Bolsters Intact's leadership position in
Canada
Brings Intact's North American specialty lines
platform close to its $3 billion
annual Direct Premiums Written objective
- Adds attractive surety business and expertise on both sides of
the border
- Enhances specialty lines with public entity capabilities and
adds an MGA to the platform
- Expands Intact's personal lines offering in Canada with high net worth products
- Delivers a return on capital above Intact's threshold and
immediate accretion to NOIPS
- Strong financial position maintained, with over $1 billion of capital margin after closing
TORONTO, Aug. 15, 2019 /CNW/ - Intact Financial
Corporation (TSX: IFC) ("Intact" or the "Company") announced today
that it has entered into a definitive agreement with Princeton
Holdings Limited ("Princeton Holdings") to acquire The Guarantee
Company of North America ("The
Guarantee"), a specialty lines insurer in Canada and the U.S., and Frank Cowan Company
Limited ("Frank Cowan"), a managing general agent ("MGA") focused
on specialty insurance for a cash consideration of approximately
$1 billion. The transaction is
expected to close in the fourth quarter of 2019, subject to
regulatory approvals.
In Canada, the acquisition
bolsters Intact's position and adds new products for the high net
worth customer segment. It meaningfully advances Intact's North
American specialty lines platform solidifying prominent positions
in public entity and surety. The transaction will also contribute
to additional distribution-related earnings.
The Guarantee is a Canadian-owned insurance company with
customers in Canada and the U.S.
Two-thirds of its business is specialty lines and surety and
one-third personal lines including a high net worth home and auto
insurance portfolio in Canada. It
adds more than $560 million in Gross
Premiums Written1, including over $100 million in the U.S., bringing Intact's
annual North American specialty lines Direct Premiums Written close
to $3 billion2.
Frank Cowan Company Limited is an MGA that is a leader in
providing specialized insurance programs to public entities across
Canada. It offers coverage
placement, risk management consultation, and claims services for
municipalities, healthcare, education, community, children's and
social service organizations. Frank
Cowan places business with several insurers including The
Guarantee.
Princeton Holdings will continue to retain full ownership of its
other businesses: Cowan Insurance Group, Cowan Asset Management,
and Fountain Street Finance.
"The acquisition of The Guarantee Company of North America and Frank Cowan Company is
strongly aligned with our strategic and financial objectives," said
Charles Brindamour, Chief Executive
Officer, Intact Financial Corporation. "We are delivering on our
objectives to grow in Canada and
build a leading North American specialty platform. I'm enthusiastic
about what we will accomplish by leveraging the combined expertise
of our teams and our expanded offering."
The transaction is expected to deliver strong economics for
Intact through loss ratio improvements, expense savings, and
optimization of reinsurance and capital. In addition, the combined
platform offers top-line expansion opportunities.
"The Guarantee Company of North
America and Frank Cowan Company have built a strong
customer-focused specialty and personal lines business over almost
150 years, of which we are very proud. After careful
consideration, we believe that combining our strong customer focus
and the expertise of our employees in specialty lines and surety,
with Intact's resources, in particular its advanced analytics
capabilities, provides tremendous opportunities for the combined
entities to leverage one another's strengths to build an
outstanding, Canadian owned, North American specialty insurer,"
said Maureen Cowan, Chairman of the
Board, Princeton Holdings Limited.
Intact expects the acquisition to generate a return on capital
above its threshold and expects the acquisition to be immediately
accretive to net operating income per share ("NOIPS") with low
single-digit NOIPS accretion within 24 months after close. To
finance the transaction, Intact has access to its own capital
resources and bank facilities and may evaluate capital markets
alternatives. Intact will maintain a strong capital
position at closing with an estimated capital margin above
$1 billion, estimated MCT at 195% and
a debt to total capital ratio below 25%. The debt to capital ratio
is expected to return below the target level of 20% within 24
months following closing of the acquisition.
Conference Call
Intact Financial Corporation will host a conference call to
review the transaction today, August 15,
2019 at 4:30 p.m. ET. To
listen to the call via live audio webcast and to view the Company's
presentation slides and other information not included in this
press release, visit our website at www.intactfc.com and
link to the "Investors" section.
The conference call is also available by dialing 1 (647)
427-7450 or 1 (888) 231-8191 (toll-free in North America). Please call 10 minutes before
the start of the call. A replay of the call will be available later
today at 7:30 p.m. ET until midnight
on August 22, 2019. To listen to the
replay, call 1 (855) 859-2056, passcode 5171553.
About Princeton Holdings
Princeton Holdings is a private holding company that is
headquartered in Cambridge,
Ontario. All subsidiary companies within Princeton Holdings
are providers of comprehensive insurance, risk management and
wealth management solutions to specialized market segments. All
subsidiary companies within Princeton Holdings have expert
knowledge of their industry and proven delivery of customized
client solutions focused on chosen market segments where they have
specialized expertise.
About Intact Financial Corporation
Intact Financial Corporation (TSX: IFC) is the largest provider
of property and casualty insurance in Canada and a leading provider of specialty
insurance in North America, with
over $10 billion in total annual
Direct Premiums Written. The Company has approximately 14,000 full-
and part-time employees who serve more than five million personal,
business and public-sector clients through offices in Canada and the U.S. In Canada, Intact distributes insurance under the
Intact Insurance brand through a wide network of brokers, including
its wholly-owned subsidiary BrokerLink, and directly to consumers
through belairdirect. In the U.S., OneBeacon Insurance Group, a
wholly-owned subsidiary, provides specialty insurance products
through independent agencies, brokers, wholesalers and managing
general agencies.
Forward Looking Statements
This press release contains statements that constitute
"forward-looking information" as defined under applicable Canadian
provincial and territorial securities laws and "forward-looking
statements" within the meaning of the U.S. Private Securities
Litigation Reform Act of 1995. The words "may", "will", "would",
"should", "could", "expects", "plans", "intends", "trends",
"indications", "anticipates", "believes", "estimates", "predicts",
"likely", "potential" or the negative or other variations of these
words or other similar or comparable words or phrases, are intended
to identify forward-looking statements. This press release contains
forward-looking statements with respect to, among other things, the
Company's current and future plans, expectations and intentions,
results, levels of activity, performance, goals or achievements;
expected growth (including magnitude of growth); the anticipated
benefits and costs of the proposed acquisition; the anticipated
effect of the acquisition on the Company's strategy, operations and
financial performance, including its book value per share, debt to
capital ratio, NOIPS, MCT, direct premiums written, products,
services, expertise and capabilities; earnings contributions, cost
savings and transition and integration costs; and statements with
respect to the financing structure for the acquisition and the
completion of and timing for completion of the acquisition. Unless
otherwise indicated, all forward-looking statements in this press
release are made as at the date hereof and are subject to change
after that date.
Many factors could cause the Company's actual results,
performance or achievements or future events or developments to
differ materially from those expressed or implied by the
forward-looking statements, including, without limitation, the
following factors:
- expected competition and regulatory processes and outcomes in
connection with the acquisition;
- the Company's ability to implement its strategy or operate its
business as it currently expects;
- the Company's ability to accurately assess the risks associated
with the insurance policies that it writes;
- the impact of potentially unfavourable developments from
historical claims which may affect the Company's reserve
levels;
- unfavourable capital market developments or other factors which
may affect the Company's investments, floating rate securities and
funding obligations under its pension plans;
- the cyclical nature of the property and casualty insurance
industry;
- the Company's ability to accurately predict future claims
frequency and severity, including in the personal auto line of
business and catastrophe losses caused by severe weather and other
weather-related losses;
- government regulations designed to protect policyholders and
creditors rather than investors;
- litigation and regulatory actions;
- periodic negative publicity regarding the insurance
industry;
- intense competition;
- the Company's reliance on brokers and third parties to sell its
products to clients and provide services to the Company;
- the Company's ability to successfully pursue its acquisition
strategy;
- the Company's ability to execute its business strategy;
- the Company's ability to achieve synergies arising from
successful integration plans relating to acquisitions
- the terms and conditions of the acquisition;
- the Company's expectations in relation to synergies, future
economic and business conditions and other factors in relation to
the acquisition and resulting impact on growth and accretion in
various financial metrics;
- the Company's financing plans for the acquisition, including
the availability of equity and debt financing in the future;
- various other actions to be taken or requirements to be met in
connection with the acquisition and integration post-closing of the
acquisition;
- the Company's participation in the Facility Association (a
mandatory pooling arrangement among all industry participants) and
similar mandated risk-sharing pools;
- terrorist attacks and ensuing events;
- the occurrence and frequency of catastrophe events, including a
major earthquake;
- the Company's ability to maintain its financial strength and
issuer credit ratings and access to debt financing;
- the Company's ability to compete for large commercial
business;
- the Company's ability to alleviate risk through
reinsurance;
- the Company's ability to successfully manage credit risk
(including credit risk related to the financial health of
reinsurers);
- the Company's ability to contain fraud and/or abuse;
- the impact of developments in technology and use of data on the
Company's products and distribution;
- the Company's reliance on information technology and
telecommunications systems and potential failure of or disruption
to those systems, including in the context of evolving
cybersecurity risk;
- the Company's dependence on and ability to retain key
employees;
- changes in laws or regulations;
- general economic, financial and political conditions;
- the Company's dependence on the results of operations of its
subsidiaries and the ability of the Company's subsidiaries to pay
dividends;
- the volatility of the stock market and other factors affecting
the trading prices of the Company's securities;
- the Company's ability to hedge exposures to fluctuations in
foreign exchange rates;
- future sales of a substantial number of its common shares;
- changes in applicable tax laws, tax treaties or tax regulations
or the interpretation or enforcement thereof; and
- those risks outlined in the "Risk Management" section of the
Company's management discussion and analysis of operating and
financial results for the year ended December 31, 2018 (the "Annual MD&A"), which
is posted under the Company's profile on SEDAR at
www.sedar.com
Forward-looking statements are based on estimates and
assumptions made by management based on management's experience and
perception of historical trends, current conditions and expected
future developments, as well as other factors that management
believes are appropriate in the circumstances. Certain of the
material factors or assumptions that have been applied in making
the forward-looking statements include the following: that the
acquisition will be completed in the fourth quarter of 2019 on the
terms currently anticipated; that the anticipated benefits of the
acquisition to the Company will be realized, including the impact
on growth and accretion in various financial metrics; that reserves
will be strengthened following closing of the acquisition; and
assumptions about future events, including economic conditions and
proposed courses of action, based on management's assessment of the
relevant information available as of the date hereof. Although the
forward-looking statements are based upon what management believes
to be reasonable assumptions, the Company cannot assure investors
that actual results will be consistent with these forward-looking
statements. Certain of the forward-looking statements included in
this press release may be considered "financial outlook" for
purposes of applicable Canadian provincial and territorial
securities laws. The financial outlook information contained herein
may not be appropriate for purposes other than for the purpose of
giving an indication of the expected financial performance of the
Company upon and following completion of the acquisition. All of
the forward-looking statements included in this press release are
qualified by these cautionary statements and those made in the
section entitled Risk Management (Sections 19-24) of our Annual
MD&A. These factors are not intended to represent a complete
list of the factors that could affect the Company. These factors
should, however, be considered carefully. Although the
forward-looking statements are based upon what management believes
to be reasonable assumptions, the Company cannot assure investors
that actual results will be consistent with these forward-looking
statements. Investors should not rely on forward-looking statements
to make decisions and investors should ensure the preceding
information is carefully considered when relying on forward-looking
statements made herein. The Company and management have no
intention and undertake no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
Non-IFRS Measures
The Company uses both International Financial Reporting
Standards ("IFRS") and certain non-IFRS measures to assess
performance. Non-IFRS measures do not have any standardized meaning
prescribed by IFRS and are unlikely to be comparable to any similar
measures presented by other companies. Management analyzes
performance based on underwriting ratios such as combined, expense,
loss and claims ratios, MCT, RBC and debt-to-total capital, as well
as other non-IFRS financial measures, namely DPW, change or growth
in constant currency, underlying current year loss ratio,
underwriting income (loss), underwriting expenses, NEP, NOI, NOIPS,
OROE, ROE, AROE, non-operating results, net distribution income,
adjusted net income, AEPS, total net claims, and total capital
margin. See section 27 of the Annual MD&A, which is posted
under the Company's profile on SEDAR at www.sedar.com, for the
definition and historical reconciliation to the most comparable
IFRS measure, where such a measure exists.
Footnotes:
|
|
1 Gross
Premiums Written include reinsurance assumed. For FY 2018 the
reinsurance assumed was $9.5M.
|
2 North
American Specialty based on trailing twelve months from June 30,
2019.
|
SOURCE Intact Financial Corporation