By Chris Munro

May 27 - (The Insurer) - Definity Financial Corporation has agreed a definitive C$3.3 billion ($2.4 billion) cash deal to acquire all but the surety unit of Travelers Canada in a deal that would establish the Waterloo, Ontario-based insurer as the country’s fourth largest P&C carrier.

Travelers Canada generated C$1.6 billion of gross premiums written in 2024, and was the 12th largest player in the country last year.

Subject to customary regulatory approvals, the transaction is expected to close in the first quarter of 2026.

Definity said the C$3.3 billion acquisition price values the Travelers operations at 1.4x price to book value, as of December 31, 2024.

Travelers, in its own announcement confirming the deal, said the purchase price represents a multiple of 1.8x book value, as of 2024’s close, adjusting for approximately $800 million of excess local capital that is being repatriated as part of the transaction.

Definity said the “highly strategic” acquisition is immediately accretive to operating earnings per share which is expected to reach double digits within 36 months of the deal’s close, and supports its bid to become one of Canada’s five largest P&C insurers.

Together, the combined Definity and Travelers operations will generate around C$6 billion in combined annual premiums.

Travelers Canada “is a well-established multi-line business with an attractive commercial and specialty lines portfolio, and combined with its personal lines business, is highly complementary,” said Definity.

As Definity noted, the transaction will strengthen its commercial lines business by adding approximately C$600 million in annual premiums, up 40% from its current levels.

“Acquiring Travelers Canada’s operations will accelerate the transformation of Definity’s commercial insurance platform, while adding additional capabilities in marine, professional liability and other lines of business,” Definity said.

“Definity’s commercial insurance market position will improve to fourth in Canada and our underwriting capabilities will be enhanced through the acquisition of hard-to-source underwriting and claims expertise,” the company added.

The acquisition will also “add significant scale” to Definity’s personal lines business, adding around C$1 billion in annual premiums, an increase of 30% from current levels.

Adding Travelers Canada will make Definity a top five personal lines player in the country.

“The addition of Travelers Canada's premiums to our leading digital platforms will allow for a modernized systems approach, providing an opportunity to optimize performance and enhance the overall broker experience,” Definity said.

In a statement, Definity’s president and CEO Rowan Saunders said the “transformative acquisition…is squarely in line with the growth strategy we’ve set”.

“This highly complementary business will diversify our portfolios, provide additional expertise and product offerings, and continue our track record of shareholder value creation.

“This acquisition demonstrates our commitment to long-term growth and competitiveness, while broadening our reach and deepening relationships with brokers and customers across the country,” Saunders added.

Travelers’ chairman and CEO Alan Schnitzer said the sale of the Canadian operations “is a reflection of our steadfast commitment to disciplined capital allocation and long-term value creation.”

“The evolution of the Canadian market over the past decade has made Definity a natural long-term owner for this business, a view affirmed by the compelling value of their proposal.

“I am confident that our Canadian customers, brokers and colleagues will benefit from being part of one of the country’s leading and fully integrated property casualty insurers,” Schnitzer added.

Definity intends to fund the C$3.3 billion cash consideration through various means.

It will generate approximately C$281 million in proceeds from a bought deal private placement of Definity common shares at a price of C$66.65 each.

Another C$70 million in proceeds will be generated from a non-brokered private placement of common shares to its cornerstone investor, the Healthcare of Ontario Pension Plan Trust Fund, at the same C$66.65 price as the bought deal private placement.

A further C$1.5 billion in excess capital and C$1.6 billion of new debt which Definity expects will consist of bank and bond financing will also be used to support the deal.

RBC Capital Markets is acting as financial advisor to Definity.

Jefferies LLC is acting as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP and Stikeman Elliott LLP serve as legal advisors to Travelers in this transaction.