Fairfax Financial wins price target raise at RBC

Following a good quarter, RBC analyst Scott Heleniak has raised his price target on Fairfax Financial (Fairfax Financial Stock Quote, Chart, News, Analysts, Financials TSX:FFH).

On February FFH reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Net Earnings of $1.67-billion on Net Insurance Revenue of $5.68-billion.

“Two thousand twenty-three was the best year in our history, with net earnings of $4.4-billion, producing record adjusted operating income of $3.9-billion (or operating income of $5.7-billion, including the benefit of discounting, net of a risk adjustment on claims) from our property and casualty insurance and reinsurance operations, reflecting records achieved in our core underwriting performance, interest and dividends of $1.7-billion, and increased favourable results from profit of associates,” CEO Prem Watsa said. “All of our major insurance and reinsurance companies achieved combined ratios below 100 per cent for a consolidated combined ratio of 93.2 per cent and underwriting profit of $1.5-billion on an undiscounted basis. Gross premiums written grew by 4.8 per cent or $1.3-billion to $28.9-billion, while net premiums written grew by 3.5 per cent, primarily reflecting new business and incremental rate increases in certain lines of business.”

As reported by the Globe and Mail, Heleniak February 20 maintained his “Outperform” rating and raised his price target on FFH from (US) $1,085 to $1200.

“We believe the new price target is warranted considering our constructive underwriting and net investment income outlook for 2024 and given favorable multiples for P&C insurers in the sector,” the analyst wrote. “Fairfax’s underwriting units continue to deliver impressive results and its investment portfolio has likewise begun delivering improving returns as some of its associate/affiliate holdings are monetized. We would look for these things to continue as Fairfax’s insurance companies are well positioned to capitalize on improved P&C pricing and have a track record of opportunistic growth in such environments. Our thesis is that Fairfax’s long-term track record of double-digit book value growth will continue and the current valuation provides an attractive risk-reward entry point for those willing to back the company’s long-term investment track record. Fairfax has a deep cash position and ample access to capital, which gives it the flexibility to be opportunistic as well as patient.”