Canadian Underwriter

Intact agrees to sell former RSA operation for $1.26 billion

June 14, 2021   by Greg Meckbach

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Less than two weeks after the takeover of RSA plc closed, the insurers who bought RSA are now agreeing to sell RSA’s former operation in Denmark.

At the moment, Toronto-based Intact Financial Corp. owns half of Codan Forsikring A/S’s Danish business, a property and casualty insurer known as Codan DK. The other half of Codan DK is owned by Danish insurer Tryg A/S. The three-way deal for Intact and Tryg to acquire RSA in its entirely closed June 1.

Then, on June 11, Intact announced that it has entered into a definitive agreement with Tryg to sell Codan DK to Danish financial services firm Alm.Brand A/S Group for about Cdn$2.52 billion.

If the proposed deal to sell Codan DK closes, then Intact will no longer co-own any former RSA operation in Denmark, an Intact spokesperson told Canadian Underwriter.

Intact now owns what used to be RSA’s operations in Canada, as well as in Britain, Ireland, and the Middle East. Tryg now owns what used to be RSA’s operations in Sweden and Norway.

In the original deal announced Nov. 5, Tryg and Intact agreed to split RSA’s operations in Denmark 50-50.

“We are co-owning [the RSA operation in] Denmark after the transaction closes with Tryg and this was meant to be structured in a way that would meet anti-trust requirements for the transaction to [get approved in Denmark],” Intact chief financial officer Louis Marcotte said this past February during an online virtual fireside chat with Credit Suisse analyst Mike Rizvanovic.

Rizvanovic had asked Marcotte to discuss the non-Canadian parts of RSA that Intact gets as a result of the deal.

Intact plans to look at every part of RSA that it acquires and ask two questions, said Marcotte. Does the business add to our specialty lines expertise and scale overall? And can it outperform in the marketplace where it is operating?

“If the answer is ‘no’ to both questions, we will look at strategic alternatives to those businesses,” Marcotte said during the 22nd Annual Credit Suisse Virtual Financial Services Forum in February 2021. “If we have the ability to outperform in the marketplace, we will continue with the business and grow it.”

The RSA deal will increase Intact’s direct premiums written from about $12 billion to $20 billion a year, Intact CEO Charles Brindamour said in a press conference this past November, shortly after the deal was announced. Intact’s head count will grow from about 16,000 to 26,000.

The Intact and Tryg deal to buy RSA is valued at about £7.2 billion, with Intact paying £3.0 billion and Tryg paying £4.2 billion. The British pound closed Friday at $1.71.

During Intact’s recent 2021 Q1 earnings call, an investment banking analyst asked about the countries other than Canada in which Intact will operate as a result of the RSA deal.

“For most markets, we are putting the final touches of how performance will be built, and I think there are a couple of areas where we are exploring strategic alternatives at the moment,” CEO Charles Brindamour replied May 12 during the Q1 earnings call.

In a press release June 11, Intact said it would get about Cdn$1.26 billion from the sale of its share of the Denmark operation. Intact intends to use its proceeds from the sale of Codan to repay short-term debt raised by Intact to acquire RSA and for general corporate purposes, the company said June 11.

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