Coming on the heels of last week’s State Farm acquisition announcement, Desjardins continues to make waves in the channel by issuing new shares worth $500 million.
Offered exclusively to Desjardins caisse members in Québec, these capital shares are issued by the Fédération des caisses Desjardins du Québec and sold through the caisse network. The shares are issued in order to boost the capitalization of the caisses and Desjardins Group.
“Desjardins ranks among the most stable financial institutions in the world and this is in large part thanks to its capitalization,” says Monique F. Leroux, chair of the board, president and CEO of Desjardins Group. “This advantage also protects the company from economic fluctuations while allowing for growth which benefits its members and clients.”
The $500 million issuance follows up on the success of last year’s first issue of $1.5 billion in capital shares, says Leroux.
“Acquiring capital shares allows caisse members to show their support towards the development of their cooperative,” she says.
The capital shares have a par value of $10 and the minimum amount for each subscription is $100. The interest rate is set annually and may not exceed the greater of the average annual yield for 5-year Government of Canada bonds or 4.25 per cent. For caisse members, acquiring these shares represents a long-term investment with good return potential and a great way to achieve healthy portfolio diversification. (continued.)
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Last week Desjardins announced it was taking over the State Farm Canada operations. As a result of the transaction, Desjardins Group will become the second largest P&C insurance provider in Canada with annual gross written premiums of approximately $3.9 billion, up from approximately $2 billion. The transaction also strengthens Desjardins Group's position as the fourth largest life and health insurer in Canada.
Part of the deal includes State Farm making a $450 million investment in non-voting preferred shares into Desjardins Group's post-closing property and casualty insurance business, which will include the newly acquired State Farm Canada property and casualty operations.
In addition, Desjardins Group will allocate capital of approximately $700 million to support the growth of its P&C business. As well, Desjardins Group's Life and Health Insurance subsidiary, Desjardins Financial Security, and certain other Desjardins units will allocate capital of $250 million for the life insurance, mutual fund, loan and living benefits components of the agreement.
