BRITISH and Irish insurance group Sun Life and Provincial Holdings is expected to be valued at around £1.5 billion sterling when it is floated on the stock market in the middle of next month by the French insurance combine UAP.

The float is likely to involve the sale of new shares worth up to £600 million, putting a value of some £900 million on UAP's ongoing majority interest. New capital raised through the share sale will be used partly to redeem £320 million loans from UAP.

Bankers Robert Fleming yesterday issued the "pathfinder prospectus" for the float as part of its marketing drive among international investors. The retail offer aimed at private investors will be introduced by mid June. Pricing of the share sale will need to reflect the mixture of life and general insurance activities.

Investors are likely to be attracted by Sun Life's strong position as Britain's fourth largest life and pensions business, earning £90 million annual profits and writing £1.5 billion gross premium income, mainly through independent financial advisers.

Also whetting investors' appetites will Sun Life's position as one of the City's leading fund managers with more than £19 billion in funds under management. Similarly, investors are likely to look positively on the group's majority interest in New Ireland, the second largest life company in the Republic with a 10 per cent share of the new regular premium life and pensions market.

New Ireland's annual profits of £34 million in 1995 will account for nearly 20 per cent of the group's overall profits. Directors of Sun Life and Provincial believe that New Ireland is well positioned to take advantage of the rationalisation and consolidation currently taking place in the life assurance market in Ireland and to achieve wider market penetration, particularly in the pensions market".

By contrast, investors will probably be much less enthusiastic about Provincial, Britain's 13th largest general insurer which earned £64 million profits last year on nearly £350 million net premiums in commercial, motor and personal lines. Now is not a good time to be floating a general insurance business, either on its own or as part of a larger grouping.

Not only is the insurance cycle lurching downwards again after three good years, new competition from phone based insurers is intensifying greatly, particularly in the motor sector.