The integration of RSA's operations will impact Intact Financial Corporation’s return on equity (ROE), according to CFO Louis Marcotte. He explained his projections to analysts in a conference call following the release of the insurer’s Q1 2021 financial results.
For the past few quarters, Intact has achieved a double-digit ROE. By the end of 2021, Marcotte expects it to be below 10 per cent. Double-digit returns are expected to resume by 2023, says Intact's CFO. Meanwhile, Intact will have realized $250 million in synergies, he adds.
“After completing the transaction, the operating ROE will be lower than current levels, As we get closer to Year 3, we expect synergies to fully kick in. With an IRR well north of 15 per cent, solid earnings accretion and a price below book value, the financial merits of the transaction are compelling,” Marcotte says.
Canadian value creation
Intact expects 75 per cent of the value creation from the Intact-RSA transaction to come from Canada, Marcotte adds.
“We will lean on our successful track record of Canadian integration to deliver on our targets. The addition of RSA to our strong operations is highly strategic and transformational. Our teams are already hard at work to ensure we deliver on our expectations. And now the real work begins. With the help of our new colleagues at RSA, we can create a tremendous amount of value for all stakeholders.”