Trisura Group Ltd.
(TSU-T) C$34.38
Q1/22 Preview
Event
Effective with this report, Marcel Mclean is assuming coverage of TSU.
TSU will report Q1/22 earnings on May 5, with a conference call scheduled for 9:00 a.m. the following day. We forecast Q1/22 adjusted EPS of $0.37, down from $0.46 last year; consensus: $0.38.
Impact: NEUTRAL
Following Q4/21 results, TSU stock sold off nearly 40%, which we believe was overdone, given what we consider the one-time nature of the elevated claims in the quarter and the continued strong top-line momentum (discussed in our March 16 report). Since the mid-March low, the stock has recovered ~20%.
In Q1/22E, we forecast U.S. GPW of $315mm, up ~$22mm from the prior quarter. The increase falls within the $15mm-$25mm guidance range management has referenced in the past, although it is somewhat lower than the robust growth seen over the previous two quarters (average ~$35mm q/q). Driving this growth are continued favourable market dynamics in the E&S space (high submission activity), as well as increasing momentum in nascent admitted lines. Recall, last quarter, the company wrote ~$24mm of admitted premiums. While the outlook for E&S is generally more positive than admitted over the next ~12 months (given hardening market conditions), the launch of the admitted platform will provide another avenue for growth when the cycle eventually does turn.
In Canada, 2021 was a year characterized by very robust top-line growth across all lines of business (notably new fronting premiums in RS). In 2022, we expect growth rates to return to more long-term sustainable levels, with the ROE returning to the 20% range.
TD Investment Conclusion
We expect Trisura to regain momentum, reflecting the company's strong growth profile and ROE. We continue to like the company based on our view of its: 1) relative underlying earnings and price stability as a P&C insurer; 2) rapidly growing earnings profile, especially in the U.S. (early days of launching into admitted market and Surety in the U.S.); and 3) relative valuation compared with peers (KNSL and RLI are trading at higher multiples, but have similar EPS growth and ROE profiles).