Definity Financial to Acquire Travelers’ Canadian Operations
Definity Financial Corp. plans to acquire the Canadian division of U.S. insurance leader Travelers for a substantial $3.3 billion. This acquisition will elevate Definity to the fourth position among property and casualty insurers in Canada, marking a significant milestone for the company.
Details of the Acquisition
The announcement made on Tuesday specifies that Definity will take over most of Travelers’ Canadian operations, which will add around $1.6 billion in annual gross written premiums to its portfolio—this figure represents the total amount received from policyholders and serves as a crucial component of an insurance provider’s revenue.
With this acquisition, Definity’s total annual premiums are projected to rise to approximately $6 billion, propelling the company from sixth place to fourth in the Canadian insurance market.
CEO’s Vision for Growth
Rowan Saunders, the CEO of Definity, expressed excitement about the acquisition, describing it as a pivotal move towards establishing a Canadian powerhouse in the insurance sector. He noted that in recent years, Definity has been able to grow at a rate roughly double that of the industry average. The impetus for listing the company publicly was to engage in significant market consolidation and take advantage of emerging opportunities within the property and casualty industry.
Funding the Acquisition
To finance the acquisition, Definity will leverage a combination of $1.5 billion from Travelers’ balance sheet and its own cash reserves, alongside $1.6 billion in new debt. This will be supplemented by raising $281 million through a public equity offering and an additional $70 million from a sale of shares to the Healthcare of Ontario Pension Plan Trust Fund (HOOPP), a major stakeholder in Definity.
The share price for the public and HOOPP equity sale is set at $66.65 per share.
Next Steps for Approval
This transaction is subject to regulatory approvals, including clearance from the federal Competition Bureau. The acquisition is expected to be finalized in the first quarter of 2026, pending those approvals.
Travelers’ Historical Context in Canada
Travelers first entered the Canadian market in 2013 via its acquisition of The Dominion of Canada General Insurance Company for $1.1 billion. Since then, Travelers Canada has expanded significantly, employing over 1,400 individuals across key cities such as Vancouver, Calgary, Toronto, Ottawa, and Montreal while providing a wide array of personal, commercial, and specialty insurance products.
Statements from Travelers’ Leadership
Alan Schnitzer, the chairman and CEO of Travelers, remarked on the evolution of the Canadian market, emphasizing that Definity represents a suitable long-term steward for Travelers’ Canadian operations. He expressed confidence that the merger would yield benefits for Canadian customers, brokers, and employees, as they will become part of one of the country’s leading integrated property and casualty insurers.
Job Security and Operational Integration
Definity has made it clear that it plans to retain all of Travelers’ Canadian employees and consolidate the two companies under a single brand. However, Travelers will maintain its Canadian surety business, which typically provides coverage for companies to guarantee their obligations and commitments.
Strategic Focus on Growth Post-IPO
This acquisition aligns with Mr. Saunders’ strategy dating back to the company’s public offering in November 2021, when Definity was the eighth-largest insurer in Canada. He announced plans to increase market share through strategic acquisitions aimed at breaking into the top five insurers.
In the past few years, Definity has invested over $1 billion in at least 20 transactions to enhance its insurance broker distribution network and improve its technology capabilities.
Inspiration Behind the Acquisition
The vision for a transformative acquisition solidified over a year ago, according to Mr. Saunders, during discussions with Mr. Schnitzer in New York. Noticing the evolving Canadian insurance marketplace and the vital importance of scalability, both leaders recognized that Travelers was at a juncture where they sought a more robust partner to ensure future success.
Through a series of discussions, Mr. Saunders successfully presented an attractive valuation for Travelers’ operations, circumventing the competitive auction process common in such acquisitions, while also assuring employees of deal stability.
Impact and Future Implications
“This acquisition is a game-changer that perfectly aligns with our growth strategy,” Mr. Saunders stated. He affirmed that it demonstrates Definity’s commitment to long-term growth and market competitiveness while broadening its customer base and strengthening ties with brokers across Canada.
Definity operates under various brands, including Family Insurance Solutions Inc., Petline Insurance Co., and Sonnet Insurance Co., the latter being a fully digital platform offering direct insurance to consumers.
If the acquisition proceeds as planned, it could increase Definity’s commercial insurance premiums by roughly $600 million and introduce specialty lines such as marine insurance, cyber insurance, and professional liability insurance. In terms of personal insurance, Travelers is expected to contribute approximately $1 billion in annual premiums, reflecting a 30% increase from current levels.
Long-Term Trends in the Insurance Market
Mr. Saunders highlighted that with more than 100 insurance companies currently operating in Canada, the ongoing trend toward consolidation is likely to continue. This acquisition could serve as a catalyst for future mergers, signaling a shift in how companies perceive scale and competitiveness in the marketplace.
“If a robust North American entity like Travelers deems scale crucial and makes the decision to divest its Canadian operations, it will prompt smaller international players to reevaluate their positions and strategies,” he added.
Definity aims to establish itself as a serious contender in the Canadian insurance consolidation landscape, showcasing its capabilities and intentions to further shape the industry.
Advisors on the Deal
In this transaction, RBC Capital Markets served as financial advisor to Definity, while Jefferies LLC provided advisory services to Travelers. Legal expertise for Travelers was supplied by Skadden, Arps, Slate, Meagher & Flom LLP and Stikeman Elliott LLP.
