Have a $225.00 target. GLTA

EQUITY RESEARCH
July 28, 2022 Flash Research
INTACT FINANCIAL CORP.

Q2 First Look: Another Big EPS Beat

Our Take: Positive. EPS was higher than consensus, personal auto was
better than expected, and the outlook for strong premium growth has not
changed.


Overview Of Results: Operating EPS of $3.14 was significantly better than
our estimate of $2.62 and consensus of $2.71, with strong margins across all
business lines. Gross premiums written came in at $5,807MM, up 36% Y/Y,
and above our forecast of $5,720MM. Catastrophe losses of $248MM were
consistent with revised consensus of $241MM. BVPS ended at $80.86, up
4% Y/Y and down 2% Q/Q. This compares to consensus of $80.07.


Sources Of Variance: The earnings beat relative to our estimate mostly
came from higher underwriting income (+$0.52/share), with most segments
making a positive contribution (Personal Property was the only exception).
Smaller positive variances came from distribution income (+$0.05/share) and
investment income (+0.02/share). Negative variances include higher finance
expense (-$0.02/share) and other expenses (-$0.08/share).


Canada Personal Auto Results Better Than Expected. The combined
ratio (CR) was 89.8% versus 82.4% in Q2 last year and below consensus of
91.4%. Prior year development was favourable (-4.6%), helping to offset the
9.1 pts increase in the underlying loss ratio. Intact expects premium growth
to progress towards the mid-single-digit range (i.e., rate increases expected).
Margin pressure, similar to U.S. auto insurers is likely to be avoided.


U.K. & International Also Better Than Forecast. UK&I reported a CR of
91.3%, better than consensus of 94.2%. Results were helped by 4 pts of
favourable reserve development, but still a solid result.


U.S. Segment Prints Strong Results. CR was 91.1%, up from 90.3% in Q2-
21 and relative to consensus of 90.8%. Organic growth was 14%.

RSA Accretion Ahead Of Target. EPS accretion over the first 12 months is
15%, above management’s expectation. Thus far, the firm has achieved
$175MM in run-rate synergies and is on track to realize >$250MM pre-tax
annual run-rate synergies in 2024.


Increasing Guidance On Distribution Income. The company reported a
distribution income of $141MM, up 19% Y/Y from $118MM last year and
above our estimate of $130MM and the consensus estimate of $120MM.
Full-year guidance was revised from >$400MM to $425MM.


Investment Income Trending Higher. The company reported dividend and
interest income of $211MM, up from $154MM a year ago. Turnover of the
bond portfolio has been accelerated to capture higher yields.


Conference Call: Friday, July 29 at 10:00 a.m. ET (1-888-664-6392).