Definity Financial Corp. Acquires Travelers’ Canadian Operations
Definity Financial Corp. has announced its intent to purchase the Canadian division of the U.S. insurance behemoth Travelers for a significant sum of $3.3 billion. This acquisition will elevate Definity to the fourth position among property and casualty insurers in Canada, a noteworthy advancement in the competitive insurance landscape.
Details of the Acquisition
Revealed on a recent Tuesday, the deal will allow Definity, denoted by the stock symbol DFY-T, to take over the majority of Travelers’ operations in Canada, which will contribute approximately $1.6 billion in annual gross written premiums. Gross written premiums reflect the total income an insurer collects from policyholders, making it a crucial component of their overall revenue.
Following this acquisition, Definity’s annual premiums are projected to reach $6 billion, propelling the Waterloo, Ontario-based insurance firm from its present sixth place in the Canadian market to a more formidable position.
Definity’s Growth Strategy
Rowan Saunders, the CEO of Definity, shared insights on the acquisition, stating, “This represents a significant milestone in our quest to cultivate a Canadian leader in the insurance sector.” Over the past years, Definity has experienced organic growth at approximately double the rate of the broader industry. The company’s public listing was initiated to allow participation in what many perceive to be a consolidating market for property and casualty insurance.
Financial Structuring of the Deal
The financial framework for this acquisition includes $1.5 billion sourced from Travelers’ own balance sheet coupled with Definity’s cash reserves. In addition, the company is set to incur $1.6 billion in new debt, $281 million will come from selling shares to the public, and a transaction worth $70 million is planned with the Healthcare of Ontario Pension Plan Trust Fund (HOOPP), which holds a significant shareholder position in Definity.
The equity offering includes pricing shares at $66.65 each to the public and HOOPP. Upon completion, the agreement will require approval from regulatory bodies and the federal Competition Bureau, and is anticipated to finalize in the first quarter of 2026.
Travelers’ Canadian Presence
Travelers entered the Canadian marketplace in 2013 by acquiring The Dominion of Canada General Insurance Company for $1.1 billion. Since that strategic move, Travelers Canada has seen substantial growth, employing over 1,400 individuals across major cities such as Vancouver, Calgary, Toronto, Ottawa, and Montreal. The company provides various insurance products, including personal, commercial, and specialty insurance.
Chairman and CEO of Travelers, Alan Schnitzer, commented, “The transformation of the Canadian market over the past decade positions Definity as the ideal long-term steward for this enterprise, a sentiment backed by the attractive value of their offer.” He expressed confidence that clients, brokers, and team members in Canada would gain advantages from being part of a leading, fully integrated property and casualty insurer.
Employee Retention and Brand Integration
Definity has indicated its intention to retain all Travelers’ Canadian employees, as the two companies will amalgamate their operations under a single brand. However, Travelers will maintain its surety business in Canada, which customarily provides insurance coverage to companies for meeting their commitments and obligations.
Aiming for Higher Market Position
This acquisition aligns well with Definity’s strategic plans for growth following its public listing in November 2021. At that time, Definity was identified as Canada’s eighth-largest insurer. Saunders indicated a clear goal of enhancing the company’s market share and striving for a spot within the top five within the sector.
In recent years, the company has invested over $1 billion across more than 20 transactions, aimed at augmenting its broker distribution network and improving technological capabilities. The drive for a substantial presence in Canada intensified for Saunders about a year ago during discussions with Schnitzer in New York, as they examined the evolving Canadian insurance market.
Strategic Insights and Prognosis
Saunders elaborated on the conversations with Travelers, highlighting a universal understanding of how crucial size and scale have become in the industry. Both parties recognized that maintaining competitiveness would require adapting to these trends. Through several discussions, Saunders successfully negotiated a valuation that met Travelers’ expectations, providing them with the necessary assurance regarding their employees’ futures.
“This acquisition serves as a transformative milestone that fits seamlessly into Definity’s growth strategy,” Saunders remarked, emphasizing that it demonstrates the company’s commitment to sustainable growth and the strengthening of relationships with customers and brokers across Canada.
Brand Portfolio and Future Opportunities
Definity operates under multiple brands within both personal and commercial insurance markets, which includes Family Insurance Solutions Inc., Petline Insurance Co., and Sonnet Insurance Co., a fully digital platform catering directly to consumers. If the acquisition is approved, it will contribute an estimated $600 million to Definity’s annual premiums specifically within its commercial insurance sector, and will also introduce new specialty insurance lines such as marine and cyber insurance, along with professional liability insurance.
Impact on the Canadian Insurance Landscape
In terms of personal insurance, Travelers is expected to bolster Definity’s portfolio with approximately $1 billion in annual premiums, representing a 30 percent increase from current levels. Observing the extensive number of insurance companies operating in Canada—over 100—Saunders suggested that this recent acquisition might serve as a stimulus for additional mergers and acquisitions within the industry.
“If a major North American player like Travelers is acknowledging the importance of scale and opts to divest its Canadian operations, it likely prompts similar considerations among other smaller international players.” He concluded by asserting that the acquisition showcases Definity as a serious contender in consolidating the Canadian insurance market.
Advisory Roles in the Transaction
In this major transaction, RBC Capital Markets is serving as the financial advisor to Definity, while Jefferies LLC also acts as financial advisor. Legal counsel for Travelers is being provided by Skadden, Arps, Slate, Meagher & Flom LLP, and Stikeman Elliott LLP.
