INTACT FINANCIAL $88.33 (Toronto symbol IFC; TSINetwork Rating: Extra Risk) (416-341-1464; www.intactfc.com; Shares outstanding: 131.3 million; Market cap: $11.6 billion; Dividend yield: 2.6%) is Canada’s largest provider of property and casualty insurance.
Intact dropped to as low as $85 from about $92 after the wildfires at Fort McMurray, Alberta. Investors were worried about the company’s exposure to residential damage claims.
However, the impact on the insurer is very manageable. It now expects to take a charge of about $1.00 to $2.00 per share ($130 million to $160 million). To put that in perspective, it made $5.20 a share ($706 million) in 2015.
Like all large insurers, Intact purchases reinsurance with other firms to protect against outsized losses. Of the first $200 million in damage claims for a single event, it pays $140 million. Anything above that $200 million is 92% covered by reinsurance.
As well, the company sets aside considerable capital reserves. It will be able to carry on with its normal activities and growth strategies, but may trim its share buybacks for 2016.
Intact Financial remains a buy.
