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Definity Financial Corp. (TSE:DFY)
TSX:DFY

Definity Financial Corp. (DFY) AI Stock Analysis

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Definity Financial Corp.

(TSX:DFY)

Rating:80Outperform
Price Target:
C$87.00
▲(15.16%Upside)
Definity Financial Corp. has a strong overall stock score driven by positive technical indicators and strategic corporate events. The solid financial performance supports this rating, despite some pressure on net margins and valuation concerns.
Positive Factors
Combined Ratio Improvement
Combined ratio better, at 90.3% versus our/consensus' 91.2%/91.6%, on better results in personal property.
Growth Potential
Definity Financial Corp. is positioned for outsized top-line growth with a scalable platform that should help drive continued improvements in underwriting profitability.
Stock Target Price
The target price for Definity Financial Corp. has been increased by $1 to $64, reflecting confidence in its future performance.
Negative Factors
CAT Loss Impact
The CAT losses reported are 79% higher than the previous estimate, indicating a significant impact on the company's financials.
Top-line Growth
Top-line growth was modestly weaker than estimated, impacting personal auto and distribution segments.
Weather-related Claims
The underlying loss ratio was slightly higher than expected, largely due to higher weather-related claims.

Definity Financial Corp. (DFY) vs. iShares MSCI Canada ETF (EWC)

Definity Financial Corp. Business Overview & Revenue Model

Company DescriptionDefinity Financial Corporation, together with its subsidiaries, provides property and casualty insurance products in Canada. It offers personal insurance products, including auto, property, general and umbrella liability, and pet insurance products to individuals under the Economical, Sonnet, Family, Petsecure, and Peppermint brands; and commercial insurance products comprising fleet, commercial auto, property, liability, and specialty insurance products to businesses under the Economical brand name. The company distributes its products on a primarily intermediated basis, and through brokers, as well as directly to customers. Definity Financial Corporation was formerly known as Economical Holdings Corporation and changed its name to Definity Financial Corporation in August 2021. Definity Financial Corporation was founded in 1871 and is headquartered in Waterloo, Canada.
How the Company Makes MoneyDefinity Financial Corp. generates revenue primarily through the underwriting and sale of insurance policies. The company collects premiums from policyholders, which forms the core of its income. Investment income is another significant revenue stream, as the company invests the premiums it collects into various financial instruments to earn returns. Additionally, Definity Financial Corp. may partner with brokers and agents to expand its distribution network, thereby increasing its market reach and policy sales. Factors such as effective risk assessment, claims management, and operational efficiency contribute significantly to the company's profitability.

Definity Financial Corp. Earnings Call Summary

Earnings Call Date:May 08, 2025
(Q3-2024)
|
% Change Since: 9.16%|
Next Earnings Date:Jul 31, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a resilient performance with strong growth in premiums and investment income, despite significant challenges from natural catastrophes impacting underwriting results. The company showed robust book value growth and maintained a positive outlook on achieving future financial targets.
Q3-2024 Updates
Positive Updates
Solid Underlying Performance Despite Catastrophes
Operating net income of $14.6 million or $0.13 per share was achieved despite a 17-point impact on the combined ratio from natural disasters.
Strong Growth in Gross Written Premiums
Underlying gross written premiums increased by 12.2%, with reported growth at 9.9% despite the exit of Sonnet Alberta personal auto business.
Robust Book Value Growth
Book value per share grew by 17.9% from one year ago, supported by an operating ROE of 10.7%.
Personal Auto Growth
Adjusted growth in Personal Auto gross written premiums was 15.8% in Q3 2024.
Commercial Lines Growth
Commercial lines saw gross written premiums up 12.6% year-over-year, supported by strategic segment growth and strong market conditions.
Investment Income Increase
Net investment income increased by $2.7 million from Q3 2023 due to higher interest income.
Distribution Income on Target
Distribution income of $15.8 million was in line with expectations, supporting the full-year target of $75 million.
Negative Updates
Catastrophe Impact on Underwriting
Natural disasters led to a 17-point impact on the combined ratio, with $7 billion in industry catastrophe losses.
Challenges in Personal Property
Catastrophe losses accounted for more than 46 points of the reported combined ratio of 124.9% in Personal Property.
High Catastrophe Losses in Commercial Lines
Commercial lines experienced higher catastrophe losses accounting for 8.8 points in Q3 2024, up from 4.2 points in Q3 2023.
Sonnet Alberta Auto Exit
The exit of Sonnet Alberta Auto business impacted growth by 5.5 points in Q3 2024 due to its loss-making nature.
Company Guidance
During the Definity Financial Corporation Q3 2024 earnings call, the company provided guidance on several financial metrics, highlighting a 17-point impact on the combined ratio due to significant catastrophe events, which was above expectations. Despite this, the company achieved an operating net income of $14.6 million or $0.13 per share, with underlying gross written premiums increasing by 12.2% and reported growth of 9.9%. The operating return on equity (ROE) was 10.7%, with robust book value growth per share of 17.9% from a year ago. The company expects firm market conditions in auto and commercial insurance to persist, with a focus on expense optimization and claims transformation to enhance ROE towards a mid-teen level over the next few years. Additionally, the company anticipates managing $1.5 billion in premiums via its broker platform, targeting $75 million in operating income for 2024 before financial considerations.

Definity Financial Corp. Financial Statement Overview

Summary
Definity Financial Corp. demonstrates strong financial health with consistent revenue growth, robust profit margins, and a solid balance sheet. However, slight pressure on net profit margin and volatility in investing cash flows are noted.
Income Statement
75
Positive
Definity Financial Corp. shows a strong financial performance with a consistent revenue growth rate over the years. The TTM revenue growth is notable compared to previous years, indicating a positive trajectory. Gross profit margin and EBIT margin are robust, suggesting efficient cost management. However, the net profit margin has slightly decreased in the TTM, which may indicate some pressure on net earnings.
Balance Sheet
80
Positive
The balance sheet of Definity Financial Corp. is solid with a low debt-to-equity ratio, reflecting prudent financial leverage. The equity ratio is strong, indicating a healthy proportion of equity financing. The return on equity has shown strength in the TTM, enhancing shareholder value. The company's liquidity position is also favorable with substantial cash reserves.
Cash Flow
70
Positive
The cash flow analysis reveals a stable operating cash flow, supporting the company's operational needs and investment activities. The free cash flow growth rate in the TTM is positive, showcasing effective capital management. The operating cash flow to net income ratio is healthy, indicating efficient cash conversion from earnings. However, fluctuations in investing cash flows highlight potential volatility in investment activities.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
2.34B4.53B3.91B3.25B2.92B2.70B
Gross Profit
2.53B4.53B3.93B3.25B2.92B2.70B
EBIT
1.43B578.70M3.86B304.60M273.00M193.10M
EBITDA
687.80M713.60M578.30M165.20M335.70M252.40M
Net Income Common Stockholders
417.20M430.40M350.10M252.00M213.20M153.90M
Balance SheetCash, Cash Equivalents and Short-Term Investments
335.70M504.90M197.50M2.99B3.59B2.91B
Total Assets
7.78B7.69B7.26B8.32B7.89B6.62B
Total Debt
147.60M149.50M149.90M70.80M18.90M21.70M
Net Debt
-3.40M-172.60M66.70M-129.70M-368.40M-488.60M
Total Liabilities
4.20B4.19B4.25B5.84B5.50B4.80B
Stockholders Equity
3.37B3.32B2.85B2.37B2.40B1.82B
Cash FlowFree Cash Flow
307.20M231.60M264.30M166.10M605.80M447.40M
Operating Cash Flow
383.30M307.20M351.80M256.90M655.20M490.20M
Investing Cash Flow
-593.20M-298.00M-351.90M-374.70M-1.04B-74.60M
Financing Cash Flow
-99.20M-113.80M-61.00M73.40M376.80M0.00

Definity Financial Corp. Technical Analysis

Technical Analysis Sentiment
Positive
Last Price75.55
Price Trends
50DMA
67.65
Positive
100DMA
63.80
Positive
200DMA
59.22
Positive
Market Momentum
MACD
2.16
Negative
RSI
65.66
Neutral
STOCH
40.74
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:DFY, the sentiment is Positive. The current price of 75.55 is above the 20-day moving average (MA) of 71.51, above the 50-day MA of 67.65, and above the 200-day MA of 59.22, indicating a bullish trend. The MACD of 2.16 indicates Negative momentum. The RSI at 65.66 is Neutral, neither overbought nor oversold. The STOCH value of 40.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:DFY.

Definity Financial Corp. Peers Comparison

Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSDFY
80
Outperform
C$8.53B20.2113.25%1.02%18.15%18.11%
64
Neutral
$12.85B9.817.79%78.20%12.23%-7.93%
$40.83B9.2017.21%0.89%
TSIAG
77
Outperform
C$13.02B14.7812.54%2.57%-7.31%28.65%
TSIFC
76
Outperform
C$54.77B24.7812.95%1.73%4.73%44.14%
TSELF
72
Outperform
C$5.46B4.9914.11%95.06%-25.60%-5.43%
72
Outperform
C$7.40B12.415.40%0.37%-10.83%-34.83%
* Financial Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:DFY
Definity Financial Corp.
75.55
33.07
77.85%
FRFHF
Fairfax Financial Holdings
1,679.49
565.62
50.78%
TSE:ELF
E-L Financial
15.58
5.53
55.02%
TSE:IAG
iA Financial Corporation Inc
140.72
55.57
65.26%
TSE:IFC
Intact Financial Corporation
303.94
83.36
37.79%
TSE:ONEX
ONEX Corporation
106.57
10.59
11.03%

Definity Financial Corp. Corporate Events

Private Placements and FinancingM&A Transactions
Definity Financial Completes $385 Million Private Placement to Fund Strategic Acquisition
Positive
Jun 11, 2025

Definity Financial Corporation has successfully completed a $385 million private placement of common shares, with RBC Capital Markets leading the syndicate of underwriters. The proceeds from this offering, along with a private placement by the Healthcare of Ontario Pension Plan Trust Fund, are intended to fund the acquisition of the Canadian operations of Travelers, excluding its surety business, for approximately $3.3 billion. This strategic acquisition is expected to enhance Definity’s market position, although the transaction is not contingent on financing. If the acquisition does not proceed, the funds will be used for general corporate purposes.

The most recent analyst rating on (TSE:DFY) stock is a Hold with a C$53.00 price target. To see the full list of analyst forecasts on Definity Financial Corp. stock, see the TSE:DFY Stock Forecast page.

Private Placements and FinancingM&A Transactions
Definity Financial Expands Private Placement to Fund Acquisition
Neutral
May 28, 2025

Definity Financial Corporation has announced an increase in the size of its previously declared private placements of common shares to $385 million. This move is aimed at partially funding the acquisition of the Canadian operations of Travelers, excluding its surety business, for a cash consideration of approximately $3.3 billion. The offering is expected to close around June 11, 2025, subject to regulatory approvals, and if the acquisition does not proceed, the funds will be used for general corporate purposes.

The most recent analyst rating on (TSE:DFY) stock is a Hold with a C$53.00 price target. To see the full list of analyst forecasts on Definity Financial Corp. stock, see the TSE:DFY Stock Forecast page.

M&A TransactionsBusiness Operations and Strategy
Definity Financial to Acquire Travelers’ Canadian Operations for $3.3 Billion
Positive
May 27, 2025

Definity Financial Corporation has announced a significant acquisition of Travelers’ Canadian operations for $3.3 billion, excluding the Canadian surety business. This move positions Definity as the fourth-largest P&C insurer in Canada, enhancing its leadership in the broker channel and aligning with its growth strategy. The acquisition is expected to be immediately accretive to earnings per share and improve return on equity, with anticipated synergies and increased scale providing substantial value creation opportunities. The transaction, pending regulatory approval, is set to close in early 2026 and will significantly bolster Definity’s commercial lines business, adding $600 million in annual premiums and expanding its expertise in various specialty insurance areas.

The most recent analyst rating on (TSE:DFY) stock is a Hold with a C$53.00 price target. To see the full list of analyst forecasts on Definity Financial Corp. stock, see the TSE:DFY Stock Forecast page.

Shareholder MeetingsBusiness Operations and Strategy
Definity Financial Corporation Reports Strong Shareholder Support at 2025 Annual Meeting
Positive
May 15, 2025

Definity Financial Corporation announced the results of its 2025 annual meeting of shareholders, where all proposed items, including the election of directors and the appointment of an auditor, were approved with overwhelming support. The results reflect strong shareholder confidence in the company’s leadership and strategic direction, which may positively influence its market positioning and stakeholder relations.

The most recent analyst rating on (TSE:DFY) stock is a Hold with a C$53.00 price target. To see the full list of analyst forecasts on Definity Financial Corp. stock, see the TSE:DFY Stock Forecast page.

Business Operations and StrategyFinancial Disclosures
Definity Financial Corp. Achieves Strong Q1 2025 Results Amid Market Challenges
Positive
May 8, 2025

Definity Financial Corp. reported a 9.6% growth in gross written premiums for Q1 2025, driven by strong personal auto activity and firm market conditions in personal and commercial insurance. The company maintained a combined ratio of 94.5% despite increased claims due to winter weather, thanks to proactive rate actions and disciplined expense management. Operating net income was stable at $75.9 million, with a strong book value per share increase of 16.2% year-over-year. The company strategically shifted its investment portfolio towards government bonds to protect against market volatility, enhancing its financial capacity.

Financial Disclosures
Definity Financial Faces $50 Million Impact from Q1 Catastrophe Losses
Negative
Apr 9, 2025

Definity Financial Corporation announced that its first-quarter 2025 operating income would be negatively impacted by approximately $50 million due to catastrophe losses, which is double the historical average for this period. The losses stem from severe weather conditions, including heavy snowfall and an ice storm in Ontario, affecting property damage and power outages, highlighting the company’s enhanced catastrophe response capabilities and commitment to supporting customers.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.