Skyscrapers are shown at the corner of Bay and Adelaide Streets in Toronto.GLORIA NIETO/The Globe and Mail
Wawanesa Mutual Insurance Co. has struck a deal with Desjardins Group to buy its Western Canadian insurance businesses for roughly $775-million, the latest tie-up in a consolidating industry.
The Winnipeg-based mutual insurance company said Thursday that its subsidiary Trimont Financial Ltd. would acquire High River, Alta.-based Western Financial Group Inc. and Western Life Assurance.
It's the biggest deal in Wawanesa's 121-year history, and chief executive officer Jeff Goy said the transaction highlights the company's goal to expand its network of independent insurance brokers in Canada. The move would bolster Wawanesa's sales force when the industry is also grappling with changing technology and consumer demands.
"We made this investment as an investment in distribution of insurance through brokers, to preserve that channel," Mr. Goy said. He added that Wawanesa's customers, which are also the owners of the business, largely want to buy insurance through independent brokers that can offer them a range of products in the region where they live.
"We're a proud mutual company. … We want to continue to grow," Mr. Goy said.
Wawanesa was formed in 1896 and now has more than $9-billion in assets and two million customers across the country, with a significant presence in California where it expanded in the early 1970s, as well as in Oregon.
Through the deal, Wawanesa will gain Western's personal and business insurance-brokerage network with 157 offices, primarily in Western Canada, but situated as far east as Quebec. Western has 1,700 employees – about half the workforce that Wawanesa has – and it will continue to operate independently under its brand name. Brokers will still sell insurance products from a wide range of insurers. Both Wawanesa and Western also underwrite their own insurance policies.
The deal between Wawanesa and Desjardins, which uses a similar co-operative-ownership model wherein customers own the business instead of shareholders, also highlights the trend of mergers in the insurance industry – particularly in the property and casualty spaces, where the market is highly fragmented.
Among the deals last year, Desjardins sold a pet-insurance business to another mutual insurer, and Aviva Canada Inc. bought the Royal Bank of Canada's home and auto-insurance business. More mergers are expected in the coming years as the more than 200 providers of home, auto and business insurance in Canada fight for market share and brand recognition.
Desjardins first bought Western Financial Group for roughly $440-million in 2010 as part of its push to expand beyond its Quebec marketplace and identify new ways to distribute its insurance products – both life and property as well as casualty. Western operated with a significant amount of autonomy and grew from 500,000 customers to nearly 800,000. But when Desjardins acquired the Canadian arm of U.S. mutual insurer State Farm Insurance Co. in 2014, the company's priorities changed.
Desjardins reviewed the Western Financial operations last year. "We felt that to optimize what could be done with Western Financial Group would require a lot of IT investment, a lot of focus from us, a lot of effort," said Denis Berthiaume, chief operating officer at Desjardins Group. Ultimately, the company decided "that these efforts, and these dollars, were probably better spent into our current distribution channel."
The transaction is expected to close in the third quarter of 2017, pending regulatory and other approvals.