Allied Dunbar
Encyclopedia
Allied Dunbar was a large British
assurance group. In its early years as Hambro Life Assurance it was listed on the London Stock Exchange
and was once a constituent of the FTSE 100 Index
. However it was acquired by BAT Industries
, merged with Eagle Star, and sold to Zurich Financial Services
in 1998.
, Lord Joffe
and Sir Sydney Lipworth
after Abbey Life
was taken over, when they obtained seed finance from Hambros Bank
, and set up its headquarters in Swindon
town centre in 1970 under the name 'Hambro Life Assurance'. It was first listed on the London Stock Exchange
in 1975. The company expanded its financial adviser
operations during the late 70's and early 80's, acquiring the Allied Unit Trusts of which it was soon the major unitholder, to become 'Allied Hambro' in 1984; after Hambros disposed of their highly profitable investment, changing to 'Allied Dunbar' in 1985 after it purchased Dunbar & Co., a small private bank; following the acquisition by BAT Industries
, the asset management department was hived off to form Threadneedle, and it was bought out by Zurich Financial Services
in 1998.
Its forceful direct sales force became the Zurich Advice Network (ZAN) in 2001. In 2005 and following changes in industry regulation ZAN evolved into a stand-alone limited entity known as Openwork - a directly authorised multi-tiered financial distribution network.
As far as possible, Allied Dunbar avoided all direct financial exposure to policyholder funds and liabilities. The company took the minimum responsibility for its sales force, even after tied agents were regulated under the Financial Services Act 1986, and the hard-sell tactics of some of its self-employed "Sales Associates", soon gave it the soubriquet of Allied Crowbar. The company's financial responsibility for the sales force, in the form of "indemnity commission" paid in advance to profits accruing from premium payments, was largely passed back to its self-employed Sales Managers. Most Mortality risk was reassured, and every other kind of risk was ruthlessly designed out or managed out as far as practicable; the company was thus highly successful in comparison with traditional life offices.
To take advantage of regulatory, tax and trust law, the group was successively expanded to provide pensions, investment bonds, unit trusts, banking services, and offshore policies.
s made complaints. These complaints were prompted by a fall in the market (which meant that nearly nine in ten of their accounts were likely to suffer maturity value and mortgage repayment shortfalls) as well as new regulations which required that customers be notified semi-annually of the projected earnings of the endowment, with particular regard to such shortfalls. Around 1,000 such complaints were rejected during the above period. The Financial Services Authority
investigated the rejected complaints, as well as Allied Dunbar's internal procedures for handling such customer complaints, and while maintaining a majority of them, it fined the company £725,000 on 11 March 2004 for mishandling such complaints.
In its decision, the Financial Services Authority
noted that:
Allied Dunbar stopped writing endowment mortgages in November 2001. It was not the only company fined by the FSA, and at the time this was only the fifth largest fine for offences related to endowment complaint mismanagement. Friends Provident
had been fined £625,000 in November 2003, and five other firms had previously been fined a total of £5.2 million for their mismanagement of such complaints. The largest fine fell to Royal Scottish Assurance
, which incurred a £2m penalty.
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
assurance group. In its early years as Hambro Life Assurance it was listed on the London Stock Exchange
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
and was once a constituent of the FTSE 100 Index
FTSE 100 Index
The FTSE 100 Index, also called FTSE 100, FTSE, or, informally, the footsie , is a share index of the 100 most highly capitalised UK companies listed on the London Stock Exchange....
. However it was acquired by BAT Industries
British American Tobacco
British American Tobacco p.l.c. is a global tobacco company headquartered in London, United Kingdom. It is the world’s second largest quoted tobacco company by global market share , with a leading position in more than 50 countries and a presence in more than 180 countries...
, merged with Eagle Star, and sold to Zurich Financial Services
Zurich Financial Services
Zurich Financial Services AG is a major financial services group based in Zurich, Switzerland.-History:The Company was founded in 1872 as subsidiary of the Schweiz Marine Insurance Company under the name Versicherung Verein...
in 1998.
History
The Company was founded by Sir Mark WeinbergMark Weinberg
-Early life and education:Weinberg was born in South Africa and educated at King Edward VII School in Johannesburg. He received degrees in Commerce and Law and practised as a barrister...
, Lord Joffe
Joel Joffe, Baron Joffe
Joel Goodman Joffe, Baron Joffe CBE is a Labour peer in the House of Lords.Born in South Africa, he was educated at the University of Witwatersrand , and worked as a human rights lawyer 1958-65, including at the infamous 1963-4 Rivonia Trial, representing Nelson Mandela...
and Sir Sydney Lipworth
Sydney Lipworth
Sir Sydney Lipworth, QC, is a South African born British lawyer, businessman, public servant and philanthropist.Lipworth was born in Johannesburg, South Africa, in 1931.Educated at King Edward VII School in Johannesburg...
after Abbey Life
Abbey Life
Abbey Life plc was a leading life assurance business based in London also with an office in Bournemouth. It was listed on the London Stock Exchange and was once a constituent of the FTSE 100 Index.-History:...
was taken over, when they obtained seed finance from Hambros Bank
Hambros Bank
Hambros Bank was a British bank based in London. The Hambros bank was a specialist in Anglo-Scandinavian business with expertise in trade finance and investment banking, and was the sole banker to the Scandinavian kingdoms for many years...
, and set up its headquarters in Swindon
Swindon
Swindon is a large town within the borough of Swindon and ceremonial county of Wiltshire, in South West England. It is midway between Bristol, west and Reading, east. London is east...
town centre in 1970 under the name 'Hambro Life Assurance'. It was first listed on the London Stock Exchange
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
in 1975. The company expanded its financial adviser
Financial adviser
A financial adviser, is a professional who renders financial services to individuals, businesses and governments. This can involve investment advice, which may include pension planning, and/or advice on life insurance and other insurances such as income protection insurance, critical illness...
operations during the late 70's and early 80's, acquiring the Allied Unit Trusts of which it was soon the major unitholder, to become 'Allied Hambro' in 1984; after Hambros disposed of their highly profitable investment, changing to 'Allied Dunbar' in 1985 after it purchased Dunbar & Co., a small private bank; following the acquisition by BAT Industries
British American Tobacco
British American Tobacco p.l.c. is a global tobacco company headquartered in London, United Kingdom. It is the world’s second largest quoted tobacco company by global market share , with a leading position in more than 50 countries and a presence in more than 180 countries...
, the asset management department was hived off to form Threadneedle, and it was bought out by Zurich Financial Services
Zurich Financial Services
Zurich Financial Services AG is a major financial services group based in Zurich, Switzerland.-History:The Company was founded in 1872 as subsidiary of the Schweiz Marine Insurance Company under the name Versicherung Verein...
in 1998.
Its forceful direct sales force became the Zurich Advice Network (ZAN) in 2001. In 2005 and following changes in industry regulation ZAN evolved into a stand-alone limited entity known as Openwork - a directly authorised multi-tiered financial distribution network.
Business Model
Allied Dunbar's business, like its predecessor Abbety Life's, was unit-linked: the direct investment risk and reward due to market changes was very largely exclusive to the individual investors, rather than the company, its shareholders or other planholders. Despite its initial form as an Assurance Company, Allied Dunbar was always essentially a retail investment group. Its initial sales proposition was to offer unit-linked Bonds, which could be sold door-to-door (unlike unit trusts at the time), and including property investment (when property unit trusts were not then authorised. Although nominally single premium life policies, these offered only nominal life cover, and incidentally neatly avoided the liability to ad valorem stamp duty on life policies. Equity exposure was obtained by investing via a range of feeder funds into Allied Unit Trusts, whose manager was owned by Hambros; and property via Berkeley Hambro.As far as possible, Allied Dunbar avoided all direct financial exposure to policyholder funds and liabilities. The company took the minimum responsibility for its sales force, even after tied agents were regulated under the Financial Services Act 1986, and the hard-sell tactics of some of its self-employed "Sales Associates", soon gave it the soubriquet of Allied Crowbar. The company's financial responsibility for the sales force, in the form of "indemnity commission" paid in advance to profits accruing from premium payments, was largely passed back to its self-employed Sales Managers. Most Mortality risk was reassured, and every other kind of risk was ruthlessly designed out or managed out as far as practicable; the company was thus highly successful in comparison with traditional life offices.
To take advantage of regulatory, tax and trust law, the group was successively expanded to provide pensions, investment bonds, unit trusts, banking services, and offshore policies.
Endowment complaints
Over the period May 2001 to April 2003, a portion of the nearly 300,000 Allied Dunbar customers who had been sold endowment mortgageEndowment mortgage
An endowment mortgage is a mortgage loan arranged on an interest-only basis where the capital is intended to be repaid by one or more endowment policies. The phrase endowment mortgage is used mainly in the United Kingdom by lenders and consumers to refer to this arrangement and is not a legal...
s made complaints. These complaints were prompted by a fall in the market (which meant that nearly nine in ten of their accounts were likely to suffer maturity value and mortgage repayment shortfalls) as well as new regulations which required that customers be notified semi-annually of the projected earnings of the endowment, with particular regard to such shortfalls. Around 1,000 such complaints were rejected during the above period. The Financial Services Authority
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
investigated the rejected complaints, as well as Allied Dunbar's internal procedures for handling such customer complaints, and while maintaining a majority of them, it fined the company £725,000 on 11 March 2004 for mishandling such complaints.
In its decision, the Financial Services Authority
Financial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
noted that:
Allied Dunbar stopped writing endowment mortgages in November 2001. It was not the only company fined by the FSA, and at the time this was only the fifth largest fine for offences related to endowment complaint mismanagement. Friends Provident
Friends Provident
Friends Provident was an organisation offering life insurance based in the United Kingdom. It was founded as a mutual Friendly Society for Quakers, although it was demutualised in 2001 and became a publicly listed company, no longer linked with the Religious Society of Friends...
had been fined £625,000 in November 2003, and five other firms had previously been fined a total of £5.2 million for their mismanagement of such complaints. The largest fine fell to Royal Scottish Assurance
Royal Bank of Scotland
The Royal Bank of Scotland Group is a British banking and insurance holding company in which the UK Government holds an 84% stake. This stake is held and managed through UK Financial Investments Limited, whose voting rights are limited to 75% in order for the bank to retain its listing on the...
, which incurred a £2m penalty.