June 10, 2011 by Canadian Underwriter
Intact Financial Corporation’s acquisition of AXA Canada, announced on May 31, will ultimately result in the disappearance of AXA Canada’s brand name, but brokers can expect no cuts in commissions or in how the new, bigger Intact will work with its brokers, according to Intact Insurance president Louis Gagnon.
Gagnon spoke about the deal at the Insurance Broker Association of Ontario (IBAO)’s Young Broker Council (YBC) Conference in Niagara Falls on June 9.
Being a broker himself, Gagnon said he could empathize with brokers’ uncertainty surrounding the acquisition, in which Canada’s largest P&C insurer, Intact, bought Canada’s sixth-largest P&C insurer, AXA Canada, for $2.6 billion in cash.
Gagnon said AXA’s French parent company approached Intact with an offer to sell its Canadian operations seven weeks ago. Now that the sale is public, Gagnon was able to discuss some of its details.
Among them, Intact has a transitional agreement to stop actively using the AXA name after a period of six months. “We have a trademark transitional agreement, where we can use the name for a certain period of time for certain things, but after six months, we are not allowed to use the AXA name actively,” he said.
Gagnon said Intact would want to drop the AXA trademark name anyway, to avoid any confusion arising out of a situation in which AXA was selling another product in Canada through its United States operations.
Earlier, a young broker in the audience said he worked at a brokerage that has a contract to represent AXA, but not Intact. “You are an Intact broker [now],” Gagnon said in response.
And what does that mean?
Brokers, Gagnon promised, would not see any major changes in how they work with Intact. Any cuts due to “synergies” between the companies, he said, in an answer to a question from the audience, would likely be targeted at parties working outside of the organization – in the use of third party vendors (such as external lawyers, for example) and in the claims management area.
“One thing is for sure, we are not going to cut anything, anything, that is related to writing an insurance policy or settling a claim,” he said. “Underwriters are going to stay. Claim adjusters are going to stay….
“There is going to be no cut in [broker] commissions… There is going to be no change in how AXA is looking at portfolios and how we [at Intact] would look at a portfolio. We will try to use the best of the two. So there is going to be no change in how we deal with the broker.”
In fact, given that Intact will be doing 80% to 90% of its business through the broker channel after the deal, representing $5 billion in volume, brokers will have a strong voice with the company as a result of the AXA acquisition. “Before this transaction, we had nothing to lose,” he said. “Now we have everything to lose.”
Gagnon said Intact’s deal with AXA would give the company a 16.5% market share in Canada’s property and casualty marketplace. This would, in effect, give brokers the power of offering a Canadian company’s product, with a strong brand name.
This is important, Gagnon said, because U.S. competitors with strong brand names appear poised to enter the Canadian market.
Gagnon mentioned no names, but brokers have hinted in the past at a potential jump into the Canadian market by U.S. companies along the likes of GEICO.