Definity announces $3.3-billion deal to buy Canadian operations of U.S. insurance giant Travelers

Definity Financial Corp. is set to acquire the Canadian operations of U.S. insurance giant Travelers for $3.3-billion, vaulting it into fourth place among property and casualty insurers in Canada.

The deal announced Tuesday will see Definity DFY-T acquire most of Travelers’ Canadian operations and add about $1.6-billion in annual gross written premiums – the amount an insurer receives from policyholders and a key part of total revenue.

That will bring Definity’s total annual premiums up to $6-billion and boost the Waterloo, Ont.-based company from its current sixth-place standing in the Canadian market.

“This is a big step in our journey to build a Canadian champion,” Definity chief executive Rowan Saunders said in an interview.

“If you look at our performance, in the last few years, we’ve been able to grow organically at a rate of about twice the industry growth rate. But the whole reason for us listing as a public company was so that we could participate in what we believed would be a consolidating P&C market.”

Definity is paying for the purchase with $1.5-billion from Travelers’ balance sheet and its own cash reserves, plus $1.6-billion in new debt, $281-million from a sale of Definity stock to public investors and a $70-million share sale to the Healthcare of Ontario Pension Plan Trust Fund (HOOPP), a significant shareholder in the Canadian insurer.

Definity is selling equity to the public and HOOPP at a price of $66.65 per share.

The deal, which still requires approval from regulators and the federal Competition Bureau, is expected to close in the first quarter of 2026.

New York-based The Travelers Companies Inc. first entered Canada in 2013 after it acquired The Dominion of Canada General Insurance Company for $1.1-billion.

Since then, Travelers Canada has grown to employ more than 1,400 people in Vancouver, Calgary, Toronto, Ottawa and Montreal, and offers policies in personal, commercial and specialty insurance.

“The evolution of the Canadian market over the past decade has made Definity a natural long-term owner for this business, a view affirmed by the compelling value of their proposal,” Travelers chairman and CEO Alan Schnitzer said in a statement.

“I am confident that our Canadian customers, brokers and colleagues will benefit from being part of one of the country’s leading and fully integrated property casualty insurers.”

Definity intends to retain all Travelers’ employees in Canada as it combines the two operations under one brand. Travelers will keep its Canadian surety business, which typically provides coverage for companies to guarantee their commitments and obligations.

The acquisition is the kind of deal Mr. Saunders set out to find after the company went public in November, 2021. At the time, Definity was Canada’s eighth-largest insurer, but as the ticker DFY began trading on the Toronto Stock Exchange, Mr. Saunders told investors he was ready boost the newly public company’s market share through acquisitions and climb into the top 5.

Over the past few years, the company has deployed more than $1-billion in at least 20 transactions to expand its insurance broker distribution network and enhance technology.

But the vision to make a bigger splash in Canada really began to take shape just over a year ago, Mr. Saunders said, when he met with Mr. Schnitzer in New York.

“They really saw the Canadian marketplace evolving and realized that size and scale is really important and they weren’t at a stage where they could see that being as successful as other sources for their capital,” Mr. Saunders said.

Over several quarters and more discussion, Mr. Saunders was able to avoid a typical auction with competitors and provide Travelers with an “appropriate” valuation for their business as well as “deal certainty” for their employees.

“This is a transformative acquisition that is squarely in line with the growth strategy we’ve set for Definity,” Mr. Saunders said.

“It demonstrates our commitment to long-term growth and competitiveness, while broadening our reach and deepening relationships with brokers and customers across the country.”

Definity operates under several brands in personal and commercial insurance, including Family Insurance Solutions Inc., Petline Insurance Co., and Sonnet Insurance Co., which is a fully digital insurance platform that sells direct to consumers.

If approved, the deal will add about $600-million in annual premiums to Definity’s commercial insurance business, and introduce new specialty lines of business such as marine insurance, cyber insurance and professional liability.

In personal insurance, Travelers will add approximately $1-billion in annual premiums ‐ up 30 per cent from current levels.

Mr. Saunders said with still more than 100 insurance companies operating in Canada – and consolidation still a long-term trend – that Tuesday’s deal will be a catalyst for future mergers and acquisitions in the country.

“If a big, strong, North American company like Travelers feels scale is importance and therefore decided to sell their Canadian business, there are many other international players that are much smaller that must be thinking the same thing or at least asking that question,” he added.

“And what we have shown here is that we are a serious and capable consolidator in Canada.”

RBC Capital Markets acted as financial adviser to Definity in this transaction, while Jefferies LLC acted as financial adviser and Skadden, Arps, Slate, Meagher & Flom LLP and Stikeman Elliott LLP served as legal advisers to Travelers.