On May 31, 2011, Intact Financial Corporation announced that it is acquiring the Canadian operations of Paris-based AXA Group for $2.6 billion. Intact said the deal is expected to generate an internal rate of return of 20 percent and will see the insurer’s direct premiums written increase by $2 billion to more than $6.5 billion, cementing the insurer’s strong position in the Canadian P&C insurance market.
ILSTV spoke with Louis Gagnon, President of Intact Insurance about the acquisition and what it means for Intact and other Canadian insurers.
Louis Gagnon: I think we’re buying a company that has a lot of similarities with us: same vision about the future, a lot of the same values regarding the way we should do business, great financial performance. We were, I would say, two of the best companies in the market so joining forces will make us an even stronger company. It’s going to have an impact for sure on the Canadian market. I think it’s going to bring the other players to be even better, also. I think it’s going to create a great, positive dynamic in the industry. We’ve been saying for a while that there’s going to be consolidation in the market and this is one of the signs of that consolidation is happening. There’s probably going to be more, we’ll see. But again, I think it puts us in an excellent position in joining two companies that have a lot of similarities and a lot of the same vision.
Narrator: Intact is preparing for the integration, having formed eleven task forces comprised of management from various departments at both Intact and AXA Canada, in order to plan for a seamless integration for brokers and customers. Louis says Intact’s broker distribution will not be changed.
Louis Gagnon: There’s not going to be any change in our distribution. To the contrary, I think it kind of increases our reach. It makes us present in some areas that we were not and makes our products available to consumers through more brokers in the market. We have no intention of changing the brokers we’re dealing with with Intact or with AXA and we will do as smooth of a transition as possible. That’s what we’re working on integrating the two businesses to make sure that for brokers, it will be as seamless as possible during the transition period.
Narrator: Through the acquisition of AXA Canada, Intact’s reach will expand. Louis explains that there are different types of risk diversification possible because of the transaction.
Louis Gagnon: The key factor of that acquisition and what was really interesting is that it gives Intact the possibility of doing quite a great diversification of risk. That diversification just doesn’t come geographically – yes, we are improving our position in B.C., we are improving our position in Quebec, we are improving our position in Atlantic Canada. The other aspect of the diversification that is also key is that AXA has more commercial lines business in percentage than us. They are in commercial lines and in things that we were not there before, mainly because of expertise. In purchasing and acquiring AXA, we are also acquiring a lot of great expertise that comes with a very healthy portfolio and a chance also to diversify our business more to commercial lines. So, geographic diversification for sure but most importantly, the expertise and product diversification.
Narrator: Intact is now waiting for the deal to be approved by regulators, but Louis says there’s plenty to do in the meantime.
Louis Gagnon: Regulatory approval should usually take between – it’s a bit difficult, it’s summer – between 60 and 120 days. I think the time that we have now to discuss, look, prepare all of the work that’s going to have to be done when we have the regulatory approval, and there’s a lot of work to be done. There’s a lot of stuff to reconcile, there’s a lot of things to evaluate. The operation is really to try to keep the best of both operations and try to make it one at the end of the day. Our expectation is that within 18 months, we will have one system – one IT system, one platform – we will share locations all across the country, we will have the same kind of salary and benefit packages for employees. Really, I would say this is the highlight of the transition.