Definity Financial Corporation
Q3/23 operating EPS was well ahead of our forecast and consensus
TSX: DFY | CAD 37.56 | Outperform | Price Target CAD 48.00
Sentiment: Positive
Our take: Definity Financial reported Q3/23 operating EPS of $0.15, well ahead of our $0.11 forecast and $0.03 consensus (consensus range of -$0.07 – $0.11) with the variance primarily due to higher-than-forecast underwriting income (see Exhibit 1 on page 2).
Key metrics from the Q3/23 results that we believe investors are focused on include:
• Gross written premiums of $1,040MM were in line with our $1,031MM forecast and $1,030MM consensus.
• Reported combined ratio of 102.5% was better than our 103.2% forecast and 104.7% consensus. By comparison, the combined ratio was 96.7% Y/Y in Q3/22 and 95.3% Q/Q in Q2/23.
• On a segmented basis, combined ratios were:
Personal Auto: At 98.9%, it was marginally higher than our 98.5% forecast and 98.7% consensus. By comparison, it was worse Y/Y (vs. 95.9% in Q3/22) and Q/Q (vs. 96.3% in Q2/23);
Personal Property: At 123.3%, it was better than our 126.4% forecast and much better than 128.9% consensus. By comparison, it was worse Y/Y (vs. 100.1% in Q3/22), and Q/Q (vs. 102.6% in Q2/23); and
Commercial Lines: At 86.6%, it was in line with our 86.9% forecast but better than 89.6% consensus. By comparison, it was better Y/Y (vs. 93.9% in Q3/22), but slightly worse Q/Q (vs. 84.3% in Q2/23).
• Book value per share (including AOCI) was $22.87, in line with our $22.93 forecast but lower than consensus at $23.04.
Conference call tomorrow morning (Friday) at 11am ET; dial in: 1-888-664-6392 or (416) 764-8659. A live audio webcast is also available on Definity’s investor relations website.