# Intact Financial (IFC.TO)



## Freedom45 (Jan 29, 2011)

What's everyone think of Intact Financial? Pretty solid track record, relatively healthy dividend at 2.5%ish with regular increases. Anyone buying and/or already own?

Looking at a long term position...


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## Synergy (Mar 18, 2013)

Anyone following Intact Financial? Largest P&C provider in Canada. Everyone needs insurance so the demand is pretty steady. They've had a rough year (storms, flooding, etc.) but they will be able to raise rates in 2014 to compensate for this. The ontario government has mandated lower auto insurance rates going forward, but according to what I've read this will be offset by lower industry costs. Valuation seems reasonable and they just raised their dividend. Any thoughts?


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## GoldStone (Mar 6, 2011)

David Merkel of Aleph Blog is an expert on the insurance industry. He spent most of his investment career in the industry. His #1 metric to value insurers is price to book. He doesn't like anything above 2x to book. Here's what he said, verbatim: _"It is very rare that an insurer should be valued near 2x book value." _

IFC trades at 2x per book, very close to 5 year high. This is expensive by Merkel's standard. You will have to dig deeper and figure out whether 2x per book is justified.


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## Synergy (Mar 18, 2013)

Thanks Goldstone. I do recall someone on BNN mentioning that IFC isn't inexpensive based on BV: "not inexpensive at 2X BV but they do have an 18% ROE, which is very good."

I'll have to do a little more reasearch. 

I also wonder if we are in for more extreme weather - meaning P&C may not be the best place to be over the next decade or so (climate change or whatever you want to call it).


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## GoldStone (Mar 6, 2011)

WebBroker quotes ROE of 11.2%. StockRover quotes 8.7%. So you have to question that 18% number.

Take a look at the 3rd graph:
http://alephblog.com/2012/02/25/thinking-about-the-insurance-industry/

Most P&C insurers in the US have a ROE of less than 12% and a P/B of less than 1.5.

Not sure how applicable this is to Canada. Is IFC protected from competition, as is often the case in Canada?


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## Synergy (Mar 18, 2013)

I noticed that in WebBroker. There's a few ways ROE can be calculated so I'd have to do the math to verify the numbers. Interesting article and graph representations. The insurance industry in Canada is highly regulated, but I'm not sure I'd say that they are protected from competition. I guess one could say that they have a competitive advantage.

Anyway, here's a good general article with regards to the insurance industry going forward in 2014



> Canadian Underwriter asked senior executives for some of the country's primary insurance companies the following question: What are the key trends affecting the Canadian property and casualty market and what sort of response is needed to meet the challenges or opportunities in 2014


http://www.canadianunderwriter.ca/news/real-puzzler/1002809067/?&er=NA


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## doctrine (Sep 30, 2011)

Good dividend growth over the last 5 years, but the yield has dropped as P/E and P/B have expanded. Good to be an owner perhaps if you had this 3+ years ago, but I wouldn't buy today. Better to be in at a big bank - they have similar business lines, more diversified, but more importantly much better value per share in terms of P/E and yield.


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## GoldStone (Mar 6, 2011)

TD Securities report wrote this:



> Justification of Target Price
> 
> Applying a target P/B of 1.9x to book value per share estimate at Q1/15, we arrive at a 12-month target price of C$72.00 (no change). The long-term relationship between P/B and ROE supports a 1.9x target P/B.
> 
> ...


I don't care about their target price but their methodology is instructive.

I'm taking a pass on this stock. It doesn't strike me as a good value.


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## Synergy (Mar 18, 2013)

Same here, the more I learn the more concerns I have. I'm underweight CDN financial so I think I'll just add some money to one of the banks and perhaps a lifeco. I wanted to look into P&C insurance as I thought it may help add some additional diversification to my portfolio.


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## Canadian (Sep 19, 2013)

A consideration with P&C insurance is that it is much more difficult to estimate the probability and quantify losses than in life insurance. Performance tends to fluctuate more in the P&C business due to the variability in claims ratio.


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## OurBigFatWallet (Jan 20, 2014)

Looks like a decent long term hold with an attractive dividend. My only concern would be the increased frequency of major natural disasters (ie floods) and their associated costs but as mentioned above if they can raise rates accordingly this wouldn't be a problem


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## Canadian (Sep 19, 2013)

The difficulty is estimating and quantifying the premiums required to cover those costs. Sure, there are models to predict frequencies and magnitudes of disasters but the nature of, well, nature is so unpredictable.


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## GoldStone (Mar 6, 2011)

David Merkel:



> When I was half my current age, an actuary in my life insurance firm said to me, "Property-Casualty insurance is not real insurance. When they lose money, they just raise rates, and they make the money back." Today, with greater knowledge, I know that he was half-right. Here is where he was wrong:
> 
> ...


*Investing In P&C Insurers*
http://seekingalpha.com/article/1048051-investing-in-p-and-c-insurers


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## Synergy (Mar 18, 2013)

"Intact profit doubles as impact of floods recedes"

http://www.thestar.com/business/eco...ofit_doubles_as_impact_of_floods_recedes.html

despite gov regulation and natural disasters these guys continue to rake in the money...


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## james4beach (Nov 15, 2012)

Another old, inactive thread on one of the better stocks in the country 

I bought some IFC. I liked their mix of revenue sources and they also seemed to be quite resilient through COVID.

Here's a chart of IFC versus the TSX index. It started really pulling ahead in 2019 and 2020


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## Tostig (Nov 18, 2020)

james4beach said:


> Another old, inactive thread on one of the better stocks in the country
> 
> I bought some IFC. I liked their mix of revenue sources and they also seemed to be quite resilient through COVID.
> 
> ...


Thanks for messing with my brain. I just did an analysis on IFC and compared it with SLF which is what I own and now wondering if I should switch holdings.

If you owned $10K worth of IFC since January 1, 2011, your annual growth would be 13.63% including DRIP (12.74% without DRIP). The dividends are really small, so you'll need minimum of 200 shares to get the DRIP.

For Sunlife, that's 11.11% with DRIP, 9.5% without DRIP.


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## james4beach (Nov 15, 2012)

Tostig said:


> Thanks for messing with my brain. I just did an analysis on IFC and compared it with SLF which is what I own and now wondering if I should switch holdings.


If you have an existing similar holding, I'm not sure it's worth switching between them. In my case I redeployed funds from some stocks I sold, because I no longer liked those.


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## cliffsecord (Jan 10, 2020)

Hahaha...it's like switching lines in the grocery store or Costco gas station. The other line looks faster until you switch...then it's slower!!

FWIW, SLF and IFC are almost the same weight (about 3% of total portfolio) in my portfolio, but I've put far less into IFC. They fulfil different purposes in my portfolio.


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## Synergy (Mar 18, 2013)

james4beach said:


> If you have an existing similar holding, I'm not sure it's worth switching between them. In my case I redeployed funds from some stocks I sold, because I no longer liked those.


Two different types of companies in the same sector. I own both Manulife and Intact. One thing to keep in mind is debt levels and interest rate sensitivity. I would have a hard time trying to figure out who is going to perform better over the next 5-10 yrs so I own one P&C insurer and one Lifeco.


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## jargey3000 (Jan 25, 2011)

FWIW , I'm with Johnson Insurance & got this email yesterday that they been bought by Intact:






















Hello,

As a loyal customer we wanted to share an important update about your Insurance.








Today, we are pleased to announce that *Johnson Inc. (“Johnson”)* was acquired by *Intact Financial Corporation*, the largest provider of property and casualty insurance in Canada and a leading provider of specialty insurance in North America.

*No action is required by you at this time*. Your insurance coverage, and payments will remain the same. Johnson will continue to provide you with the same great service you know and trust.

We value you as our customer and appreciate the opportunity to serve you. Always by your side, we’re confident that going forward, we will continue to be the insurance partner you can count on.















*John Thompson
Johnson Insurance*


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## Synergy (Mar 18, 2013)

jargey3000 said:


> FWIW , I'm with Johnson Insurance & got this email yesterday that they been bought by Intact:
> 
> 
> ​
> ...


Johnson was acquired through Intact's recent purchase of RSA. This was a big purchase and should provide lots of value going forward. I'm not quite sure what is going to happen to the RSA / WA brand. For now it appears that they are going to run them as separate brands. Not likely cost efficient in the long run? I think it's reasonable to see 8-12% growth plus dividends over the next 5-10 yrs from Intact. CAT events are a big unknown but that's why you have re-insurers - insurance for insurers!


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