close
close

Intact CEO discusses next steps for M&A growth

Intact has fully processed the acquisition of RSA Canada, once Canada’s seventh largest insurer, and now continues to maintain its target of growing to a 25 to 30% market share in Canada.

“When it comes to mergers and acquisitions, the main area of ​​interest is Canada,” Charles Brindamour, CEO of Intact Financial Corporation, told CIBC Capital Markets analyst Paul Holden in a virtual fireside chat on May 14. plenty of room to grow in the Canadian context as an insurer and as a distributor. This is where the first (M&A) dollar goes.”

Holden asked Brindamour a number of questions about Intact’s future merger and acquisition plans.

Intact has already signaled its intention to expand its BrokerLink distribution network for brokers to $5 billion in direct premiums written by the end of 2025. Holden and other investors asked about the company’s intention to expand its growth on the insurance side as well.

“In terms of mergers and acquisitions in North America, I would say that is where the focus is, and we are absolutely ready to do something,” Brindamour said. “But at the end of the day, we have very well-established economic norms; it has to be strategic in nature, and we don’t make deals just to make deals or to create…punctual growth.”

Holden asked Brindamour about balance sheet capacity and excess capital. Such capital can be used to close a deal.

“Capital margin at the end of the first quarter of 2024 was $2.7 billion,” Brindamour reported, adding that all debt absorbed as part of the deals for RSA Canada and the acquisition of Direct Line Insurance Group plc in the U.K. Kingdom last year “are behind us. .” He also noted that the company divested the pension liabilities of its RSA UK last year. “As far as I am concerned, there is sufficient firepower on the balance sheet to carry out transactions in this environment,” says Brindamour.

To put Intact’s capital margin into perspective, Intact acquired Axa Canada in 2011 for $2.6 billion. Axa Canada was the sixth largest non-life insurer in Canada at the time.

In 2020, Intact paid $5.1 billion to acquire RSA’s Canadian, UK and international operations. At the time, RSA Canada ranked seventh in Canadian property and casualty insurance market share.

Also in the news: what the Canadian P&C industry could pay for NatCats in 2038

Despite Intact’s sizable war chest to close a deal, Brindamour said “the biggest opportunity is organic growth.” He noted that tough market conditions in the Canadian non-life sector still prevail, and that the company is already comfortable with its margins in the areas in which it operates.

Brindamour made no mention of any specific deals on the burner.

Hypothetically, money would be the only limit to the size of the deal it could make to reach a total market share of 30%. If money were no object, Intact could acquire any of Canada’s top 10 companies on its way to reaching its target of a 25% to 30% market share.

Based on total insurance revenue market share in Canada, Intact ranked first in the country in 2023 with a 16.8% share, according to statistics from MSA Research to be published in Canadian endorser‘s upcoming Statistics Guide for 2024. The number 2 company in Canada in 2023 was Desjardins Group with a market share of 10.35%. Third was Aviva Canada, with a market share of 8.97%.

During the fireside chat, a member of the audience asked Brindamour if he was concerned about Intact hitting the Competition Bureau’s antitrust threshold. The Bureau investigates all deals that give Canadian companies a market share of more than 35% in the areas in which they operate.

“Our market share in the products we operate in, across the home, automotive and commercial lines, is in the 20 to 25% range,” Brindamour responded. “There are segments of the market where we are underrepresented. For example, in sectors other than SME (small and medium enterprises) and mid-market, we are in the teens.

“In total, I think we can grow our franchise by 50% before focusing on organic growth as the main growth driver. The threshold for antitrust regulation is about 35% per product and per province you operate in, so I think it’s uneven across the country.

“But there is plenty of room in my mind to grow our operation in meaningful ways and ultimately protect many more Canadians than what we are doing now.”

Feature image courtesy of iStock.com/zhuweiyi49