Intact Financial Corporation is the largest provider of property and casualty insurance in Canada and a leading provider of specialty insurance in North America.
About 85% of its revenues is derived from Canada and remaining 15% is from the US. In terms of business segments, personal and auto accounts for nearly 40% of DPW (direct premium written), followed by personal property (20%), commercial lines Canada (25%) and commercial lines USA (15%).
The company operates through Intact insurance, BrokerLink, OneBeacon and Belairdirect banners. Its large coast-to-coast presence and cross-border services help serve customers better. The company offers a comprehensive range of insurance products and caters to the financial needs of a wide range of clients ranging from personal, business, public sector to institutional clients.
Intact Financial has captured 17% share in the P&C insurance market in Canada. About one in every five Canadians is a customer of Intact Financial products and services.Investment Data
- Opportunity Score: 59
- Ticker: TSE:IFC
- Sector: Financial Services
- Industry: Insurance - Property & Casualty
- Market Cap: 20.18B
- P/E: 26.65
- Dividend Yield: 2.35%
- Payout Ratio (Earnings): 62.76%
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 7/10
- Dividend Income Fit: 6/10
Revenue Growth & Market Exposure
The company earns close to $10 billion in annual premiums. A multi-channel distribution strategy has helped the company reach different markets and address different customer preferences.
Intact Financial operates through a large network of offices and brokers such as BrokerLink and OneBeacon Insurance in Canada and the US, respectively. Belairdirect does not involve brokers and helps Intact to reach its clients directly. Belairdirect is one of the most recognized direct-to-consumer insurance brands in the market.
Intact Financial has a century old history of operations which has helped the company develop a strong understanding of its clients’ needs. A disciplined approach, large scale, and in-house claims expertise supports in retaining and attracting clients. Intact is a customer centric business; its wide range of products and customized solutions are the keys to its success. Investments in digital transformation will make the customer experience even more simpler, faster and convenient.
The company has been growing through acquisitions and has a successful track record of 16 accretive acquisitions since 1988. The acquisition of OneBeacon in 2017 has strengthened Intact Financial as a leading speciality insurer in North America with a strong focus on small and midsize businesses. The acquisition is estimated to be accretive to earnings growth by 2019. Strategic acquisitions like OneBeacon will consolidate Intact’s footprint in the fragmented specialty lines market.
Intact is expecting a mid-single- and a low-to-mid single-digit rate growth in its Canadian and US businesses over the next 12 months, respectively.
Intact Financial is a Canadian Dividend Aristocrat and Dividend Achiever, growing its dividend by 9% CAGR over the last decade.The last dividend hike of over 9%, marked the 13th consecutive annual increase since the IPO. The company sports a decent dividend yield of 2.8%.
Intact’s sound record of capital generation and disciplined deployment has supported shareholder returns while meeting its growth objectives.Though Intact has a high payout ratio of 59%, the company has been growing its earnings by more than 10% per year over time.
The company is targeting net operating income per share growth of 10% per year over time and has recorded 11.5% CAGR in the last 8 years. It also aims to generate $3 billion in annual DPW and has grown its DPW at ~8% CAGR compared to industry average of 3.8%, over the last decade.
With decades of experience in the insurance business, Intact has developed strong advantages that are difficult to replicate. It has helped the company retain its leading position as well as make the most of organic growth opportunities at hand. The winning combination of organic growth and accretive acquisitions has led to a significant outperformance versus the industry. Intact is targeting market share growth, through customer driven transformation, expanding distribution and massive digital & AI deployments.
The P&C insurance industry is highly competitive. As Canada’s largest home, auto and business insurer, Intact has a 17% market share in a huge and fragmented industry. The next four close competitors occupy 30% of the market share in all, while the top 20 constitute 84% of the market. Intact Financial competes with a large number of domestic and foreign insurers, as well as with several Canadian banks that sell insurance products. Private players command 16% of the market while foreign players constitute 29% of the total market.
Intact Financial is in a unique position to grow by leveraging its deep distribution partnerships, expanding its geographic footprint and investing in new specialty markets. Its leading market share position enables it to attract new customers, as well as expand geographies. A dominant market share in the insurance industry, ownership of popular brands and well thought out investments should support the rate of dividend growth in the future.
DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.