CIBCHave a $55.00 target. GLTA
EQUITY RESEARCH
May 4, 2023 Flash Research
TRISURA GROUP LTD.
Clarity Provided On Q1 Results
Our Take: Trisura indicated that it will report Q1 earnings on May 11. We
suspect that the announcement of the reporting date was a bit later than
normal owing to the implementation of IFRS 17 & 9 (but sense that investors
were becoming a bit jittery about the lack of a release date owing to the delay
of Q4 results in February). The company also provided an estimate of the
earnings impact from the run-off program and operating EPS for the quarter.
We believe that the magnitude of the impact from the run-off program
appears very manageable in the context of full-year earnings, and feel
inclined to look through it considering that the program should have no
impact beyond 2023. Positively, operating earnings per share came in ~10%-
20% above our estimate, which suggests to us that claims activity was
relatively benign in the quarter and underlying business performance
continues to exceed expectations.
Key Takeaways
• TSU announces an earnings release date. Trisura indicated that it
will release results after market close on Thursday, May 11, with a
conference call the following morning. We sense that investors were
starting to become a bit jittery about the lack of a date, particularly in
the context of the earnings delay in Q4. We suspect that the
reporting date may have been firmed up a bit later than normal owing
to the implementation of IFRS 17 & 9 this quarter.
• Update provided on the run-off program. When Trisura
announced the Q4 write-down of reinsurance recoverables, it also
signaled potential for other one-time costs as it exited the program
over the course of 2023. The company estimates an after-tax
earnings drag of $5 million to $9 million in the first half of 2023, and
intends to provide an estimate of the second-half impact in advance
of Q3 reporting. Overall, we are not too concerned considering that
1) the magnitude is manageable in the context of consensus full-year
earnings expectations of ~$100 million, 2) the program will run-off in
its entirety by year-end and will have no further influence beyond
2023, and 3) unlike the Q4 write-down, the earnings impact is not
expected to result in a reduction of regulatory capital.
• Q1 operating earnings were above expectations. In the context of
the transition to IFRS 17 & 9, Trisura indicated that it intends to
introduce a new core earnings measure called “Operating Earnings
Per Share” which is comparable to the previous definition of adjusted
earnings per share (and excludes the impact from the run-off
program). TSU indicated that it expects Q1 operating EPS to be in
the range of $0.57-$0.62, which is ~10%-20% above our estimate.
This suggests to us that claims activity was relatively benign in Q1,
and that overall business performance exceeded our expectations.