Trisura Group Ltd. (“Trisura” or “Trisura Group”) (TSX: TSU), a
leading specialty insurance provider, today announced financial
results for the second quarter of 2023.
David Clare, President and CEO of Trisura,
stated, “Trisura reported strong performance in the quarter with
operating net income of $26.0 million, or $0.56 per share, achieved
through measured growth, underwriting profitability and enhanced
investment income. Quarterly net income of $26.8 million, or $0.57
per share, was positively impacted by the run-off of a US program,
partially offset by unrealized losses on the investment
portfolio.
Maturation of our business and continued
expansion with distribution partners drove increased market share
and resulted in insurance revenue growth of 43.0%. In Canada,
disciplined underwriting yielded a combined ratio of 82.9%. US
Fronting demonstrated strong fundamentals, with improvements in
fronting operational ratio and sustained growth.
Net investment income grew 134.4% in the
quarter, reaching $11.9 million through higher risk-adjusted yields
and increased size of the investment portfolio.
Our business remains well-capitalized, supported
by surplus capital, a $50 million revolving credit facility, a
12.4% debt to capital ratio and a conservatively positioned
investment portfolio.”
Financial Highlights
- Insurance
revenue growth of 43.0% in Q2 2023 reflected sustained momentum
across North America.
- Net income of
$26.8 million in the quarter grew compared to prior period as a
result of growth in the business. Operating net income(1) of $26.0
million in the quarter grew 36.5% compared to prior period, driven
by profitable growth in Canada and growth in core operations(2) in
the US, as well as growth in Net investment income.
- EPS of $0.57 in
Q2 2023 compared to $0.50 in Q2 2022. Operating EPS(3) of $0.56 for
the quarter compared to $0.45 in the prior year.
- Book value per
share(4) of $11.53 increased 30.0% from June 30, 2022, driven by
our July 2022 equity raise, strong Canadian earnings and foreign
currency movements, but diluted by the write down on reinsurance
recoverables and unrealized losses on investments.
- ROE(4) of 4.9%
compared to 19.2% in Q2 2022, below our mid-teens target as a
result of the write down on reinsurance recoverables and losses
associated with the run-off program. Operating ROE(5) of 19.2%
exceeded our target, demonstrating the strength of our core
operations despite significant growth and a larger capital
base.
Amounts in C$ millions |
Q2 2023 |
Q2 2022 |
Variance |
Q2 2023 YTD |
Q2 2022 YTD |
Variance |
Insurance revenue |
664.4 |
|
464.6 |
|
43.0% |
|
1,303.5 |
|
868.3 |
|
50.1% |
|
Net income |
26.8 |
|
20.9 |
|
28.0% |
|
40.8 |
|
44.3 |
|
(7.9%) |
|
Operating net income(1) |
26.0 |
|
19.1 |
|
36.5% |
|
52.6 |
|
38.6 |
|
36.2% |
|
EPS – diluted, $ |
0.57 |
|
0.50 |
|
14.0% |
|
0.87 |
|
1.05 |
|
(17.1%) |
|
Operating EPS – diluted, $(3) |
0.56 |
|
0.45 |
|
24.4% |
|
1.13 |
|
0.92 |
|
22.8% |
|
Book value per share, $(4) |
11.53 |
|
8.87 |
|
30.0% |
|
11.53 |
|
8.87 |
|
30.0% |
|
Debt-to-Capital ratio(4)(11) |
12.4% |
|
22.7% |
|
(10.3pts) |
|
12.4% |
|
22.7% |
|
(10.3pts) |
|
ROE(4) |
4.9% |
|
19.2% |
|
(14.3pts) |
|
4.9% |
|
19.2% |
|
(14.3pts) |
|
Operating ROE(5) |
19.2% |
|
19.6% |
|
(0.4pts) |
|
19.2% |
|
19.6% |
|
(0.4pts) |
|
Combined ratio – Canada |
82.9% |
|
79.9% |
|
3.0pts |
|
81.8% |
|
78.6% |
|
3.2pts |
|
Fronting operational ratio – US(4) |
78.6% |
|
81.2% |
|
(2.6pts) |
|
94.0% |
|
76.6% |
|
17.4pts |
|
Fronting operational ratio excluding run-off – US(6) |
79.9% |
|
81.2% |
|
(1.3pts) |
|
83.0% |
|
76.6% |
|
6.4pts |
|
Insurance Operations
- Insurance
revenue in Canada increased by 31.5% in the quarter compared to Q2
2022, reflecting increased market share, expansion of distribution
relationships, new fronting arrangements and the benefit of stable
market pricing conditions in certain lines of business. Strong
underwriting performance across all lines contributed to a combined
ratio of 82.9%, an ROE of 26.7% and Operating ROE of 28.4% in Q2
2023.
- Insurance
revenue in the US of $467.9 million in the quarter increased by
48.5%, compared to Q2 2022, reflecting favourable market conditions
and maturation of existing programs. Fee income(7) of $18.9 million
in the quarter increased by 22.3% compared to $15.5 million in Q2
2022. This contributed to Net income of $16.0 million and improved
Operating net income of $11.1 million in the quarter, supporting a
14.3% Operating ROE.
Capital
- The Minimum
Capital Test ratio(8) of our regulated Canadian subsidiary was 224%
as at June 30, 2023 (233% as at December 31, 2022), which
comfortably exceeded regulatory requirements(9) of 150%.
- As at December
31, 2022, the Risk-Based Capital of the regulated insurance
companies of Trisura US were in excess of the various company
action levels of the states in which they are licensed.
- Consolidated
debt-to-capital ratio of 12.4% as at June 30, 2023 is below our
long-term target of 20.0%.
- Surplus capital
and a $50 million revolving credit facility. In July 2023, $10
million USD was utilized from the revolving credit facility for
purposes of issuing a letter of credit, in relation to our US
Surety operations.
Investments
- Interest and
dividend income rose 134.4% in the quarter compared to Q2 2022. The
portfolio benefited from higher risk-adjusted yields and increased
capital generated from strong operational performance and the July
2022 equity raise.
Corporate Development
- On August 9th,
Trisura executed a purchase and sale agreement to acquire a US
surety company. The company is a Treasury-listed platform that will
enhance the offering of our US Surety practice as well as expand
our distribution relationships. Regulatory approval is
pending.
Earnings Conference Call
Trisura will host its Second Quarter Earnings
Conference Call to review financial results at 9:00 a.m. ET on
Friday, August 11th, 2023.
To listen to the call via live audio webcast,
please follow the link below:
https://edge.media-server.com/mmc/p/4awigj54
A replay of the call will be available through the link
above.
About Trisura Group
Trisura Group Ltd. Is a specialty insurance
provider operating in the Surety, Risk Solutions, Corporate
Insurance, and Fronting business lines of the market. Trisura has
investments in wholly owned subsidiaries through which it conducts
insurance and reinsurance operations. Those operations are
primarily in Canada (“Trisura Canada”) and the United States
(“Trisura US”). Trisura Group Ltd. Is listed on the Toronto Stock
Exchange under the symbol “TSU”.
Further information is available at
http://www.trisura.com. Important information may be disseminated
exclusively via the website; investors should consult the site to
access this information. Details regarding the operations of
Trisura Group Ltd. Are also set forth in regulatory filings. A copy
of the filings may be obtained on Trisura Group’s SEDAR profile at
www.sedar.com.
For more information, please contact:
Name: Bryan Sinclair
Tel: 416 607 2135
Email: bryan.sinclair@trisura.com
Trisura Group Ltd.Condensed Interim
Consolidated Statements of Financial PositionAs at
June 30, 2023 and December 31, 2022(in thousands
of Canadian dollars, except as otherwise noted) |
As at |
June 30, 2023 |
December 31, 2022 |
Cash and cash equivalents |
340,825 |
406,368 |
Investments |
828,890 |
765,375 |
Other Assets |
40,310 |
61,852 |
Reinsurance contract assets |
1,873,282 |
1,527,799 |
Capital assets and intangible assets |
17,649 |
19,529 |
Deferred tax assets |
19,234 |
17,942 |
Total assets |
3,120,190 |
2,798,865 |
Insurance contract liabilities |
2,432,392 |
2,165,103 |
Other liabilities |
83,118 |
65,111 |
Loan payable |
75,000 |
75,000 |
Total liabilities |
2,590,510 |
2,305,214 |
Shareholders' equity |
529,680 |
493,651 |
Total liabilities and shareholders' equity |
3,120,190 |
2,798,865 |
Trisura Group Ltd.Condensed Interim
Consolidated Statements of Comprehensive Income
(Loss)For the three and six months ended June
30(in thousands of Canadian dollars, except as
otherwise noted) |
|
Q2 2023 |
Q2 2022 |
Q2 2023 YTD |
Q2 2022 YTD |
Insurance revenue |
664,420 |
|
464,643 |
|
1,303,520 |
|
868,312 |
|
Insurance service expenses |
(567,217) |
|
(407,172) |
|
(1,067,660) |
|
(720,622) |
|
Net expense from reinsurance contracts assets |
(57,491) |
|
(30,019) |
|
(179,433) |
|
(93,332) |
|
Insurance service result |
39,712 |
|
27,452 |
|
56,427 |
|
54,358 |
|
Net investment income |
11,899 |
|
5,077 |
|
21,970 |
|
9,100 |
|
Net (losses) gains |
(6,867) |
|
1,441 |
|
(9,082) |
|
967 |
|
Net credit impairment losses |
376 |
|
- |
|
227 |
|
- |
|
Total investment income |
5,408 |
|
6,518 |
|
13,115 |
|
10,067 |
|
Finance (expenses) income from insurance contracts |
(10) |
|
3,782 |
|
(36,638) |
|
12,604 |
|
Finance (expenses) income from reinsurance contracts |
(277) |
|
(2,603) |
|
31,625 |
|
(10,668) |
|
Net insurance finance (expenses) income |
(287) |
|
1,179 |
|
(5,013) |
|
1,936 |
|
Net financial result |
5,121 |
|
7,697 |
|
8,102 |
|
12,003 |
|
Net Insurance and financial result |
44,833 |
|
35,149 |
|
64,529 |
|
66,361 |
|
Other income |
902 |
|
855 |
|
6,080 |
|
5,197 |
|
Other operating expenses |
(10,075) |
|
(6,997) |
|
(15,507) |
|
(11,332) |
|
Other finance costs |
(601) |
|
(642) |
|
(1,201) |
|
(1,233) |
|
Income before income taxes |
35,059 |
|
28,365 |
|
53,901 |
|
58,993 |
|
Income tax expense |
(8,252) |
|
(7,422) |
|
(13,118) |
|
(14,712) |
|
Net income |
26,807 |
|
20,943 |
|
40,783 |
|
44,281 |
|
Operating net income |
26,032 |
|
19,071 |
|
52,602 |
|
38,614 |
|
Other comprehensive loss |
(9,871) |
|
(22,403) |
|
(3,950) |
|
(43,457) |
|
Comprehensive income (loss) |
16,936 |
|
(1,460) |
|
36,833 |
|
824 |
|
Trisura Group Ltd.Condensed Interim
Consolidated Statements of Cash FlowsFor the three
and six months ended June 30 (in thousands of
Canadian dollars, except as otherwise noted) |
|
Q2 2023 |
Q2 2022 |
Q2 2023 YTD |
Q2 2022 YTD |
Net income |
26,807 |
|
20,943 |
|
40,783 |
|
44,281 |
|
Non-cash items |
3,001 |
|
171 |
|
8,233 |
|
6,267 |
|
Change in working capital |
(35,293) |
|
50,565 |
|
(36,339) |
|
51,574 |
|
Realized losses (gains) |
196 |
|
(2,301) |
|
441 |
|
(5,354) |
|
Income taxes paid |
(3,836) |
|
(9,890) |
|
(7,673) |
|
(21,524) |
|
Interest paid |
(1,112) |
|
(997) |
|
(1,239) |
|
(1,496) |
|
Net cash (used in) from operating activities |
(10,237) |
|
58,491 |
|
4,206 |
|
73,748 |
|
Proceeds on disposal of investments |
21,378 |
|
44,267 |
|
52,979 |
|
97,856 |
|
Purchases of investments |
(45,781) |
|
(75,684) |
|
(125,768) |
|
(176,667) |
|
Net purchases of capital and intangible assets |
(230) |
|
(117) |
|
(407) |
|
(407) |
|
Net cash used in investing activities |
(24,633) |
|
(31,534) |
|
(73,196) |
|
(79,218) |
|
Shares issued |
- |
|
1,115 |
|
711 |
|
1,666 |
|
Shares purchased under Restricted Share Units plan |
(801) |
|
- |
|
(1,670) |
|
(2,106) |
|
Issuance of note payable |
- |
|
30,000 |
|
- |
|
30,000 |
|
Lease payments |
(510) |
|
(445) |
|
(1,022) |
|
(947) |
|
Net cash (used in) from financing activities |
(1,311) |
|
30,670 |
|
(1,981) |
|
28,613 |
|
Net decrease in cash and cash equivalents,
and short-term securities during the period |
(36,181) |
|
57,627 |
|
(70,971) |
|
23,143 |
|
Cash and cash equivalents, beginning of period |
368,210 |
|
304,464 |
|
406,367 |
|
341,319 |
|
Currency translation |
8,796 |
|
5,875 |
|
5,429 |
|
3,504 |
|
Cash and cash equivalents, and short-term securities, end
of period |
340,825 |
|
367,966 |
|
340,825 |
|
367,966 |
|
Non-IFRS Financial Measures
Table 1 – Reconciliation of reported Net income to
Operating net
income(4):
reflect Net income, adjusted for certain items to normalize
earnings to core operations in order to reflect our North American
specialty operations.
|
Q2 2023 |
Q2 2022 |
2023 |
|
2022 |
|
Net income |
26,807 |
|
20,943 |
|
40,783 |
|
44,281 |
|
Adjustments: |
|
|
|
|
Run-off Program |
(6,629) |
|
- |
|
8,062 |
|
- |
|
Impact of share based compensation |
1,815 |
|
194 |
|
(1,555) |
|
(2,948) |
|
Impact of movement in yield curve within Finance income from
insurance and reinsurance contracts |
(2,314) |
|
(1,316) |
|
(144) |
|
(3,565) |
|
Net losses (gains) |
6,867 |
|
(1,441) |
|
9,082 |
|
(967) |
|
Net credit impairment losses |
(376) |
|
- |
|
(227) |
|
- |
|
Net losses from life annuity |
- |
|
- |
|
- |
|
77 |
|
Tax impact of above items |
(138) |
|
691 |
|
(3,399) |
|
1,736 |
|
Operating net income |
26,032 |
|
19,071 |
|
52,602 |
|
38,614 |
|
Table 2 –
ROE(4)
and Operating
ROE(5):
a measure of the Company’s use of equity.
|
Q2 2023 |
Q2 2022 |
LTM net income |
24,297 |
|
67,597 |
|
LTM average equity |
497,777 |
|
352,242 |
|
ROE |
4.9% |
|
19.2% |
|
Operating LTM net income(5) |
95,629 |
|
68,866 |
|
LTM average equity |
497,777 |
|
352,242 |
|
Operating LTM ROE |
19.2% |
|
19.6% |
|
Table 3 – Reconciliation of Average
equity(10)
to LTM average equity: LTM average equity is used
in calculating Operating ROE.
|
|
Q2 2023 |
Q2 2022 |
Average equity |
448,341 |
343,653 |
Adjustments: days in quarter proration |
49,436 |
8,589 |
LTM average equity |
497,777 |
352,242 |
Footnotes
(1) See section on Non-IFRS financial measures
table 10.2.1 in Q2 2023 MD&A for details on composition.
Operating net income is a non-IFRS financial measure. Non-IFRS
financial measures are not standardized financial measures under
the financial reporting framework used to prepare the financial
statements of the Company to which the measure relates and might
not be comparable to similar financial measures disclosed by other
companies. Details and an explanation of how it provides useful
information to an investor can be found in table 1.
(2) See Section 10, Operating Metrics in Q2 2023
MD&A for the definition of Operating Net Income, for further
explanation of “core operations”.
(3) This is a non-IFRS ratio, see table 10.2 in
Q2 2023 MD&A for details on composition, as well as each
non-IFRS financial measure used as a component of ratio, and an
explanation of how it provides useful information to an investor.
Non-IFRS ratios are not standardized under the financial reporting
framework used to prepare the financial statements of the Company
to which the ratio relates and might not be comparable to similar
ratios disclosed by other companies. To access MD&A, see
Trisura’s website or SEDAR at www.sedar.com.
(4) This is a supplementary financial measure.
Refer to Q2 2023 MD&A, Section 10, Operating Metrics table for
its composition.
(5) This is a non-IFRS ratio. See table 10.4 in
Q2 2023 MD&A for details on composition, as well as each
non-IFRS financial measure used as a component of ratio, and an
explanation of how it provides useful information to an
investor.
(6) This is a non-IFRS financial measure.
Adjusted figures exclude the impacts from write down of reinsurance
recoverables, and the run-off program.
(7) This is a non-IFRS financial measure. See
table 10.5.5 in Q2 2023 MDA for details on composition.
(8) This measure is calculated in accordance
with the Office of the Superintendent of Financial Institutions
Canada’s (OSFI’s) Guideline A, Minimum Capital Test.
(9) This target is in accordance with OSFI’s
Guideline A-4, Regulatory Capital and Internal Capital Targets.
(10) Average equity is calculated as the sum of
opening equity and closing equity over the last twelve months,
divided by two.
(11) The Q2 2022 and Q2 2022 YTD metric has not
been restated to reflect the adoption of IFRS 9 and IFRS 17.
Cautionary Statement Regarding Forward-Looking
Statements and Information
Note: This news release contains
“forward-looking information” within the meaning of Canadian
provincial securities laws and “forward-looking statements” within
the meaning of applicable Canadian securities regulations.
Forward-looking statements include statements that are predictive
in nature, depend upon or refer to future events or conditions,
include statements regarding operations, business, financial
condition, expected financial results, performance, prospects,
opportunities, priorities, targets, goals, ongoing objectives,
strategies and outlook of the Company and its subsidiaries, as well
as the outlook for North American and international economies for
the current fiscal year and subsequent periods, and include words
such as “expects,” “likely,” “anticipates,” “plans,” “believes,”
“estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts”
or negative versions thereof and other similar expressions, or
future or conditional verbs such as “may,” “will,” “should,”
“would” and “could”.
Although we believe that our anticipated future
results, performance or achievements expressed or implied by the
forward-looking statements and information are based upon
reasonable assumptions and expectations, the reader should not
place undue reliance on forward-looking statements and information
because they involve known and unknown risks, uncertainties and
other factors, many of which are beyond our control, which may
cause the actual results, performance or achievements of our
Company to differ materially from anticipated future results,
performance or achievement expressed or implied by such
forward-looking statements and information.
Factors that could cause actual results to
differ materially from those contemplated or implied by
forward-looking statements include, but are not limited to: the
impact or unanticipated impact of general economic, political and
market factors in the countries in which we do business; the
behaviour of financial markets, including fluctuations in interest
and foreign exchange rates; global equity and capital markets and
the availability of equity and debt financing and refinancing
within these markets; insurance risks including pricing risk,
concentration risk and exposure to large losses, and risks
associated with estimates of loss reserves; strategic actions
including dispositions; the ability to complete and effectively
integrate acquisitions into existing operations and the ability to
attain expected benefits; changes in accounting policies and
methods used to report financial condition (including uncertainties
associated with critical accounting assumptions and estimates); the
ability to appropriately manage human capital; the effect of
applying future accounting changes; business competition;
operational and reputational risks; technological change; changes
in government regulation and legislation within the countries in
which we operate; governmental investigations; litigation; changes
in tax laws; changes in capital requirements; changes in
reinsurance arrangements and availability and cost of reinsurance;
ability to collect amounts owed; catastrophic events, such as
earthquakes, hurricanes or pandemics; developments related to
COVID-19, including the impact of COVID-19 on the economy and
global financial markets; the possible impact of international
conflicts and other developments including terrorist acts and
cyberterrorism; risks associated with reliance on distribution
partners, capacity providers and program administrators; third
party risks; risk that models used to manage the business do not
function as expected; climate change risk; risk of economic
downturn; risk of inflation and other risks and factors detailed
from time to time in our documents filed with securities regulators
in Canada.
We caution that the foregoing list of important
factors that may affect future results is not exhaustive. When
relying on our forward-looking statements, investors and others
should carefully consider the foregoing factors and other
uncertainties and potential events. Except as required by law, the
Company undertakes no obligation to publicly update or revise any
forward-looking statements or information, whether written or oral,
that may be as a result of new information, future events or
otherwise.
Cautionary Non-IFRS and Other Financial
Measures
Reported results conform to generally accepted
accounting principles (GAAP), in accordance with IFRS. In addition
to reported results, the Company also presents certain financial
measures, including non-IFRS financial measures that are
historical, non-IFRS ratios, and supplementary financial measures,
to assess results. Non-IFRS financial measures, such as operating
net income, are utilized to assess the Company’s overall
performance. To arrive at operating results, the Company adjusts
for certain items to normalize earnings to core operations, in
order to reflect our North American specialty operations. Non-IFRS
ratios include a non-IFRS financial measure as one or more of its
components. Examples of non-IFRS ratios include operating diluted
earnings per share and operating ROE. The Company believes that
non-IFRS financial measures and non-IFRS ratios provide the reader
with an enhanced understanding of our results and related trends
and increase transparency and clarity into the core results of the
business. Non-IFRS financial measures and non-IFRS ratios are not
standardized terms under IFRS and, therefore, may not be comparable
to similar terms used by other companies. Supplementary financial
measures depict the Company’s financial performance and position,
and are explained in this document where they first appear, and
incorporates information by reference to the Company’s current
MD&A, for the three and six months ended June 30, 2023. To
access MD&A, see Trisura’s website or SEDAR at www.sedar.com.
These measures are pursuant to National Instrument 52-112 Non-GAAP
and Other Financial Measures Disclosure.
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