Definity Financial Corp. Announces Major Acquisition
Definity Financial Corp. has announced its plans to acquire the Canadian operations of the U.S.-based insurance company Travelers for a substantial $3.3 billion. This strategic move is expected to elevate Definity to the fourth largest player in the property and casualty insurance sector in Canada, significantly impacting its market presence.
Details of the Acquisition
The acquisition, which was publicly disclosed on Tuesday, will see Definity take over the majority of Travelers’ Canadian operations. This expansion is expected to contribute approximately $1.6 billion in annual gross written premiums—an essential metric indicating the amount collected from policyholders and representing a significant component of total revenue.
Once the deal is finalized, Definity will see its overall annual premiums rise to $6 billion, enhancing its position in the market from sixth place to fourth. In an interview, Definity’s CEO Rowan Saunders emphasized that this acquisition is a pivotal step toward establishing a domestic champion in Canada’s insurance industry.
Strategic Financial Approach
To facilitate the acquisition, Definity is employing a combination of financial resources. The company will utilize $1.5 billion extracted from Travelers’ balance sheet alongside its own funds. In addition, Definity plans to secure $1.6 billion in new debt, supported by $281 million from a public offering of Definity shares and $70 million from a share sale to the Healthcare of Ontario Pension Plan Trust Fund (HOOPP), a significant stakeholder in the insurer.
The share sales to the public and HOOPP are priced at $66.65 each. This mix of financing methods underscores Definity’s strategic approach to expanding its insurance footprint.
Regulatory Requirements and Future Outlook
The acquisition is subject to regulatory approval, including validation from the federal Competition Bureau. The closing date for the transaction is anticipated to occur in the first quarter of 2026, pending the necessary approvals.
Travelers Companies Inc., based in New York, made its initial entry into the Canadian market in 2013 with the acquisition of The Dominion of Canada General Insurance Company for $1.1 billion. Since that time, Travelers Canada has expanded significantly, employing over 1,400 individuals across major Canadian cities, including Vancouver, Calgary, Toronto, Ottawa, and Montreal, thus providing a wide range of personal, commercial, and specialty insurance products.
Statements from Leaders
Travelers’ chairman and CEO, Alan Schnitzer, expressed confidence in the acquisition, stating that the evolving Canadian market makes Definity a suitable long-term owner for the business. He believes that Canadian clients, brokers, and employees will greatly benefit from becoming part of one of the leading fully integrated property casualty insurers in the country.
Retention of Employees and Brand Integration
Definity has expressed plans to retain all employees currently employed by Travelers in Canada as it integrates both operations under a unified brand. However, Travelers will maintain its Canadian surety business, which covers companies against their commitments and obligations. This retention strategy reflects Definity’s commitment to both workforce stability and operational efficiency.
Definity’s Growth Strategy and Market Positioning
The acquisition aligns well with the growth trajectory that Mr. Saunders envisioned after Definity’s public listing in November 2021. At that time, the company was positioned as Canada’s eighth-largest insurer. As the stock ticker DFY debuted on the Toronto Stock Exchange, Saunders had signaled a willingness to strengthen the company’s market share through targeted acquisitions, aiming for a spot within the top five insurance providers.
Since then, Definity has invested over $1 billion across at least 20 transactions to enhance its distribution network through insurance brokers and improve its technological capabilities. The expansion into larger acquisitions began to crystallize a year ago when Saunders strategic discussions with Schnitzer highlighted the importance of scale and organizational sizes in the competitive insurance landscape.
Avoiding Auction Dynamics
Through several meetings and discussions, Saunders managed to bypass a typical auction scenario often involving competitors, thus providing Travelers with an appealing valuation for their Canadian operations. He emphasized his aim to ensure “deal certainty” for the employees involved as part of the acquisition strategy.
Long-Term Vision and Industry Trends
“This transformative acquisition is directly aligned with the growth strategy we have laid out for Definity,” Saunders remarked, underscoring the significance of this deal. It is aimed not only at expanding the company’s reach but also at fostering deeper relationships with brokers and customers throughout Canada.
Definity currently operates several brands in the personal and commercial insurance sectors. These include Family Insurance Solutions Inc., Petline Insurance Co., and Sonnet Insurance Co., which is known for its fully digital direct-to-consumer insurance platform. Upon completion of this acquisition, Definity expects to add around $600 million in annual premiums to its commercial insurance division while introducing new specialty lines such as marine insurance, cyber insurance, and professional liability insurance.
Projected Impact on Personal Insurance
In the realm of personal insurance, the integration with Travelers will contribute approximately $1 billion in annual premiums, translating to a 30% increase from current figures. This adjustment signifies a significant enrichment of Definity’s personal insurance roster.
Future of Consolidation in the Insurance Market
With over 100 insurance companies currently operating in Canada, Saunders perceives the ongoing trend of consolidation as a long-term reality, and he believes that this latest transaction will act as a catalyst for future mergers and acquisitions in the country.
He noted that if a robust North American entity like Travelers recognizes the necessity of scale and opts to divest its Canadian business, other smaller international players will likely consider similar moves. This shift underscores Definity’s position as a serious player capable of leading consolidation efforts within the Canadian insurance market.
Advisors Involved in the Deal
In terms of advisory roles, RBC Capital Markets has stepped in as the financial consultant for Definity during the acquisition process. Meanwhile, Jefferies LLC has served as the financial advisor for Travelers, with Skadden, Arps, Slate, Meagher & Flom LLP and Stikeman Elliott LLP providing legal counsel in the transaction.
