TSX:FFH - Post Discussion
Post by
retiredcf on Nov 02, 2024 8:20am
RBC Raises Target
A real pain to cut and paste. Their upside scenario target is also raised to US$1650.00 GLTA
November 1, 2024
Outperform
OTC BB: FRFHF; USD 1,245.52; TSX: FFH
Price Target USD 1,500.00 ↑ 1,425.00
Fairfax Financial Holdings Limited
Delivered good Q3 underwriting margins despite an active cat quarter
Our view: Overall we viewed Q3 as a strong underwriting quarter as the company delivered a core accident year combined ratio that was sub-90%. Cat losses were heavy as expected but manageable and in line with our estimate. Reserve releases were solid with no notable weakness in any particular areas. Premium growth was in line with our forecast as Fairfax continues to find pockets of growth in areas like specialty and international. Investment income and dividends were up y/y but lagged our forecast. We remain constructive on FFH shares and we continue to find the current valuation appealing.
Key points:
Estimates & price target: We are revising our 2024 EPS estimate to $144.26 (from $133.40), mainly to account for Q3 reported results. We are adjusting our 2025 EPS estimate to $152.00 (from $154.00) to reflect modest tweaks in net investment income and underwriting assumptions. We are introducing a 2026 EPS estimate of $160.00. We are bumping up our price target to $1,500 (from $1,425), which remains based on 1.2x our ending 2025 book value per share estimate. Our ending '25 book value estimate is now higher than previously due to positive FI marks.
Fairfax Financial reported 3Q/24 net earnings per share of $42.62, which compares with our $29.14 net estimate. The Q3 combined ratio tracked better than our estimate (despite elevated cat losses) while NII was modestly short of our forecast. Q3 included large unrealized gains and also large financial expenses from discounting (due to lower interest rates).
The Q3 P&C combined ratio amounted to 93.9% vs. 98.3% last year and better than our 99.9% forecast. Most of Fairfax’s sub- units produced combined ratios in the low-to-mid 90s (Allied World was the standout with an 88.5% combined ratio in the quarter). Cat losses were elevated in Q3 at $434.5 million (6.8 combined ratio points) with Canadian loss events totaling $132.1 million and Hurricane Helene losses at $105.1 million. Management didn’t disclose a Hurricane Milton loss estimate (we are assuming around $200 mm) but noted that it should come within its Q4 cat margin. Favorable reserve development was $130.5 million (or 2.0 loss ratio points) vs. our 1.2 point forecast. Net written premiums in the P&C units grew +10.0% to $6.42 billion (RBC estimate was +10.2%), driven by growth from the Gulf Insurance acquisition. In all, 2 of its 3 segments showed NWP growth in the quarter.
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