Savvy acquisitions into U.S. and overseas markets have added significantly to the firm’s bottom line and helped offset the risk of its growth by acquisition. 

In the meantime, the stock trades at a reasonable 17.1 times the earnings forecast and has a track record of raising its dividend an average 7.4% annually over the past five years.

INTACT FINANCIAL CORP. (Toronto symbol IFC; www.intactfc.com) is Canada’s largest provider of property and casualty insurance. Intact insures more than five million individuals and businesses. Its major brands are Intact Insurance, Canada BrokerLink and belairdirect.

To add value for investors, the company—in conjunction with Danish insurer Tryg A/S—has now completed its $9.3 billion U.S. takeover of U.K.-based RSA Insurance Group plc.

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RSA offers a range of general and specialty insurance products and had long been viewed as a possible takeover target. Under the transaction, Intact took RSA’s Canadian business as well as its U.K. and international division. Tryg now owns RSA’s operations in Sweden and Norway.

RSA’s Denmark business remained jointly owned by the two firms—but they have just agreed to sell the unit for $2.52 billion. Intact will receive 50% of the proceeds.

For the three months ended June 30, 2021, Intact’s overall revenue jumped 27.1%, to $4.30 billion from $3.38 billion a year earlier. Overall earnings per share climbed 38.7%, to $3.26 from $2.35.

The gains came in part from the RSA acquisition, but also from improved profitability. That was fuelled by lower catastrophe-related losses and lower auto claims. “Hard market conditions” also played a role. That’s when demand for insurance is high, and companies like Intact can enforce stricter rules about what kind of risks they will insure. This generally means more profitable policies.

Dividend Stocks: Past acquisitions have been net gains for the firm

Intact previously acquired OneBeacon Insurance Group for $1.7 billion U.S. in September 2017. The Minnesota-based insurance holding company focuses on property-casualty insurance. Through its businesses, the firm provides a range of specialty insurance products.

OneBeacon represented Intact’s entry into the U.S. market to drive future growth. Still expanding beyond its home market, plus an acquisition of this size, adds risk. The firm is nonetheless turning out to be a great fit for Intact, which has successfully integrated a number of acquisitions in the past few years.

The company will probably earn $9.91 a share in 2021, and the stock trades at a reasonable 17.1 times that forecast.

Intact last raised its quarterly dividend by 9.2% in March 2020, to $0.83 a share from $0.76. The annual rate of $3.32 yields 2.0%. Due to uncertainty over COVID-19, Intact has delayed the regular 2021 dividend increase to later in the year.

The insurer has raised its dividend an average 7.4% annually over the past five years. Intact’s TSI Dividend Sustainability Rating is Above Average.

Recommendation in Dividend Advisor: Intact Financial Corp. is a buy.