Intact Financial Stock Q1 2022 Earnings Results: Investor Takeaways

Image source: Getty Images

Intact Financial (TSX: IFC) has been a well-managed company and a solid stock market performer over the long term. For example, its 10-year total returns beat the market. Below is the result of investing $10,000 10 years ago in dividend stocks and the TSX:XIU (used as an indicator of the Canadian stock market) for comparison.

IFC Total Performance Level Table

IFC and XIU Total Yield Level Data by YCharts

From 2011 to 2021, Intact Financial has grown its earnings per share at a compound annual growth rate (CAGR) of around 12%, while its price-earnings ratio has not changed significantly. As a result, the stock generated total returns at a healthy CAGR of around 13% over this period.

Intact Financial is a leader in the field of property and casualty insurance. It is the largest property and casualty insurer in Canada and is among the top four property and casualty insurers in Ireland. Moreover, it is a consolidator in the fragmented space and therefore also does business in the UK and the US. Canada still constitutes the heart of its activity, with 65% of its high-end activity.

The TSX The stock stands out for its outperformance with returns on equity above those of the industry and has a history of growth in its net operating income (NOI) and its dividend per share.

Intact Financial Stock Q1 2022 Results

Intact Financial announced its first quarter (Q1) results yesterday. The results are not bad in the current environment.

Here are some key highlights from the Q1 2022 Earnings Report vs. Q1 2021:

  • Direct operating premiums written increased 86% (in constant currency) to $4,678 million, primarily reflecting the impact of the RSA acquisition. It also experienced organic growth of 8% and growth of 15% in commercial insurance.
  • RNE per share growth of 13% to $2.70, helped by the acquisition of RSA.
  • Combined operating ratio of 91.7% – 2.4% higher than last year due to high catastrophic losses, but as it is below 100%, it still indicates profitable underwriting operations.
  • Book value per share increased 32% to $82.20.
  • Return on equity (ROE) of 14.9%, down 2.7%, but still a high ROE compared to its five-year ROE of around 12.3%.

Valuation and dividend

Yesterday, at market close, Intact Financial stock was trading at $173.40 per share and offering a decent yield of 2.3%. While I’m not sure how the market will react to the stock today, it’s safe to say that the stock is trading at about a 16% discount to the price target on 12 months of analyst consensus.

Intact Financial stock is a Canadian dividend aristocrat. It is a longtime dividend producer that launched a common stock dividend in 2005 and has increased it every year since. For reference, its 10-year dividend growth rate is 8.7%. Its distribution rate is estimated at 35% this year. Thus, it maintains a sustainable payout ratio that aligns with that of the insurance industry.

Take-out foolish investment

Intact Financial shares are a solid buy-and-hold stock for conservative investors. However, given the current market environment, investors may be able to buy at an even lower price during a sell-off. That said, given its reasonable valuation today, this is a good downside buying opportunity to start building a position for long-term investors.

Comments are closed.