TSX:IFC - Post Discussion
Post by
retiredcf on Feb 09, 2022 8:38am
RBC Upgrade
Their upside scenario target is now $241.00. GLTA
Outperform
TSX: IFC; CAD 178.00
Price Target CAD 216.00 ↑ 200.00
Intact Financial Corporation
No, no, no. This is a Rouchefoucauld. Who wants to go to Gstaad?
Our view: Q4/21 results re-affirmed why IFC is our #1 best idea for 2022 reflecting positive fundamentals, potential catalysts (e.g., RSA divestiture(s)/asset swap), strong defensive attributes and an attractive valuation. Much like the famous Rouchefoucauld watch worn by Dan Aykroyd in Trading Places, IFC is delivering excellent performance...as for Gstaad? Well, it was the coolest sounding city that the watch tells time for and we doubt we’ll ever get another chance to use Gstaad in a report title. Back to Intact, we increase our target to $216 (was $200) and maintain our Outperform rating.
Key points:
Q4/21 operating EPS of $3.78 was well above our forecast of $2.37 and consensus of $2.58 (consensus range of $2.10 to $3.10) with the variance primarily due to better-than-forecast underwriting income (UK & International, Personal Property, Personal Auto and Commercial Lines).
Quarterly dividend increased +10% to $4.00/share annualized (was $3.64), which was right in line with our forecast. This follows the dividend increase announced last quarter (+10% to $3.64/share from $3.32/share). Intact also initiated an NCIB allowing it to repurchase up to 3% of its shares outstanding (5.3MM shares).
Q4/21 combined ratio was 87.8%, which was much better than our 93.2% forecast and consensus of 91.9% (range of 89.2% to 93.2%). On a segmented basis, combined ratios were: (1) Personal Auto (Canada) at 87.8% (vs. our forecast of 90.3% and consensus of 91.1%); (2) Personal Property (Canada) at 79.5% (vs. our forecast of 87.5% and consensus of 85.4%); (3) Commercial Lines (Canada) at 84.3% (vs. our forecast of 94.8% and consensus of 92.0%); (4) U.S. Commercial P&C at 92.5% (vs. our forecast of 92.8% and consensus of 92.0%); and (5) UK&I P&C at 93.0% (vs. our forecast of 96.0% and consensus of 95.6%).
Other key takeaways: (1) Intact said RSA contributed close to 16% accretion to Q4/21 operating EPS and 12% accretion for the 7 months since the deal closed. $85MM of the $250MM pre-tax run-rate synergies have been realized. In Canada, over 40% of Personal Lines broker policies and almost 40% of Commercial Lines small business and fleet policies have migrated onto Intact's systems; (2) annual catastrophe guidance was increased slightly to $600MM/year (was $570MM) reflecting changes to IFC’s reinsurance programs; (3) Global Specialty Lines had pro-forma almost $5B in DPW and an 89.2% combined ratio; and (4) IFC is guiding to 2022 distribution income of >$400MM (vs. $362MM in 2021).
Increasing 12-month price target to $216/share (was $200) and maintaining Outperform rating. Our higher price target reflects higher- than-forecast BVPS, higher financial forecasts and a slightly higher valuation multiple due to further evidence of stronger financial performance.
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