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(B)(N) IFC Intact Financial Corporation

May 8, 2013

Drama. What’s the world coming to? The banks can’t make enough money on “managing our wealth” and neither can we with their help, but they’re likely to join the bread line behind us and their “fixed income” cohorts (please see today’s Reuters, May 8, 2013, UBS overhaul ups pressure on private banking head and our recent Post, (B)(N) UBS Union Bank of Switzerland AG, May 2013); the insurance companies can’t make money on “managing our wealth” or on their own investments (please see our Post, (B)(N) MFC Manulife Financial Corporation, May 2013) ; the public pension plans are very disturbing and have some explaining to do, Proactive Risk Management For Everybody & The One Rule, May 2013); and now we learn that the auto, property and casualty insurers can’t make money insuring what we have left that is not money (Reuters, May 8, 2013, Intact Financial shares slide as results miss estimates).

Intact Financial has been in the Perpetual Bond™ since $35 in 2009 and left it at $63 in July last year (please Exhibit 1, Red Line Stock Price (SP) above the Black Line Risk Price (SF), and for no other reason) after its acquisition of the Canadian operations of AXA Insurance for $2.6 billion in 2011, and later Jevco for $530 million in September last year; and it took a price hit today of minus $2 to close at $58 on a volume (1.8 million shares) at least six times its usual daily volume of 300,000 shares, apparently because it didn’t make more money this year than last year and missed the analysts’ average expectations, something that those in the know would have known for months, in view of the uncertain weather and property damage last year; and the Ontario Government wants to reduce auto insurance costs for consumers by 15%, although the Government has not yet made any suggestions about how that could be done (ibid, Reuters), other than by fixing the roads and driver education, and providing more support for public transit, all of which it has declined or simply not mentioned.

Despite all of that, the dividend yield is 3%, or $0.44 per share per quarter, and the company expects to pay $235 million to its shareholders this year, and is also planning to use some of its cash to buy in about 5% of its stock for about $350 million (ibid, Reuters). Our estimate of the quarterly downside volatility in the stock price is minus ($2.50) and the current Risk Price (SF) is $63 and has been declining from $65 last year.

If  the stock price can get over the Risk Price (SF), it might be an early riser (as it was in 2009), but we prefer to wait and won’t make any investment for which we’re not in the driver’s seat, so to speak.

Exhibit 1: (B)(N) IFC Intact Financial Corporation – Risk Price Chart

(B)(N) IFC Intact Financial Corporation

(B)(N) IFC Intact Financial Corporation

Intact Financial Corporation is a provider of automobile, property and liability insurance to individuals and small to medium-sized businesses across Canada.

(Please Click on the Chart to make it larger if required.)

From the Company: Intact Financial Corporation, through its subsidiaries, provides property and casualty insurance products for individuals, and small and medium sized businesses primarily in Canada. It principally underwrites automobile, home and commercial property, and liability insurance products. The company distributes its products through a network of insurance brokers, as well as directly to consumers under the Intact Insurance, belairdirect, Grey Power, and Jevco brand names. The company was formerly known as ING Canada Inc. and changed its name to Intact Financial Corporation in May 2009. Intact Financial Corporation was founded in 1809 and is based in Toronto, Canada.

The Price of Risk

The calculated Risk Price (SF) is a provably effective estimate of the “price of risk” which is “the least stock price at which the company is likeable” (Goetze 2009) and “likeability” is determined by the demonstrated factors of “risk aversion” – we want to keep our money and obtain a hopeful return above the rate of inflation – and the properties of portfolios of such stocks.

Stock prices that are less than the price of risk can be said to be “bargain prices” but with the risk attached that the company might never get a higher price other than that due to ambient volatility or “surprise”; on the other hand, investors who are willing to pay the “full price” above the price of risk, and buy and hold the stock at those prices, must also be confident, and have reason to believe, that the company will produce those values, absent new information.

Please see our Posts, The Price of Risk, August 2012 and The Nash Equilibrium & Its Stock Price, October 2012, for more information on the theory.

To see what else “risk averse” investing can do for us, please see our recent Posts, The Wall Street Put, April 2013, and earlier Posts such as The Dow Transports, March 2013, or The Risk Adjusted Dow, March 2013, or The Canada Pension Bond, February 2013, and for a more colorful description of investment risk and the application of the “price of risk” to mergers & acquisitions, please see our Post, Bystanders & Collateral Damage, April 2013.


We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to


Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.

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