An industry that has become known for constant takeovers and mergers is witness to another major takeover today by Canada’s leading cooperative financial group.
Desjardins Group announced that it has entered into an agreement to purchase State Farm Canada's businesses in property and casualty and life insurance, as well as its Canadian mutual fund, loan and living benefits companies.
“This acquisition will allow Desjardins to develop a broader, multi-channel distribution network across the country, while continuing to meet the needs of State Farm's Canadian client base,” said Monique F. Leroux, chair of the board, president and chief executive officer of Desjardins Group. “At the same time, it will enhance our position in Canada by expanding our customer reach and achieving economies of scale.”
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.
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.
State Farm will make 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. (continued.)
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In addition, Crédit Mutuel, a major European cooperative financial group and long-term partner of Desjardins Group, will invest $200 million.
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.
Once the transaction is finalized, 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. Desjardins expects the transaction will lead to job creation in the coming years in Canada, including Québec.
Desjardins will continue to operate its other insurance brands separately across the country.
“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,” added Leroux. “It also provides a foundation for exploring additional opportunities for even greater collaboration in Canada in the future.” (continued.)
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Edward B. Rust Jr., State Farm Chairman and Chief Executive Officer, said the transaction will create a well-positioned, Canadian-focused provider of property and casualty, life and financial services products that will expand on the operations State Farm's Canadian employees and agents have built in Ontario, Alberta and New Brunswick.
“This combination creates a leading platform with new opportunities for growth and success for our employees, agents and customers,” he said. “State Farm's financial investment in the newly combined P&C business and license to use the State Farm brand reflect our confidence in the strength of the combined business going forward.”
