CIBCCurrently have a $55.00 target. GLTA
EQUITY RESEARCH
May 28, 2023 Earnings Update
TRISURA GROUP LTD.
Introducing New Estimates Under IFRS 17 & 9
Our Conclusion
The adoption of a new accounting standard with IFRS 17 has introduced
significant changes to the way that earnings are recognized, measured,
presented and disclosed for insurance and reinsurance companies. The
geography of various line items has changed significantly, and we have
completely rebuilt our financial statement projection model to conform to the
new accounting standard. We are publishing this note with the purpose of
introducing our new operating EPS estimates, which do not differ materially
from our previous forecasts.
Key Points
Operating EPS is the new primary earnings metric. Concurrent with the
transition to a new accounting standard, Trisura has introduced a new
primary measure of earnings: operating earnings and operating earnings per
share. The definition of operating EPS is largely consistent with the previous
definition of adjusted EPS in the sense that it excludes the impact of
fluctuating market yields on discounted claims reserves, net credit
impairment losses and mark-to-market volatility on the investment portfolio.
We believe that operating EPS should be construed and interpreted in the
same way as the previous adjusted EPS metric: as a measure of core
operating profitability. Our new EPS estimates are consistent with Trisura’s
definition of operating EPS, and we use this metric as a basis to formulate
our price target.
Focus remains on the same key performance indicators. Despite the
new language introduced by IFRS 17 & 9, we believe that the interpretation
of results will remain largely focused on the same key performance
indicators. Top-line growth, underwriting margins (excluding the impact of
changing market yields on discounted claims reserves), and adjusted ROE
continue to be important metrics.
Actuals to be backfilled at a later date. Although the transition to a new
accounting statement compels prior-year restatement of earnings under the
new standard, we do not have a fulsome history of actual operating EPS
calculated under IFRS 17 & 9. As the company releases Q2/23 to Q4/23
results, we expect to receive comparable period earnings under the new
accounting standard. However, the estimates summary on the right-hand
side of this page does not present 2021 and 2022 actual EPS owing to the
absence of this data under the new accounting standard.