Scotia Capital’s Phil Hardie cut his Intact Financial Corp. (IFC-T) target to $231, remaining above the $222.92 average, from $235 with a “sector outperform” rating.
“Core results were about 10 per cent ahead of expectations, but the stock is likely to see some near-term weaknesses as investors absorb the underlying puts and takes,” said Mr. Hardie. “On the surface, the earnings beat was largely driven by better-than-expected investment income and lower taxes, with underwriting profitability coming in line with expectations. However, a number of issues that, while fundamentally quite manageable, will likely create some unease with investors and are more negative for near-term sentiment. These include: (1) the two key investor touch-point areas, Personal Auto and UK&I, both underperformed Street expectations, (2) the company raised its annual CAT loss guidance, and (3) book value per share fell a bit short of expectations.
“On the more constructive side, the variance in auto was largely due to seasonality, and management noted that auto claims inflation trends were easing with price adjustments working their way through. The team remains confident it can deliver a sub-95 combined ratio for auto in 2023. Further, the pricing environment across almost all lines that Intact operates in remains constructive.”