Trisura Group Ltd.
(TSU-T) C$34.52
2023 Investor Day Supports Positive Outlook Event
Trisura held its inaugural Investor Day yesterday afternoon to discuss the various operating segments of the business, highlighting some key accomplishments over the past several years, as well as how it is positioned well to capitalize on opportunities, going forward. The company also showcased the depth/strength of its management teams on both sides of the border and detailed its latest strategic initiatives (launch of U.S. Surety, Corporate Insurance, and admitted products, as well as fronting in Canada). Although there was nothing that we would consider materially new, the vast majority of the information presented was supportive of our long-term positive outlook on the company.
Impact: POSITIVE
Management laid out three key targets that point to book value roughly doubling over the next five years. Those targets are mid- to high-teens (~15% +) revenue growth, ROE, and BVPS growth. For context, Trisura's operating ROE in 2022 was 20% and BVPS increased 130% over the previous five-year period. The targets for the next five years imply continued momentum in the existing businesses, as well as contribution from the early stage initiatives listed above.
Investment income should continue to be a tailwind in 2023. Investment income doubled to $25.2mm from 2020 to 2022 and in Q1/23, it was $10mm; ~40% of total 2022 investment income. This has been driven by growth in the business, as well as reinvesting the portfolio into increasingly higher rates. Moreover, investment income is predictable and repeatable.
Our estimates and $53.00 target price are unchanged. The stock continues to trade at a material discount to its historical average and peers.
TD Investment Conclusion
We believe Trisura demonstrates a 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, Surety, and Corporate Insurance in the U.S.); and 3) relative valuation compared with peers (KNSL and RLI are trading at higher multiples). The company has achieved impressive growth over the past 3-5 years, which we believe supports our outlook of the earnings trajectory in 2023 and beyond.