Despite earnings miss, analyst stays bullish on insurer intact financial

Intact Financial Corp. might have missed earnings expectations for two quarters in a row now, but Barclays Capital analyst John Aiken says investors should continue to be bullish on the stock.

The Toronto-based i nsurer said earnings per share amounted to $1.28 in the second quarter, a big miss compared to the average analyst estimate of $1.66.

But shareholders forgave Intact for the lousy quarter, pushing the stock up slightly on Wednesday. Aiken said Intact still offers good value to investors, despite the miss.

“While a poorer-than-anticipated performance in its investment returns was the main culprit in both cases, the underlying results remain quite positive, with an improvement in overall combined ratio and ongoing premium growth,” he said in a note to clients.

Aiken notes that Intact is currently one of the “few options for core earnings growth amongst the Canadian financials.” Intact has been gaining market share, growing distribution earnings and has a track record of acquisitions. Earlier this year, the company acquired Canadian Direct Insurance for $197 million.

The broader financial industry in Canada, meanwhile, faces headwinds from a weak Canadian economy, highly indebted consumers and a slumping domestic stock market.

“As questions about growth continue with other sectors, we believe that Intact’s proven ability to take market share and augment on industry growth will be well-rewarded for some time,” Aiken said.

He rates Intact as overweight and has a 12-month price target of $97 on the stock.