Business Focus

Intact Financial Corp (IFC)

Intact Financial Corp (IFC) is Canada’s largest property and casualty (P&C) insurer and a significant player in the global insurance market. While its primarily focused on Canada, it has expanded internationally, through its 2021 acquisition of RSA Groups Canadian, UK and international operations and its specialty insurance throughout North America. It currently holds the largest market share in Canada’s P&C insurance industry. 

Chubb (CB)

Chubb (CB) is a leading global provider of insurance and reinsurance products, known for its extensive range of coverages and strong reputation in the insurance industry. It offers P&C, specialty, accident and health, and life insurance products. It is a global insurer, with operations in more than 50 countries, and a strong presence in the US, Asia, Europe, and Latin America. 

Valuation and Performance

Looking at valuation, we can see that IFC has historically traded and also currently trades at a premium valuation to CB. IFC has a 16X forward earnings multiple while CB trades at 13X. We feel that IFC’s premium valuation is due to its industry leading position within the Canadian insurance market. It has a high market share and strong pricing power. Looking at performance between the two names over the past five years (middle panel), we see that IFC has slightly outperformed CB, but they have traded very closely over the years. Both names have seen their dividend yields compress over the years, from above 2% in 2020, to just under 2% today, largely as a result of their strong share price performances. 

Financial Metrics and Forward Estimates

The table below compares the financial metrics and stats between IFC and CB. We can see that CB is a much larger company than IFC, almost 4X the size of IFC. Both are expecting similar forward earnings growth rates, with strong ROEs, although CB has a higher gross and net income margin profile. We think both of these names have the ability to continue growing their businesses and share prices at attractive levels, especially given the stability of the insurance industry. 

Investment Outlook

Both CB and IFC have shown strong price performance over the years, and while CB is a much larger company than IFC, Intact’s market leading position within the Canadian insurance industry supports its premium valuation relative to CB. We like the margin profile of CB relative to IFC, but we feel this leaves room for margin expansion for IFC as it can grow into international segments or even different markets in the future (specialty lines, life insurance, etc.). CB is a much larger and more globally established names, and so for investors looking for safety and some conservatism, we might prefer CB, but for investors seeking a bit more growth potential and an industry-leader, we like the prospects of IFC.

Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.

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