I was looking at many of the Canadian listed Property and Casualty insurers in it looked like the price appreciation for FFH was and extreme outlier at approx. 65% Total Return for the last 12 months. Can you help explain what they have done differently than the rest of group? I thought that with many of the natural disasters would put pressure on this group of stocks. I would really appreciate your comments.
FFH has experienced a tailwind from high interest rates in recent quarters, leading to a better yield in the investment portfolio, and is now trading at 1.0x times' Price/Book. Results have been good, and largely superior to peers: In the 2Q, FFH’s adjusted operating income grew 41%, driven by better-increased interest and dividend income, as well as strong underwriting profit. Better underwriting discipline, growth in premium written and especially the ROEs – one of the key metrics to evaluate financial companies which also shows improvement recently, averaging around 12%-15% range. Overall, the recent results showed a solid quarter with improvement across operating metrics. The stock was also cheap vs peers, trading at only 1.0x book value is a cheap valuation for such a quality insurance name. The other factor was that in 2022, investor sentinment shifted very strongly from 'growth' to 'value'. At only 5X earnings, investors saw in FFH a very cheap stock when other sectors were trading at 30X, or more. Essentially, FFH has gone from a 'hated' stock to a solid performer in an uncertain market, and the love has returned to it. The results have seen multiple broker upgrades over the past year which also contributed.