Definity to acquire Travelers Canada

Definity has entered into a $3.3-billion merger agreement to acquire Travelers’ Canadian business.

“We believe this is a concrete demonstration of our commitment to build a Canadian champion in the still fragmented P&C insurance industry,” Definity’s president and CEO Rowan Saunders announces during a Thursday webcast.

“The addition of Travelers Canada’s $1.6 billion in annual GWP [gross written premium] brings our proforma GWP to $6 billion in combined annual premiums, representing an increase of roughly one third, improving our overall P&C industry position from Number 6 to Number 4.”

This Transaction is expected to add about $1 billion in annual premiums to Definity’s personal lines business, an increase of 30% from current levels.

“What makes this announcement so rewarding is that Travelers Canada has been at the top of our list for years, as it offers us the right combination of size, talent and business mix,” Saunders says. “It effectively checks off all of our key priorities. We’ve worked for many months to be able to advance to this point. I’m thrilled that Travelers found our offer compelling.”

For Definity, it’s a milestone stride in its longstanding strategic plan to grow after becoming Canada’s first-ever (and still only) property and casualty insurer to demutualize. The company demutualized in 2021.

“The primary intention behind demutualizing and becoming a public company was to have the access to capital that would allow us to participate meaningfully in a consolidating industry,” Saunders says. “Now, the years of planning and preparation are coming to fruition as we make this announcement.”

Deal mechanics

The deal with Travelers is expected to add approximately $600 million in annual premiums to Definity’s commercial lines business, representing a 40% increase form current levels.

Saunders says Travelers Canada’s P&C insurance business ranks 12^th in Canada, with approximately $1.8 billion in annual gross written premiums.

The acquired premiums of $1.6 billion exclude approximately $200 million of premiums from Travelers Canada’s global surety and cross-border businesses, which Travelers will retain.

Travelers will also retain its Canadian branch, St. Paul Fire and Marine Insurance Company, which will enter into assumption reinsurance agreements with Travelers Insurance Company of Canada.

The Definity-Travelers Canada deal is subject to customary regulatory approvals, including from the Minister of Finance and clearance under the Competition Act (Canada). The Transaction is expected to close in the first quarter of 2026.

The assumption reinsurance agreements that will see Travelers retain some parts of its business are subject to their own insurance regulatory approvals but are expected to close alongside the principal merger deal.

Saunders says the technological capabilities of the combined entity will provide brokers with improved capabilities.

Integration challenges

But there is a risk, says Morningstar DBRS, in a commentary on the deal.

“Since this is Definity’s first large-scale acquisition, the transaction raises integration and execution risks in the short to medium term,” Morningstar DBRS says. “While there have been no large-scale integrations…the company’s management has successfully led large reorganization projects in the past, thereby partially mitigating this concern.”

Philip Mather, Definity’s executive vice president and chief financial officer, says the company’s leadership team “has considerable experience in the P&C insurance industry with extensive M&A experience from prior roles.” Plus, he adds: “We have been able to demonstrate the ability to turn around businesses and manage complex challenges through our own transformation during demutualization.”

That demutualization process required OSFI to draw up new rules for deregulating mutual insurers in the P&C space.