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Definity Financial Corp. (TSE:DFY)
TSX:DFY
RESEARCH TOOLSreports
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Definity Financial Corp.
(TSX:DFY)
76Outperform
Positive Factors
Dividend Increase
Sonnet is, as of Q4/24, now breaking even, consistent with guidance, and a better-than-expected dividend increase, up 17%.
Financial Performance
Definity reported net operating income per share of $0.13, which was better than the consensus of ($0.03).
Negative Factors
Catastrophe Losses
The CAT losses reported are 79% higher than the previous estimate, indicating a significant impact on the company's financials.
Valuation Concerns
The company's stock is trading at a peak valuation, which is a concern given the return on equity it is generating.
Definity Financial Corp. (DFY) vs. S&P 500 (SPY)
Market Cap
C$7.92B
Dividend Yield0.97%
Average Volume (3M)217.62K
Price to Earnings (P/E)18.2
Beta (1Y)0.53
Revenue Growth15.24%
EPS Growth23.01%
CountryCA
Employees3,442
SectorFinancial
Sector Strength88
IndustryInsurance - Property & Casualty
Share Statistics
EPS (TTM)3.75
Shares Outstanding115,833,540
10 Day Avg. Volume124,617
30 Day Avg. Volume217,617
Financial Highlights & Ratios
PEG Ratio0.79
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$65.22Price Target Upside-4.66% Downside
Rating ConsensusHold
Number of Analyst Covering9
Definity Financial Corp. Business Overview & Revenue Model
Company DescriptionDefinity Financial Corp. (DFY) is a Canadian-based financial services company predominantly operating in the property and casualty insurance sector. The company offers a variety of insurance products, including auto, home, and commercial insurance, catering to both individual and business clients. With a focus on providing tailored insurance solutions, Definity Financial Corp. aims to deliver exceptional customer service and innovative risk management strategies.
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. Financial Statement Overview
Summary
Definity Financial Corp. demonstrates strong financial health with robust revenue growth and profitability. The balance sheet reflects prudent management with low leverage and stable equity, but decreasing operating cash flow could signal potential challenges.Income Statement
Definity Financial Corp. has demonstrated strong revenue growth, with a consistent upward trajectory from 2019 to 2024. The net profit margin has improved significantly, indicating robust profitability. While the EBIT margin data is unavailable for 2024, the EBITDA margin remains healthy. Overall, the company shows strong financial performance with slight fluctuations in operating efficiency.85
Very Positive
Balance Sheet
The company's debt-to-equity ratio is low, reflecting a conservative leverage strategy. Return on Equity (ROE) has been increasing steadily, demonstrating efficient use of equity to generate profits. The equity ratio remains stable, showcasing a solid financial foundation. However, a decline in cash reserves might pose a potential risk in liquidity management.78
Positive
Cash Flow
Operating cash flow has decreased over the years, which may indicate challenges in converting sales into cash. Free cash flow has shown variability but remains positive, indicating adequate cash generation to support capital expenditures. The free cash flow to net income ratio suggests a reasonable alignment, though declining operating cash flow needs monitoring.72
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 4.53B | 3.91B | 3.25B | 2.92B | 2.70B | Gross Profit |
| 4.53B | 3.93B | 3.25B | 2.92B | 2.70B | EBIT |
| 0.00 | 3.86B | 304.60M | 273.00M | 193.10M | EBITDA |
| 713.60M | 578.30M | 165.20M | 335.70M | 252.40M | Net Income Common Stockholders |
| 430.40M | 350.10M | 252.00M | 213.20M | 153.90M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 504.90M | 197.50M | 2.99B | 3.59B | 2.91B | Total Assets |
| 7.69B | 7.26B | 8.32B | 7.89B | 6.62B | Total Debt |
| 149.50M | 149.90M | 70.80M | 18.90M | 21.70M | Net Debt |
| -172.60M | 66.70M | -129.70M | -368.40M | -488.60M | Total Liabilities |
| 4.19B | 4.25B | 5.84B | 5.50B | 4.80B | Stockholders Equity |
| 3.32B | 2.85B | 2.37B | 2.40B | 1.82B |
| Cash Flow | Free Cash Flow | |||
| 231.60M | 264.30M | 166.10M | 605.80M | 447.40M | Operating Cash Flow |
| 307.20M | 351.80M | 256.90M | 655.20M | 490.20M | Investing Cash Flow |
| -298.00M | -351.90M | -374.70M | -1.04B | -74.60M | Financing Cash Flow |
| -113.80M | -61.00M | 73.40M | 376.80M | 0.00 |
Definity Financial Corp. Technical Analysis
Positive
68.41
Price Trends
62.51
Positive
60.13
Positive
56.19
Positive
Market Momentum
1.76
Negative
67.97
Neutral
84.22
Negative
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 68.41 is above the 20-day moving average (MA) of 64.35, above the 50-day MA of 62.51, and above the 200-day MA of 56.19, indicating a bullish trend. The MACD of 1.76 indicates Negative momentum. The RSI at 67.97 is Neutral, neither overbought nor oversold. The STOCH value of 84.22 is Negative, 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 |
|---|---|---|---|---|---|---|---|
78 Outperform | C$54.48B | 24.68 | 13.38% | 1.62% | 5.02% | 77.36% | |
76 Outperform | $53.19B | 9.24 | 16.48% | 0.97% | 13.82% | -6.68% | |
76 Outperform | C$7.92B | 18.25 | 13.96% | 0.97% | 15.24% | 23.01% | |
75 Outperform | $75.08B | 15.28 | 11.03% | 3.73% | 7.64% | 9.22% | |
70 Outperform | $47.52B | 15.75 | 12.87% | 3.95% | -12.72% | -0.16% | |
68 Neutral | C$48.27B | 12.41 | 15.52% | 4.39% | -2.40% | 42.24% | |
64 Neutral | $12.64B | 9.74 | 8.05% | 17044.60% | 12.66% | -4.62% |
* Financial Sector Average
Performance Comparison
TSE:DFY
Definity Financial Corp.
68.41
22.65
49.50%
TSE:SLF
Sun Life Financial
82.95
13.38
19.23%
TSE:MFC
Manulife Financial
43.57
11.52
35.92%
TSE:FFH
Fairfax Financial Holdings
2,195.41
660.69
43.05%
TSE:GWO
Great-West Lifeco
51.86
10.58
25.63%
TSE:IFC
Intact Financial Corporation
305.47
77.94
34.25%
Definity Financial Corp. Earnings Call Summary
Earnings Call Date:Feb 13, 2025
(Q3-2024)
| % Change Since: 8.92%|
Next Earnings Date:May 08, 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. Corporate Events
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.
Spark’s Take on TSE:DFY Stock
According to Spark, TipRanks’ AI Analyst, TSE:DFY is a Outperform.
Definity Financial Corp. demonstrates a strong financial position with solid revenue growth and a prudent balance sheet. The technical analysis shows a positive trend, and the valuation is reasonable. The company’s performance, particularly its growth in premiums and dividend increase, enhances its appeal. However, attention to cash flow management is needed to address potential operational challenges.
To see Spark’s full report on TSE:DFY stock, click here.
DividendsBusiness Operations and StrategyFinancial Disclosures
Definity Financial Corp. Reports Strong 2024 Financial Results Amid Industry Challenges
Positive
Feb 14, 2025
Definity Financial Corp. reported robust financial results for Q4 and the full year 2024, with significant growth in gross written premiums and operating net income. Despite industry challenges, the company achieved a combined ratio of 90.3% in Q4 and 94.5% for the year, reflecting its strong business model and resilience. The increase in book value per share and a substantial dividend hike underscore Definity’s solid financial position and operational confidence. The company’s strategic focus on underwriting profits and the expansion of its broker platform contributed to its successful performance, enhancing its market position and shareholder returns.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
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.