On Thursday, BMO Capital Markets adjusted its outlook on Intact Financial Corp (IFC:CN) (OTC: IFCZF), increasing the price target to Cdn$250.00 from the previous Cdn$240.00, while reiterating an Outperform rating on the stock. The adjustment follows Intact Financial's strong performance in the first quarter of 2024, which surpassed expectations.
The firm's analyst pointed to a 1% increase in operating EPS estimates after Intact Financial reported a solid first-quarter beat. The new price target is based on a consistent 2.65x price-to-book value (P/BV) multiple, now applied to the anticipated book value per share (BVPS) for the first quarter of 2025, rather than the fourth quarter of 2024 estimate.
Intact Financial's recent financial results were noted for their clarity, with one-time factors such as a lower tax rate and one-time incentive compensation adjustments having a neutral impact overall. The company's combined ratio, an important measure of profitability in the insurance industry, was commendable at 91.2%, which was slightly better than both the analyst's and the consensus' expectations of 91.3% and 92.3%, respectively.
The report highlighted that the lower than expected catastrophic (CAT) losses, which were benign in Canada, and better-than-anticipated favorable reserve development, underscored Intact Financial's conservative reserving approach. Furthermore, the loss ratio excluding CAT losses, which the analyst values as a significant metric, was in line with expectations at 54.8%.
In addition to these factors, Intact Financial's top-line growth was reported to be better than expected, while investment income met projections. This comprehensive financial performance has led to a more optimistic valuation by BMO Capital Markets.
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