Here is the official press release the industry received regarding the recent intent of Intact Insurance to purchase AXA Insurance Canada. We will continue to release information as we receive it. We are contracted with both AXA and Intact Insurance, and will watch the updates closely for our valued clients.
Intact Financial Corporation (TSX: IFC) has signed a definitive agreement with Paris-based AXA Group for the acquisition of its affiliate AXA Canada – the sixth-largest home, auto and business insurance company in the country – for $2.6 billion in cash.
Intact announced a further performance-based contingent consideration of up to $100 million may also be payable “if certain profitability metrics are met within a period of five years.”
The transaction is expected to close later this year upon the receipt of all required regulatory approvals.
As a result of the transaction, Intact Financial Corporation (IFC) will expand its position in Canada by increasing its direct premiums written by $2 billion to more than $6.5 billion.
“Over the years, AXA Canada and its management team have built a quality organization with a history of excellent performance,” commented Charles Brindamour, president and CEO of Intact Financial. “By combining the resources of these two highly-regarded insurance franchises, the acquisition creates new opportunities for IFC.
“It will strengthen our offerings, notably in business insurance, improve our capabilities to support insurance brokers, reinforce our competencies in risk selection, expand our distribution platform and deepen the quality of our management team.”
According to Jean-François Blais, President and CEO of AXA Canada, “the transaction represents an excellent opportunity for our organization to join a Canadian leader with a history of outstanding performance and values that are similar to those that guide us.”
Annual “synergies” amounting to a minimum of $100 million after-tax are expected from a combination of systems-related cost savings, external loss adjustment expense reductions and operational and claims efficiencies, Intact announced. “Furthermore, Intact Financial is expected to increase its profitability outperformance versus the industry, and to benefit from greater earnings stability resulting from a wider diversification of its activities across the country and business lines.”
IFC says it intends to finance the acquisition of AXA Canada and related transaction expenses using $500 million of its own excess capital, issuing $800 million of equity, net of commissions, through a bought deal subscription receipt offering and by accessing committed senior in unsecured credit facilities fully underwritten by CIBC of $1.3 billion. These are expected to be partly replaced by the issuance of medium term notes and preferred shares.
IFC says it will maintain a strong capital position with an MCT of over 200%.