Intact Financial Stock Q1 2022 Earnings Results: Investor Takeaways

Intact Financial (TSX:IFC) stock is a solid pick for conservative investors. It’s reasonably valued today to start a position.

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Intact Financial (TSX:IFC) has been a well-managed business and solid stock performer for the long haul. For example, its 10-year total returns have beat the market. Shown below is the result of investing $10,000 10 years ago in the dividend stock and the TSX:XIU (used as a Canadian stock market proxy) as a comparison.

IFC Total Return Level Chart

IFC and XIU Total Return Level data by YCharts

From 2011 to 2021, Intact Financial increased its earnings per share at a compound annual growth rate (CAGR) of about 12%, while its price-to-earnings multiple hasn’t changed much. Therefore, the stock delivered total returns at a CAGR of about 13% healthily in this period.

Intact Financial is a leader in the property and casualty (P&C) insurance space. It is the largest P&C insurer in Canada and is among the top four P&C insurer in Ireland. Additionally, it is a consolidator in the fragmented space and therefore also has operations in the U.K. and the United States. Canada still makes up the core of its business though, with 65% of its premium business.

The TSX stock stands out as an outperformer with industry-beating returns on equity and has a track record of growing its net operating income (NOI) and dividend per share.

Intact Financial stock Q1 2022 results

Intact Financial reported its first-quarter (Q1) earnings results yesterday. The results are not bad in today’s environment.

Here are some key highlights from the Q1 2022 earnings report versus Q1 2021:

  • Operating direct premiums written increased 86% (in constant currency terms) to $4,678 million, which mainly reflected the impact from the RSA acquisition. It also experienced organic growth of 8% and 15% growth in commercial lines.
  • NOI-per-share growth of 13% to $2.70, helped by the RSA acquisition.
  • Operating combined ratio of 91.7% — 2.4% higher than last year due to elevated catastrophe losses, but as it’s under 100%, it still indicates profitable underwriting operations.
  • Book value per share growth of 32% to $82.20.
  • Return on equity (ROE) of 14.9%, down 2.7%, but it’s still a high ROE versus its five-year ROE of roughly 12.3%.

Valuation and dividend

Yesterday, at market close, Intact Financial stock traded at $173.40 per share and offered a decent yield of 2.3%. Although I’m not sure how the market will react to the stock today, it’s safe to say that the stock trades at a discount of about 16% from the analyst consensus 12-month price target.

Intact Financial stock is a Canadian Dividend Aristocrat. It is a long-time dividend grower that has started a common stock dividend in 2005 and have since increased it every year. For reference, its 10-year dividend-growth rate is 8.7%. Its payout ratio is estimated to be 35% this year. So, it maintains a sustainable payout ratio that aligns with that of the insurance industry.

Foolish investor takeaway

Intact Financial stock is a solid stock to buy and hold for conservative investors. However, given the market environment today, investors may be able to buy at an even lower price on a market selloff. That said, given its reasonable valuation today, it’s a good buy-the-dip opportunity to start building a position for long-term investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends INTACT FINANCIAL CORPORATION. Fool contributor Kay Ng has no position in any of the stocks mentioned.

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