Intact Financial CEO Charles Brindamour speaks during the annual general meeting of shareholders in Toronto May 4, 2011.MIKE CASSESE/Reuters
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Intact Financial Corp. is pushing into the U.S. insurance market with a $2.3-billion acquisition that positions the company to compete with international insurers.
The country's largest property and casualty insurer said Tuesday that it would buy OneBeacon Insurance Group Ltd., a Bermuda-domiciled holding company that focuses on specialty insurance.
Intact's chief executive Charles Brindamour has been trying to expand the company abroad and said the deal not only adds new products to the Canadian operations, but also gives Intact the ability to do more cross-border business.
"Today, we've taken an important step in building a world-class P&C insurer. The addition of OneBeacon is creating a leading North American specialty lines insurer focused on small to mid-sized businesses," Mr. Brindamour said in a statement.
OneBeacon can trace its roots in commercial and individual insurance back to 1831, but the company has largely sold off its traditional insurance businesses to become focused on offering specialty insurance products through independent agents and brokers in the United States and Canada. That ranges from insuring architects and engineers to the entertainment industry and beyond. OneBeacon even offers tuition refund insurance that can pay out if a student withdraws from school.
Intact said its business is a good fit with OneBeacon because of their focus on small to mid-size businesses "where both organizations have deep capabilities and ability to scale up." Intact says its deal with OneBeacon would create a North American leader in specialty insurance with more than $2-billion in annual premiums.
Intact plans to finance the deal through $700-million of equity financing, in part backed by three pension funds: Caisse de dépôt et placement du Québec, Canada Pension Plan Investment Board and Ontario Teachers' Pension Plan.
Intact will also use $700-million of excess capital and about $1-billion in bank term loans, medium-term notes and preferred shares in its financing arrangement.
The deal is expected to close in the fourth quarter of the year, pending some closing conditions.