Definity Financial Corporation has its eyes set on carrier acquisitions, the insurer’s president and CEO, Rowan Saunders, confirmed during a recent earnings call.
Saunders made his comments Feb. 14 during the carrier’s fourth-quarter and full-year 2024 financial results conference call. He was responding to an investor who asked if it would be fair to suggest that Definity’s focus for mergers and acquisitions (M&A) is shifting more towards insurance carrier acquisitions rather than brokerage acquisitions.
“It’s not that we wouldn’t continue investing in the broker channel, but definitely our attention is on the carrier side,” Saunders said.
Initially, it was important for Definity’s broker platform “to get some really strong, high-performing, large anchor brokers,” Saunders added. “And so in the earlier years, you saw some larger transactions being done. They are now, in effect in a programmatic way, doing a roll-up.
“I think that there are more numbers of smaller transactions that have been done,” he said. “That doesn’t mean we wouldn’t be open for another larger broker transaction. We would.”
In October 2022, Definity increased its ownership interest in large Ontario brokerage McDougall Insurance from 25% to 75% (later 78%), bringing its total investment to more than $250 million. The following year, as a Definity subsidiary, McDougall merged with another large Ontario brokerage — McFarlan Rowlands Insurance Brokers. By October 2023, McDougall completed its acquisition of Alberta-based Drayden Insurance.
“We expect continued M&A activity and the organic growth momentum of the business to result in at least $1.5 billion of managed premiums by the end of 2026. That’s earlier than we originally anticipated,” Saunders said.
Definity’s national broker platform generated $76 million of operating income in 2024, Saunders reported. “We expect to increase this by approximately 15% in 2025, with a similar 70/30 split between distribution income and commission offset.”
According to Definity, its broker platform is now the 10th largest P&C insurance broker in Canada, with about $1.2 billion in gross written premiums (GWP) — about $900 million in Ontario, with 60+ offices, and approximately $300 million in Alberta, with 12 offices.
In 2022, Definity completed one brokerage acquisition, with about $500 million in acquired GWP. In 2023, it made six brokerage acquisitions worth approximately $400 million in GWP and nine acquisitions worth about $200 million in 2024.
“Look, we are thinking about the transactions for carriers as well as brokers,” Saunders said during the earnings call.
“We’re happy with how the broker distribution has gone,” he says. “It’s now moving forward quite nicely. And clearly, as we think about deploying the excess capital that we have, looking for carriers, it makes total sense for us.”
Feature image by iStock.com/metamorworks
