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services or for dissemination in the
United States/
- RSA to sell its UK direct Personal Lines (Home and Pet)
operations following the recent conclusion of a strategic
review
- RSA will also exit its Home and Pet partner and broker
contracts in the UK, which completes its exit from the UK Personal
Lines market
- Accelerates path to sustainable outperformance for the
continuing UK&I business, which is now expected to deliver a
low-90s combined ratio1 in 2024
- No material impact expected to Net Operating Income Per Share
(NOIPS)2
TORONTO, Dec. 7, 2023
/CNW/ - Intact Financial Corporation (TSX: IFC) (Intact, IFC or the
Company) and its subsidiary Royal & Sun Alliance Insurance
Limited (RSA) announced today that they have reached an agreement
to sell RSA's UK direct Personal Lines operations, representing
approximately £165 million of annual premiums3, to
Admiral Group plc (Admiral). The transaction will result in
the transfer of renewal rights, brands and employees. RSA will
retain the claims reserves, which will be run off over time.
The sale has been approved by the Boards of Directors of both
Intact and Admiral, and is expected to close at the end of Q1
2024.
RSA will also exit its UK Home and Pet partner and broker
contracts representing annual premiums of approximately £515
million3, and is exploring options to either transfer
these arrangements to other parties or let the contracts expire
over time. This step completes RSA's exit of the UK Personal Lines
market and marks the conclusion of the strategic review announced
on September 6, 2023.
The sale price for RSA's direct Home and Pet operations includes
an initial cash consideration of £82.5 million, with a potential
additional payment of up to £32.5 million, subject to the
fulfilment of certain retention thresholds. In aggregate, the
proceeds from the sale to Admiral and the release over time of
capital backing the UK Personal Lines business are expected to
total approximately £350 million, including the benefit of earnout
provisions.
"The exit from the UK personal lines market sharpens RSA's focus
as a leading UK commercial and specialty lines player, accelerating
our ability to deliver sustainable outperformance in the UK&I
segment," said Charles Brindamour,
Chief Executive Officer, Intact Financial Corporation.
Ken Norgrove, Chief Executive
Officer, RSA, added, "We recognize the important work of our
Personal Lines colleagues in building RSA's leading Home and Pet
businesses. I'm confident that Admiral's shared values and track
record in delivering excellence for customers makes them a perfect
fit for our UK direct Personal Lines business. Our focus is on
ensuring an orderly transition that supports our customers,
colleagues and partners."
Although it is exiting the UK Personal Lines market, RSA will
continue to maintain its personal lines presence in Ireland, where it is recognized as a leading
provider of motor and home insurance, in addition to commercial
insurance.
Strong strategic
rationale
- Exit of UK Personal Lines accelerates our ability to deliver
outperformance in the UK&I operations, consistent with Intact's
objective to outperform wherever it operates.
- RSA will focus its resources on its leading Commercial and
Specialty Lines platform, which has consistently been delivering
low-90s combined ratios.
- RSA's technology investments will now be redirected to
Commercial Lines, thereby accelerating the company's ability to
modernize its platforms and build outperformance.
- Refocuses RSA's distribution model on brokered Commercial
Lines, where the economics are more attractive.
Financial impact
- Underwriting income (including any catastrophe losses) from UK
Personal Lines will be reported in Exited Lines from Q4 2023
onward. The impact on NOIPS attributable to the exit of UK Personal
Lines is not expected to be material.
- The overall exposure to UK Personal Lines will gradually
diminish as approximately £6803 million of annual
premiums run off starting in mid-2024.
- Approximately £240 million of capital is expected to be
released over time, which will partly be used to reduce leverage.
The pro forma adjusted debt-to-total capital ratio4 is
expected to return to approximately 20% by the end of 2024, though
release of capital is expected to continue beyond that date until
both direct and partnership business is fully run off.
- RSA expects to incur costs related to the exit of UK Personal
Lines over the next three years, the majority of which is non-cash.
The ultimate amount of these costs is contingent on the nature and
timing of the transfer of partnership arrangements. Proceeds from
the sale of UK direct Personal Lines are expected to mostly offset
these costs.
- The impact on book value per share (BVPS)5 is not
expected to be material.
Additional details related to the
UK Personal Lines exit
- The sale of RSA's direct Personal Lines operations in the UK
entails the transfer of the new business franchise and certain
operations, brands, employees, data and renewal rights to Admiral,
with the transfer expected to take place at the end of Q1
2024.
- The transfer of policies will be completed through a renewal
migration over 12 months expected to start from Q3 2024, minimizing
impact on customers.
- Around 300 RSA employees will move to Admiral to provide
ongoing support and service delivery.
- RSA is exploring options to transfer to other parties its Home
and Pet partner and broker contracts, which will otherwise expire
over the next two to three years. RSA will work closely with
partners and brokers to ensure a smooth transition process.
- RSA will retain the claims reserves related to all of its UK
Personal Lines business, which have recorded favourable prior-year
development over the last two years.
Outlook for the continuing
UK&I business
On October 26, 2023, Intact and
RSA completed the acquisition of Direct Line's brokered Commercial
Lines operations, representing annual written premiums of
approximately £530 million. This transaction significantly
strengthened RSA's outperforming Commercial Lines business.
- Following the subsequent exit of UK Personal Lines, Intact's
continuing UK&I operations are expected to generate £2.8
billion of premiums in 2024, representing approximately 20% of IFC
direct premiums written.
- Approximately 95% of UK&I direct premiums written will be
attributable to Commercial and Specialty Lines, with the remainder
coming from Personal Lines in Ireland.
- The pro forma UK&I combined ratio is expected to be in the
low 90s in 2024. This is expected to improve by approximately 2
points in the subsequent 12 to 24 months through both loss and
expense ratio synergies related to the Direct Line
acquisition.
- The Direct Line brokered Commercial Lines transaction is
expected to generate an IRR6 in excess of 15%.
Advisers
J.P. Morgan Securities plc is acting as financial adviser to
Intact Financial Corporation. Skadden, Arps, Slate, Meagher &
Flom LLP is acting as legal adviser to Intact Financial Corporation
in this transaction.
About Intact Financial
Corporation
Intact Financial Corporation (TSX: IFC) is the largest provider
of property and casualty (P&C) insurance in Canada, a leading provider of global specialty
insurance, and, with RSA, a leader in the UK and Ireland. Our business has grown organically
and through acquisitions to over $21
billion of total annual premiums.
In Canada, Intact distributes
insurance under the Intact Insurance brand through a wide network
of brokers, including its wholly-owned subsidiary BrokerLink, and
directly to consumers through belairdirect. Intact also provides
affinity insurance solutions through the Johnson Affinity
Groups.
In the US, Intact Insurance Specialty Solutions provides a range
of specialty insurance products and services through independent
agencies, regional and national brokers, and wholesalers and
managing general agencies.
In the UK, Ireland, and
Europe, Intact provides a range of
personal, commercial and specialty insurance solutions through a
wide network of brokers, third party partners and directly to
customer under the RSA brands.
About RSA Insurance
RSA Insurance is a multinational insurance group. We are one of
the world's oldest general insurers, providing peace of mind to
individuals and protecting small businesses and large organisations
from uncertainty. We use our capabilities to anticipate and improve
outcomes for customers via our direct channel, our strong broker
relationships or partner organisations. We have established
businesses in the UK, Ireland and
continental Europe.
In 2021, the former RSA Group Plc came under new ownership and
is now a wholly-owned subsidiary of Intact Financial
Corporation.
For more information about RSA Insurance, please visit
www.rsainsurance.co.uk
About Admiral Group plc
Admiral Group is a leading FTSE100 Financial Services company
with businesses in the UK, Europe
and the US. Established in 1993 as a car insurance specialist in
the UK, it has expanded into other countries and products such as
household, travel and pet insurance, as well as personal lending
products.
Cautionary note regarding
forward-looking statements
Certain of the statements included in this press release
constitute forward-looking statements. The words "may", "will",
"would", "should", "could", "expects", "plans", "intends",
"trends", "indications", "anticipates", "believes", "estimates",
"predicts", "likely", "potential" or the negative or other
variations of these words or other similar or comparable words or
phrases, are intended to identify forward-looking statements.
Unless otherwise indicated, all forward-looking statements in this
press release are made as of the date hereof and are subject to
change.
Forward-looking statements are based on estimates and
assumptions made by management based on management's experience and
perception of historical trends, current conditions and expected
future developments, as well as other factors that management
believes are appropriate in the circumstances. Many factors could
cause the Company's actual results, performance or achievements or
future events or developments to differ materially from those
expressed or implied by the forward-looking statements. In addition
to other estimates and assumptions which may be identified herein,
estimates and assumptions have been made regarding, among other
things, the anticipated completion of the transactions referred to
herein and their anticipated impact on the Company's financial
results, release of capital and premiums written. There can be no
assurance that the transactions referred to herein will be
completed or have the anticipated effects withing anticipated
timeframes or at all. All of the forward-looking statements
included in this press release are qualified by these cautionary
statements and those made in the "Risk Management" sections of the
Company's 2022 Management's Discussion and Analysis (Sections
30-34) and the Company's Q3-2023 Management's Discussion and
Analysis (Sections 17-18), in Notes 10 and 13 of the Company's
Consolidated Financial Statements for the year ended December 31, 2022 and in the Company's Annual
Information Form dated February 7,
2023, all of which are available on the Company's website at
www.intactfc.com and on SEDAR+ at www.sedarplus.ca. These factors
are not intended to represent a complete list of the factors that
could affect the Company. These factors should, however, be
considered carefully. Although the forward-looking statements are
based upon what management believes to be reasonable assumptions,
the Company cannot assure investors that actual results will be
consistent with these forward-looking statements. Investors should
not rely on forward-looking statements to make decisions and
investors should ensure the preceding information is carefully
considered when reviewing forward-looking statements made in this
press release. The Company has no intention and undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
Disclaimer
The information contained in this press release concerning the
Company does not purport to be all-inclusive or to contain all the
information that an investor may desire to have in evaluating
whether or not to make an investment in the Company. The
information is qualified entirely by reference to the Company's
publicly disclosed information and the cautionary note regarding
forward-looking statements included in this press release.
Any website address included in this press release in an
inactive textual reference only and information appearing on such
website is not part of, and is not incorporated by reference in,
this press release.
J.P. Morgan Securities plc ("J.P. Morgan"), which is authorised
in the UK by the Prudential Regulation Authority (the "PRA") and
regulated in the UK by the PRA and the Financial Conduct Authority,
is acting as financial adviser exclusively for Intact and its
affiliates and no one else in connection with the transaction and
will not regard any other person as a client in relation to the
transaction and will not be responsible to anyone other than Intact
and its affiliates for providing the protections afforded to
clients of J.P. Morgan or its affiliates, nor for providing advice
in relation to the transaction or any other matters referred to in
this announcement.
Non-IFRS Measures
The Company uses both International Financial Reporting
Standards (IFRS) and certain non-IFRS measures to assess
performance.
Non-IFRS financial measures and Non-IFRS ratios (which are
calculated using Non-IFRS financial measures) do not have
standardized meanings prescribed by IFRS and may not be comparable
to similar measures used by other companies. They are used by
management to assess the Company's performance.
Supplementary financial measures, non-IFRS financial measures
and non-IFRS ratios used in this Press Release and the Company's
financial reports include NOIPS, operating ROE, BVPS, combined
ratio, claims ratio, expense ratio, GWP, DPW, and adjusted
debt-to-total capital ratio.
For more information about these supplementary financial
measures, Non-IFRS financial measures and non-IFRS ratios,
including definitions and explanations of how these measures
provide useful information, refer to Section 19 – Non-GAAP and
other financial measures in the Company's Q3-2023 Management's
Discussion and Analysis dated November 7,
2023, which Section is incorporated by reference into this
press release and which is available on the Company's website at
www.intactfc.com and on SEDAR+ at www.sedarplus.ca.
___________________________________
|
1
|
Combined ratio is a
non-IFRS ratio, which does not have a standardized meaning
prescribed by IFRS and may not be comparable to similar measures
used by other companies in our industry. It is the sum of (i)
claims ratio (which is a non-IFRS ratio which represents operating
net claims divided by operating net underwriting revenues) and (ii)
expense ratio (which is a non-IFRS ratio which represents operating
net underwriting expenses divided by operating net underwriting
revenues. See Non-IFRS measures at the end of this press
release.
|
2
|
NOIPS is a non-IFRS
ratio, which does not have a standardized meaning prescribed by
IFRS and may not be comparable to similar measures used by other
companies in our industry. It is calculated by dividing net
operating income attributable to common shareholders, divided by
the weighted-average number of common shares outstanding on a daily
basis during a specific period. Net operating income attributable
to common shareholders is a non-IFRS measure which represents the
net income attributable to shareholders, excluding the after-tax
impact of non-operating results, net of net income (loss)
attributable to non-controlling interests (non-operating
component), preferred share dividends and other equity
distributions. See Non-IFRS measures at the end of this press
release.
|
3
|
2022 annual premiums,
restated under IFRS 17
|
4
|
Adjusted debt-to-total
capital ratio is a non-IFRS ratio, which does not have a
standardized meaning prescribed by IFRS and may not be comparable
to similar measures used by other companies in our industry. It is
calculated using debt outstanding (excluding hybrid debt) divided
by adjusted total capital. See Non-IFRS measures at the end of this
press release.
|
5
|
BVPS is a supplementary
financial measure, which does not have a standardized meaning
prescribed by IFRS and may not be comparable to similar measures
used by other companies in our industry. It is calculated by
dividing common shareholders' equity by the number of common shares
outstanding. See Non-IFRS measures at the end of this press
release
|
6
|
IRR is the discount
rate that makes the net present value of all cash flows equal to
zero in a discounted cash flow analysis.
|
SOURCE Intact Financial Corporation