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.
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.
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.
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.
• This is the largest acquisition carried out by a Canadian P&C insurer in history. Given the size and international scope of this acquisition, it poses some challenges such as dealing with the higher product risk associated with U.K. specialty insurance lines, integrating organizational cultures, and managing the increased operational risk of cross-border businesses.
• In DBRS Morningstar’s view, the integration of RSA is facilitated by both organizations offering similar products and competing for the same business in Canada
DBRS Morningstar projects that Intact’s annual direct premiums written will increase to approximately CAD 20.0 billion annually going forward from CAD 12.0 billion, an increase of about 67% (see Exhibit 1). This transaction also enhances Intact’s presence in the global P&C specialty lines market. DBRS Morningstar projects that premiums written from specialty lines will grow by CAD 1.0 billion to about CAD 4.0 billion annually with a target combined ratio in the low- to mid-90% range. This is similar to the current combined ratio target for the Company’s North American specialty business. RSA has strong brand recognition in the U.K. and Europe; however, based on the rebranding of OneBeacon to operate as Intact Insurance Specialty Solutions, it is possible that the RSA business could be rebranded after a few years.