TORONTO Canadian financial services group Desjardins is selling Western Financial, an insurance brokerage unit in Western Canada, six years after acquiring the business, sources familiar with the sale said.
The asset, which includes a brokerage and a life insurance business, could be worth about C$500 million ($381 million), according to three sources, who declined to be named as the matter is private. The sources spoke over the past week.
Desjardins said on Friday it doesn't comment on rumors.
Canada's property and casualty insurers have been consolidating in response to challenging market conditions due to low interest rates, volatile investment returns and sluggish economic growth.
The retreat from a business focused on some of the oil-producing provinces comes after a prolonged slump in oil prices began taking a toll on financial service providers exposed to the region. Quebec-based Desjardins is the biggest customer-owned financial services group in Canada.
Desjardins acquired Western Financial Group for C$443 million in 2011. Western Financial was a publicly listed company for 15 years until the acquisition.
Economical Mutual Insurance Co this month bought Desjardins Group’s pet insurance business, Western Financial Insurance Co, which was part of Western Financial Group.
British insurer Aviva plc's (AV.L) Canadian division last year acquired the general insurance division of lender Royal Bank of Canada (RY.TO) for C$582 million ($443.06 million).
Desjardins, which snapped up State Farm Canada's businesses in property and casualty and life insurance in 2015, is now one of the biggest property and casualty insurers in Canada.
Canadian property and casualty insurer Intact Financial Corp (IFC.TO), Aviva and U.S. insurer Travelers Cos Inc (TRV.N) are among those that may be interested in Western Financial Group, the sources said.
Intact, Aviva and Travelers Cos did not immediately respond to requests for comment.
Insurance companies looking to strengthen their distribution network are likely to find it particularly appealing, the sources said. Pure-play brokerages could also take a look, the sources said.
The potential buyers could also spin out the life insurance business after completing a deal, one of the sources said.
Desjardins is looking to sign a deal over the next few months, the sources said.
The insurer reported a 12 percent rise in earnings before payouts to members in its latest quarter, with strength in wealth management, life and health insurance businesses making up for weaker growth in its property and casualty business.
(Reporting by John Tilak and Matt Scuffham; Editing by James Dalgleish)