At a recent gathering of investors and asset managers at the Scotiabank Financials Summit on Sept. 10, Rowan Saunders, president and CEO of Definity Financial Corporation focused attention on the synergies the company has realized following the acquisition of the Canadian operations of Travelers. Notably, the president and CEO’s comments suggest that the business’s conversion costs are lower than previously anticipated.
“It’s interesting to see how the systems, how efficient they were,” he told those gathered for the presentation. “We knew they’d be scalable. We had confidence in them, but the reality is they’re more scalable than we had thought. The other part of it is the teams are really skilled and have had time to prepare for this integration. We’re finding the costs to do the conversion are lower.”
In response, the company recently increased its guidance on the synergies it expects to realize following the completion of the Travelers integration, raising targets from $100 million to $125 million in annualized cost synergies. “We’re delighted with that,” he told those gathered for the presentation. “Putting that into perspective, that’s about eight or nine points of combined ratio of that business.”
Travelers, an update
Following the close of the company’s acquisition of the Canadian operations of Travelers, Saunders says the company gained $1.5 billion in business with the acquisition. Broken down, this works out to about $1 billion in personal lines business and $500 million in commercial and specialty lines business, both of which helped push the company into position as a top five player in the industry. Saunders says closing costs were less than expected.
“Things are going quite nicely. I think you see that confidence coming through with us changing the synergy targets,” he said. “I think it gives you an illustration of the support we enjoy with our broker partners, that the retention ratio of the Travelers business as it moves to Definity systems is actually higher than it was under the Travelers’ management.”
He adds that the company doesn’t expect any surprises going forward, either.
“When you acquire an insurance company, it’s easy to quantify the assets and more difficult to quantify the liabilities of the business until you really take full ownership. I think we’re in a position now, a few quarters in, that we’re really comfortable with the balance sheet of the business. It’s actually better than we anticipated,” he said. “I don’t think we’re expecting any surprises or concerns on the back half of the year.”
Cultural change management, thoughtful technology integration and stakeholder communication were all cited in the presentation as lessons learned from the transaction.
“The time spent onboarding the Travelers folks has been very helpful,” he told those gathered. “There was a lot of excitement from the Travelers employees to join Definity. We spent a lot of time on onboarding, coaching, organizational design, putting people in the right spots and being clear and upfront about that. I think that has been extremely helpful in talent retention. The other one for us is clearly the technology – really being thoughtful and planning and putting the top talent in our integration management office to ensure a smooth transition to our platforms.”
He adds that brokers would not be providing this much support if they weren’t satisfied with the level of support they are receiving themselves. Following this, he again noted that retention numbers have been better under Definity’s management than was the case in the past.
Future growth and acquisition targets
To realize the company’s vision of being a top three player in the Canadian property and casualty (P&C) space, future mergers and acquisitions (M&A) are generally expected by investors and Definity’s management.
“There’s a structural change going on in Canadian P&C. If you look at some of the other financial services, the concentration in banking and maybe in life segments, I think we’re still somewhat more fragmented,” he says. “Our thesis is that structurally, the industry is going to become more attractive than it is even today. We want to be a leader and a player in that, so we’ve built this very strong and scalable foundation to allow us to organically grow ahead of the market, which is what we’ve been doing,” he adds. “Then we want to supplement with M&A. What’s next for M&A? We clearly would like more commercial business.”
Following commercial, he says the next priority would be acquisitions to augment the company’s multi-lines business. “I think priority would be commercial. Next would be the big kind of scale transaction that we may see in the coming years ahead.”
Financial levers
While the third quarter of 2026 is likely going to be marked by significant weather events, Saunders says this does not change the company’s full-year outlook. To enhance return on equity (ROE), he adds that the company has a few organic levers at its disposal.
“One of them was to get Sonnet scaled up and to get it to break even. The other one was to use the scale and efficient systems to get some operational leverage and reduce our operating ROE,” he says. “The third one is the transformation of our claims team and all the benefits that come out of the claims transformation.”
He adds that the Sonnet target has been met – the company is now running at a profit. Definity has about 50 basis points to go in reducing expenses, again faster than anticipated, and the claims transformation process, meanwhile, is currently about half complete.
“When we came to the market, we had a story of becoming a leader in the Canadian business. We’ve broken into the top five. I think in the next three to five years we will be a top three player,” he says. “I would like us to look like a top three player that has an ROE in the mid-teens. We have a 10-year strategic plan that we put in place with the board a little over a year ago to triple the company, triple the value. We’re well on track with that.”
