Valued at a market cap of almost $50 billion, Intact Financial (TSX:IFC) is among the largest companies in Canada. Intact Financial is a leading property and casualty insurance provider operating in Canada, the United States, the United Kingdom, and internationally.
It offers personal auto and property insurance, commercial and specialty lines, pet insurance, and risk management solutions. Intact serves individuals and businesses through multiple distribution channels, including brokers, direct-to-consumer platforms, and managing general agents.
In the last decade, the TSX stock has returned 208% to shareholders. However, after adjusting for dividends, cumulative returns are closer to 300%. As past returns shouldn’t matter much to current investors, let’s see if you should own this TSX dividend stock right now.
How did the TSX stock perform in Q2?
Intact Financial delivered solid second-quarter (Q2) results with net operating income per share of $5.23, an 8% increase year over year, driving operating return on equity above 16% for the third consecutive quarter.
The Canadian insurer’s book value per share climbed 12% annually, supported by strong underwriting performance across all geographic segments.
Premium growth reached 4% in the quarter, marking a one-point improvement from the previous quarter. This growth was primarily driven by continued momentum in personal lines, where both auto and property segments benefited from rate increases and unit growth of 2%.
Personal auto premiums rose 11% while personal property grew 10%, with management expecting challenging market conditions to persist given elevated weather-related claims and industry profitability headwinds.
Intact’s overall combined ratio improved to 86.1%, down one point year over year despite higher catastrophe losses of $137 million from Canadian storms and commercial fires. This performance demonstrates the effectiveness of Intact’s ongoing investments in pricing models, risk selection, and portfolio management strategies.
Commercial lines growth remained subdued at 1% in Canada, reflecting sustained competitive pressure in large account markets. CEO Charles Brindamour noted that while conditions remain constructive overall with mid-single-digit rate and exposure growth, competition has intensified, particularly for larger commercial property risks. Despite this headwind, the company maintained a strong 74% combined ratio in commercial lines.
International operations showed mixed results. The UK&I segment experienced a 5% premium decline due to continued remediation in the Direct Line portfolio, though excluding this impact, premiums grew 3%.
The combined ratio of 92.9% reflected higher large losses but included strong favourable prior-year development. Management reaffirmed its target of reaching a 90% combined ratio by the end of 2026.
Distribution income contributed $165 million, with BrokerLink completing 13 acquisitions year to date and approaching $5 billion in premium volume. While on-site operations faced headwinds from benign catastrophe activity, management expects distribution income to return to 10% growth targets.
Intact remains optimistic in achieving 10% annual net operating income per share growth and outperforming industry return on equity by at least 500 basis points, supported by its strong balance sheet and $3.1 billion total capital margin.
Is Intact Financial stock undervalued?
Analysts tracking the TSX stock estimate adjusted earnings to grow from $14.67 per share in 2024 to $18.65 per share in 2027. In this period, the annual dividend per share is forecast to expand from $4.84 to $6.27.
Today, IFC stock is priced at a forward price-to-earnings multiple of 16.8 times. If the TSX dividend stock maintains a similar multiple, it will trade around $315 in early 2027, indicating an upside potential of 13% from current levels. If we adjust for dividends, total returns would be closer to 16%.
