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1. Company Snapshot

1.a. Company Description

Definity 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.

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1.b. Last Insights on DFY

Definity Financial Corporation's recent performance was negatively impacted by the retirement of Richard Freeborough from its Board of Directors, effective January 12, 2026, for personal reasons. Additionally, the company's upcoming earnings release on February 12, 2026, may bring attention to any potential challenges or concerns related to its fourth quarter and year-end 2025 results.

1.c. Company Highlights

2. Definity Financial's Strong Q4 Earnings Reflects Disciplined Underwriting and Claims Management

Definity Financial Corporation reported full-year operating earnings per share of $3.53, a 33% increase over 2024. The company's operating performance was driven by a solid organic growth, returns on digital technology investments, and disciplined underwriting and claims management. In Q4, the company generated substantial operating net income of $120.7 million, reflecting strong underwriting income alongside meaningful contributions from its insurance broker platform and net investment income. The actual EPS for Q4 came out at $0.48, significantly lower than the estimated $0.883.

Publication Date: Feb -18

📋 Highlights
  • Operating Earnings Growth:: Full-year operating EPS rose 33% to $3.53, with book value per share increasing 16%.
  • Combined Ratio Improvements:: Personal Auto combined ratio improved to 95% (Q4) and 94.2% (full-year), up 4.3 points from 2024.
  • Travelers Acquisition Impact:: Added $1.5B in premiums, targeting 200 bps of run-rate operating ROE by integration completion.
  • Commercial Business Performance:: 6.9% Q4 premium growth, $14.5M underwriting income increase in Q4, driven by small business and specialty expansion.
  • Integration Synergies:: $100M annual run-rate synergies projected, with 2/3 of efforts expected to be completed within 18 months.

Segment-wise Performance

The Personal Auto segment delivered a solid combined ratio of 95% in Q4, an improvement from 2024. For the full year, the segment reported a combined ratio of 94.2%, a 4.3-point improvement from 2024. The Personal Property segment also saw a robust combined ratio of 82.7% in Q4 2025, with a full-year combined ratio of 88.5%, a 7.8-point improvement from 2024. The commercial business premium growth was 6.9% in Q4 and 8.6% for the full year 2025, driven by strong retention and rate achievement.

Acquisition and Integration of Travelers' Canadian Business

The acquisition of Travelers' Canadian business has brought approximately $1.5 billion in premiums and is expected to add roughly 200 basis points of run-rate operating ROE by the end of the integration period. The integration work is progressing well, with at least $100 million of annual run-rate synergies identified. The company expects to start the policy conversion process in Q2 2026 and is confident that the Definity business will continue to operate in the upper single digits.

Valuation and Outlook

With a Price-to-Book Ratio (P/B) of 1.98, the stock is trading at a premium to its book value. The company's strong operating performance and growth prospects are reflected in its valuation metrics. Analysts estimate next year's revenue growth at 8.3%. Given the company's confidence in its long-term trajectory and the expected synergies from the Travelers acquisition, the stock may continue to outperform the market.

Growth Prospects

Definity Financial's growth is driven by structural advantages, including a portfolio skewed towards small and mid-market businesses and investments in technology and specialty capabilities. The company's digital platform, Vyne Commercial, is expected to drive high single-digit growth in the small business space. With a strong track record of success in deploying AI tools, the company is well-positioned to adapt to the changing landscape and continue its growth trajectory.

3. NewsRoom

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DEFINITY FINANCIAL CORPORATION CHIEF EXECUTIVE OFFICER ROWAN SAUNDERS TO HOLD VIRTUAL FIRESIDE CHAT WITH RBC CAPITAL MARKETS

Feb -18

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Assessing Definity Financial (TSX:DFY) Valuation After Mixed Momentum And Travelers Canada Acquisition Plans

Feb -16

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What Catalysts Are Rewriting The Story For Definity Financial (TSX:DFY)

Feb -15

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Definity Financial Corp (DFYFF) Q4 2025 Earnings Call Highlights: Strong Growth and Strategic ...

Feb -13

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Definity Financial Q4 Earnings Call Highlights

Feb -13

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Definity Q4 Operating Income Higher Than Forecast, Dividend Raised 15%

Feb -12

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Definity Foundation and Definity Financial Corporation Announce Support for Indigenous Land Stewardship and Innovation at Ulnooweg Education Centre

Feb -09

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DEFINITY FINANCIAL CORPORATION TO ANNOUNCE FOURTH QUARTER AND YEAR-END 2025 RESULTS ON FEBRUARY 12, 2026, AND HOLD ITS EARNINGS CONFERENCE CALL THE FOLLOWING DAY

Jan -29

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.00%)

6. Segments

Property and Casualty Insurance

Expected Growth: 8%

Definity Financial Corporation's 8% growth in Property and Casualty Insurance is driven by increasing demand for personalized insurance products, expansion into new markets, and strategic partnerships. Additionally, investments in digital platforms and data analytics have improved underwriting efficiency and customer experience, contributing to premium growth and market share gains.

7. Detailed Products

Individual Insurance

Definity Financial Corporation offers a range of individual insurance products, including life insurance, disability insurance, and critical illness insurance, designed to provide financial protection to individuals and their families.

Group Benefits

Definity Financial Corporation provides group benefits solutions to businesses, including employee life insurance, disability insurance, and health insurance, to help attract and retain top talent.

Retirement Savings

Definity Financial Corporation offers a range of retirement savings products, including RRSPs, TFSAs, and annuities, designed to help individuals save for their retirement goals.

Investments

Definity Financial Corporation provides a range of investment products, including mutual funds, exchange-traded funds, and segregated funds, designed to help individuals achieve their long-term investment goals.

Wealth Management

Definity Financial Corporation offers wealth management services, including financial planning, investment management, and estate planning, designed to help high net worth individuals manage their wealth.

8. Definity Financial Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Definity Financial Corporation operates in a highly competitive industry, and customers have various alternatives to choose from. However, the company's strong brand reputation and customer loyalty programs help to mitigate the threat of substitutes.

Bargaining Power Of Customers

Definity Financial Corporation's customers have significant bargaining power due to the availability of alternative financial services providers. The company must focus on providing excellent customer service and competitive pricing to retain customers.

Bargaining Power Of Suppliers

Definity Financial Corporation has a diverse supplier base, which reduces the bargaining power of individual suppliers. The company's strong procurement practices and long-term contracts also help to mitigate supplier power.

Threat Of New Entrants

While there are barriers to entry in the financial services industry, new entrants can still disrupt the market. Definity Financial Corporation must continue to innovate and invest in digital technologies to stay competitive.

Intensity Of Rivalry

The financial services industry is highly competitive, with many established players and new entrants vying for market share. Definity Financial Corporation must focus on differentiating its products and services to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 4.16%
Debt Cost 3.95%
Equity Weight 95.84%
Equity Cost 3.94%
WACC 3.94%
Leverage 4.34%

11. Quality Control: Definity Financial Corporation passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Definity Financial

A-Score: 6.4/10

Value: 4.3

Growth: 7.4

Quality: 6.1

Yield: 2.0

Momentum: 9.0

Volatility: 9.7

1-Year Total Return ->

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Hiscox

A-Score: 6.4/10

Value: 3.7

Growth: 6.0

Quality: 7.2

Yield: 3.0

Momentum: 9.5

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
Selective Insurance

A-Score: 5.3/10

Value: 7.7

Growth: 6.0

Quality: 6.8

Yield: 3.0

Momentum: 1.5

Volatility: 7.0

1-Year Total Return ->

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Kinsale Capital Group

A-Score: 5.2/10

Value: 4.1

Growth: 9.7

Quality: 8.8

Yield: 0.0

Momentum: 3.0

Volatility: 5.7

1-Year Total Return ->

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Stock-Card
White Mountains Insurance

A-Score: 5.0/10

Value: 2.5

Growth: 8.3

Quality: 5.8

Yield: 0.0

Momentum: 4.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Kemper

A-Score: 4.8/10

Value: 7.8

Growth: 3.7

Quality: 6.2

Yield: 5.0

Momentum: 1.0

Volatility: 5.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

68.01$

Current Price

68.01$

Potential

-0.00%

Expected Cash-Flows