This case is unusual. The primary defendants in this case were directors of a
publicly listed insurance holding company. All but one of the eleven directors was an
independent director. The other director was the chief executive officer of the holding
In 1998, the holding company embarked on a strategy of growth by acquisition.
Within a span of two years, the holding company acquired three other unaffiliated
insurance companies in arms-length transactions. The two transactions at issue in this
case involved the acquisition of publicly-traded entities and were approved by a vote of
the holding company’s stockholders. The holding company’s stockholder base was
diverse and the company had nothing close to a controlling stockholder.
In connection with the last acquisition, the holding company redomiciled to
Bermuda, for the disclosed reason that tax advantages would flow from that move.
Consistent with the objective of reducing its tax burden, the holding company
reorganized its subsidiaries by national line, creating lines of United States, United
Kingdom, and Bermudan subsidiaries. As a result of that reorganization, the holding
company’s top U.S. subsidiary came to be the intermediate parent of all of the holding
company’s U.S. operations. The top U.S. subsidiary also continued and deepened its role
as a guarantor of the holding company’s overall debt, including becoming a primary
guarantor of $260 million of a $490 million line of credit, a secondary guarantor of the
remainder of that debt, and assuming the holding company’s responsibility for
approximately $190 million worth of various debt securities. Nonetheless, after that