State Farm Insurance is getting out of Canada. The Bloomington-based insurance giant is selling its Canadian unit to Desjardins Group, Canada's largest credit union.
The purchase price is not being made public at this point. State Farm, Desjardins and its French partner Credit Mutuel, will invest $1.5 billion in the combined business. State Farm's investment in Desjardins stock will be $450 million Canadian.
State Farm is now the fourth largest auto insurer in Canada and seventh largest property and casualty operation, though it's business is largely concentrated in three provinces, Ontario, Alberta, and New Brunswick.
The new business to be run by Desjardins under the State Farm brand for some years would become the second largest Canadian property and casualty insurer with a larger geographical reach.
Desjardins approached State Farm. Rust also said the agreement opens the door to future cooperative ventures in Canada.
Desjardins tells its Canadian workers in a letter that the regulatory and political response to the great recession, and the Bloomington company's U.S.-centric approach limits State Farm's ability to respond and adapt to changing Canadian markets.
Rust calls the decision to sell "difficult" but says it will create opportunities for the new operation to become a market leader in Canada. The deal is expected to close in January of 2015.
At that point State Farm's 1,700 Canadian workers and 500 Agents would work for Desjardins.
Desjardins is also acquiring State Farm's Canadian mutual fund, loan, and living benefit operations. It says State Farm agents in Canada will retain their existing agency agreement terms for a few years.