November 9, 2020 by Greg Meckbach
A takeover of RSA Canada by Intact would still leave clients with plenty of choice in property and casualty insurance while making Intact more of an international player, an Ontario broker suggests. However, another notes that there is reason for concern.
Intact Financial Corp. announced Nov. 5 it intends to make a joint offer with Denmark-based Tryg A/S to acquire RSA plc for the Canadian equivalent of about $12 billion. If the deal goes through, it would cost about £7.2 billion, with Intact paying £3.0 billion and Tryg paying £4.2 billion. The British pound closed Friday at Cdn$1.71.
Tryg would retain RSA’s Sweden and Norway operations, with Intact and Tryg co-owning RSA’s Denmark operations.
The deal is tentative at this point.
“There are a lot of things that need to happen before this deal gets done, so it certainly does not appear to be inevitable,” said Kent Rowe, president of the Insurance Brokers Association of Canada.
But if it does go through, Intact would essentially take over RSA’s operations in Canada, as well as in some in Europe and the Middle East.
“It’s impressive that it’s getting announced. What they have been able to pull off and what has been the success story of Intact — first in the United States and now in Europe — it’s unbelievable,” said Adam Mitchell, president of Whitby, Ont.-based Mitchell & Whale Insurance Brokers Ltd.
If the deal gets approved, Intact would enter the insurance market in Britain, Ireland and several “attractive European and Middle Eastern markets,” Intact said Monday in a release.
Bahrain-based Royal & Sun Alliance Insurance (Middle East) owns 50% of Al Alamiya for Cooperative Insurance Company and 52.5% of Al Ahlia Insurance Company SAOG. Al Alamiya and Al Ahlia operate in Saudi Arabia and Oman respectively.
In Canada, Intact had 15.27% of the overall P&C market (with $8.76 billion in net premiums written), according to the 2020 Canadian Underwriter Statistical Guide. RSA’s overall market share was 4.35%.
“I think there is still plenty of consumer choice, and I think, for the average consumer, RSA has not been a growing book for a while,” said Mitchell. “Compared to life insurance, the P&C side is very fragmented. It could sustain a lot more merger and acquisition activity.”
On the other hand, brokers do get concerned any time a competitor is eliminated due to consolidation, suggested Rowe, who by day works in St. John’s, Nfld. as vice president of commercial lines for Wedgwood Insurance.
“As a local broker here in Newfoundland and Labrador — and I would say the same thing would apply nationally — we are always concerned when choice in the marketplace is potentially limited. Any time we lose an option when it comes to choice, it is concerning,” said Rowe.
The combined Canadian operation of Intact and RSA, if the deal goes through, would have pro forma premiums of $13 billion a year, Intact said Monday.
The proposed deal gives Intact an opportunity to “create strong global franchises” in lines such as marine, specialty property, errors and omissions and directors’ and officers’ liability, Intact said in a release Nov. 9.
Intact made a major move in the U.S. commercial specialty market with the 2017 acquisition of Minnesota-based OneBeacon Insurance Group Ltd. for about US$2.3 billion. OneBeacon’s coverages include liability, marine, surety and entertainment, among others. In 2019, Intact bought The Guarantee Company of North America and MGA Frank Cowan Company.
Worldwide, RSA had net premiums written of £6.4 billion in 2019. Of that, £1.8 billion was in Scandinavia, £1.7 billion was in Canada and £2.9 billion was in its U.K. and international business.
If the deal goes through, Intact would not be the only Canadian firm with a large international presence.
Toronto-based Fairfax Financial Holdings Ltd. reported net premiums written of US$13.8 billion in 2019, with most of that coming from foreign insurers. That makes Fairfax’s total worldwide P&C business about twice the size of Intact’s and about as big as the Canadian P&C businesses of Intact, Desjardins and Wawanesa put together.
Fairfax subsidiary Northbridge placed 11th in the Canadian P&C market last year with 3% market share, or $1.8 billion in premium, according to the 2020 Canadian Underwriter Statistical Guide.
Fairfax was founded in 1985 in Canada by current CEO Prem Watsa and has steadily expanded in the United States and overseas. Its biggest acquisitions include Odyssey Group in 1996, Crum & Forster in 1998, Brit PLC in 2015 and Allied World in 2017.
If the RSA-Intact-Tryg deal were to be completed, Intact would still be bigger in Canada than Fairfax, Mitchell pointed out.
If you use data from Canadian Underwriter’s 2020 Statistical Guide, Intact and RSA had a combined total of nearly $11.3 billion in premiums in 2019. By contrast, Fairfax subsidiaries Northbridge, Odyssey and Allied World had a combined total of about 3.3% market share or $1.9 billion in premium, in Canada, in 2019.
Feature image via iStock.com/omersukrugoksu