SGI CANADA is realigning its business strategy in an effort to more quickly achieve its targets for geographic diversification of risk.
For two decades, SGI CANADA has been building its book of business outside of Saskatchewan to achieve this goal. Geographic diversification is important for insurance companies, as it allows them to offset losses due to extreme weather events in one region with profits from other regions.
As part of the strategy to accelerate geographic diversification, SGI CANADA has entered into an agreement to sell its shares in the Insurance Company of Prince Edward Island (ICPEI) to EGI Financial Holdings Inc. (EGI) (TSX: EFH) at book value, estimated to be $10 million, and an additional $3.5 million to license the use of SGI's computer systems. The transaction is expected to close this summer. SGI CANADA will be working closely with EGI to ensure a smooth transition for ICPEI's policyholders, brokers and employees.
SGI CANADA plans to redirect resources to strengthen focus on Ontario and Western Canada. It has recently applied for a licence to compete in B.C.'s property and casualty market as part of that strategy.
"Like any insurer in today's evolving business climate, SGI CANADA continuously evaluates its market position," said Andrew Cartmell, SGI CANADA President and CEO. "The opportunity to divest ourselves of ICPEI arrived at the right time. British Columbia is a region with strong growth potential that also fits with SGI CANADA's plans to build expertise in providing insurance to Western Canadian industries, such as, mining and oil and gas, so moving further west is a natural fit."
SGI CANADA employees supporting ICPEI business are located at SGI CANADA's head office in Regina. None of these employees will lose their jobs or have to relocate as a result of the sale of ICPEI. Instead, their job duties will change to support growth in other markets, whether that be in B.C. or the other regions in which SGI CANADA currently operates, namely Saskatchewan, Alberta, Manitoba and Ontario.
"Our plans to exit the Maritimes and move into B.C. will allow us to achieve geographic diversification targets faster, spreading risk more effectively and helping ensure financial stability for the company and, ultimately, providing enhanced security for customers in all regions," said Cartmell.
SGI CANADA purchased 75 per cent of ICPEI's shares in 2001. SGI plans to retain its operations in all other jurisdictions.