RSA expands in Canada with a £94m purchase

City A.M. Reporter
RSA, Britain’s biggest commercial insurer, has agreed to buy Canada’s L’Union Canadienne for £94m, more than doubling its share of the lucrative Quebec market.

“Our group strategy is to drive continued growth and strong profitability in our overseas markets,” RSA chief executive Simon Lee said in a statement.

RSA, Canada’s third-largest general insurer after its $425m (£274m) takeover of GCAN in 2010, is looking for small acquisitions to drive growth outside its home market but is not interested in big deals that would require external fundraising, Lee said in April.

The insurer, best known in Britain for its More Than home and motor insurance brand, has a track record of small-scale takeovers, completing 50 acquisitions between 2005 and the end of 2011.

“To us, this is a classic RSA bolt-on acquisition,” one Shore Capital analyst said of the L’Union Canadienne deal.

“Small enough to be paid for in cash, big enough to make a difference, we envisage L’Union Canadienne becoming a valuable element of RSA’s presence in Canada.”

RSA shares closed 2.25 per cent higher yesterday at 99.85p, in line with a 2.36 per cent rise in the FTSE 100 share index.

L’Union Canadienne, part of Canada’s Co-operators General Insurance Company, had net written premiums of £169m last year.

Earlier this month, RSA said it was off to a good start to the year as newer markets offset a slump at its car insurance business, More Than.

Net written premiums rose five per cent to £2.2bn in the first quarter of the year, thanks to a rate hike coupled with a one per cent uptick in volumes.

Overall UK premiums rose four per cent to £725m, but its investment portfolio shrank slightly to total £14.4bn at the end of March, which was due to a £33m foreign exchange hit and other movements causing a £47m dent.

At the time, the firm maintained its outlook for the full year and said it expects good premium growth and around £500m of investment income for the year.