RSA Canada is selling its majority stake in Noraxis Capital Corp., its Canadian network of insurance brokers, part of a deal that could signal more consolidation in the industry.
The property and casualty insurer will receive $441-million for its share of the company. The buyer is Illinois-based Arthur J. Gallagher & Co., a global insurance brokerage and risk management firm that has been expanding internationally.
“The timing was right to sell our stake. Noraxis was strategically important, but not a core part of our business,” said Rowan Saunders, chief executive officer of RSA Canada, in a statement.
Noraxis provides insurance products in several different areas including commercial, personal and employee benefits from about two-dozen offices across five provinces. The large broker business operates through several different regional brands, had revenues of $125-million last year and employs more than 650 people.
Arthur J. Gallagher & Co.’s CEO J. Patrick Gallagher Jr. said the deal aligns well with the energy, construction and mining industry focus his business has built. He sees these as areas of growth in the Canadian market.
“By adding Canada to our recent expansion in Australia, New Zealand and the U.K., we are now well positioned in those countries to replicate our successful acquisition strategy of partnering with smaller, family-owned, and entrepreneurial agents and brokers,” Mr. Gallagher Jr. said, adding that there will likely be more consolidation of insurance brokerage businesses in these countries.
RSA Canada is a subsidiary of London-based insurance firm RSA Insurance Group PLC, which has struggled financially in the last year and is undergoing a strategic shift. RSA Group chief executive Stephen Hester said the Canadian arm would focus on its strengths as an insurance provider.
“This disposal represents further progress against our aim of tightening the strategic focus of the Group," Mr. Hester said statement. The insurer has operated in Canada for more than 150 years.
Noraxis president Ken Keenan will continue to oversee the business, and members of the management team will still own 13 per cent of the company, according to a release