Intact to acquire The Guarantee Company & Frank Cowan Company

Intact Financial Corporation announced today that it has entered into a definitive agreement with Princeton Holdings Limited to acquire The Guarantee Company of North America (“The Guarantee”), a specialty lines insurer in Canada and the U.S., and Frank Cowan Company Limited (“Frank Cowan”), a managing general agent (“MGA”) focused on specialty insurance for a cash consideration of approximately $1 billion. The transaction is expected to close in the fourth quarter of 2019, subject to regulatory approvals.

In Canada, the acquisition bolsters Intact’s position and adds new products for the high net worth customer segment. It meaningfully advances Intact’s North American specialty lines platform solidifying prominent positions in public entity and surety. The transaction will also contribute to additional distribution-related earnings.

The Guarantee is a Canadian-owned insurance company with customers in Canada and the U.S. Two-thirds of its business is specialty lines and surety and one-third personal lines including a high net worth home and auto insurance portfolio in Canada. It adds more than $560 million in Gross Premiums Written1, including over $100 million in the U.S., bringing Intact’s annual North American specialty lines Direct Premiums Written close to $3 billion2.

Frank Cowan Company Limited is an MGA that is a leader in providing specialized insurance programs to public entities across Canada. It offers coverage placement, risk management consultation, and claims services for municipalities, healthcare, education, community, children’s and social service organizations. Frank Cowan places business with several insurers including The Guarantee.

Princeton Holdings will continue to retain full ownership of its other businesses: Cowan Insurance Group, Cowan Asset Management, and Fountain Street Finance.

“The acquisition of The Guarantee Company of North America and Frank Cowan Company is strongly aligned with our strategic and financial objectives,” said Charles Brindamour, Chief Executive Officer, Intact Financial Corporation. “We are delivering on our objectives to grow in Canada and build a leading North American specialty platform. I’m enthusiastic about what we will accomplish by leveraging the combined expertise of our teams and our expanded offering.”

The transaction is expected to deliver strong economics for Intact through loss ratio improvements, expense savings, and optimization of reinsurance and capital. In addition, the combined platform offers top-line expansion opportunities.

“The Guarantee Company of North America and Frank Cowan Company have built a strong customer-focused specialty and personal lines business over almost 150 years, of which we are very proud. After careful consideration, we believe that combining our strong customer focus and the expertise of our employees in specialty lines and surety, with Intact’s resources, in particular its advanced analytics capabilities, provides tremendous opportunities for the combined entities to leverage one another’s strengths to build an outstanding, Canadian owned, North American specialty insurer,” said Maureen Cowan, Chairman of the Board, Princeton Holdings Limited.

Intact expects the acquisition to generate a return on capital above its threshold and expects the acquisition to be immediately accretive to net operating income per share (“NOIPS”) with low single-digit NOIPS accretion within 24 months after close. To finance the transaction, Intact has access to its own capital resources and bank facilities and may evaluate capital markets alternatives. Intact will maintain a strong capital position at closing with an estimated capital margin above $1 billion, estimated MCT at 195% and a debt to total capital ratio below 25%. The debt to capital ratio is expected to return below the target level of 20% within 24 months following closing of the acquisition.