Private equity firm to acquire 50% interest in western Canadian insurer

An Alberta-based private equity company announced Tuesday it has entered into a letter of intent to acquire a 50% interest in a western Canadian-based property and casualty insurance company for $2 million.

The Western Investment Company of Canada, a publicly traded company based in High River, Alta., said the acquisition represents about 90% of the insurance company’s book value as of the closing date – April 2019 if certain conditions are met.

“We will identify the insurer once we have a number of key conditions removed – the goal is to do so by the end of January,” Scott Tannas, Western’s president and CEO, told Canadian Underwriter Wednesday. “The insurer is very small right now, and has a very limited product focus. Our plan is to quickly expand the volume and lines of business.”

To achieve rapid growth, the insurer intends to partner with about a dozen brokers in western Canada to identify new insurance product niches and participate in current insurance programs.

“We believe we have found the ideal partner and platform to launch a specialty underwriter that will blossom into a successful and profitable financial institution,” Tannas said in a release Tuesday. “Over the coming weeks we will work to finalize our plans and seek necessary approvals, and will provide additional information to stakeholders as conditions to the transaction are removed. We are excited for what 2019 has in store for our small, profitable and growing company.”

The proposed transaction is subject to a number of conditions, including approval by Western’s board, TSX Venture Exchange and the Alberta Superintendent of Insurance. If all conditions are removed, the transaction is expected to close by April 2019.

“Western’s CEO Scott Tannas has an exemplary track record in western Canada’s P&C business,” said board chair Jim Dinning. “So, it’s appropriate that Western will lead the development and execution of a plan to expand the insurers’ operations significantly in 2019 and 2020.”

Tannas, who is also a senator, said the private equity firm has been clear in its intention to enter the insurance industry in western Canada. “In fact, it was an important component of our founding plan.”

The latest transaction is Western’s fifth investment. Canadian Underwriter asked Tannas about any future M&A plans for Western. “We will spend a significant amount of time and focus on making sure we add value to the insurance business in 2019,” he said. “The other four businesses also have significant expansion plans, some of which require additional capital from Western Investment Company. So, while we may look at a few other investments, I think our dance card is pretty full this coming year.”

Tannas founded the Western Financial Group brokerage in 1996 and served as CEO until 2014. He oversaw the building of Western Financial through more than 100 acquisitions. In 2015, Tannas started the Western Investment Company of Canada.