Definity Financial Corporation Announces Acquisition of Travelers Canada

Building a Canadian champion: Definity Financial Corporation announces agreement to acquire Canadian operations of Travelers for $3.3 billion and concurrent $351 million private placements of common shares

• Definity to acquire Canadian operations of Travelers for $3.3 billion¹, representing ~1.4x P/B²
• Establishes Definity as the #4 overall P&C insurer in Canada, strengthening leadership position in the broker channel, and delivering on financial objectives and inorganic growth strategy
• Immediately accretive to operating EPS³, expected to reach double-digits within 36 months of close; internal rate of return in excess of 20%⁴
• Significant value creation opportunity through scale benefits with estimated run-rate expense synergies of ~$100 million (pre-tax), before considering loss cost improvements
• Effectively delivers on operating ROE³ target, with an expected improvement of over 200 bps on a run-rate basis, enabling Definity to sustainably target mid-teens post integration
• Optimizes balance sheet via strategic deployment of excess capital and utilization of significant financial leverage capacity

Waterloo, ON (May 27, 2025) – Definity Financial Corporation is pleased to announce that it has entered into a definitive agreement with Travelers to acquire Canadian operations of Travelers (other than Travelers’ Canadian surety business) for cash consideration of approximately $3.3 billion. The assets to be acquired as part of the Transaction represent most of Travelers’ Canadian operations (“Travelers Canada”), excluding select business lines retained by Travelers, including its Canadian surety business.

Travelers Canada is a national P&C insurer with a long history and approximately $1.6 billion in annual gross written premiums (“GWP”)^1,5. Ranked #12 in Canada⁶, it is a well-established multi-line business with an attractive commercial and specialty lines portfolio, and combined with its personal lines business, is highly complementary to Definity.

The Transaction is subject to customary regulatory approvals and is expected to close in the first quarter of 2026.

“This is a transformative acquisition that is squarely in line with the growth strategy we’ve set for Definity, one that will move us into the top four largest P&C insurers in Canada. This highly complementary business will diversify our portfolios, provide additional expertise and product offerings, and continue our track record of shareholder value creation,” said Rowan Saunders, President & CEO, Definity. “This acquisition demonstrates our commitment to long-term growth and competitiveness, while broadening our reach and deepening relationships with brokers and customers across the country.”

Highly Strategic

The Transaction will achieve Definity’s strategic objective to become one of the five largest P&C insurers in Canada, with ~$6 billion in combined annual premiums⁷, accelerating the Company’s growth strategy as a leading player in the Canadian market.

Enhancing Our Commercial Presence and Expertise

The Transaction will further strengthen Definity’s commercial lines business by adding approximately $600 million in annual premiums, representing an increase of 40% from current levels. Acquiring Travelers Canada’s operations will accelerate the transformation of Definity’s commercial insurance platform, while adding additional capabilities in marine, professional liability and other lines of business. Definity’s commercial insurance market position will improve to 4^th in Canada and our underwriting capabilities will be enhanced through the acquisition of hard-to-source underwriting and claims expertise.

Scale Benefits in Personal Insurance

This Transaction is expected to add significant scale to Definity’s personal lines business, an increase of approximately $1 billion in annual premiums, or 30% from current levels, moving Definity into the top 5 in Canada. The addition of Travelers Canada’s premiums to our leading digital platforms will allow for a modernized systems approach, providing an opportunity to optimize performance and enhance the overall broker experience.

Additionally, the Transaction provides expanded offerings and a consistent service proposition, driving enhanced traction and growth in the broker channel.

Compelling Financial Rationale

Transaction Fully Aligned with Our Stated Financial Objectives

• Expected to be immediately accretive to operating EPS, with double-digit accretion within 36 months of closing⁸
• Delivers on our hurdle rates, with expected internal rate of return in excess of 20%⁴
• ~$100 million (pre-tax) of run-rate expense synergies with further opportunities for platform benefits
• Operating ROE expected to increase by over 200 bps, enhancing returns and enabling a path to a sustainable mid-teens target in the medium term

Optimized Balance Sheet Supporting Enhanced Returns

The Transaction will optimize Definity’s balance sheet via strategic deployment of excess capital and the introduction of financial leverage in a prudent, sustainable manner. The accretive use of Definity’s financial capacity is expected to drive a meaningful increase in operating ROE while maintaining our strong regulatory capital position.

Definity’s debt-to-capital ratio⁹ is expected to return to our long-term target levels within 24 months of close with the regulatory MCT ratio maintained above 190%.

Closing and Approvals

The transaction remains subject to customary regulatory approvals, including from the Minister of Finance and clearance under the Competition Act (Canada). The Transaction is expected to close in the first quarter of 2026.

Transaction Structure

As part of the Transaction, Definity will acquire all of the issued and outstanding shares of 8527512 Canada Inc., a Canadian holding company, and Travelers Insurance Company of Canada and The Dominion of Canada General Insurance Company, both of which are Canadian insurance companies. Travelers will retain its Canadian surety business. Travelers will also retain its Canadian branch, St. Paul Fire and Marine Insurance Company, which will enter into assumption reinsurance agreements with Travelers Insurance Company of Canada to cause Travelers Insurance Company of Canada to assume the St. Paul Fire and Marine Insurance Company business that Definity is acquiring, and St. Paul Fire and Marine Insurance Company to assume the Travelers Insurance Company of Canada business that Travelers is retaining. The assumption reinsurance transactions are subject to their own insurance regulatory approvals but are expected to close concurrently with the Transaction.

Transaction Financing

Overview

Definity intends to finance the $3.3 billion cash consideration¹⁰ with:

• Approximately $281 million in proceeds from a bought deal private placement of Definity common shares (“Common Shares”) at a price of $66.65 per Common Share, as further described below;
• Approximately $70 million in proceeds from a non-brokered private placement of Common Shares to our cornerstone investor, Healthcare of Ontario Pension Plan Trust Fund (“HOOPP”) at the same price as the bought deal private placement (the “HOOPP Private Placement”), as further described below;
• $1.5 billion in excess capital (combination of Definity and Travelers Insurance Company of Canada and The Dominion of Canada General Insurance Company excess capital)
  • ~$1.0 billion of Travelers Insurance Company of Canada and The Dominion of Canada General Insurance Company excess capital expected to be divested within 6 months post transaction close to repay excess capital term loan, subject to regulatory approval
  • ~$500 million of excess capital at Definity
• $1.6 billion in new debt, expected to consist of bank and bond financing⁹

The Transaction is not subject to any financing condition or contingency.

Bought Deal Private Placement of Common Shares

Definity has entered into an agreement with a syndicate of underwriters (the “Underwriters”) led by RBC Capital Markets as Sole Bookrunner, to sell 4,210,000 Common Shares on a bought deal private placement basis to the Underwriters. The Common Shares will be offered at a price of $66.65 per Common Share, for gross proceeds of approximately $281 million (the “Offering”). The Underwriters intend to arrange for substituted purchasers for the Common Shares being issued in the Offering. The net proceeds from the Offering are intended to be used by Definity to fund a portion of the purchase price of the Transaction. The closing of the HOOPP Private Placement is conditional on the closing of the Offering, however the closing of the Offering is not conditional on the closing of the HOOPP Private Placement.

The Common Shares will be offered by way of private placement to “accredited investors” in all provinces and territories of Canada, and in the United States on a private placement basis to “qualified institutional buyers” pursuant to Rule 144A under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), and in such other jurisdictions outside of Canada and the United States in accordance with applicable law. Closing of the Offering is expected to occur on or about June 11, 2025, subject to the approval of the Toronto Stock Exchange and customary closing conditions. Closing of the Offering is not conditional upon closing of the Transaction. In the event that the Transaction does not ultimately close, the net proceeds from the Offering are intended to be used by Definity for general corporate purposes.

The Common Shares have not been and will not be registered under the U.S. Securities Act, or under any state securities laws in the United States, and may not be offered, sold, directly or indirectly, or delivered within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from or not subject to, the registration requirements of the U.S. Securities Act and applicable state securities laws. This release does not constitute an offer to sell or a solicitation to buy Common Shares in the United States or in any other jurisdiction where such offer is or may be unlawful.

HOOPP Private Placement

In connection with the exercise by HOOPP of its pre-emptive right under the Governance Agreement dated November 23, 2021 between Definity and HOOPP, HOOPP has agreed to purchase an additional 1,045,930 Common Shares on a private placement basis at a price of $66.65 per Common Share, for aggregate gross proceeds of $69,711,235, subject to the terms of HOOPP’s subscription agreement.

Financial Advisor

RBC Capital Markets is acting as financial advisor to Definity.

Webcast

An audio webcast with transcript has been made available at www.definity.com under the Investors tab, where Rowan Saunders, President and Chief Executive Officer, and Philip Mather, Executive Vice-President and Chief Financial Officer, discuss the Transaction.

About Travelers

Travelers (NYSE: TRV) is a leading provider of property casualty insurance for auto, home and business. A component of the Dow Jones Industrial Average, Travelers has more than 30,000 employees and generated revenues of more than US$46 billion in 2024. For more information about Travelers, visit www.travelers.com.

About Travelers

Travelers Insurance Company of Canada, The Dominion of Canada General Insurance Company and St. Paul Fire and Marine Insurance Company are the Canadian licensed insurers known as Travelers Canada. For more information, visit travelerscanada.ca.

About Definity

Definity Financial Corporation (“Definity”, which includes its subsidiaries where the context so requires) is one of the leading property and casualty insurers in Canada, with over $4.5 billion in gross written premiums for the 12 months ended March 31, 2025 and approximately $3.4 billion in equity attributable to common shareholders as at March 31, 2025

Formed in 2021, Definity Financial Corporation (TSX:DFY) is the parent company to some of Canada’s most long-standing and innovative property and casualty insurance brands and companies, including Economical Insurance, Sonnet Insurance, Family Insurance Solutions, and Petline Insurance. By investing in businesses and innovations, the companies in our group help our customers, broker partners, employees, and communities adapt and thrive in a world of constant change. For more information, visit www.definityfinancial.com.

Cautionary Note Regarding Forward-Looking Information

This news release contains “forward-looking information” within the meaning of applicable securities laws in Canada. Forward-looking information may relate to our future business, financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, plans and objectives. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “aims”, “targets”, “expects” or “does not expect”, “is expected”, “an opportunity exists”, “budget”, “scheduled”, “estimates”, “forecasts”, “projection”, “prospects”, “strategy”, “intends”, “anticipates”, “does not anticipate”, “optimize”, “strengthening”, “leadership”, “believes”, or variations of such words and phrases or statements that certain actions, events or results “can”, “may”, “could”, “delivers”, “would”, “might”, “will”, “will be taken”, “occur” or “be achieved”. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Specifically, forward-looking information in this news release includes, among other things, statements in respect of: our financial performance, including gross written premiums and operating return on equity; the Transaction; the terms of the Transaction, including the anticipated purchase price, purchase metrics and required regulatory approvals; the anticipated timing of the closing of the Transaction; the characteristics of our business after the completion of the Transaction; certain strategic benefits and opportunities expected to result from the Transaction; the timing for expected synergies resulting from the Transaction to be realized; projected financial measures following the closing of the Transaction; expectations regarding Transaction financing; the terms of the Offering; the intended use of the net proceeds of the Offering; and the HOOPP Private Placement.  Statements containing forward-looking information are not historical facts, but instead represent management’s expectations, estimates and projections regarding possible future events or circumstances.

Our assessment of, and targets for, gross written premiums, combined ratio and operating return on equity constitute forward-looking information. See Section 4 “Operating Environment and Outlook” and “Financial Targets” in our Management’s Discussion and Analysis (“MD&A”) for the year ended December 31, 2024 for additional information concerning our strategies, assumptions and outlook in relation to those assessments.

Forward-looking information in this news release is based on our opinions, estimates and assumptions in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we currently believe are appropriate and reasonable in the circumstances. In addition to other estimates and assumptions which may be identified herein, estimates and assumptions have been made regarding, among other things: that the Transaction will be effected as currently proposed; that sources of funding of the Transaction will be available in a timely manner on terms acceptable to Definity; that the Offering and HOOPP Private Placement will be effected as currently proposed; that all requisite approvals will be obtained in a timely manner in form and substance acceptable to Definity; that the Transaction will otherwise proceed on the currently anticipated timing; that the expected benefits of the Transaction will be realized; and that the applicable economic and political environments and current industry conditions will generally continue. Despite a careful process to prepare and review the forward-looking information, there can be no assurance that the underlying opinions, estimates and assumptions will prove to be correct. Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as at the date such statements are made, and are subject to many factors that could cause our actual results, performance or achievements, or other future events or developments, to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the following factors:

• Definity’s ability to continue to offer competitive pricing or product features or services that are attractive to customers;
• Definity’s ability to appropriately price its insurance products to produce an acceptable return, particularly in provinces where the regulatory environment requires auto insurance rate increases to be approved or that otherwise impose regulatory constraints on auto insurance rates;
• Definity’s ability to accurately assess the risks associated with the insurance policies that it writes;
• Definity’s ability to assess and pay claims in accordance with its insurance policies;
• Definity’s ability to obtain adequate reinsurance coverage to manage risk;
• Definity’s ability to accurately predict future claims frequency or severity, including the frequency and severity of weather-related events and the impact of climate change;
• Definity’s ability to address inflationary cost pressures through pricing, supply chain, or cost management actions;
• the occurrence of unpredictable catastrophe events;
• litigation and regulatory actions, including potential claims in relation to demutualization and our IPO and unclaimed demutualization benefits and the tax treatment of related amounts transferred to the Company, and COVID-19-related class- action lawsuits that have arisen and which may arise, together with associated legal costs;
• unfavourable capital market developments, interest rate movements, changes to dividend policies or other factors which may affect our investments or the market price of the Common Shares;
• changes associated with the transition to a low-carbon economy, including reputational and business implications from stakeholders’ views of our climate change approach or of our environmental or climate change–related representations (i.e. “greenwashing”), that of our industry, or that of our customers;
• Definity’s ability to successfully manage credit risk from its counterparties;
• foreign currency fluctuations;
• Definity’s ability to meet payment obligations as they become due;
• Definity’s ability to maintain its financial strength rating or credit rating;
• Definity’s dependence on key people;
• Definity’s ability to attract, develop, motivate, and retain an appropriate number of employees with the necessary skills, capabilities, and knowledge;
• Definity’s ability to appropriately collect, store, transfer, and dispose of information;
• Definity’s reliance on information technology systems and software, internet, network, data centre, voice or data communications services and the potential disruption or failure of those systems or services, including disruption as a result of cyber security risk or of a third-party service provider;
• failure of key service providers or vendors to provide services or supplies as expected, or comply with contractual or business terms;
• Definity’s ability to obtain, maintain and protect its intellectual property rights and proprietary information or prevent third parties from making unauthorized use of our technology;
• Definity’s ability to effectively govern the use of models, artificial intelligence, and generative AI technology;
• compliance with and changes in legislation or its interpretation or application, or supervisory expectations or requirements, including changes in the scope of regulatory oversight, effective income tax rates, risk-based capital guidelines, accounting standards, and generally accepted actuarial techniques;
• changes in domestic or foreign government policies, such as cross-border tariffs or trade policies, may negatively impact the Canadian economy and the P&C insurance industry and/or exacerbate other risks to Definity;
• failure to design, implement and maintain effective controls over financial reporting and disclosure which could have a material adverse effect on our business;
• deceptive or illegal acts undertaken by an employee or a third party, including fraud in the course of underwriting insurance or administering insurance claims;
• Definity’s ability to respond to events impacting its ability to conduct business as normal;
• Definity’s ability to implement its strategy or operate its business as management currently expects;
• general business, economic, financial, political, and social conditions, particularly those in Canada;
• the emergence or continuation of widespread health emergencies or pandemics, and their impact on local, national, or international economies, as well as their heightening of certain risks that may affect our business or future results;
• the competitive market environment and cyclical nature of the P&C insurance industry;
• the introduction of advanced technologies, disruptive innovation or alternative business models by current market participants or new market entrants;
• distribution channel risk, including Definity’s reliance on brokers to sell its products;
• Definity’s dividend payments being subject to the discretion of its board of directors and dependent on a variety of factors and conditions existing from time to time;
• the discontinuance, modification, or failure to renew or complete Definity’s normal course issuer bid;
• Definity’s dependence on the results of operations of its subsidiaries and the ability of the subsidiaries to pay dividends;
• Definity’s ability to manage and access capital and liquidity effectively;
• Definity’s ability to successfully identify, complete, integrate and realize the benefits of acquisitions or manage the associated risks, including with respect to the Transaction;
• management’s estimates and judgments in respect of IFRS 17 and its impact on various financial metrics;
• periodic negative publicity regarding the insurance industry, Definity, or Definity Insurance Foundation; and
• management’s estimates and expectations in relation to interests in the broker distribution channel and the resulting impact on growth, income, and accretion in various financial metrics.

If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information. The opinions, estimates or assumptions referred to above and described in greater detail in Section 11 – “Risk Management and Corporate Governance” of our MD&A for the year ended December 31, 2024 should be considered carefully by readers.

To the extent any forward-looking information in this presentation constitutes a “financial outlook” within the meaning of applicable securities laws, such information is being provided to assist investors in understanding the potential financial impact of the Transaction. Such information may not be appropriate for other purposes.

Although we have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, the factors above are not intended to represent a complete list and there may be other factors not currently known to us or that we currently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as at the date made. The forward-looking information contained in this news release represents our expectations as at the date of this news release (or as at the date they are otherwise stated to be made) and are subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws in Canada.

All of the forward-looking information contained in this news release is expressly qualified by the foregoing cautionary statements.

Supplementary Financial Measures and Non-GAAP Financial Measures and Ratios

We measure and evaluate performance of our business using a number of financial measures. Among these measures are the “supplementary financial measures”, “non-GAAP financial measures”, and “non-GAAP ratios” (as such terms are defined under Canadian Securities Administrators’ National Instrument 52-112 – Non-GAAP and Other Financial Measures Disclosure), and in each case are not standardized financial measures under GAAP. The supplementary financial measures, non-GAAP financial measures, and non-GAAP ratios in this news release may not be comparable to similar measures presented by other companies. These measures should not be considered in isolation or as a substitute for analysis of our financial information reported under GAAP. These measures are used by financial analysts and others in the P&C insurance industry and facilitate management’s comparisons to our historical operating results in assessing our results and strategic and operational decision-making.

Certain of the following supplementary financial measures, non-GAAP financial measures and non-GAAP ratios are included in this news release:

Supplementary Financial Measures: Book value per share, catastrophe losses, financial capacity, gross written premiums, combined annual premiums, leverage capacity, and underwriting loss from exited lines.

Non-GAAP Financial Measures: Core accident year claims and adjustment expenses, distribution income, net claims and adjustment expenses, net commissions, net operating expenses, net premium taxes, net underwriting expenses, net underwriting revenue, non-operating gains (losses), operating income, operating net income, prior year claims development, and underwriting income.

Non-GAAP Ratios: Claims ratio, combined ratio, expense ratio, return on equity, operating return on equity (“operating ROE”), operating earnings per common share (“operating EPS”), and certain other ratios.

For more information about these supplementary financial measures, non-GAAP financial measures and non-GAAP ratios, including (where applicable) definitions, the most directly comparable GAAP measures, composition of the measures and explanations of how these measures provide useful information to investors, refer to Section 11 – Supplementary financial measures and non-GAAP financial measures and ratios in our Q1 2025 MD&A dated May 8, 2025, which is available at www.definity.com and at www.sedarplus.ca.

NOTES

* All amounts in Canadian dollars unless stated otherwise.

1 Transaction perimeter excludes select business lines including Canadian surety business retained by Travelers with GWP of approximately $200M as at December 31, 2024.

2 Refers to price/book value. Based on December 31, 2024 unadjusted book value of acquired business.

3 This is a supplementary financial measure, non-GAAP financial measure, or a non-GAAP ratio that does not have a standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures provided by other companies. Please refer to “Supplementary Financial Measures and Non-GAAP Financial Measures and Ratios” in this news release and “Section 11 – Supplementary Financial Measures and Non-GAAP Financial Measures and Ratios” in our latest MD&A, which is incorporated by reference herein, for further details.

4 Internal rate of return, based on target capital structure of 75% equity and 25% debt.

5 This is a supplementary financial measure, non-GAAP financial measure, or a non-GAAP ratio that does not have a standardized meaning prescribed by GAAP and is not necessarily comparable to similar measures provided by other companies. Please see Travelers disclosure for further details.

6 MSA Research, based on 2024 insurance revenue.

7 Combined annual premiums is the combined total gross written premiums of Definity and Travelers Canada from the sale of insurance during a specified period, including premiums assumed and excluding exited lines.

8 Includes run-rate expense synergies and excludes impact on non-recurring restructuring costs.

9 Debt-to-capital ratio excludes Travelers Insurance Company of Canada and The Dominion of Canada General Insurance Company excess capital, of ~$1 billion, to be financed through an excess capital term loan, expected to be repaid within six months post transaction close, subject to regulatory approval.

10 Excludes transaction costs of ~$100 million, inclusive of estimated Travelers Canada excess capital of ~$1 billion; transaction perimeter excludes select business lines retained by Travelers with GWP of ~$200 million; financial performance post-December 31, 2024 will accrue to Definity. The purchase price will be paid in US dollars. Foreign exchange hedge agreements have been entered into by Definity that provide purchase price certainty against the risk of adverse currency movements.

SOURCE: Definity Financial Corporation

Tags: Acquisition, Definity, Travelers