INTACT FINANCIAL CORP. $61.99 - Toronto symbol IFC

INTACT FINANCIAL CORP. $61.99 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341- 1464; www.intactfc.com; Shares outstanding: 132.0 million; Market cap: $8.2 billion; Dividend yield: 2.8%) is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power.

In the three months ended June 30, 2013, Intact’s revenue rose 10.4%, to $2.18 billion from $1.98 billion a year earlier. The company earned $0.89 a share, down sharply from $1.35. However, the latest results include a one-time loss of $0.79 a share related to storms and flooding in Alberta.

Earlier this year, Ontario’s minority Liberal government agreed to meet an NDP demand for a 15% cut to auto insurance premiums. This was in exchange for NDP support on the June 2013 provincial budget, which avoided triggering an election.

The NDP pointed to higher premiums charged by insurers in 2011, even after the Ontario government introduced reforms that lowered benefits for drivers and cut payouts on auto-accident claims.

Intact has enjoyed improved profits from its Ontario auto insurance business since the reforms were put in place, so it has some room to accommodate a rate reduction. As well, the terms of the reduction are still under negotiation.

However, personal auto insurance is a significant line of business for Intact, accounting for 45% of the company’s annual premiums. Ontario drivers supply 40% of those premiums.

Intact Financial is still a hold.

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