How digital direct fits into Definity’s Top 3 priorities

Will digital direct offering Sonnet Insurance become a billion-dollar business? It’s a hopeful possibility, Definity Financial Corporation president and CEO Rowan Saunders tells The Desjardins Inaugural Toronto Conference on Tuesday.

While Job 1 for Definity (Sonnet’s parent company) remains delivering on existing commitments, the operational integration of Travelers’ Canadian business and seeing Sonnet digital shift to profitability and full functionality are the other top priorities for the coming quarters.

Saunders says significant executive time is being spent on revenue growth, organic growth of the business and maintaining the firm’s sub-95% combined ratio — which stood at 94.5% for the full-year 2024.

“That’s the real…earnings driver of the business,” he adds. “So, most of the operation is really focused on that.”

Further, Saunders calls Definity’s acquisition of Travelers’ Canadian business “a transformational deal,” that’s expected to finalize as planned during first quarter of 2026.

“The teams are very, very busy on integration planning…getting ready for Day 1, and then of course the full integration as we take possession of that company,” he says. “It gets us to being a Top 5 player and really will bring a lot of capabilities to us.”

Priority 3 for Definity is Sonnet.

“We spent a lot of time and effort in the last few years working and trying to get that model to work the way we like it, and we feel the best we’ve ever felt about that business,” Saunders tells attendees.

He says efforts have focused on making Sonnet profitable and crafting a business model that works as a fully digital insurer. “We think we’re there for now,” he says.

Related: What’s next for Definity following Travelers Canada acquisition

Sonnet’s important to the larger business going forward, says Saunders, and notes a little over 50% of the personal insurance marketplace is direct to consumer.

“So it’s disintermediating,” he says.

“I think what we see in that market…is an acceleration of pure digital versus traditional direct. People used to be comfortable going to an agent in the local mall. They used to be comfortable going to a contact centre — that’s traditionally how most of the direct insurers in Canada operate.”

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What’s different about Sonnet is that it’s fully digital direct. “We have no underwriters in that business, and that is starting to…get more traction with consumers,” says Saunders.

“The other thing we found there is that we’ve been able to build a…slightly disruptive model to target groups and affinities and [in] our view of personal insurance that’s really one of the most attractive components of the personal lines business.”

Sonnet has now seen four consecutive quarters “printing an underwriting profit,” which, while small, is still a profit and has a “sub-100 combined ratio,” says Saunders.

“I think Sonnet’s our next billion-dollar business,” in premium, he adds.

Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.