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Strengthening RSA’s main UK Commercial Lines platform
- Enhances the profitability and progress profile of the UK & International (UK&I) business via elevated concentrate on Royal & Sun Alliance Insurance Limited’s (RSA) outperforming Commercial Lines business
- Increases RSA’s presence within the enticing UK Commercial Lines market, the place it’s going to develop into the third largest participant with an estimated 7% market share
- Broadens RSA’s dealer distribution community and expands our present Commercial Lines product providing
- Accretive to Net Operating Income Per Share (NOIPS)1 in 2024, with low single-digit accretion by Year 3
- Expected Internal Rate of Return (IRR)2 in extra of 15% and instantly accretive to Book Value Per Share (BVPS)3 by 2%
- Strategic choices being explored for RSA’s UK Personal Lines business
TORONTO, Sept. 06, 2023 (GLOBE NEWSWIRE) — Intact Financial Corporation (TSX: IFC) (Intact, IFC or the Company) and its subsidiary RSA immediately introduced that they’ve reached an settlement with Direct Line Insurance Group plc (Direct Line) to accumulate Direct Line’s brokered Commercial Lines operations. The buy worth consists of an preliminary money consideration of £520 million (C$884 million), with potential for as much as an extra £30 million (C$51 million) contingent fee beneath earnout provisions regarding the monetary efficiency of the acquired business strains. The transaction will outcome within the switch of renewal rights, manufacturers, staff, and methods to RSA.
Direct Line’s brokered Commercial Lines generated written premiums4 of £530 million in 2022, and delivered a median mixed ratio56 of roughly 96% throughout 2021 and 2022.
The transaction has been unanimously accepted by the Boards of Directors of each Intact and Direct Line, and is topic to approval by Direct Line’s shareholders (Direct Line Shareholder Approval).
“This acquisition significantly strengthens our UK&I business, and is strongly aligned with our strategic and financial objectives,” mentioned Charles Brindamour, Chief Executive Officer, Intact Financial Corporation. “The transaction enhances our position in the UK by doubling down on lines of business where we already outperform.”
Ken Norgrove, Chief Executive Officer, RSA, added: “We look forward to welcoming a team of experienced, highly talented and skilled colleagues from strong brands, including NIG and FarmWeb, to further enhance RSA’s strong Commercial Lines business.”
To speed up its outperformance ambition, Intact can be exploring strategic choices in respect of RSA’s UK Personal strains business, together with a doable sale. RSA had beforehand introduced its exit from the UK Personal Lines motor market in March 2023, in addition to outlined plans to optimize its main Home and Pet platforms.
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1 NOIPS is a non-IFRS ratio, which doesn’t have a standardized that means prescribed by IFRS and is probably not similar to related measures utilized by different firms in our business. It is calculated by dividing web working revenue attributable to widespread shareholders, divided by the weighted-average variety of widespread shares excellent every day throughout a selected interval. Net working revenue attributable to widespread shareholders is a non-IFRS measure which represents the online revenue attributable to shareholders, excluding the after-tax influence of non-operating outcomes, web of web revenue (loss) attributable to non-controlling pursuits (non-operating element), most well-liked share dividends and different fairness distributions. See Non-IFRS measures on the finish of this press launch.
2 IRR is the low cost charge that makes the online current worth of all money flows equal to zero in a reduced money circulate evaluation.
3 BVPS is a supplementary monetary measure, which doesn’t have a standardized that means prescribed by IFRS and is probably not similar to related measures utilized by different firms in our business. It is calculated by dividing widespread shareholders’ fairness by the variety of widespread shares excellent. See Non-IFRS measures on the finish of this press launch.
4Stated as Gross Written Premiums (GWP), which is a supplementary monetary measure, doesn’t have a standardized that means prescribed by IFRS, and is probably not similar to related measures utilized by different firms in our business. It is outlined as the whole premiums from insurance coverage contracts that have been incepted in the course of the interval.
5 Combined ratio is a non-IFRS ratio, which doesn’t have a standardized that means prescribed by IFRS and is probably not similar to related measures utilized by different firms in our business. It is the sum of (i) claims ratio (which is a non-IFRS ratio which represents working web claims divided by working web underwriting revenues) and (ii) expense ratio (which is a non-IFRS ratio which represents working web underwriting bills divided by working web underwriting revenues. See Non-IFRS measures on the finish of this press launch.
6 Data supplied by Direct Line. Average mixed ratio is offered on an IFRS 4 foundation.
Strong strategic match
The acquisition is a novel alternative to boost the outperformance place of the UK&I platform.
- Strengthens our presence within the enticing small and medium-sized enterprises (SME) and mid-market phase of the UK market, bettering the danger profile of our UK&I business.
- Acquisition of well-established and main manufacturers, together with NIG and FarmWeb, given Direct Line’s 125-year historical past within the UK industrial insurance coverage market.
- Broadens our dealer distribution community and expands our present Commercial strains product providing.
- Drives outperformance via better presence and concentrate on our UK&I Commercial and Specialty strains portfolios, which have delivered a 91% mixed ratio5 within the two years for the reason that acquisition of RSA.
- Opportunity to drive worth creation via loss ratio enchancment within the acquired business by leveraging our underwriting experience.
Financially compelling
- Internal charge of return (IRR)2 is anticipated to be in extra of 15%.
- Annual UK&I Commercial Lines (together with Specialty) direct premiums written (DPW)7 is anticipated to extend to roughly £2.3 billion on a professional forma foundation from £1.8 billion in 2022.
- The professional forma UK&I Commercial Lines mixed ratio5 is anticipated to be roughly 92% in 2024. By leveraging our worth segmentation and danger choice capabilities, we count on this to enhance to roughly 90% within the subsequent 12 to 24 months.
- We count on to drive annual cost synergies of roughly £20 million by Year 3.
- We count on the transaction to be accretive to NOIPS1 in 2024, with low single-digit accretion by Year 3. The influence on Operating ROE8 is anticipated to be largely impartial.
- BVPS3 is anticipated to extend by roughly 2% upon the issuance of widespread shares to finance the transaction.
- Intact will keep a powerful capital place after financing the transaction, with all regulatory capital ratios remaining at or above goal working ranges.
- The professional forma adjusted debt-to-total capital ratio9 is anticipated to be beneath 25% upon completion of the financing, and return to pre-transaction ranges by the top of 2024. Intact doesn’t count on that its exterior credit score scores shall be impacted.
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7 Direct premiums written (DPW) is a supplementary monetary measure, which doesn’t have a standardized that means prescribed by IFRS and is probably not similar to related measures utilized by different firms in our business. It consists of the whole quantity of premiums for brand new and renewal insurance policies written in the course of the reporting interval, excluding business swimming pools, fronting and exited strains. See Non-IFRS measures on the finish of this press launch.
8 Operating ROE is a non-IFRS ratio, which doesn’t have a standardized that means prescribed by IFRS and is probably not similar to related measures utilized by different firms in our business. It is calculated by dividing web working revenue attributable to widespread shareholders by the adjusted common widespread shareholders’ fairness (excluding amassed different complete revenue). See Non-IFRS measures on the finish of this press launch.
9 Adjusted debt-to-total capital ratio is a non-IFRS ratio, which doesn’t have a standardized that means prescribed by IFRS and is probably not similar to related measures utilized by different firms in our business. It is calculated utilizing debt excellent (excluding hybrid debt) divided by adjusted whole capital. See Non-IFRS measures on the finish of this press launch.
Transaction particulars and approvals
The transaction is topic to Direct Line Shareholder Approval, with the vote anticipated to happen in October 2023.
The transaction shall be effected via the mix of:
- An settlement to switch the brand new business franchise and sure operations, manufacturers, staff, contractors, knowledge, renewal rights, third get together contracts and premises to RSA, with the switch anticipated to happen in Q2 2024.
- A quota share reinsurance settlement regarding premiums written however not but earned, whereby considerably the entire future economics of Direct Line’s brokered Commercial Lines portfolio shall be transferred to RSA ranging from October 1, 2023. If accepted by the Court, this shall be adopted by an insurance coverage business switch.
- Certain administration and transitional providers preparations.
As a part of the transaction, Direct Line will retain the pre-October 1, 2023 economics in relation to the acquired portfolio. RSA is subsequently not uncovered to any growth on prior-year reserves. However, RSA and Direct Line intend to enter into discussions relating to the potential switch of these economics at a later date.
Any further capital required to assist the quota share reinsurance settlement and new business progress shall be funded via extra capital in our UK subsidiary, in addition to future capital era.
RSA and Direct Line will work intently with brokers to make sure a easy transition course of.
Around 800 Direct Line staff will transfer to RSA to offer ongoing assist and repair supply, which is able to enable RSA to proceed to keep up its glorious relationships with brokers and supply excellent service to prospects.
Transaction financing
Following Direct Line Shareholder Approval, Intact will make a £520 million (C$884 million) fee to Direct Line as money consideration for the acquired UK industrial strains business, with potential for as much as an extra £30 million (C$51 million) contingent fee beneath sure earnout provisions regarding the monetary efficiency of the business strains.
The buy worth, in addition to anticipated integration prices of roughly £45 million, shall be financed via a mixture of:
- a C$500 million purchased deal public providing of widespread shares;
- issuance of medium-term notes; and
- a brand new time period mortgage facility
Intact has entered into an settlement with a bunch of underwriters, led by CIBC Capital Markets and BMO Capital Markets for the issuance of 2,666,000 widespread shares at C$187.60 per widespread share (the Offering Price) for gross proceeds to Intact of roughly C$500 million (the Offering) pursuant to a purchased deal public providing in Canada and within the United States in a non-public providing to certified institutional patrons in reliance upon Rule 144A beneath the U.S. Securities Act of 1933, as amended (the U.S. Securities Act).
Intact has granted the underwriters an choice, exercisable, in entire or partially, at any time and occasionally, till the date that’s 30 days following the closing of the Offering, to buy as much as an mixture of 399,000 further widespread shares for added gross proceeds of as much as C$75 million. Closing of the Offering is anticipated to happen on September 13, 2023.
In assist of the transaction, Caisse de dépôt et placement du Québec (“CDPQ”) intends to buy widespread shares pursuant to the purchased deal public providing, on the Offering Price, representing an mixture buy worth of roughly C$50 million. As a outcome, CDPQ’s fairness curiosity in Intact is anticipated to stay largely unchanged at roughly 10%.
The issuance of the widespread shares is topic to the approval of the Toronto Stock Exchange and different customary closing situations.
Advisers
J.P. Morgan Securities plc is appearing as monetary adviser to Intact Financial Corporation. Skadden, Arps, Slate, Meagher & Flom LLP is appearing as authorized adviser to Intact Financial Corporation on this transaction.
Additional info
For extra particulars on this transaction, a pre-recorded audio webcast, transcript and presentation slides have been posted to the company web site. Please go to the Events and Presentations part beneath “Investors” at www.intactfc.com to entry these supplementary supplies.
About Intact Financial Corporation
Intact Financial Corporation (TSX: IFC) is the most important supplier of property and casualty (P&C) insurance coverage in Canada, a number one supplier of world specialty insurance coverage, and, with RSA, a pacesetter within the U.Ok. and Ireland. Our business has grown organically and thru acquisitions to over $21 billion of whole annual premiums.
In Canada, Intact distributes insurance coverage beneath the Intact Insurance model via a large community of brokers, together with its wholly-owned subsidiary BrokerLink, and on to shoppers via belairdirect. Intact additionally gives affinity insurance coverage options via the Johnson Affinity Groups.
In the US, Intact Insurance Specialty Solutions gives a variety of specialty insurance coverage services via impartial companies, regional and nationwide brokers, and wholesalers and managing normal companies.
In the U.Ok., Ireland, and Europe, Intact gives a variety of non-public, industrial and specialty insurance coverage options via a large community of brokers, third get together companions and on to buyer beneath the RSA manufacturers.
About RSA Insurance
RSA Insurance is a multinational insurance coverage group. We are one of many world’s oldest normal insurers, offering peace of thoughts to people and defending small businesses and enormous organisations from uncertainty. We use our capabilities to anticipate and enhance outcomes for patrons through our direct channel, our sturdy dealer relationships or companion organisations. We have established businesses within the UK, Ireland and continental Europe.
In 2021, the previous RSA Group Plc got here beneath new possession and is now a wholly-owned subsidiary of Intact Financial Corporation.
For extra details about RSA Insurance, please go to www.rsainsurance.co.uk
About Direct Line
Direct Line Insurance Group plc is a retail normal insurer with main market positions within the United Kingdom. The Group operates beneath extremely recognised manufacturers similar to Direct Line and Churchill and is comprised of 5 major segments: motor, home, rescue and different private strains, and industrial.
About CDPQ
CDPQ is a world funding group managing funds for public pension and insurance coverage. It invests constructively to generate sustainable returns over the long run, working alongside companions to build enterprises that drive efficiency and progress. It is energetic within the main monetary markets, non-public fairness, infrastructure, actual property and personal debt.
For additional info please contact:
| Intact Media Inquiries David Barrett Director, Media, Social and Owned Channels 1 416 227-7905 / 1 514 985-7165 [email protected] |
Intact Investor Inquiries Shubha Khan Vice President, Investor Relations 1 416 341-1464 ext. 41004 [email protected] |
Cautionary be aware relating to forward-looking statements
Certain of the statements included on this press launch in regards to the acquisition of Direct Line’s brokered Commercial Lines operations and the issuance of widespread shares pursuant to the Offering, together with the completion of the transaction and the Offering, the receipt of Direct Line Shareholder Approval, the timing of the switch of Direct Line’s brokered Commercial Lines operations, the anticipated sources of financing for the transaction, expectations relating to sources of funds for any further capital required to assist the quota share reinsurance settlement and new business progress, and the anticipated advantages of the transaction, together with the influence of the transaction on Intact’s business, monetary situation, capital place, money flows and outcomes of operations, expectations regarding market share, mixed ratio, adjusted debt-to-total capital ratio, IRR, BVPS, NOIPS, working ROE, and DPW, Intact’s plans in respect of RSA’s UK Personal Lines business and the efficiency of the UK&I Personal Lines business, the timing of closing of the Offering, the anticipated use of the online proceeds of the Offering, or every other future occasions or developments represent forward-looking statements. The phrases “might”, “will”, “would”, “ought to”, “may”, “expects”, “plans”, “intends”, “developments”, “indications”, “anticipates”, “believes”, “estimates”, “predicts”, “seemingly”, “potential” or the damaging or different variations of those phrases or different related or comparable phrases or phrases, are meant to establish forward-looking statements. Unless in any other case indicated, all forward-looking statements on this press launch are made as of the date hereof and are topic to vary.
Forward-looking statements are based mostly on estimates and assumptions made by administration based mostly on administration’s expertise and notion of historic developments, present situations and anticipated future developments, in addition to different components that administration believes are applicable within the circumstances. Many components may trigger the Company’s precise outcomes, efficiency or achievements or future occasions or developments to vary materially from these expressed or implied by the forward-looking statements. In addition to different estimates and assumptions which can be recognized herein, estimates and assumptions have been made relating to, amongst different issues, the anticipated completion of the transaction, the sources of financing for the transaction, the anticipated closing of the Offering of and the anticipated use of the online proceeds thereof. However, the completion of every of the transaction and the Offering is topic to customary closing situations, termination rights and different dangers and uncertainties, and there will be no assurance that the transaction and the Offering shall be accomplished inside anticipated timeframes or in any respect. All of the forward-looking statements included on this press launch are certified by these cautionary statements and people made within the “Risk Management” sections of the Company’s 2022 Management’s Discussion and Analysis (Sections 30-34) and the Company’s Q2-2023 Management’s Discussion and Analysis (Sections 19-20), in Notes 10 and 13 of the Company’s Consolidated Financial Statements for the 12 months ended December 31, 2022 and within the Company’s Annual Information Form dated February 7, 2023, all of which can be found on the Company’s web site at www.intactfc.com and on SEDAR+ at www.sedarplus.ca and people who shall be made within the prospectus complement to be filed in respect of the Offering. These components should not meant to symbolize a whole record of the components that might have an effect on the Company. These components ought to, nevertheless, be thought of rigorously. Although the forward-looking statements are based mostly upon what administration believes to be cheap assumptions, the Company can not guarantee traders that precise outcomes shall be according to these forward-looking statements. Investors shouldn’t depend on forward-looking statements to make choices and traders ought to make sure the previous info is rigorously thought of when reviewing forward-looking statements made on this press launch. The Company has no intention and undertakes no obligation to update or revise any forward-looking statements, whether or not because of new info, future occasions or in any other case, besides as required by regulation.
Disclaimer
This press launch doesn’t represent or type a part of any provide on the market or solicitation of any provide to purchase or subscribe for any securities nor shall it or any a part of it type the premise of or be relied on in reference to, or act as any inducement to enter into, any contract or dedication in any respect.
The info contained on this press launch regarding the Company doesn’t purport to be all-inclusive or to include all the knowledge that an investor might need to have in evaluating whether or not or to not make an funding within the Company. The info is certified fully by reference to the Company’s publicly disclosed info and the cautionary be aware relating to forward-looking statements included on this press launch.
No securities regulatory authority has both accepted or disapproved the contents of this press launch. The widespread shares to be issued pursuant to the Offering and over-allotment choice haven’t been, and won’t be, registered beneath the U.S. Securities Act, or any state securities legal guidelines. Accordingly, the widespread shares might solely be supplied or bought inside the United States pursuant to exemptions from the registration necessities of the U.S. Securities Act and relevant state securities legal guidelines. This press launch shall not represent a suggestion to promote or the solicitation of a suggestion to purchase, nor shall there be any sale of the widespread shares in any jurisdiction wherein such provide, solicitation or sale could be illegal.
Any web site handle included on this press launch is an inactive textual reference solely and data showing on such web site isn’t a part of, and isn’t included by reference in, this press launch.
J.P. Morgan Securities plc (“J.P. Morgan”), which is authorised within the UK by the Prudential Regulation Authority (the “PRA”) and controlled within the UK by the PRA and the Financial Conduct Authority, is appearing as monetary adviser completely for Intact and its associates and nobody else in reference to the transaction and won’t regard every other particular person as a shopper in relation to the transaction and won’t be accountable to anybody apart from Intact and its associates for offering the protections afforded to purchasers of J.P. Morgan or its associates, nor for offering recommendation in relation to the transaction or every other issues referred to on this announcement.
Non-IFRS Measures
The Company makes use of each International Financial Reporting Standards (IFRS) and sure non-IFRS measures to evaluate efficiency.
Non-IFRS monetary measures and non-IFRS ratios (that are calculated utilizing non-IFRS monetary measures) wouldn’t have standardized meanings prescribed by IFRS and is probably not similar to related measures utilized by different firms. They are utilized by administration to evaluate the Company’s efficiency.
Supplementary monetary measures, non-IFRS monetary measures and non-IFRS ratios used on this press launch and the Company’s monetary reviews embrace NOIPS, working ROE, BVPS, mixed ratio, claims ratio, expense ratio, GWP, DPW, and adjusted debt-to-total capital ratio.
For extra details about these supplementary monetary measures, non-IFRS monetary measures and non-IFRS ratios, together with definitions and explanations of how these measures present helpful info, discuss with Section 21 – Non-GAAP and different monetary measures within the Company’s Q2-2023 Management’s Discussion and Analysis dated August 2, 2023, which Section is included by reference into this press launch and which is offered on the Company’s web site at www.intactfc.com and on SEDAR+ at www.sedarplus.ca.
SOURCE Intact Financial Corporation
