Abstract: A Clear and Present Danger? The State, Foreign Control, and the Canadian Life Insurance Industry, 1950-1962

Laurence B. Mussio

Abstract

This paper examines the relationship between the Canadian Life Insurance Industry and the government of Canada in responding to the threat of a massive American-based takeover of the Canadian life insurance industry in the 1950s. It does so primarily through the experience of the then-largest Canadian life company, Sun Life of Canada. In the context of the growing contintentalization of the post-World War II Canadian economy, joint-stock life companies found themselves particularly vulnerable to the depredations of aggressive groups of investors south of the border. In the United States, a new and more pugnacious attitude on the part of stockholders added to the perilous environment. Stockholders were much more willing to challenge managerial prerogatives over a range of issues, from profit levels to investments, previously under the undisputed control of management. By the 1950s these pressures combined to make Canadian stock life companies increasingly vulnerable to takeover. Companies found themselves with ever-increasing assets balanced on a relatively small shareholder investment. As a general rule Canadian life company shares were closely held by a relatively small number of shareholders. Further, the capitalization itself was divided into comparatively few shares. When U.S. investors turned their attention to the institutional insurance behemoths north of the border, they saw large, profitable companies ripe for takeovers that could be accomplished with relatively modest amounts of money. Throughout the 1950s a determined group of American investors sought to capture managerial control of Sun Life of Canada. They were met with a broad consensus of corporate executives and public policy-makers who held to the view that, like the transportation, communications, and public utilities sectors, banking and insurance were key economic activities best left to Canadians. This threat against Canadian life companies represented perhaps the greatest peril to Canadian control in the financial services sector of the postwar period. The struggle to define both industry interests and the national interest commanded the efforts of both senior management and federal regulation. The result was the mutualization of virtually all the Canadian major life insurance companies. This paper is based on extensive access to an extraordinary range of corporate and public archives in Canada and the United States.</blockquote></p></div></div><div class="main2"><div class="text2"><p>Marina Nicoli