Definity Financial Corp T.DFY

RBC

[retiredcf]

October 5, 2023

Definity Financial Corporation
Updated Q3/23 catastrophe loss estimate is slightly better than our forecast

TSX: DFY | CAD 38.05 | Outperform | Price Target CAD 49.00

Sentiment: Neutral

Summary: Definity announced an estimate of $122MM ($0.77/share after-tax) for Q3/23 catastrophe losses (net of reinsurance recoveries and including reinstatement premiums). The $122MM estimate for Q3/23 cat losses is marginally higher than DFY's previous Q3/23-to-date estimate of $120MM announced on September 5, 2023. Definity attributed the $122MM estimate as follows: (1) $8MM to Personal Auto; (2) $104MM to Personal Property; and (3) $10MM to Commercial. Definity also indicated that elevated cat loss activity in 2023 has resulted in their catastrophe aggregate reinsurance treaty being fully utilized for 2023.

DFY highlighted that there were 11 events that contributed to the cat losses in Q3, with B.C wildfires representing the largest contributor. The other events that contributed to cat losses included severe wind and rainstorms in Ontario, Quebec and Nova Scotia; tornados in Ontario and Quebec; and a number of hail events across Canada.

Our take: Definity's $122MM estimate for Q3/23 cat losses was slightly better than our $135MM forecast. We maintain our Outperform rating and $49 target. We believe DFY is generating positive fundamentals; has potential catalysts (e.g., M&A, CBCA approval); strong defensive attributes; and attractive valuation.