Definity Financial Corp T.DFY

RBC Raise Target

[retiredcf]

Their upside scenario target is $62.00. GLTA

May 10, 2024

Definity Financial Corporation 
Q1/24 EPS was largely in line with our forecast

Outperform

TSX: DFY; CAD 46.54

Price Target CAD 51.00 ↑ 50.00

Our View: Q1/24 Operating EPS was in line with our forecast with gross written premiums (GWP) ahead of our forecast. We think DFY has done a good job executing on its growth strategy (e.g., double-digit GWP growth, mid-90s combined ratio and building its broker distribution business, providing earnings diversification). Increasing target to $51 (was $50) and maintaining our Outperform rating.

Key points:

Q1/24 operating EPS of $0.65 was a penny below our $0.66 forecast and $0.71 consensus (range: $0.64 – $0.86) with the variance to our forecast due to lower-than-expected distribution income ($10MM vs. our $18MM forecast), driven by lower-than-expected distribution revenues. Consolidated GWP of $956MM (+13% Y/Y) was ahead of our $932MM forecast and $925MM consensus.

Segmented combined ratios: (1) Personal Auto – 97.1%, better than our 98.0% forecast and consensus at 98.2%; (2) Personal Property – 91.0%, better than our 93.2% forecast and largely in line with consensus at 90.7%; and (3) Commercial – 92.1%, worse than our 90.8% forecast and 90.3% consensus.

Distribution income of $10MM was below our $18MM forecast, driven by lower-than-forecast distribution revenues.

Increasing target to $51/share (was $50) and maintaining our Outperform rating. The higher target reflects slightly higher BVPS forecasts.

Conference call today at 11am ET; dial in: 1-888-664-6392 or [phone]. A live audio webcast is also available on Definity’s investor relations website.