The merger, a few years ago, of two large composite insurance company Groups brought together under one ultimate control three substantial life assurance funds each fully operative and transacting all types of ordinary life assurance and annuity business. Those three funds have now been fused together by the legal transfer of the life businesses of two of the companies in the Group to the parent company and, as this fusion seems to be the first of its kind which has been undertaken for many years, and certainly the first of such size in the life assurance history of Great Britain, it has been suggested that the operation is of sufficient interest to actuaries generally as to warrant the submission of a paper to a sessional meeting. We are, however, conscious of the fact that, whilst the operation may have added to our history as a practical application of the law and some of our principles, it has not added either to previous knowledge or to our technique. The law governing the operation has remained virtually unchanged since the comprehensive review of life company amalgamations by the late K. J. Britt in the paper he submitted to the Institute in April 1931 (J.I.A. 62, 276) and probably the whole of the technical aspects involved have been expounded by Redington in the masterful review of the principles of life office valuations which he submitted in April 1952 (J.I.A. 78, 286).

This paper is concerned with our relationship to the outside world; for by doing all our own teaching and examining we tend to live in a world of our own. It asks what have been and what should be our contributions to investment thought; and where are our teachings different or our views insular.

This is the preamble to the petition presented to the Secretary of State's office of the British Parliament in April 1757 by the promoters of ‘The Corporation for Equitable Assurances on Lives’, the seed from which modern life insurance has sprung. It is undoubtedly the clearest statement made as to the purpose and justification of the life insurance industry and stands as a challenge to those engaged in it.

For the last thirty years the teaching of statistics in universities in this country has been dominated by the relative frequency theory of probability, exemplified in Richard von Mises's book, Probability, Statistics and Truth. This statistical definition along the lines of the long run frequency concept of probability can be illustrated by asking what meaning is to be given to the statement ‘the probability of getting a head on a single toss of a penny is one half.’ The relative frequency adherent would answer something like ‘in a long sequence of repeated tosses, the proportion of outcomes that are heads is one half’. In the last ten years, however, an alternative approach has come to the fore, under the general title of the Bayesian Approach to Statistics. A Bayesian adherent would answer something along the lines that he would be ‘prepared to offer even money on getting a head on a single toss’.