Ontario Teachers launches insurance play

Teachers’ Private Capital of Ontario has made a first acquisition for what is expected to be a major insurance platform, buying GCAN Insurance Company in a roughly $150m deal.

Pursuing a consolidation plan in the Canadian insurance space, Teachers’ Private Capital, the private investment arm of Ontario Teachers’ Pension Plan, has agreed to acquire GCAN Insurance Company.

The pension acquired the business from a private equity consortium consisting of Torquest Partners, Newport Capital Insurance and CIBC Capital Partners, with sources indicating the group paid around $150 million for the business.

GCAN, with a presence in Toronto, Montreal, Calgary and Vancouver, is a niche insurance provider, specifically targeting property and casualty insurance in the commercial and industrial markets.

Teachers’ is pursuing the investment amid a shakeup that has been taking place in the Canadian insurance market. “Our view is that there is a consolidation wave occurring in the Canadian insurance space, and this is a company on which we can start to build our own business,” Teachers’ senior vice president James Leech told PEO.

The Canadian industry has already undergone the first stage of upheaval that saw groups such as GCAN and other Canadian insurers, spin out from their international parents. (GCAN, two years ago, was carved out of its German parent, Gerling Insurance Group.) The next stage, Leech believes, will occur when the Canadian marketplace converges and consolidation among the different players begins to materialize.

GCAN is a relatively small business, logging $221 million in gross underwriting premiums in 2004, but Leech believes the company is well positioned to pursue future acquisitions.

“The company’s not enormous, but it’s very profitable,” Leech said. “It’s done very well in the past, and has been very consistent throughout all of the ups and downs in the insurance industry through the years.”

Teachers’ will finance the entire transaction with equity. Once the deal is completed, which is expected this month, David Huebel will succeed GCAN’s current president and CEO in that role. Huebel is currently the chief operating officer.

CIBC World Markets advised the sellers on the transaction.