INTACT FINANCIAL $89.80 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341-1464; www.intactfc.com; Shares outstanding: 131.5 million; Market cap: $11.8 billion; Dividend yield: 2.4%) is Canada’s largest provider of property and casualty insurance. Its brands include Intact Insurance, Canada BrokerLink and belairdirect.
In the three months ended March 31, 2015, Intact’s revenue rose 5.3%, to $1.57 billion from $1.50 billion a year earlier. The company earned $186 million, or $1.37 a share, up 44.2% from $129 million, or $0.94.
The latest results reflect a $64-million reduction in catastrophic losses, mostly related to weather. That helped Intact report an improved combined ratio, or claims paid out divided by premiums taken in (the lower, the better) of 93.4%, down from 97.1%.
Earlier this year, Intact expanded in Western Canada by purchasing Canadian Direct Insurance for $197 million. Canadian Direct offers home, auto and travel insurance, mainly in Alberta and B.C. The acquisition also lets Intact expand its higher-profit-margin direct-to-consumer distribution channel. Direct distribution lets consumers use extended call centre hours to speak with—and purchase policies from—licensed insurance representatives.
Canadian Direct looks like a great fit with Intact, which has successfully integrated a number of acquisitions in the last few years, including AXA Canada, Jevco and Metro General. Intact still has a lot of excess cash and will keep looking for more acquisitions.
The stock trades at 13.4 times Intact’s forecast 2015 earnings of $6.72 a share. It yields 2.4%.
Intact Financial is a buy.
