Where Definity is seeing gains from the Travelers integration

Definity Financial Corporation posted $36 million in run-rate expense synergies linked to integration of Travelers Canada business into its operations during 2026 Q1, according to management’s discussion and analysis (MD&A) included in its quarterly regulatory filings.

(Run-rate expense calculations determine a company’s operating costs on an annualized basis by extrapolating short-term spending, quarterly in this case, over a full year.)

Provided the first-quarter trend holds, that means Definity is “in position to achieve run-rate expense synergies of at least $100 million (pre-tax) within 36 months of close,” according to the company’s MD&A.

“We now expect to realize approximately one-third of our $100 million target in the first 12 months, and the remainder over the subsequent 24 months,” the filing adds.

Related: Definity Q1 earnings show Travelers integration producing results

Three main sources for synergies identified by the company include:

• technology platform consolidation, as acquired personal and commercial volumes migrate onto Definity’s platforms
• elimination of service charges from Travelers’ U.S. parent company
• “operational efficiencies driven by elimination of duplicative and administrative activities and the benefits of scale.”

During a May 8 earnings call with investment industry analysts, Definity president and CEO Rowan Saunders notes: “While these initial savings are largely from the elimination of U.S. parent company service charges and proactive attrition management, the next phase of synergies will be driven by technology platform consolidation and operational efficiencies as the integration progresses.”

He adds discipline around costs to achieve those savings are equally important.

“To date, we have incurred approximately $93 million in acquisition costs and recorded $44 million of integration-specific expenses, keeping us firmly on track with our total estimate,” Saunders says, adding the careful execution shows up on the company’s balance sheet.

“Our debt-to-capital ratio is already down to 26.8%, approaching our long-term target of 25%, well ahead of our 24-month guidance. Even after funding this major acquisition, our total financial capacity remains robust at more than $1.1 billion, putting us in an enviable position to fund future organic growth and deliver on our capital priorities.”

Business priorities

One goal emphasized during the earning call is retention of the acquired Travelers Canada business.

“If you just look at the total growth in the first quarter of 35.4% to $1.4 billion overall…we’d say about 80% of that growth is coming through the acquired business in the first quarter,” chief financial officer Philip Mather tells the earnings call in response to a question on breakdown of the 2026 Q1 earnings growth. “Now, attribution to that gets less simple as time goes on, because with the pace of integration, we’ve already unified the new business offering. Trying to split that between the acquired operations versus the underlying run rate activity gets more complex as you go.

“That said, if you take the 35.4% and you…simply isolate out the impact of the retained premiums that we acquired through the deal, the split for that is just over 27% [and] is coming from the retention of the acquired premiums in the quarter. Just over 8% is coming from the underlying organic growth of the business, combined with the Travelers new business contribution in that quarter.”

For context, he adds, that 27% from the acquired business represents a roughly 82% retention rate for that block of business. “That’s already within just a couple of points of our company-wide retention rate,” Mather adds.

Investment income and capital growth

Another plus from the Travelers acquisition was a 60% growth in net investment income to $79.9 million during the quarter, Mather tells the earnings call. He notes the change was “driven primarily by the large asset base from the acquisition,” along with the company’s repositioning as fixed-income yields increased.

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“Given this strong performance on our view of the current yield environment, we now expect our net investment income for the full year 2026 will be approximately $320 million,” he adds.

“Our broker distribution platform operating income grew by nearly 25%, driven by strong policy growth and favorable contingent profit commissions earned on a high-quality portfolio.”

And, in response to an analyst question about Definity’s financial capacity of $1.15 billion following the close of the Travelers Canada transaction being “higher than we would have expected,” Saunders replies the company is “very happy” with the outcome.

“Our experience is that this would not put us on the sideline for other opportunities that come by…,” he tells the earnings call. “We’re happy to keep building up some of that capital because our conviction is that there will continue to be M&A opportunities in the Canadian marketplace over the next couple of years.”

Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.