Onex Signals Major Shift Towards Insurance Investments
In a significant strategic move, Toronto-based alternative asset manager Onex Corp. has announced its openness to pursuing more large-scale investments in the insurance sector. This comes on the heels of a massive $7 billion transaction where Onex partnered with American International Group Inc. (AIG) to acquire stakes in the specialty insurer Convex Group Ltd.
Chief Executive Officer Bobby Le Blanc confirmed the company's direction, stating that Onex has the capacity to redeploy billions of dollars from its balance sheet into similar, substantial deals.
Details of the Landmark Convex Transaction
Last week, Onex and AIG finalized their agreement to purchase Convex Group Ltd., a specialist in property and casualty reinsurance. Upon completion of this landmark deal, Onex will hold a controlling 63% stake in Convex directly on its own balance sheet. Its partner, AIG, will secure a 35% ownership interest.
Intriguingly, the two companies are buying Convex from one of Onex's own private equity funds and other co-investors. As part of the broader agreement, AIG has also committed to buying a 9.9% interest in Onex for approximately $646 million and to invest a further $2 billion over three years in various Onex funds.
A Strategic Transformation for Onex
CEO Bobby Le Blanc described this deal as a major transformation for Onex, marking another step in a restructuring plan he has been implementing for years. When asked if more such transactions are on the horizon, he responded with a clear 'yes'.
Le Blanc told analysts that he envisions a very concentrated approach, potentially involving 'one or two other' major investments similar to the Convex deal. While he highlighted insurance as a natural area for such bets, he also indicated openness to other sectors where Onex has a proven track record.
This strategic pivot follows years of effort by Le Blanc to streamline operations. His initiatives have included trimming expenses, exiting certain businesses like the wealth manager Gluskin Sheff, and focusing on expanding the company's footprint in credit markets.
Following the deal announcement, shares of Onex experienced a slight dip of 1.3% in early afternoon trading on the Toronto stock exchange, settling at C$116.15.
