INTACT FINANCIAL CORP. $74.47 (Toronto symbol IFC; TSINetwork Rating: Speculative) (416-341-1464; www.intactfc.com; Shares outstanding: 131.5 million; Market cap: $9.7 billion; Dividend yield: 2.6%) 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, 2014, Intact’s revenue was virtually unchanged from a year earlier, at $2.17 billion. The company earned $210 million, or $1.60 a share, up sharply from $98 million, or $0.73.
However, the year-earlier results include a pre-tax loss of $143 million, mostly related to storms and flooding in southern Alberta. Similar losses in the 2014 quarter were just $33 million.
The lower catastrophe losses let Intact report an improved combined ratio, or claims paid out divided by premiums taken in (the lower, the better), of 92.9% in the latest quarter, down from 97.5%.
Personal auto insurance premiums account for 45% of Intact’s total, and Ontario drivers supply 40% of those premiums. However, the longer-term outlook for the Ontario car insurance market is uncertain, partly because the province’s Liberal government plans to cut auto insurance rates by 8% in the coming year and 15% in two years.
Still, Intact has enjoyed improved profits from its Ontario auto insurance business, so it has some room to accommodate a reduction. As well, the Ontario government aims to offset lower car insurance premiums with measures to cut abuse and fraud by drivers.
Intact Financial is still a hold.
