AM Best has commented that the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of Intact Financial Corporation (IFC) [TSX: IFC] (Ontario, Canada) and the Financial Strength Ratings of A+ (Superior) and the Long-Term ICRs of “aa-” of its operating subsidiaries remain unchanged following the recent announcement that IFC, together with Tryg A/S, have approached RSA Insurance Group plc (RSA) with a cash takeover offer. In addition, all existing debt ratings remain unchanged.
The disclosure announcement is in accordance with the United Kingdom’s regulatory code on takeovers and acquisitions. A stock purchase agreement has not been executed at this time. As a result, there is currently no certainty that an offer will be made or accepted.
Under the terms of the potential transaction as discussed with IFC management, IFC would acquire RSA’s Canada, United Kingdom and international business concerns, and gain a 50% ownership position in RSA’s Denmark business. The remaining 50% of RSA’s Denmark business would be owned by Tryg A/S.
This potential transaction will include RSA’s personal auto, personal property and commercial lines business and represent a strong strategic fit with IFC’s existing business segments while further consolidating IFC as Canada’s market leader. Additionally, the transaction would further diversify IFC’s specialty platform beyond North America with premiums spread across the United Kingdom, Ireland, Europe and the Middle East.
IFC anticipates funding the acquisition through a combination of privately placed equity, together with debt and preferred share issuances. While there is execution and integration risk associated with this transaction, IFC’s consistent profitability, successful track record of prior acquisitions and moderate financial leverage should mitigate any execution and integration risks associated with this potential transaction. As currently described, AM Best anticipates that financial leverage measures would remain within bounds for the rating level. AM Best plans additional discussions with company management over the near term to discuss further details of the proposed transaction as they become available and will provide further commentary as deemed appropriate.
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