TORONTO, June 1, 2021 /CNW/ -
Building a Leading P&C Insurer
- Expands our leadership position in Canada with a broader customer offering
- Bolsters our leading specialty lines platform and brings
international expertise
- Entry into the U.K. and Ireland at scale with a strong and seasoned
team
- Increases investment in our core capabilities to strengthen our
outperformance
- High single digit NOIPS accretion expected in the first 12
months, increasing to upper teens within 36 months
- Maintaining mid-teens OROE target and BVPS to increase by over
20% at close
- Strong total capital margin at over $2
billion following close and debt-to-capital ratio expected
to reach 20% within 36 months
Intact Financial Corporation (TSX: IFC) ("Intact" or the
"Company") announced today that, together with Tryg A/S (CPH: TRYG)
("Tryg"), it has completed the acquisition (the "Acquisition") of
RSA Insurance Group plc. ("RSA"), having received all required
approvals.
"Bringing together Intact and RSA will expand our leadership and
accelerate our strategy as we continue to focus on outperformance
across our business," said Charles
Brindamour, Chief Executive Officer, Intact Financial
Corporation. "Our teams have worked hard and diligently since we
announced the deal to plan the integration and transition process,
and we are now ready to combine our businesses and start delivering
on our financial objectives. We are delighted to welcome RSA
employees into the Intact family. Together, we will continue to
focus on delivering second-to-none customer experiences and
creating significant value for our shareholders."
Pursuant to the Acquisition, Intact retains RSA's Canadian, U.K.
and International entities, Tryg retains RSA's Swedish and
Norwegian businesses, and Intact and Tryg co-own RSA's Danish
business.
With the Acquisition, Intact is taking a significant step to
accelerate its strategy and drive significant value creation.
Expands leadership in Canada
Intact's leadership position in Canada expands with an approximate 30%
increase in premiums to an estimated $13
billion annually, representing close to two-thirds of the
Company's aggregate premium base. The Company expects to continue
to generate outperformance in Canada by leveraging its expertise in data,
pricing and segmentation and through further internalization of its
claims service. The Acquisition broadens Intact's customer base and
product suite, enhancing its ability to deliver second-to-none
customer experiences to people and businesses across Canada. With Johnson Insurance, Intact is
entering the affinity market with a leading platform. The
transaction also improves the Intact Insurance product suite,
making the combined Company better positioned to service the broker
channel, with expanded personal and commercial lines offerings.
Creates a leading specialty lines platform
Intact bolsters its North American specialty lines platform by
adding international capabilities, scale and expertise in existing
lines, as well as adding new verticals. The specialty lines
platform will grow by approximately 30% to over $4 billion of annual premiums and will include
leading global franchises in marine and specialty property. The
Acquisition also adds a well-known Global Network to the Specialty
platform, which facilitates the placement of tailored,
multinational insurance programs through partnerships, allowing the
Company to better service customers globally.
Entry into the U.K. and Ireland at scale
In the U.K. and Ireland, which
represent approximately $4.4 billion
of annual premiums, the Company will look to strengthen its leading
position and continue the underwriting momentum in the business.
Intact will build on the well-recognized RSA brands and scale in
home and commercial lines, while leveraging its core competencies
to continue to create best-in-class capabilities. In the near term,
the fundamental pillars of the outperformance strategy are to
optimize the underwriting performance, focus the footprint, and
invest in data and technology. Beginning in the third quarter
of fiscal 2021, the operating results for the U.K., Ireland, Europe and Middle
East businesses will be consolidated and reported in the
U.K. & International segment, which is expected to have
approximately $5.1 billion of annual
premiums.
Strengthens ability to outperform
The Acquisition increases Intact's premiums by approximately 70%
and enables further investment in the Company's core capabilities
of data, risk selection, claims and supply chain management to
sustain and drive increased outperformance across the markets in
which it operates.
Financially compelling with significant shareholder value
creation
The Acquisition provides a unique opportunity to create
significant value for Intact's shareholders, with an expected
internal rate of return ("IRR") above the Company's 15%
threshold.
The Acquisition is expected to generate high single digit net
operating income per share ("NOIPS") accretion in the first 12
months following closing of the Acquisition, increasing to upper
teens within 36 months. The expected NOIPS accretion is driven by
adding RSA's profitable business to Intact and by generating over
$250 million of expected pre-tax
annual run-rate synergies within 36 months. Not included in the
synergies are anticipated loss ratio improvements, driven by the
benefit of the Company's data and analytics expertise.
Intact expects its operating ROE ("OROE") to be in the mid-teens
level in the medium term. Book value per share ("BVPS") is
estimated to increase by over 20% on the closing of the
Acquisition, reflecting the equity issued to finance the
Acquisition and the estimated current fair value of the net assets
acquired.
The Acquisition supports Intact's financial objectives to grow
NOIPS by 10% yearly over time and exceed the industry ROE by 500
basis points annually.
Strong capital position maintained
Intact will maintain its strong capital position, with an
estimated total capital margin above $2
billion and solid regulated capital ratios in all
jurisdictions, including the new U.K. & International
perimeter. Intact's pro forma debt-to-capital ratio is expected to
be below 26% as of June 30, 2021 and
reach its target of 20% within 36 months.
Issuance of common shares pursuant to subscription
receipts
A portion of Intact's approximately £3.0 billion ($5.2 billion) payment for the Acquisition was
financed with the net proceeds from the private placement of
approximately $3.2 billion of
subscription receipts (the "Cornerstone Subscription Receipts") to
Caisse de dépôt et placement du Québec, Canada Pension Plan
Investment Board and Ontario Teachers' Pension Plan Board, and from
an underwritten private placement of approximately $1.25 billion of subscription receipts (the
"Underwritten Subscription Receipts") to accredited investors in
Canada and other exempt
purchasers.
Upon closing of the Acquisition, the common shares of Intact
issuable pursuant to the 23,791,824 Cornerstone Subscription
Receipts issued by Intact in November
2020 and the 9,272,000 Underwritten Subscription Receipts
issued by Intact in December 2020
were automatically issued through the facilities of CDS Clearing
and Depository Services Inc. in accordance with the terms of the
Cornerstone Subscription Receipts and the Underwritten Subscription
Receipts, as applicable, on a one-for-one basis. This issuance of
common shares increased the number of Intact's outstanding common
shares to approximately 176.0 million.
Trading in the Underwritten Subscription Receipts on the Toronto
Stock Exchange (the "TSX") (TSX: IFC.R) will be halted effective
prior to opening of trading on the TSX today and the Underwritten
Subscription Receipts will be delisted as at the close of business
today. The transfer register maintained by the subscription receipt
agent for both the Cornerstone Subscription Receipts and the
Underwritten Subscription Receipts will be closed as at the close
of business today. The common shares issued in respect of the
Cornerstone Subscription Receipts and the Underwritten Subscription
Receipts are expected to begin trading on the TSX today.
In addition, pursuant to the terms of both of the Cornerstone
Subscription Receipts and the Underwritten Subscription Receipts, a
dividend equivalent payment of $1.66
per subscription receipt, less applicable withholding taxes, will
be paid to former holders of such subscription receipts, which is
an amount equal to the aggregate cash dividends declared on
Intact's common shares for which record dates have occurred during
the period from issuance of the subscription receipts to
June 1, 2021, the closing date of the
Acquisition. The dividend equivalent payments will be made on or
about June 4, 2021.
About Intact Financial Corporation
Intact Financial Corporation (TSX: IFC) is the largest provider
of property and casualty (P&C) insurance in Canada, a leading provider of global specialty
insurance, and, with RSA, a leader in the U.K. and Ireland. Our business has grown organically
and through acquisitions to over $20
billion of total annual premiums.
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. Intact also provides
affinity insurance solutions through the Johnson Affinity
Groups.
In the U.S., Intact Insurance Specialty Solutions provides a
range of specialty insurance products and services through
independent agencies, regional and national brokers, and
wholesalers and managing general agencies.
Outside of North America, the
Company provides personal, commercial and specialty insurance
solutions across the U.K., Ireland, Europe and the Middle East through the RSA brands.
About Tryg A/S
Tryg is one of the leading non-life insurance companies in the
Nordic region with activities in Denmark, Norway and Sweden. Tryg had total premiums of
DKK 21.7 billion (approx.
EUR 3 billion) at year end 2019 and
is active in the Private, Commercial and Corporate segment across
the Nordic region. Tryg provides coverage to 4 million customers on
a daily basis. Tryg is listed on Nasdaq Copenhagen.
Forward-looking statements
Certain of the statements included in this press release about
the Acquisition, including the anticipated impact and benefits
thereof, the delisting of the Underwritten Subscription Receipts,
the commencement of trading of the common shares issued in
respect of the Cornerstone Subscription Receipts and the
Underwritten Subscription Receipts, the timing for the
payment of dividend equivalent payments or any other future events
or developments constitute forward-looking statements. 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. Unless otherwise indicated, all forward-looking
statements in this press release are made as of June 1, 2021 and are subject to change after that
date.
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. In addition to other
estimates and assumptions which may be identified herein, estimates
and assumptions have been made regarding, among other things, the
realization of the expected strategic, financial and other benefits
of the Acquisition, and economic and political environments and
industry conditions. There can be no assurance that the strategic
and financial benefits expected to result from the Acquisition will
be realized. Many factors could cause the Company's actual
results, financial performance or condition, or achievements to
differ materially from those expressed or implied by the
forward-looking statements herein, including, without limitation,
the following factors:
- expected regulatory processes and outcomes in connection with
the Company's business;
- the Company's ability to implement its strategy or operate its
business as management currently expects;
- the Company's ability to accurately assess the risks associated
with the insurance policies it writes;
- unfavourable capital market developments or other factors,
including the impact of the COVID-19 pandemic and related economic
conditions, which may affect the Company's investments, floating
rate securities and funding obligations under its pension
plans;
- the cyclical nature of the P&C insurance industry;
- management's ability to accurately predict future claims
frequency and severity, including in the high net worth and
personal auto lines of business;
- government regulations designed to protect policyholders and
creditors rather than investors;
- litigation and regulatory actions, including with respect to
the COVID-19 pandemic;
- 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 and the
impact of COVID-19 and related economic conditions on such brokers
and third parties;
- the Company's ability to successfully pursue its acquisition
strategy;
- the Company's ability to execute its business strategy;
- the Company's ability to improve its combined ratio, retain
business and achieve synergies and maintain market position arising
from successful integration plans relating to the Acquisition, as
well as management's estimates and expectations in relation to
future economic and business conditions and other factors in
relation to the Acquisition and resulting impact on growth and
accretion in various financial metrics;
- its ability to otherwise complete the integration of the
business acquired within anticipated time periods and at expected
cost levels;
- the Company's dependence on key employees and its ability to
attract and retain key employees in connection with the
Acquisition;
- the Company's ability to achieve synergies arising from
successful integration plans relating to acquisitions
generally;
- the Company's profitability and ability to improve its combined
ratio in Canada and
internationally;
- the Company's ability to retain and attract new business in
connection with 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;
- catastrophe losses caused by severe weather and other
weather-related losses, as well as the impact of climate
change;
- the occurrence of and response to public health crises
including epidemics, pandemics or outbreaks of new infectious
diseases, including most recently, the coronavirus (COVID-19)
pandemic and ensuing events;
- the Company's ability to maintain its financial strength and
issuer credit ratings;
- the Company's access to debt and equity 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 Company's reliance on information technology and
telecommunications systems and potential failure of or disruption
to those systems, including in the context of the impact on the
ability of our workforce to perform necessary business functions
remotely, as well as in the context of evolving cybersecurity
risk;
- the impact of developments in technology and use of data on the
Company's products and distribution;
- changes in laws or regulations, including those adopted in
response to COVID-19 that would, for example, require insurers to
cover business interruption claims irrespective of terms after
policies have been issued, and could result in an unexpected
increase in the number of claims and have a material adverse impact
on the Company's results;
- COVID-19 related coverage issues and claims, including certain
class actions and related defence costs could negatively impact our
claims reserves;
- 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, including in the
context of the COVID-19 pandemic;
- the Company's ability to hedge exposures to fluctuations in
foreign exchange rates;
- future sales of a substantial number of the Company's common
shares; and
- changes in applicable tax laws, tax treaties or tax regulations
or the interpretation or enforcement thereof.
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 28-33) of our
MD&A for the year ended December 31,
2020 ("Annual MD&A"), the section entitled Risk
Management (section 19) of our MD&A for the quarter ended
March 31, 2021 ("Q1 MD&A") and
elsewhere in this press release. 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
reviewing forward-looking statements contained 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 ratio and
debt-to-total capital ratio, as well as other non-IFRS financial
measures, including IRR, BVPS, NOIPS, OROE, ROE and total capital
margin. See Section 36 of the Annual
MD&A and Section 21 of the Q1 MD&A, each of 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.
SOURCE Intact Financial Corporation