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Introduction & Market Context
Definity Financial Corporation (TSX:DFY) presented its second quarter 2025 results on August 1, showcasing continued premium growth across all segments despite facing higher catastrophe losses that impacted overall profitability. The company’s stock closed at $75.31 on July 31, 2025, down 0.88% for the day, but has shown strong performance year-to-date, trading well above its 52-week low of $46.97.
The presentation comes after a challenging first quarter where Definity missed analyst expectations, but Q2 results demonstrate improvement in key metrics as the company advances its strategic initiatives, particularly the transformative acquisition of Travelers (NYSE:TRV) Canada announced in May 2025.
Quarterly Performance Highlights
Definity reported solid financial results for Q2 2025, with gross written premiums (GWP) of $1.34 billion, representing a 9.1% year-over-year increase when adjusted for exited lines. The company achieved an operating earnings per share (EPS) of $0.84, a combined ratio of 92.9%, and a book value per share of $31.39, which grew an impressive 19.9% year-over-year.
As shown in the following key financial highlights from the presentation:
The company’s trailing twelve-month operating return on equity (ROE) stood at 9.6%, slightly below the previous year’s 10.8%, but still within the company’s target range of "10% to below teens" for 2025. This decline in operating ROE was primarily due to higher catastrophe losses, particularly in the personal property segment.
Definity continues to track well against its key financial targets for 2025, as illustrated in this slide:
Segment Analysis
All three of Definity’s core business segments delivered premium growth in Q2 2025, though profitability was mixed due to varying levels of catastrophe losses and claims ratios.
The Personal Auto segment showed solid performance with a 6.8% increase in GWP to $564.4 million and an improved combined ratio of 94.2%, down from 95.2% in Q2 2024. This improvement came despite ongoing challenges in the auto insurance market, particularly in Alberta where regulatory constraints continue to impact the industry.
The Personal Property segment experienced the most significant impact from catastrophe events, with GWP growing 7.1% to $346.0 million, but catastrophe losses jumping to 12.6% from 2.6% in the same quarter last year. This resulted in a combined ratio of 94.3%, up from 86.0% in Q2 2024. The increase in catastrophe losses was attributed to the 2024 summer storm and wildfire season.
The following consolidated performance metrics provide a comprehensive view of Definity’s Q2 results across all segments:
Commercial Insurance continued to be the strongest performing segment, with GWP growth of 10.0% to $427.0 million and a combined ratio of 89.6%. While this represents a slight increase from the 86.6% combined ratio in Q2 2024, it remains the most profitable segment for Definity.
Strategic Initiatives
The most significant strategic development for Definity is its agreement to acquire Travelers Canada for $3.3 billion, announced on May 27, 2025. This acquisition will establish Definity as the fourth-largest property and casualty insurer in Canada and strengthen its leadership position in the broker channel.
The company has made substantial progress on this transaction, including completing $385 million in private placements of common shares in June and receiving unconditional clearance from the Competition Bureau in July. The acquisition is expected to close in Q1 2026 and deliver approximately $100 million in pre-tax synergies.
The following slide details the progress and expected timeline for the Travelers Canada acquisition:
In addition to the Travelers acquisition, Definity continues to expand its broker platform, which is now the 10th largest P&C insurance broker in Canada. The company has completed 22 broker acquisitions since 2022, including 6 acquisitions year-to-date in 2025 representing approximately $160 million in acquired GWP.
The broker platform strategy is illustrated in this slide:
Financial Position & Capital Management
Definity maintained a strong balance sheet in Q2 2025, with total assets of $8.3 billion and equity attributable to common shareholders of $3.8 billion. The company’s financial capacity increased significantly to $2.7 billion as of June 30, 2025, up from $1.8 billion at the end of Q1 2025, providing substantial resources for the Travelers acquisition and other strategic initiatives.
The following slide details Definity’s balance sheet strength and capital position:
The company’s capital management strategy focuses on optimizing its balance sheet through the strategic deployment of excess capital and utilization of financial leverage capacity. Following the announcement of the Travelers transaction, Definity raised $372 million through private placements of common shares, which will be used to partially fund the acquisition.
As shown in this capital management overview:
Forward-Looking Statements
Looking ahead, Definity has outlined a path to achieving sustainable mid-teens operating ROE by the end of 2027, following the integration of Travelers Canada. This strategy combines organic initiatives such as expense optimization and claims transformation with inorganic growth through capital optimization.
The company expects to generate approximately 0.5 percentage points of improvement through expense optimization by the end of 2026, and 1-2 percentage points through claims transformation by the end of 2027. The acquisition of Travelers Canada is expected to contribute more than 2 percentage points to operating ROE through capital optimization.
The roadmap to improved operating ROE is illustrated in this slide:
For the remainder of 2025, Definity expects industry conditions to remain firm across all segments. In Personal Auto, insurers continue to aim to keep pace with loss cost trends while navigating regulatory constraints. Personal Property market conditions are expected to remain firm following the 2024 summer storm and wildfire season. Commercial Insurance market conditions are anticipated to remain attractive, though some segments are becoming more competitive.
Definity’s performance in Q2 2025 demonstrates the company’s ability to generate premium growth across all segments despite challenging market conditions. While catastrophe losses impacted profitability, particularly in the Personal Property segment, the company remains on track to achieve its full-year targets. The transformative acquisition of Travelers Canada represents a significant milestone in Definity’s growth strategy and positions the company for long-term success in the Canadian P&C insurance market.
Full presentation:
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