The Long and Short
Attractive P&C roll opportunity in IFCCN
This material is a Marketing Communication and does not constitute Independent Investment Research.
Intact Financial Corp (IFCCN: A3/A-) is a Canadian property and casualty company with limited debt available in the US corporate bond market. But investors should find bonds attractively priced relative to comparable and lower rated securities from US operators with lower share in their respective markets. IFCCN has a track record of relative operating stability during recent periods of elevated catastrophe losses. Furthermore, intermediate bonds with 2032 maturities present attractive roll opportunities for total return investors as they start to trade against 5-year US Treasury debt in a matter of months.
The company primarily issues in CAD-denominated debtwith only one outstanding bond in the US dollar market. Still, those bonds trade at a significant discount to similarly rated bonds of issuers whose operations are mostly based in the US, such as Allstate (ALL: A3/BBB+/BBB), which are also mostly still split rated entities (Exhibit 1). IFCCN remains the single widest issuer of P&C companies rated ‘A-‘ or higher in the intermediate part of the curve (Exhibit 2).
Exhibit 1: IFCCN compared to intermediate P&C peers (rated ‘BBB+’ and higher)
Source: Santander US Capital Markets LLC, Bloomberg/TRACE BVAL indications only
Exhibit 2: IFCCN compared to intermediate P&C peers (rated ‘A-‘ and higher)
Source: Santander US Capital Markets LLC, Bloomberg/TRACE BVAL indications only
IFCCN is Canada’s top property and casualty insurer with comparable market position in their home country to bellwether public operators in the US, such as Allstate and Progressive. Moody’s upgraded the credit to ‘A3’ from ‘Baa1’ in October of 2024 and affirmed those ratings earlier this week. The insurance financial strength ratings of its insurance operating companies are ‘Aa3/AA-‘.
IFCCN’s direct premiums written are 67% based in Canada, with 20% in the UK and Ireland and about 13% in the US. The company has expanded outside of Canada through strategic acquisitions over the past several years and continues to pursue a moderately active growth strategy through M&A. IFCCN’s premiums are more heavily weighted to personal lines with approximately 40% in personal auto, 21% in personal property, 27% in commercial property, 12% in specialty and 10% in commercial auto.
With exposure to catastrophe losses, IFCCN is subject to tail risk in its core markets but generally operates with a low overall combined ratio, particularly when compared to some of its larger US counterparts. In the most recent quarter, the combined ratio reported by the company was at an impressive 86.1%. That compares with a combined ratio north of 90% over recent quarters while cat losses were running significantly higher. Comparatively, ALL’s reported combined ratio for the most recent quarter was 91.1% and 94.2% for the first six months of the year. Combined ratio is a key metric for profitability in the industry, as it captures the all-in combination of the loss ratios and expense ratios of the company for a given period.
IFCCN has a very solid liquidity profile relative to its current liquidity needs and a well-staggered maturity schedule for its upcoming debt obligations. Cash and equivalents on the balance sheet as of second quarter 2025 stood at CAD1.55 billion. In addition, the company has a CAD2 billion revolving credit facility that is fully available through 2029, as well as access to a commercial paper program. After paying down a CAD300 million maturity this year, near-term maturities include just CAD250 million in 2026 and another CAD425 million in the following year.
The company’s recent acquisition activity has been primarily smaller, strategic bolt-on deals in recent years. The last sizable acquisition was for RSA Insurance Group LTD for roughly CAD12 billion, which closed in June of 2021 and vastly expanded IFCCN’s international presence. Leverage was only temporarily elevated from the deal. Total leverage has improved from nearly 37% in 2020 to its current level now below 30%, which helped prompt the recent upgrade by Moody’s.
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