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MARK BLINCH/REUTERS

The property and casualty insurance business has been busy for mergers, and it could get busier as the publicly traded Canadian companies in the space have the ability to make further acquisitions and distressed sellers are looking to unload assets.

A number of U.S. and European financial institutions have local property and casualty insurance businesses, and those could be targeted for sales as the parent companies look to raise cash.

Both Westaim Corp. and Intact Financial have excess capital, calculates GMP Securities analyst Stephen Boland in a report on the industry. He reckons that Intact could spend as much as $420-million, based on its current balance sheet, and Westaim could lay out $224-million. He expects Westaim to actively be looking for purchases, while Intact for the moment is more likely to be integrating its recent purchase of AXA Canada. Beyond Westaim and Intact, Fairfax Financial Holdings FFH-T, E-L Financial and EGI Financial Holdings all have the ability to buy, he said.

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The outcome is likely to mirror what happened in Canada's life insurance industry after that sector demutualized. A spree of consolidation created a few dominant players, led by Great-West Lifeco , Manulife Financial and Sun Life Financial .

In P&C, there are two potential pools of targets.

Subsidiaries of foreign insurers are one. In that group you will find the local P&C arms of AIG, Zurich, Old Republic and Liberty Mutual. In the other pool, there are demutualizing Canadian P&C insurers, led by Economical Group. Wawanesa is also in that second group, though less likely to be bought in Mr. Boland's opinion.

"We believe the public insurers are in a unique situation to acquire struggling operations and consolidate the Canadian P&C Market," Mr. Boland wrote. "Our analysis reveals the Canadian industry remains very fragmented. Many of the largest insurers are foreign owned or privately managed mutual insurers and would need to be willing sellers to complete a transaction or at least be demutualized. Since the industry and many of the insurers have reported improving underwriting results, we believe the purchase multiples being contemplated by sellers may be healthy."

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