Definity Financial Makes Smart Deal to Grow Market Share

By Will Ashworth

Last month, I discussed the Canadian SMID-Cap 30’s (CSMC 30) first exit, after Andlauer Healthcare (AND) agreed to a buyout from UPS (UPS) for $2.2 billion. 

As a result of the sale, AND stock delivered a 36% return over a six-month period. That’s what I’m talking about. In its place, I recommended Triple Flag Precious Metals (TFFM). Since the article appeared on May 7, TFFM stock has moved sideways, underperforming the S&P/TSX Composite Index. 

Give it time. 

Which brings me to today’s commentary about Definity Financial (DFY), the CSMC 30’s fifth-largest stock by market cap. 

On May 27, 2025, the property and casualty insurer announced that it would acquire the Canadian operations (excluding its Canadian surety business) of Travelers Companies (TRV) for $3.3 billion. The addition of the Canadian business moves Definity from sixth spot to fourth among Canadian P&C firms.  

Investors love the deal. Its shares jumped 11% on the news. They’re now up 31% in 2025. More importantly, its shares have gained nearly 40% since the creation of the CSMC 30 on Oct. 25, 2024. 

DFY stock is one of five financial services companies in the CSMC 30. Here’s why I expect it to continue to generate above-average returns for the portfolio in the years ahead.

Consolidation Continues to Benefit Definity

At the time of the company’s public markets debut, in November 2021, Definity CEO Rowan Saunders told Toronto’s Globe & Mail that the move would position the firm to benefit from consolidation in the Canadian property and casualty (P&C) industry.

“This is a big step in our journey to build a Canadian champion.”  

“If you look at our performance, in the last few years, we’ve been able to grow organically at a rate of about twice the industry growth rate. But the whole reason for us listing as a public company was so that we could participate in what we believed would be a consolidating P&C market,” the Globe & Mail reported the CEO’s comments in an interview.

The acquisition is a win for both companies. 

Travelers entered the Canadian market in 2023 by acquiring the Dominion of Canada General Insurance Company for $1.1 billion. A little over 11 years later, it is selling for three times its original investment. 

Definity adds $1.6 billion in annual gross written premiums (GWP), bringing it to $6 billion, the fourth-highest volume among Canadian underwriters. 

“This is a transformative acquisition that is squarely in line with the growth strategy we’ve set for Definity,” Mr. Saunders said.

I’m most familiar with Definity through its Sonnet Insurance brand. Sonnet, a digitally savvy operation, insures my wife’s mother and aunt. They’re pleased with the coverage. 

It’s Got a Tough Road to Number 1

While the acquisition accelerates its growth in the Canadian P&C market, it still has a long way to go to reach the number one position, currently held by Intact Financial (IFC).

For example, while the acquisition of Travelers’ Canadian business brings its GWP to $6 billion, that’s still only a quarter of the $24 billion generated by Intact in 2024. Further, Definity’s market cap is $8.89 billion after its 11% one-day gain on the news. Intact’s got a $55.36 billion market cap. 

However, there are several reasons why the transformative deal makes sense for Definity. 

It achieves significant scale in the property and casualty market across Canada, with its Commercial Insurance business growing by 40% to $2.0 billion and its Personal Insurance business increasing by 29% to $4.0 billion. 

As well, not only does it gain market share in both Commercial and Personal lines, but it also gets niche in-house capabilities, including Management Liability, Ocean Marine and others. 

Meanwhile, management expects to generate $100 million in expense synergies from the combination, which will enhance its profitability. 

Lastly, the purchase price of $3.3 billion is reasonable, given that it represents 1.4 times the 2024 unadjusted year-end book value. Furthermore, approximately 45% of the purchase price represents excess capital (67% Travellers / 33% Definity), with the remainder in debt and cash on its balance sheet.  

Travelers rightly decided that its Canadian business was in better hands with Definity. 

The Bottom Line

The word “transformative” is overused in business. Few acquisitions move the needle as much as anticipated. However, Definity continues to make all the right moves to grow its place in the Canadian P&C industry. 

If you’re not a Definity shareholder, this deal ought to make you take a closer look. It’s a smart buy at a reasonable price.

Disclaimer: The author did not hold a position in any of the securities mentioned above. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Will Ashworth is currently ranked 153 out of 31,263 financial bloggers analyzed by TipRanks, with a 16.2% return on his buy and sell ratings. He is one of the founding contributors to this newsletter.

Will has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.