Analysis: Is the Intact takeover of RSA UK good or bad news for brokers?

Should the £7.2bn acquisition of RSA by Intact Financial Corporation and Tryg A/S complete without a hitch, UK brokers are facing the prospect of a new major player on the scene.

The deal will carve up the London-based insurer’s global business, with Canadian group Intact taking over the UK & International book in its first expansion outside of North America.

Trepidation normally follows any deal of this size, particularly among UK brokers for whom RSA has been a longstanding and highly important insurer partner over the years.

Concern?
However, North American brokers with experience of working with Intact have said there is no need for UK brokers to be overly concerned.

“It is impressive, for a company of Intact’s large size, the level of engagement you get from the senior leadership, and the amount of time and understanding that they’ve got for their broker base,” Dave Partington, Gallagher Canada CEO, told Insurance Age.

Led by CEO and president Charles Brindamour since January 2008, the group has grown rapidly through M&A over the last decade. Today around 85% of the group’s CA$11bn (£6.4bn) annual written premium originates from brokers, according to Fitch Ratings, and it is classed as the largest P&C carrier in Canada.

Brokers
The business works with over 2,000 Canadian brokers, and has been a partner of the Insurance Brokers Association of Canada (IBAC) for 30 years. IBAC CEO Peter Braid said this, plus the appointment of ex-broker Louis Gagnon as president of Intact’s Canadian operations, demonstrates a strong support for the broker distribution system.

“Intact is a company that works collaboratively with their broker network, and they recognise the importance of brokers to their company’s overall success,” he added.

The majority of Intact’s direct business is personal auto written through the Belair Direct brand.

Also within the Intact stable is its own broking business, BrokerLink, which mostly deals in personal lines.

In no aspect of the businesses though did Partington or Intact’s other broker partners say there has ever been a conflict, and they were full of praise for how relationships are managed.

“In terms of account management, in my experience trading with Intact for almost 20 years, there’s always been a fairly structured approach with involvement of senior leaders owning the strategic relationship and underwriters being engaged with brokers day to day,” said Brian Gomes, president & CEO of BMS Canada Risk Services.

“Expectation management in these relationships has always been transparent and realistic, and proactive rather than reactive in my experience, and has been consistent across different business classes and geography.”

Regional
Intact employs local teams within a regional branch structure and offers product and training support programs, which experts said are beneficial to independent brokers.

“As a relationship based brokerage we need regular and frequent communications and support from our insurers and Intact is by far the best in class at this,” said Brian Nielsen, president of Edmonton-based Drayden Insurance.

“No question they are Canada’s best insurer, helping brokers to deliver service, advise, and offer choice to customers,” David Huestis, principal of New Brunswick-headquartered Huestis Insurance Group, added. “They are ‘people-people’ - personally accessible to assist brokers in good and not so good times.”

Furthermore, Braid described Intact as a “solid corporate citizen,” both for proactively offering premium rebates of CA$350m (£201m) to over one million personal and business customers during the pandemic; and for providing ongoing funding to a climate change research centre.

Specialty
In recent years the group has looked to increase its breadth of coverage, and has also established a firm foothold in the US specialty market.

Fitch puts the premium split at roughly 36% personal auto, 21% personal property, 27% Canadian commercial lines, and 16% US commercial lines.

“Intact has shown over a long period of time that they have an interest in all segments of the insurance market, whether that be personal home and motor, or whether that be large corporate and specialty lines,” Partington added.

“They are a growth-based company and RSA would give them more critical mass and more expertise in the large commercial insurance segment.”

Deals
Since going independent and rebranding as Intact Financial Corporation from ING Canada in 2009, the next six years saw the group acquire Axa Canada, Jevco Insurance Company and Canadian Direct Insurance.

In 2017 it bought US specialty insurer OneBeacon, and in 2019 it acquired two more specialty businesses - The Guarantee Company of North America and MGA Frank Cowan Company.

Partington noted that he had been impressed with the quality of past acquisitions and the pace at which Intact has integrated these new companies into the group.

“They are in the business of acquiring good insurance companies with good people, and enhancing their business,” he added.

Performance
Equally impressive has been Intact’s ability to maintain a strong underwriting performance while scaling up the business. Intact’s combined ratio has been sub-96% stretching back to 2014, achieving 95.4% in 2019. The combined ratio stood at 90.3% for the first nine months of 2020.

With the deal expected to complete no earlier than Q2 2021, brokers were unwilling to speculate on what actions Intact might take with RSA. However, there was widespread agreement that maintaining underwriting discipline would continue to be paramount.

Fitch director Gerry Glombicki agreed, commenting: “The first thing they are going to worry about is the actual book they have acquired and making sure that’s sound before looking to any growth strategies.”

Brand
Its history with past integrations also showed that Intact usually adopts a flexible attitude to how long brands are maintained. The Guarantee Company was purchased in December 2019 and brought under Intact branding fairly quickly. Whereas the OneBeacon brand was maintained much longer, only transitioning to Intact branding a few months ago.

Fitch managing director Jim Auden suggested that the decision to keep OneBeacon largely untouched for a few years was because it represented a first foray into the US market.

Similarly, with the acquisition of RSA and the expansion into new geographic territory, he did not expect significant short-term changes for which UK brokers would need to adapt.

“There may be some products that RSA writes that Intact brings expertise back to the US and Canada on, and some of their expertise they may try and bring to the UK, but that could take a while to unfold,” he said. “They have a profit oriented culture, so if there are areas where they are succeeding they will try to grow them, and if there are areas not meeting expectation you could see them cutting back the portfolio too. But it may take a while. It will take a while for the deal to close and then there will be some settling in time.”

Trading
UK brokers have said they hope that a sale can “breathe new life” into RSA after previously criticising the provider for becoming increasingly more difficult to trade with and less visible to regional brokers.

Glombicki and Auden acknowledged that there is always some risk with entering a foreign market due to the different regulatory and pricing environment, as well as new competitors. With many months to go before completion, it’s likely Intact’s senior management will want to learn more about the UK market and the intricacies of RSA’s business before agreeing on a firm strategy.

But based on their track record and the accounts of Canadian brokers, it appears a safe bet that close relationships with brokers will be a cornerstone of that plan.

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