Latest news with #DefinityFinancial
Globe and Mail
3 days ago
- Business
- Globe and Mail
Why investors love Definity's big acquisition, helping the home and auto insurer extend its hot run
Expected industry consolidation is forcing Canada's auto and property insurers to choose between eating or being eaten, and Definity Financial Corp. DFY-T is leaving no one guessing where it stands. On Tuesday the company, which predominately operates in Ontario, shelled out $3.3-billion for the Canadian operations of U.S. insurance giant Travelers Companies Inc., a deal that amounted to 40 per cent of Definity's stock market value. In most circumstances, taking such a big bite would be considered a risky bet. Yet Canada's auto and property insurance market has become very lucrative for the industry's best operators, and investors are so intrigued by the growth opportunity that they scrambled to buy more Definity stock on Wednesday, both through an upsized share sale that helps finance the takeover and in the open market. By day's end, Definity's stock jumped 11.3 per cent. Its total return, including dividends, since going public in November, 2021, is now 198.1 per cent, trouncing the 46.9-per-cent total return for the S&P/TSX Financials Index over the same period. Travelers, meanwhile, made the opposite call. The American insurer expanded to Canada in 2013 and 12 years in, its 1.85-per-cent market share remains muted. The company's Canadian business also accounted for just 2.3 per cent of its total property and casualty – that is, home, auto and commercial – premiums in 2024. While Travelers' shares have been on a run of their own and the company is in good financial standing, fighting Canadian rivals would take more capital, because the company would likely need to grow by acquisition. Instead, management decided to sell while home and auto insurers are trading at premium valuations. Travelers declined to comment. The sector is scorching hot for multiple reasons. To start, home and auto insurers are seen as defensive stocks amid the stock market volatility. Banks often struggle with surging loan losses during economic downturns, but property and casualty insurers do not face the same threats. Pricing conditions have also been favourable to insurers. Across the industry, executives often talk about 'soft' and 'hard' markets – the former is when insurers drop their prices and increase their risk tolerance in hopes of gaining market share, and the latter is when companies drop clients and hike premiums. Canada's P&C insurers have been operating in a hard market for a few years now, and there aren't many signs of it changing. When Definity reported first-quarter earnings in early May, chief executive officer Rowan Saunders said the hard market helped premiums grow 9.6 per cent over the same quarter in the prior year. The industry's best operators have also invested in technology that improves their risk models which, in turn, help them determine which clients are worthy of underwriting. This means rising prices and better profits. It also means a lower combined ratio for an insurer, which is a measure of claims to premiums earned. In 2018, Definity's combined ratio was 111.8 per cent, meaning it was paying out more in claims than it was bringing in through premiums. In the first quarter, the ratio had fallen to 94.1 per cent. Having proven its operating prowess, Definity became quite vocal over the past year about wanting to make an acquisition. The company was sitting on excess capital, and its balance sheet was in such good shape that it was comfortable adding debt to fund a large deal. By combining with Travelers' property and casualty business – Travelers' surety business in Canada will remain with the American company – Definity vaults into fourth place, ranked by market share, and its new heft will offer the scale Mr. Rowan believes is necessary to compete in a rapidly changing technology environment. Because Definity will have more revenue, it can spread its technology expenses – to upgrade its risk systems and to transform its claims operations – over a larger pot. And by growing, Definity can mimic the expansion strategy that has been so successful for Canadian rival Intact Financial Corp. Once known as ING Groep NV's Canadian arm, Intact rebranded in 2009 after ING sold the business to public investors. Intact then went on an acquisition spree in Canada, the United States and, most recently, in Britain with its deal to buy RSA Insurance Group. The growth abroad has impressed investors, because Intact has successfully integrated its takeover targets and increased profits in the process. In an interview Tuesday, Mr. Saunders said his immediate focus is to integrate the Travelers' business, but he added, 'We still have capital to keep deploying.' It's not yet clear who else would consider selling, but the more the industry consolidates, the better it is for top operators, because pricing power will only increase.
Mint
3 days ago
- Business
- Mint
TSX ekes out another record high as bank earnings impress
TSX ends up 0.1%, at 26,283.45 Posts new record closing high BMO gains 1.5% and National Bank adds 3.8% Definity Financial jumps 11.3%. (Updates at market close) May 28 (Reuters) - Canada's main stock index edged up on Wednesday to a record closing high as investors cheered quarterly earnings from some of the nation's biggest banks and assessed prospects of consolidation in the insurance sector. The Toronto Stock Exchange's S&P/TSX composite index ended up 14.45 points, or 0.1%, at 26,283.45, eclipsing Tuesday's record closing high. Wall Street shares ended lower as investors digested minutes from the last Federal Reserve meeting and awaited results from AI bellwether Nvidia. "The big story today is the banks," said Colin Cieszynski, chief market strategist at SIA Wealth Management. "Bank earnings were quite impressive given the risks that are facing the Canadian economy right now." Canada sends 75% of its exports to the United States so its economy could be hurt particularly badly in a global trade war. Bank of Montreal, Canada's third largest lender, and National Bank of Canada beat analysts' estimates for quarterly earnings. Their share prices rose 1.5% and 3.8% respectively. Canadian property and casualty insurer Definity Financial's $2.4 billion purchase of Travelers Cos' Canadian business could spur a wave of consolidation in Canada's insurance sector, its CEO said. Shares of Definity Financial jumped 11.3%. The heavily weighted financials sector added 0.2% and the materials group, which includes metal mining shares, was up 0.6%. Technology lost 0.3%, while energy ended 0.7% lower despite higher oil prices. U.S. crude oil futures settled up 1.6% as OPEC agreed to leave their output policy unchanged and the U.S. barred Chevron CVX.N from exporting Venezuelan crude. (Reporting by Fergal Smith in Toronto and Sanchayaita Roy in Bengaluru; Editing by Shilpi Majumdar, Sahal Muhammed and Alistair Bell)
CTV News
3 days ago
- Business
- CTV News
Definity signs deal to buy Travelers' Canadian operations for $3.3 billion
Definity Financial Corp. says it will acquire most of the Canadian operations of U.S. insurance firm Travelers for $3.3 billion. Definity says the deal will make it the fourth largest property and casualty insurer in Canada. The agreement will give the Waterloo, Ont.-based firm an additional $1.6 billion in annual gross written premiums. It will add about $1 billion in annual premiums to its personal lines segment and roughly $600 million to its commercial lines business. Definity says the deal excludes Travelers' Canadian surety business. The transaction is subject to approval from the minister of finance and needs clearance under the Competition Act but is expected to close in the first quarter of 2026. This report by The Canadian Press was first published May 28, 2025. The Canadian Press
Globe and Mail
3 days ago
- Business
- Globe and Mail
Definity Financial Corporation Announces Increased Size of Previously Announced Private Placements of Common Shares to $385 million
/NOT FOR DISTRIBUTION TO THE U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES/ WATERLOO, ON, May 28, 2025 /CNW/ - Definity Financial Corporation (TSX: DFY) announced today that it has increased the size of its previously announced private placements. Pursuant to the amended terms, the syndicate of underwriters, led by RBC Capital Markets as Sole Bookrunner (collectively the "Underwriters"), has agreed to purchase, on a bought deal basis, an aggregate of 4,631,000 common shares of Definity ("Common Shares") at an offering price of $66.65 per Common Share (the "Offering Price") for gross proceeds of approximately $309 million (the "Offering"). The Underwriters intend to arrange for substituted purchasers for the Common Shares being issued in the Offering.
National Post
4 days ago
- Business
- National Post
Travelers to Sell Its Canadian Personal Insurance Business and Majority of Its Canadian Commercial Insurance Business to Definity for US$2.4 Billion
Article content Article content NEW YORK — The Travelers Companies, Inc. (NYSE: TRV) today announced that it has signed a definitive agreement to sell the personal insurance business and the majority of the commercial insurance business of Travelers Canada to Definity Financial Corporation (TSX: DFY) for approximately US$2.4 billion. The purchase price represents a multiple of 1.8 times book value, adjusting for approximately US$0.8 billion of excess local capital which is being repatriated as part of this transaction in a tax-efficient manner. Travelers, which is the largest surety writer in North America, will retain its premier Canadian surety business. The transaction is expected to close in the first quarter of 2026, subject to regulatory approvals and other customary closing conditions. Article content 'This transaction is a reflection of our steadfast commitment to disciplined capital allocation and long-term value creation,' said Alan Schnitzer, Chairman and Chief Executive Officer of Travelers. 'The evolution of the Canadian market over the past decade has made Definity a natural long-term owner for this business, a view affirmed by the compelling value of their proposal. I am confident that our Canadian customers, brokers and colleagues will benefit from being part of one of the country's leading and fully integrated property casualty insurers.' Article content Travelers expects to use approximately US$0.7 billion of the net cash proceeds of the transaction for additional share repurchases in 2026, while retaining the remainder to support ongoing operations and for general corporate purposes. The transaction and resulting share repurchases are expected to be slightly accretive to the company's earnings per share in each of the next several years. Article content Jefferies LLC acted as financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP and Stikeman Elliott LLP served as legal advisors to Travelers in this transaction. Article content Calculation of Book Value Multiple The price to book value multiple calculation excludes approximately US$0.8 billion of excess local capital from both the numerator (purchase price) and the denominator (book value). Book value is based on the equity of the entities being sold as of Dec. 31, 2024, after taking into account the separation of the surety business and measured on an IFRS basis. Article content About Travelers The Travelers Companies, Inc. (NYSE: TRV) is a leading provider of property casualty insurance for auto, home and business. A component of the Dow Jones Industrial Average, Travelers has more than 30,000 employees and generated revenues of more than $46 billion in 2024. For more information, visit Article content Forward-Looking Statements All statements in this press release other than statements of historical facts are 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995. These include, among others, statements regarding expected closing of the transaction, use of proceeds, financial impact of the sale and share repurchases. Actual results of matters addressed in these forward-looking statements involve risks and uncertainties and may differ substantially from those expressed or implied. Some of the factors that could cause actual results to differ are discussed under the heading 'Risk Factors' and 'Forward-Looking Statements' in the company's most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. In addition, the transaction is subject to closing conditions, including obtaining required regulatory approvals and the satisfaction of other customary closing conditions, and may not occur. The forward-looking statements in this press release speak only as of the date of this press release, and we undertake no obligation to update any forward-looking statements. Article content Article content Article content Article content Contacts Article content Article content Article content
