Ahead of fourth-quarter earnings season for Canadian property and casualty (P&C) insurance companies, Desjardins Securities analyst Doug Young sees both Intact Financial Corp. and Definity Financial Corp. “well-positioned to grow organically and inorganically, and both have been acquisitive as of late.”
“We expect benign weather in Canada to benefit results for both companies; however, severe windstorms in the UK put some pressure on IFC’s results,” he said.
“2023 has been a tough comp year vs 2022, and especially 2021, on an underwriting basis as economies reopened, inflationary pressures persisted and the frequency of CAT events increased. Higher investment income (due to higher interest rates) was a nice offset, but will this continue in 2024? We are expecting a material increase in operating EPS for both companies in 2024 (mostly because we expect the elevated CAT losses in 2023 to not repeat at the same levels) and will be watching both managements’ outlook for 2024/25 across their different business lines.”
Mr. Young said he’ll be focused on updated guidance on CAT losses and investment income for 2024, adding: “Otherwise, we expect P&C insurance market conditions to remain favourable for the most part and for inflation to moderate sequentially, specifically in personal auto.”
Following modest changes to his forecast for the quarter, the analyst maintained a “buy” rating and $230 target for Intact and a “hold” recommendation and $40 target for Definity. The averages on the Street are $224.73 and $43.55, respectively.