to offer discounted rates. This led to a destructive rate war, which put many offices out of business altogether and depressed the industry until the 1830s. One such new company, the Phoenix Assurance, set up in 1782 and soon to become an important rival, was acquired by the Sun in 1984.

The Sun survived by entering new types of business and expanding into new geographical areas. Thus 1810 saw the establishment of Sun Life Assurance and 1836 the creation of a special foreign department to handle foreign business.

The Sun’s first foreign ventures were into Europe, initially the Baltic seaboard cities of Germany, later into France and Spain. The experiment met with mixed results—hostility from local insurance companies and the obstructive actions of governmental bureaucracies proved almost as damaging as the disastrous Hamburg fire of 1842 that cost the Sun £117,000 and almost succeeded in driving it from the Continent entirely.

The Sun turned instead to the more promising territories of the British Empire, and over the next 60 years set up agencies in virtually every British colony or dominion. The massive U.S. market was successfully penetrated when the Sun acquired the Watertown Insurance Company of New Jersey in 1882. The Chicago and Boston fires of 1871 and 1872, but more especially the San Francisco disaster of 1906—which cost the Sun £333,000—enabled the Sun to display its solidity and trustworthiness to an admiring American public.

Perhaps because of the cautious nature of its management the Sun had lagged behind its rivals, notably the Phoenix, in establishing foreign operations. It led the way, however, in organizing the major British fire offices in the 1840s into the Association of Tariff Offices, whose function was to prevent a repetition of the rate wars of previous decades.

One perhaps unintended result of the Sun’s foreign exposure was its recognition of the need for formal statutes and publicly accessible accounts. These were achieved, in 1891, by the passing of the Sun Insurance Office Act, by which name the Sun Fire Office became known until its merger with the Alliance Assurance Company in 1959.

In 1907 the Sun set up an accident department, reflecting the growth of this type of insurance in the dawning age of mass transport and machines. The department grew rapidly in size, particularly after 1945 when a far greater general level of affluence significantly increased the number of vehicles on British roads. In the inter-war years the Sun also pioneered many new types of accident insurance, for example a golfer’s policy in 1921 and caravan cover in 1938.

The outbreak of World War I in 1914 had comparatively little direct influence on the financial position of the Sun since it, in common with most other British insurers, excepted war risks from its cover. This did not mean it escaped the war years unscathed—naturally a large number of its staff served in the nation’s armed services, and a fire at Salonika, Greece, in 1917 caused losses amounting to nearly £300,000. The straitened years of the Depression caused the Sun—and the British insurance industry in general—a reduction in the growth of premium income and an increase in the rate of default on policies, indicating the financial difficulties facing both private individuals and commercial enterprises.

The Sun had entered the field of marine insurance in 1921 and sought, both by its 1931 acquisition of the Elder’s Insurance Company of Liverpool and its 1938 agreement with the Royal Exchange to operate a joint marine underwriting account, to establish itself in a field still dominated by the London.

The coming of World War II in 1939 posed no serious financial threat to the Sun, although once again the company lost a large number of its staff to the armed services. However the exigencies of total war demanded, as they had not in World War I, the temporary removal of the Sun’s operations from London to the greater safety of the countryside.

In the 1920s, the Sun had several times reorganized its U.S. operations and this process continued in the 1950s, finally resulting in 1958 in the setting-up of a common management structure in the United States for its own operations and for those of the Royal Exchange Assurance and the Atlas Assurance Company.

LONDON ASSURANCE CORPORATION

The expansion of British trade in the first decades of the 18th century revealed inherent weaknesses in the extant system of maritime insurance in London. In 1719 a wealthy City merchant Sir James Lambert, the goldsmith and banker Stephen Ram, and the broker Philip Helbut, floated the idea of a new marine insurance operation.

A subscription was opened for what was initially known as Ram’s Insurance and under the patronage of Lord Chetwynd a petition was presented to King George I arguing that Case Billingsley’s concurrent petition for an exclusive charter for maritime business represented an unfair attempt to monopolize marine insurance. Case Billingsley, a solicitor, had been instrumental in the founding of Lord Onslow’s Insurance in 1718, subsequently to become the Royal Exchange Assurance Corporation.

At the same time Lambert and Ram—Helbut by this time having dropped out—persuaded James Colebrook, who had also established a subscription for an insurance company, to unite with them, and all three repetitioned the king. The attorney general decided that neither petition should be rewarded with a charter, and there matters might have rested had not the government made known its requirement for £600,000 for the Civil List—a public fund to support the royal household—whereupon Lambert and Ram each offered £300,000 for a charter. In June 1720 Lord Chetwynd’s Insurance was incorporated under the name of the London Assurance Corporation. The transaction of marine insurance was made exclusive to it and to its slightly senior rival, the Royal Exchange Assurance Corporation.

Business began in a City coffee house under a governor, two deputies, and a court of directors. The London became associated in the public mind with those numerous ludicrous or fraudulent enterprises that together constituted the notorious South Sea Bubble of 1720, the collapse of which in the autumn of that year ruined thousands of speculators.

The London, distancing itself as best it could from official suspicion, realized that in the chaotic circumstances following the crash it could not keep to the original schedule of payments for its charter, and boldly—and successfully— sought 50% remission of the sum. Thus the London survived the perilous days of its infancy. By the end of that tumultuous year marine underwriting was in full swing.

Until the acts of 1806 and 1811 prohibiting the insurance of slave ships and their cargoes, it was a matter of course for those operating in the notorious triangle trade between Britain, West Africa, and the Americas to insure their vessels with City insurers, and the London became heavily involved in this business. As well as covering against shipwreck and “insurrection of negroes,” the London also offered insurance against loss due to piracy. Claims for the latter were frequent in the 18th century because of Britain’s almost continuous state of war with one or other of the European powers. Between 1744 and 1746 the London hosted the Commission for the Distribution of Reprizals, a body which sought to reimburse shipowners who had genuinely suffered loss at the hands of French or Spanish warships. Despite such circumstances, the London also insured large numbers of foreign vessels, principally Spanish and Portuguese.

The fortunes of the London were not exclusively anchored to the success of maritime business. From the beginning, Lord Chetwynd and the directors had envisaged the London’s engagement in the fire insurance business, no doubt stimulated by the example of the Sun Fire Office, set up barely ten years before. Consequently the directors sought and secured another charter in 1721, which empowered the London to underwrite fire business. Almost immediately agents were appointed in all parts of the kingdom. The London followed the Sun in setting up its own corps of firefighters. Curiously, the London set up no agencies for marine business in the major ports until 1829 when its Liverpool agent was instructed to handle this business too.

Like the Sun, the London arrived relatively late in the appointment of foreign representation, partly because business in the core area of marine insurance tended to gravitate towards the City. Not until 1853 were overseas agents appointed, but in that year alone, ten appeared in the Far East, India, and at the Cape of Good Hope. In the next three decades representation spread to South America, Japan, and Australasia. The first U.S. agency for fire businsess was set up in 1872, followed by a marine operation four years later. By 1881, the London had reached San Francisco and six years later Chicago. This process of foreign expansion had been initiated by J.C. Powell during his governorship, between 1822 and 1846. Powell also carried out a reform of the corporation’s internal structure in the 1830s. Powell had a distinguished predecessor in Alexander Aubert, governor from 1787 to 1805, a fellow of the Royal Society and a noted astronomer.

One of the earliest major losses involving the London was the destruction of its own premises in Cornhill Street in 1748. Losses exceeded premium income threefold and the years to the end of the century were ones of slow recovery. A steady rise in premiums during the 19th century was once again offset by the San Francisco disaster of 1906, which cost the London the then-huge sum of £966,750.

The London was also notable during the late 18th and early 19th centuries for the size and frequency of donations it considered patriotic. It voted £200 towards the cost of suppressing the 1797 mutiny in the fleet and £500 towards the relief of dependents of British casualties of the 1815 Waterloo campaign.

In 1824, the Alliance Assurance Company succeeded in having the act of 1720, limiting the transaction of marine insurance to the London and Royal Exchange, repealed despite very considerable opposition from the two corporations. The next ten years were a period of declining profitability for the London. One of its responses was to consolidate its position by a series of mergers and acquisitions, beginning with the Commercial & General Life Assurance Company in 1853 and followed by the Asylum Life Assurance Company four years later. The year 1853 also saw the amalgamation of the Ship and Fire charters by special act of Parliament.

Life insurance for the London, although it had begun as far back as 1721, remained quiescent until the early decades of the 19th century, in contrast to the energetic efforts being made at the Pelican Life Assurance. One reason for this was the London’s tardiness in applying the principles of actuarial science to its operations. Consequently, it was not until after 1945 that life premiums exceeded £1 million.

The opening decade of the 20th century was one of slow growth for the London but World War I stimulated its marine business enormously, with premium income reaching a peak in 1917. The extremely conservative nature of the corporation was modified during the war by its having to employ women on the staff for the first time. The fast rate of expansion in the interwar period—characterized especially by the acquisition or establishment of several large operations in Australasia and the United States—produced a general restructuring of the London’s management system that split responsibility for home and foreign business and resulted in 1932 in the appointment of the corporation’s first general manager.

The Depression, which had begun three years earlier, naturally reduced the rate of growth of premium income and this remained at a comparatively low level until the outbreak of World War II in 1939. The London’s directors appear to have regarded the Munich crisis of 1938 as clear warning of the imminence of war and they decided to evacuate the majority of the corporation’s staff from London to the greater safety of Somerset and Buckinghamshire, where they remained for the duration of the war and indeed for two years afterward. Once again, under the stimulus of wartime conditions, the London saw its marine business grow rapidly, reaching a high in 1942 at over £2.5 million in premium income, although by this time its fire business had outstripped marine business in size. Although damaged during the blitz of 1940, the London’s City headquarters remained structurally intact, so the corporation faced few of the housing difficulties experienced by other less fortunate firms.

Despite an 1891 act of Parliament granting the London the right to conduct accident insurance, it did not, like the other major insurance companies, seriously consider the subject until the passing of the Workmens’ Compensation Law in 1905. This stimulated the London, as it did the others, to enter the field in 1907. In the next 50 years accident business grew rapidly, outstripping life in premium income by the 1950s, to rank third behind marine and fire.

PHOENIX ASSURANCE COMPANY

The punishing premiums levied by the Sun, the London, and the Royal Exchange on the mills and distilleries in the last decades of the 18th century caused a group of “sugarbakers,” or distillers, led by the forceful and influential Nathaniel Jarman, to set up its own fire office in 1782, simply and appropriately called the New Fire Office until 1813, when it became the Phoenix Assurance Company.

The New Fire Office provided the first serious competition in the fire business for the veteran offices. Significantly the Sun, most affected by the arrival of this new competitor, early on decided on a policy of limited cooperation with the Phoenix, an unusual measure testifying to the success of the Phoenix’s policy of offering discounted premiums if the insured also took out further insurances with the company.

The Phoenix’s survival and growth depended at least as much upon the energy and intelligence of its senior management. Notable in this respect were George Griffin Stonestreet, secretary from 1786 to 1802, and his successor Jenkin Jones, secretary from 1802 to 1837. Under their guidance the Phoenix weathered the depression in the insurance industry in the late 18th century and early decades of the 19th century. By 1815 the Phoenix had overtaken the Sun in premium income.

This period also saw the Phoenix establish the Pelican Life Assurance in 1797, acquire several large provincial operations, set up agencies across Britain, and, perhaps most importantly, penetrate the European market from the Baltic Sea to the Iberian Peninsula. Simultaneously the Phoenix established itself in Canada—in Montreal in 1804—although the War of 1812 and the burning of Washington, D.C., by British troops put an end to its first operation in the United States.

These early foreign ventures are indicative of the Phoenix’s foremost place in the overseas expansion of British insurance companies. The middle decades of the 19th century were costly for the Phoenix. In the Hamburg fire of 1842 it lost £250,000, more than twice as much as its rival, the Sun, a loss which hit it nearly as hard as did the disastrous 1807 fire at St. Thomas in the Virgin Islands.

The directors of the Phoenix, viewing their widely spread foreign risks, might have used such disasters as good reason for contracting or closing down some of their numerous foreign liabilities. Instead, largely through the far-sighted advocacy of Jenkin Jones, they chose to reaffirm their commitment to their foreign enterprises. The wisdom of retaining foreign risks became apparent two generations later when, by the early years of the 20th century, foreign business began to outstrip home earnings.

These decades and the three that followed saw the establishment of agencies in the Far East, the Cape of Good Hope, Australasia, Eastern Europe, and the eastern Mediterranean. In 1879 a New York operation was once again set up, replacing the reinsurance work that the Phoenix had undertaken for other British offices up to that point. The San Francisco disaster of 1906 affected the Phoenix particularly badly—initially, there were doubts about its capacity to survive its liabilities—but, like the other Sun Group companies, the Phoenix settled with an alacrity and generosity which impressed the Americans. Although business in the last two decades of the 19th century was relatively stagnant, legally the era was one of significance for the Phoenix. The 1895 Phoenix Assurance Company Act enabled the Phoenix to add life and accident business to its operations—a provision it chose not to exploit until 1907—and placed the company on a modern footing by requiring it to publish its accounts. In 1901 the Phoenix became a limited liability company.

Until 1907 the Phoenix dealt soley with fire insurance, although it enlarged itself periodically by the acquisition of smaller fire insurance companies. In that year the Phoenix reabsorbed its own offspring, Pelican Life Assurance, at that time known as the Pelican and British Empire Life Office, and thus began its career as a composite insurer. Life business further expanded with the 1909 aquisition of the highly respected Law Life Assurance Society. In 1910 the Phoenix entered marine insurance with the purchase of the Union Marine.

Although the 1905 Workmens’ Compensation Law had persuaded the Phoenix to move tentatively into accident insurance, it was not until the 1922 acquisition of the important London Guarantee and Accident Company, with its U.S. interests, that the Phoenix fully established itself in this type of business.

World War I proved financially costly for the company. The Treaty of Versailles failed to provide for the return of the Phoenix’s German interests confiscated at the outbreak of hostilities. At a stroke, the Phoenix lost about 7% of its total fire premiums. Compounding this loss was the abrupt disappearance of its Russian business as the newly created U.S.S.R. canceled all foreign undertakings in the former Russian Empire. Similarly, the aftereffects of the collapse of the Ottoman Empire and the destruction wrought by the Greco-Turkish War of 1922 destroyed the Phoenix’s position in Turkey. The Phoenix’s entry into the expanding aviation insurance market in 1931 helped to offset the effects of the Depression although it was not until the arrival of jet airliners in the 1950s that the Phoenix appointed its first full-time aviation underwriter. The interwar years were also characterized by the setting-up of branch offices to replace the numerous agencies established during the previous century. E.B. Fergusson, managing director from 1939 to 1957, used the years of World War II as an opportunity to make a series of worldwide journeys, setting up new operations in territories hitherto unexplored by the Phoenix, for example in Ethiopia, Persia—now Iran—and Palestine. The two decades after 1945 were sometimes frustrating for the Phoenix, as newly independent countries either nationalized the Phoenix’s operations or, by bureaucratic obfuscation and corruption, rendered them unprofitable. However, in the home market, in North America, and in Australasia the Phoenix recorded high levels of growth in this period, particularly through the successful marketing of new multiperil property insurance policies that began to replace the straight fire policies common until then.

In 1959 a major rearrangement of the company’s capital base took place, increasing authorized capital to £5 million. Nine years later the Continental Insurance Company of New York, the second-largest insurance company in the United States, bought one and a half million Phoenix shares, and the two companies pooled senior management and U.S. operations. By this move, the Phoenix sought to increase its capital yet again for expansion into other areas of insurance. Continental benefited from the Phoenix’s long-established representation in the Commonwealth and the Far East.

The next decade and a half were years of comparative hardships for Britain and for the Phoenix. By the early 1980s senior management had become disillusioned with the performance of the Continental pool, and in 1984 the Phoenix disposed of its 6.25% share. Continental simultaneously sold its 24.3% shareholding in the Phoenix to the Sun Alliance.

ALLIANCE ASSURANCE COMPANY

Despite the depressed conditions in the British insurance industry in the first 30 years of the 19th century, in 1824 two prominent City financiers, Sir Moses Montefiore and Nathan Mayer Rothschild, decided to set up a new insurance company distinguished by a larger share capital and a more influential board than any existing operation. They invited three other men eminent in the spheres of commerce and finance to become co-presidents—Samuel Guerney, member of Parliament John Irving, and Francis Baring of the powerful Baring banking family. The subscribed capital was huge by the standards of the time—£5 million divided into 50,000 shares— a measure of the reputation of the founders. The new company was endowed from its inception with a range of contacts and influence in financial and political affairs as well as a capitalization that made it the equal of the already veteran Sun, the London, and the Royal Exchange.

Its name seems to have arisen from its combination of fire and life business in the one office and also because of stipulation in its prospectus that made it a condition that shareholders had to invest in the Alliance by taking out insurance with it equal to the sum held as shares. The Alliance’s first actuary was Benjamin Gompertz, a fellow of the Royal Society, writer of important works on statistical analysis, and a founder of the Institute of Actuaries.

Without delay, the directors proceeded to the appointment of provincial and foreign agents and by 1825 the Alliance had representation in New York, Quebec, Montreal, and the Indian subcontinent. The Alliance’s North American ventures proved unsuccessful. It closed its U.S. operation in 1826 and, after a series of fires in Quebec and Montreal, withdrew from Canada in 1850. Not until the final decades of the century did the Alliance re-establish itself in North America.

The checkered history of the Alliance’s North American operations was shared by the majority of British insurance companies that tried to enter that lucrative but risky market. However, the Alliance was unusual in the speed and ruthlessness with which it shut down agencies. After the San Francisco earthquake and fire, which cost it £690,000, the Alliance decided to withdraw from the Pacific coast altogether. This readiness to close, open, and close again was explained by the Alliance’s directors as a policy of concentration on quality rather than on quantity of representation.

The Alliance is principally notable for its expansion through the acquisition of established London, provincial, and dominion insurance companies. This process of acquisition began in the 1840s and continued unabated into the first decades of the 20th century, chiefly under the capable leadership of Robert Lewis, managing director from 1912 to 1917, who had begun his insurance career with the Provincial Insurance Company in 1853. The Provincial Insurance Company soon afterward was acquired by the Alliance. Until its 1959 merger with the Sun Insurance Office, the most significant acquisitions were those of the Imperial Fire and Imperial Life companies in 1902.

Already a composite insurance company in that it offered both fire and life insurance from its founding, the Alliance nevertheless had great trouble entering the field of marine insurance. In 1824, on behalf of the Alliance, member of Parliament William Huskisson—a former Sun manager— proposed a bill for the repeal of the 1720 Act which restricted the underwriting of marine business to the Royal Exchange and the London. Huskisson, who later achieved the melancholy distinction of being the first person ever killed by a railway engine, pushed the bill successfully through Parliament but an Alliance shareholder countered by obtaining an injunction restraining the Alliance from taking on marine business. The Alliance’s way out of this impasse was to set up a separate new company, the Alliance Marine, whose shares it finally managed to acquire in 1905.

In common with the other Sun Alliance companies, the Alliance entered the accident business in 1907. It managed to do this, unusually, without needing to acquire an already established accident operation.

The conjunction of these four insurance bodies into the Sun Alliance Insurance Ltd. and the London Insurance Company, predecessor to the current Sun Alliance Group, was essentially a result of the post-World War II trend towards the formation of ever-larger units in industry and commerce. The Alliance was the first to merge with the Sun Insurance Office, in 1959. The new holding company, called the Sun Alliance Insurance, acquired all the shares in the two operations.

A larger merger, with the London, followed six years later, creating a new group called the Sun Alliance and London Insurance. In January 1989 the Sun Alliance and London Insurance pic changed its name to the Sun Alliance Group. The years immediately following the London merger were dominated by the process of integrating the diverse operations of the new group, and by the formation of a central head office administration. The introduction of new types of fire and life cover and the elimination of unprofitable businesses helped offset the losses that inflation, gathering pace in Britain in the 1970s, the stock market crash of 1974, and the severe drought of 1976, inflicted on the group.

Sun Alliance entered the 1980s with a comfortable asset base, a very high solvency margin—125% in 1984—and the ambition to become one of the strongest composite insurance companies in the United Kingdom. All this seemed to point to the Sun Alliance’s expansion through a major acquisition. Still, the announcement in July 1984 of its £400 million bid for the remaining equity of the Phoenix Assurance—a price that many analysts considered low, perhaps reflecting the Phoenix’s troubled financial state in the preceding years— took the British insurance industry by surprise.

Other analysts saw the move as an attempt to make the Sun Alliance safe from foreign predators, expressing suprise that it had not gone for a major U.S. acquisition, to build up its presence in the world’s largest insurance market and to forestall any aggressive moves by a U.S. company.

Sun Alliance’s initial equity holding in Phoenix had been 24.3%, bought from Continental as the price of Phoenix’s withdrawal from Continental’s pool. This deal marked the first step in a process of disengagement from Continental that ended in 1988 with the selling of Phoenix’s Canadian subsidiaries to Continental in exchange for a 75% stake in the French Groupe Barthelmey. There followed a period of restructuring as the Sun Alliance digested its huge purchase, especially with regard to the Phoenix’s wide foreign representation. A long-running inter-union dispute resulted, since Phoenix staff belonged to a different union from that of Sun Alliance’s employees, and Sun Alliance wanted all its staff to belong to one union.

Despite the estimated £155 million that the group lost in the October 1987 hurricane, which devastated parts of southern England—the Sun Alliance had, and still retains, a very high share of the U.K. property insurance market—it has nevertheless pursued a policy of expansion into new areas of insurance by the careful acquisition of operations already successfully established in the field, two such purchases being First Health, a leader in the area of medical expenses insurance, and Bradford Pennine, a specialist motor subsidiary.

In August 1989, Sun Alliance raised its shareholding in its rival Commercial Union to 14.5% at a cost of £256 million. Sun Alliance explained this move as a defensive measure to prevent a large European insurer—rumored by some analysts to be Allianz of Germany—from gaining a major foothold in the U.K. insurance market. Other analysts, however, remembering Sun Alliance’s methods during its successful 1984 bid for the Phoenix, chose to interpret this as a first step toward another protective acquisition and the creation of a giant U.K. composite capable of withstanding a hostile takeover attempt by any foreign predator.

Sun Alliance’s results for 1989 were impressive, despite a 14% fall in pre-tax profits from the 1988 figure. The Financial Times called it the U.K.’s “highest quality financial company,” and noted its continuing underlying asset strength and high solvency margin of 119%. This was the result of the Sun Alliance’s determined defense of its money-making areas, for example U.K. property insurance, and its portfolio of high quality investments.

The incorporation of a new holding company, Sun Alliance Group pic, in January 1989, enabling the group to move into non-insurance business, is firm evidence of its intention to expand by moving into financial services, in addition to maintaining—and perhaps enlarging—an already dominant position in the British insurance industry.

Principal Subsidiaries

Sun Alliance and London Insurance pic; Sun Alliance and London Assurance Co. Ltd.; Sun Alliance Group Properties Ltd.; Sun Alliance Insurance International Ltd.; Sun Alliance Insurance Overseas Ltd.; Sun Alliance Insurance UK Ltd.; Sun Alliance Investment Management Ltd.; Sun Alliance Management Services Ltd.; Alliance Assurance Co. Ltd.; Bradford Insurance Co. Ltd.; The Century Insurance Co. Ltd.; Guildhall Insurance Co. Ltd.; Hogg Robinson Property Services Ltd.; Legal Protection Group Ltd.; The London Assurance; London Guarantee & Reinsurance Co. Ltd.; National Vulcan Engineering Insurance Group Ltd.; The Pennine Insurance Co. Ltd; Phoenix Assurance pic; Property Growth Assurance Co. Ltd.; The Sea Insurance Co. Ltd.; Sun Alliance Fund Management Ltd.; Sun Alliance Linked Life Insurance Ltd.; Sun Alliance Pensions Life & Investment Services Ltd.; Sun Alliance Pensions Ltd.; Sun Alliance Trust Co. Ltd.; Sun Alliance Unit Trust Management Ltd.; Sun Insurance Office Ltd.; Caribbean Alliance Insurance Co. Ltd. (Antigua, 75%); Sun Alliance Holdings Ltd. (Australia); Sun Alliance Australia Ltd.; Sun Alliance Life Assurance Ltd. (Australia); Sun Alliance Phoenix SA (Belgium); London Seguradora SA (Brazil); Sun Alliance Insurance Company (Canada); Sun Alliance and London Assurance Co. (Canada); Yonge Wellington Property Ltd. (Canada); Sun Alliance International Life Assurance Co. Ltd.; A/S Forsikringsselskabet Codan (Denmark, 67.2%); A/S Forsikringsselskabet Codan Liv (Denmark, 67.2%); Fjerde Søforsikringsselskab A/S (Denmark); Groupe Bar-thélémy SA (France); Sun Alliance Immobilier SA (France); Securitas Bremer Allgemeine Versicherungs AG (Germany, 98.8%); Securitas Gilde Lebensversicherung AG (Germany, 99.4%); Sun Alliance Insurance (Hellas) SA (Greece); Hollandsche Verzekering Societeit van 1808 NV (Netherlands); Phoenix of East Africa Assurance Co. Ltd. (Kenya, 61.4%); Sun Alliance Insurance (Malaysia) Sdn. Bhd (60%); Sun Alliance Insurance Ltd. (New Zealand); Sun Alliance Life Ltd. (New Zealand); Sun Alliance Insurance Co. of Puerto Rico Inc. (97.1%); Protea Assurance Co. Ltd. (South Africa, 79.7%); Sun Alliance Insurance (Singapore) Ltd.; Sun Alliance SA (Spain, 94.6%); Wm. H. McGee & Co. Inc. (U.S.A.); London Guarantee & Accident Co. of New York (U.S.A.); Phoenix Assurance Co. of New York (U.S.A.); Sun Insurance Co. of New York (U.S.A.); Phoenix Prudential Assurance of Zimbabwe Ltd. (53.2%).