TSX:FFH - Post Discussion
Post by
retiredcf on Aug 06, 2024 9:32am
RBC Raise Target
Their upside scenario target is also raised to US$1425.00. GLTA
August 2, 2024
Outperform
TSX: FFH.U; USD 1,160.76; TSX: FFH
Price Target USD 1,325.00 ↑ 1,275.00
Fairfax Financial Holdings Limited
Solid Q2 results across the board, remain active with buybacks
Our view: Overall we thought Q2 results were solid with low-to-mid 90s combined ratios across most key units. Reserve releases picked up vs. Q1, which is an encouraging data point in these times of social inflation/ increased severity for some carriers. Premium growth was up double digits due to the Gulf acquisition with underlying growth more mixed by segment. Share buybacks were notable again during the quarter while dividend & interest income continues to gain steam. We continue to rate the shares Outperform and find the current valuation attractive
Fairfax Financial reported 2Q/24 net earnings per share of $37.18, which compares with our $33.85 net estimate. On an operating basis, we calculate that the company earned $29.23 per share vs. our $30.06 forecast. We would consider Q2 results to be fairly in line with our estimates.
The Q2 P&C combined ratio amounted to 93.9%, which was flat vs. last year and one point better than our 94.9% forecast. Most units had combined ratios in the low-to-mid 90s for the quarter with Northbridge being the standout (88.5% in Q2). Favorable reserve development remained healthy at 2.2 points (RBC forecast was 1.2 points) which was up from 0.5 points of releases in the March quarter. Net written premiums in the P&C units grew +11.5% to $6.84 billion (RBC forecast was +12.7% estimate), which was close to the recent run rate. The acquisition of Gulf Insurance was a big contributor to top-line growth in the quarter (NWP would have grown around +3.0% ex this acquisition). Similar to Q1, premium growth varied by segment as we think the company is being a bit more selective in writing new business than a year ago given some increased competition (albeit pricing is still up). Fairfax remained active with buybacks and spent $678 million on buybacks in the quarter vs. $260 million in Q1. Interest and dividend income totalled $614 million in Q2, which was a step up from $590 mm during Q1 as yield benefits continue to flow through.
1) Rising interest & dividend income; 2) Notable share buybacks; and 3) Uptick in reserve releases.
1) Expense ratio was higher on a y/y basis; 2) Mixed organic NWP growth by segment; and 3) Higher combined ratio at Zenith.
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