Desjardins Group, the leading cooperative financial group in Canada, announced Wednesday that it has entered into a definitive agreement to purchase State Farm Canada’s property/casualty and life insurance businesses, as well as its Canadian mutual fund, loan and living benefits companies.
The transaction is expected to close in January 2015, subject to approval from regulators and compliance with customary closing conditions. Following the closing, Desjardins will operate the newly acquired State Farm Canada businesses under the State Farm brand for an agreed license period.
As part of the agreement:
- State Farm will make a CA$450 million ($411 million) investment in nonvoting preferred shares into Desjardins Group’s post-closing P/C insurance business.
- Crédit Mutuel, a major European cooperative financial group and long-term partner of Desjardins Group, will invest CA$200 million ($182 million).
- Desjardins Group will allocate capital of approximately CA$700 million ($639 million) to support the growth of its P/C business.
- Desjardins Group’s life/health insurance subsidiary, Desjardins Financial Security, and certain other Desjardins units will allocate capital of CA$250 million ($228 million) for the life insurance, mutual fund, loan and living benefits components of the agreement.
The allocations total CA$1.6 billion (or roughly $1.5 billion).
Desjardins Group will become the second-largest P/C insurance provider in Canada, with annual gross written premiums of approximately CA$3.9 billion ($3.6 billion), up from approximately CA$2 billion ($1.8 billion). The transaction also strengthens Desjardins Group’s position as the fourth-largest life/health insurer in Canada.
According to Monique F. Leroux, chair of the board, president and CEO of Desjardins Group, “This acquisition will allow Desjardins to develop a broader, multichannel distribution network across the country while continuing to meet the needs of State Farm’s Canadian client base. At the same time, it will enhance our position in Canada by expanding our customer reach and achieving economies of scale.”
“The agreement between State Farm and Desjardins, combined with the support of our long-term French partner, Crédit Mutuel, brings together three financial cooperative and mutual organizations to create an insurance leader in Canada. It also provides a foundation for exploring additional opportunities for even greater collaboration in Canada in the future,” she said.
Once the deal is final, State Farm’s 1,700 Canadian employees and network of more than 500 Canadian agents will continue to serve over 1.2 million customers in Ontario, Alberta and New Brunswick.
Edward B. Rust Jr., State Farm Chair and CEO, said the State Farm’s financial investment in the newly combined P/C business and license to use the State Farm brand reflect the U.S. carrier’s confidence in the strength of the combined business going forward.
Source: Desjardins Group, State Farm