Intact Financial Corp (TSX:IFC) is Canada’s largest property and casualty insurer, with a market share of 17% and some $8 billion annual premiums written.
The company has achieved results that have lapped the competition on a consistent basis. Over the last decade, it has grown premiums 3.9% faster than the industry average, had a combined ratio 3.1% better than average, and delivered return on equity of 5.8% better than competitors.
The company also consistently posts a better combined ratio than competitors. In the first half of 2016, it had a combined ratio of 97.4%, versus 104.8% for its peers. Remember, the first half of 2016 was marred by heavy losses from the Fort McMurray wildfires. Normal combined ratios are closer to 95%.
Intact has a simple corporate strategy. It wants to consolidate weaker insurers into its mix, using its underwriting and operational expertise to increase profitability. It made acquisitions in 2014 and 2015, and opened Brokerlink, an insurance brokerage which gives it another distribution channel.
Canada’s property and casualty insurance market is incredibly fragmented. Intact has 17% of the market. Its next biggest competitor has 10%. The top 20 players have 84% of the market. It’s obvious consolidation will hit the industry hard in the next decade.
Intact has made dividend growth a priority. It started paying a dividend in 2009, during the depths of the financial crisis. It has increased the payout annually since, upping it from $0.32 per share quarterly to $0.58. Shares currently yield 2.5%.
