In an effort to strengthen its foothold in Canada,
The Travelers Companies, Inc
) has proposed the acquisition of The Dominion of Canada General
Insurance Company from E-L Financial Corporation Limited for a
cash consideration of $1.1 billion (C$1.125 billion). Dominion is
the wholly owned subsidiary of E-L Financial.
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The deal will likely culminate in the fourth quarter of 2013,
pending closing conditions.
The proposed acquisition is a testimony of Travelers' prudent
investment strategy, wherein the company strives to expand in
attractive and growing market place outside the United States.
Previously, in Dec 2012, the company had made a similar attempt
by increasing its stake in J. Malucelli Participações em Seguros
e Resseguros S.A., Travelers' joint venture in Brazil, to 49.5%
Dominion, which has worked toward becoming one of the largest
property and casualty insurers, was founded in 1887 and is
headquartered in Toronto. After the completion of the merger, the
merged entity shall remain headquartered in Toronto. Travelers
expect the acquisition to be slightly accretive to earnings per
share in 2014.
Furthermore, the combination of Travelers Canada's surety,
management liability and commercial middle market products
offering with Dominion's commercial and personal portfolios will
immediately add to Travelers' product portfolio in Canada.
With the acquisition, Travelers shall be able to widen its
commercial lines of businesses in Canada through Dominion's
widespread distribution network and customer base. Additionally,
Travelers proficiency in claim and risk control besides prudent
use of data and analytics will add to the operational performance
of the business.
Travelers expect to fund the acquisition through a combination of
internal resources and debt and/or preferred stock financing. The
company ended the first quarter 2013 with cash balance of $243
million and retained earnings of $22.1 billion. Nevertheless,
Travelers does not foresee any impact on its share repurchases
for 2013 or 2014 due to this funding.
Travelers presently carries a Zacks Rank #2 (Buy). With optimism
over the proposed acquisition, we expect analysts to revise
estimates upward, which will likely raise the Zacks Rank as well.
Property and casualty insurer
Montpelier Re Holdings Ltd
HCI Group, Inc.
Hilltop Holdings Inc
), among others, carry a favorable Zacks Rank #1 (Strong