US blow for Sun Alliance

NIC CICUTTI

A lucrative, century-old trading relationship between Sun Alliance and its US partner, Chubb Corporation, soured yesterday, which could leave the UK composite insurer facing a gradual loss of up to pounds 100m a year in premium income.

Shares in Sun Alliance dropped 18p to 350p at one point, but rallied back to 362p after both sides said negotiations aimed at reversing the imbalance in the business relationship that favours the UK company would take place over several years.

Sun Alliance and Chubb have been involved in joint relationships since 1882. Recently, this has involved Chubb ceding about 14 per cent of its US business, worth about pounds 300m, to Sun Alliance in return for 7 per cent of the UK company's global premium income, worth about pounds 200m. The arrangement is re-negotiated every year.

At a Merrill Lynch insurance conference in New York yesterday, Chubb's chief executive, Dean O'Hare, was reported to have told his audience that his firm was not happy with the relationship and it would be phased out.

Glenn Montgomery, vice-president at Chubb, said: "We have over the past years made adjustments to our reinsurance relationship. This will continue, downwards, so that Sun Alliance will retain more of its global business and we retain more of our US business."