Intact Financial Corporation’s integration of RSA plc is on track, with earnings slightly better than originally anticipated, the insurer’s chief executive officer reports.
The deal increases Intact’s specialty lines presence in North America by close to 30%, Intact Financial Corporation CEO Charles Brindamour says. A large portion of the integration in Canada will be completed by the summer or early fall of this year, he anticipates.
“In aggregate, you’ve seen that the accretion to our earnings from the first quarter of the acquisition was in the upper single-digit range, in line with what we said we would generate in the first year,” Brindamour says. “It came sooner than we thought, quite frankly. A portion of it is [that the] performance is a little bit better than what we thought, and then the integration is going really fast.”
Brindamour discussed the RSA acquisition during a virtual fireside chat as part of the 25th annual CIBC Western Institutional Investor Conference Jan. 20. He was referring to the acquisition by Intact Financial Corporation and Danish insurer Tryg A/S of London, U.K.-based RSA plc, completed at the beginning of June 2021. As part of the deal, Toronto-based Intact acquired RSA Canada and some of RSA’s international operations.
Brindamour says “the integration is on track and certainly contributing to the earnings power in line, if not a little bit better, than what we thought when we did the transaction. The environment in which we are integrating is very supportive both in the U.K. as well as North America.”
Paul Holden, banks and insurance analyst and managing director with CIBC, asked Brindamour for an update on the RSA integration and earnings accretion.
Intact CEO Charles Brindamour speaking during a virtual fireside chat at the 25th annual CIBC Western Institutional Investor Conference.
Brindamour reports “a big portion” of RSA customers have already migrated to Intact’s systems and products. “And I think by the summer of 2022, early fall of 2022, a big portion of the integration in Canada will be completed,” he says. “We’re slightly ahead on synergy… [and] very pleased with where we are.”
The RSA acquisition is a “massive strategy accelerator for Intact” and increased the biggest Canadian P&C insurer’s leadership position in Canada by 30%, Brindamour says. He adds that Intact is now 25 to 30 times larger than the average player in the marketplace.
“I would call this a scale advantage,” Brindamour says. “Seventy-five per cent of the synergy comes from the Canadian integration.”
Another element of the RSA acquisition is global specialty lines capability, Brindamour says during the virtual fireside chat. “We’re increasing our specialty lines North American presence by also close to 30%,” he says. “We’re gaining a billion dollars of revenue in specialty lines outside of North America and getting access to many more markets to follow our customers in global [specialty lines] per se. That is going well, performance is really good.”
Intact’s U.K. presence also came at a “fairly positive price point,” Brindamour says. “You’ve seen the results are good, and we’re really focused to create outperformance in that market.”
The insurer was initially expecting an internal rate of return on the transaction “north of 15 [per cent]; we think it’ll be closer to the 20% range.” Some of this is due to the strength of the integration and the speed at which Intact is rationalizing the footprint (reducing costs), Brindamour says.
“You’ve seen the Denmark transaction at four times book a week after we closed the deal and rationalizing the footprint has been a contributor, contributing to the internal rate of return we’ve seen on this transaction.”