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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 faced challenges in recent months, driven by a decline in Q2 operating net income. The company's earnings release revealed a lower-than-expected performance, potentially impacting investor confidence. Additionally, institutional shareholders' significant control (54% stake) may render the stock price vulnerable to their decisions. A $385 million private placement of common shares in June may have also diluted existing shareholders. Furthermore, Wasatch International Growth's reduction of its stake in Ryohin Keikaku Co Ltd may indicate a decrease in investor appetite.

1.c. Company Highlights

2. Definity's Q3 Results Exceed Expectations

Definity reported record third-quarter results, with operating net income of $125.2 million or $1.03 per share, beating analyst estimates of $0.929. Gross written premiums increased 7.5% to $4.7 billion over the last 12 months, driven by growth in personal auto and commercial business. The company's combined ratio improved to 89.4%, reflecting ongoing actions to improve operational efficiency and lower catastrophe losses.

Publication Date: Nov -13

📋 Highlights
  • Record Q3 Operating Net Income: Achieved $125.2M ($1.03/share) driven by strong underwriting, net investment income, and insurance broker platform growth.
  • Sub-90 Combined Ratio: Core combined ratio improved to 89.4%, with 1.9 points of cat losses, reflecting operational efficiency and pricing discipline.
  • $1 Billion Bond Offering: Finalized $1B senior unsecured notes for Travelers transaction financing, enhancing financial flexibility with favorable rates.
  • 7.5% Premium Growth: Gross written premiums rose 7.5% QoQ to $4.7B YoY, with personal auto up 6.2% and commercial lines at 7.5% Q3 growth.
  • ROE Momentum: Operating ROE reached 12.5% (upper end of target range), with 17% YoY increase in average adjusted equity and path to mid-teens post-synergies.

Segment Performance

In personal auto, gross written premiums were up 6.2% in Q3, with a combined ratio of 94%, an improvement from 98.3% last year. The improvement was driven by earned rate increases, improved Sonic profitability, and lower catastrophe losses. Commercial business premium growth was 7.5% in Q3, driven by strong retention and rate achievement, with an overall combined ratio of 89.4%.

Outlook and Valuation

Definity expects continued growth in its property portfolio, driven by rate increases and unit count growth. The company's operating ROE of 12.5% puts it at the upper end of its target range. With a P/B Ratio of 2.13 and a ROE of 11.48%, the company's valuation appears reasonable. Analysts estimate revenue growth of 35.7% next year, indicating a positive outlook for the company.

Merger Update

The Travelers transaction is progressing well, with integration planning nearing completion. The company expects to close the deal in the first half of Q1 2026 and achieve cost synergies of $100 million over a couple of years. The merger is expected to have a significant impact on Definity's revenue, moving it from the sixth largest to the fourth largest performer in the Canadian P&C insurance industry.

Conclusion on Future Prospects

With a strong track record of underwriting profitability and a favorable industry outlook, Definity is well-positioned for continued growth. The company's focus on distribution income growth, with a 20% year-on-year increase in the National Broker platform, is expected to drive future revenue growth. As the company continues to execute on its strategy, investors can expect sustained profitability and growth.

3. NewsRoom

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Is Definity Financial's Share Price Justified After 24% Year-to-Date Rally?

Nov -28

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Definity Financial (TSX:DFY): Evaluating Valuation After 24% Year-to-Date Return

Nov -27

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TD on Extreme Weather and the Insurance Market

Nov -27

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Definity Chief Executive Officer Rowan Saunders to participate in fireside chat at The Desjardins Inaugural Toronto Conference

Nov -24

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Definity Financial Corp (DFYFF) Q3 2025 Earnings Call Highlights: Record Net Income and ...

Nov -08

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Wasatch International Growth's Strategic Moves: Inter & Co Inc Leads with 2.05% Portfolio Impact

Nov -04

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DEFINITY FINANCIAL CORPORATION TO ANNOUNCE THIRD QUARTER 2025 RESULTS ON NOVEMBER 6, 2025, AND HOLD ITS EARNINGS CONFERENCE CALL THE FOLLOWING DAY

Oct -23

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Definity Financial (TSX:DFY) Plans CAD 1 Billion Private Placement With Senior Unsecured Notes

Sep -12

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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: 4.2

Growth: 7.2

Quality: 7.0

Yield: 2.0

Momentum: 9.0

Volatility: 9.0

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Hiscox

A-Score: 6.3/10

Value: 3.6

Growth: 6.0

Quality: 8.5

Yield: 3.0

Momentum: 8.5

Volatility: 8.3

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Kemper

A-Score: 5.5/10

Value: 8.5

Growth: 3.7

Quality: 7.5

Yield: 5.0

Momentum: 2.5

Volatility: 5.7

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Selective Insurance

A-Score: 5.4/10

Value: 7.7

Growth: 6.0

Quality: 6.9

Yield: 3.0

Momentum: 2.0

Volatility: 7.0

1-Year Total Return ->

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Kinsale Capital Group

A-Score: 5.2/10

Value: 4.1

Growth: 9.8

Quality: 8.6

Yield: 0.0

Momentum: 3.0

Volatility: 6.0

1-Year Total Return ->

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White Mountains Insurance

A-Score: 4.7/10

Value: 4.5

Growth: 5.3

Quality: 7.6

Yield: 0.0

Momentum: 2.0

Volatility: 8.7

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

70.26$

Current Price

70.26$

Potential

-0.00%

Expected Cash-Flows