‘Business as usual’ for insurance intermediaries of Loblaw, Shoppers Drug Mart

No changes to insurance products have been announced in the wake of Loblaw Companies Ltd.’s proposed $12.4-billion acquisition of Shoppers Drug Mart Corp.

Through its President’s Choice brand, Brampton, Ont.-based supermarket chain Loblaw sells home, auto, pet, travel, critical illness and life insurance through PC Financial Insurance Agency Inc. and PC Financial Insurance Broker Inc.

Since February, Toronto-based Shoppers Drug Mart has been selling the Royal Bank of Canada’s travel insurance on its website.

PC Financial’s travel insurance is underwritten by Co-operators Life Insurance Company (and administered by TIC Travel Insurance Coordinators Ltd.) and by AIG Insurance Company of Canada (and administered by Travel Guard Group Canada Inc.).

“It’s business as usual for us at this time,” a Loblaw spokesperson wrote in an e-mail to Canadian Underwriter, when asked whether an acquisition of Shoppers would result in changes to either firm’s insurance offerings and whether Shoppers will continue selling RBC travel insurance while PC Financial sells travel insurance underwritten by AIG Canada and The Co-operators.

Shoppers Drug Mart and Loblaw announced July 15 a definitive agreement under which Loblaw would acquire all outstanding common shares of Shoppers, which operates 1,242 stores under the Shoppers Drug Mart brand (Pharmaprix in Quebec).

Loblaw’s stores operate under several brand names, including Loblaws, No Frills, Real Canadian Superstore, valu-mart, Zehrs, Fortinos, Extra Foods and Atlantic Superstore, as well as maxi and Provigo in Quebec and Dominion in Newfoundland and Labrador.

When consumers go to the Shoppers website, they can get a link to products from RBC Insurance Services Inc. They can shop for emergency medical, cancellation and interruption, baggage and personal effects and flight and travel accident coverage, underwritten by RBC Insurance Company of Canada.

Loblaw launched PC Financial Insurance Broker Inc. as a full service home and auto brokerage in early 2010. Before 2010, it had sold home and auto insurance using a direct model, underwritten by subsidiaries of Aviva Canada Inc.

PC Financial now offers auto and home coverage in Alberta, Ontario, New Brunswick, Newfoundland and Labrador, Prince Edward Island and Nova Scotia. Its underwriters include The Dominion General Insurance Company of Canada, Royal and Sun Alliance Insurance Company, Aviva, Intact Financial Corp.’s AXA subsidiary as well Allstate Canada’s Pembridge and Pafco units. 

Loblaw’s agreement to acquire Shoppers Drug Mart is subject to approval by two-thirds of Shoppers shareholders and to “compliance with the Competition Act and certain other closing conditions customary in transactions of this nature.” The directors of both firms “have unanimously determined that the proposed combination is in the best interest of their respective companies,” the companies stated in a press release.

However, the agreement allows the Shoppers board to terminate it if someone other than Loblaw offers Shoppers an “unsolicited superior proposal,” provided Shoppers pays a $300 million termination fee. If this were to happen, Loblaw would be allowed to match such a proposal. The $12.4-billion price tag is based on the closing price of Loblaw shares July 12. Loblaw is proposing to pay $33.18 in cash plus 0.5965 Loblaw shares for each Shoppers share.

 The deal is also dependent on approval of the majority of Loblaw shareholders, though 63% of Loblaw’s common shares are owned by George Weston Ltd., whose products include Country Harvest and Wonder bread.

If the acquisition closes, Loblaw plans to operate Shoppers Drug Mart as a separate division and “expand its product offerings” to include Loblaw’s food.

When it announced its travel insurance alliance with RBC in February, Shoppers noted that it already sells travel services such as passport photos and travel accessories. Its alliance with RBC includes bank accounts co-branded with Shoppers’ Optimum loyalty card.

Loblaw’s PC Financial also provides banking and credit card services — through the Canadian Imperial Bank of Commerce — and a loyalty program through President’s Choice Services Inc.

In addition to travel, home, auto and life insurance, PC Financial sells pet insurance in all Canadian provinces and territories. That coverage is underwritten by Western Financial Insurance Company, owned by High River, Alta.-based Western Financial Group Inc., which in turn is owned by Desjardins Financial Group.