Intact Financial Climbs to All-Time High on Buybacks, With an 11% Dividend Increase

Intact stock (TSX:IFC) rose after the company reported a difficult year, but managed to increase buybacks and its dividend.

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Intact Financial (TSX:IFC) shares hit all-time highs this week, as the insurance provider announced strong results, as well as a new buyback program for shareholders. Shares hit $227 after earnings were released, with analysts looking forward to even more positive momentum from the stock.

What happened

Intact stated that it earned $531 million for the fourth quarter of 2023. This was a 50% increase in earnings from $353 million during the same time last year. The insurer went on to report it achieved $1.3 billion in earnings for 2023 as a whole. However, it did see a decrease of 46% year over year, which the company noted was from natural disasters.

“The past year has been challenging for society, particularly in the face of numerous natural disasters. Through it all, our people worked relentlessly to ensure customers get back on track quickly. Despite shouldering elevated catastrophe losses as a result, the business demonstrated tremendous resilience.”

Charles Brindamour, Chief Executive Officer

Even so the company reported earnings per share of $2.78 for the fourth quarter, far higher than the $1.88 reported in the same period last year. What’s more, the company made several announcements that had investors quite excited.

The comeback

One such announcement was to increase the company’s quarterly dividend to $1.21 per share, an 11% increase. This was the 19th consecutive increase for the company. Furthermore, it announced a buyback program to repurchase up to 5.3 million common shares in the next year.

After a year of natural disasters, the company believes that it will see the stock return to normal performance. In the next year, it expects to see hard insurance market conditions, likely from inflation and losses from catastrophes.

However, the stock edged higher given that its finances remain strong. So strong, in fact, that the insurance stock put in place the buyback and dividend increase. So despite more catastrophe-related losses in the near term, the company was able to continue rewarding shareholders.

Positioned to outperform

Even as Intact stock reported that the last year was difficult, and the next one would be as well, you wouldn’t get that from earnings. Net operating income per share was up 45% to $4.22. This came down to strong underwriting, as well as investments. Further, its adjusted return on equity (ROE) climbed to 11.7%, up from 8.8% the year before.

“We achieved mid-teens operating ROE and maintained a strong balance sheet with $2.7 billion of total capital margin. As we look ahead to 2024, we are well positioned for outperformance, given strong top line momentum, continued underwriting discipline, and a refocused UK&I segment.”

Charles Brindamour, Chief Executive Officer

With a higher dividend, an all-time-high share price, and more growth on the way, Intact stock certainly looks like a strong buy. And one that remains responsible enough to seek out other income streams during literally catastrophic occasions.

So the question investors should ask themselves is this: if this company can perform so well it can increase dividends and buybacks when times are tough, what can it do when times are good? Investors may certainly want to add a stake to their portfolio to find out.

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.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Intact Financial. The Motley Fool has a disclosure policy.

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