Trisura Group Ltd T.TSU

RBC

[retiredcf]

Trisura Group Ltd. Investor Day Highlights

TSX: TSU | CAD 41.37 | Outperform | Price Target CAD 52.00

Sentiment: Neutral
Overview: Trisura held an Investor Day today following their Annual Meeting. CEO David Clare provided some high level commentary on Trisura followed by a fireside chat format with senior executives (Chris Yoshio Sekine, President & CEO of Trisura Guarantee Insurance; Michael Beasley, President & CEO of Trisura Specialty Insurance Company; and Terry Michalakos, SVP, North American Surety). Overall, we found the message to be consistent with recent commentary. The company continues to see growth opportunities across key areas of the platform (Canadian operation, fronting in both markets, and the U.S.) with an opportunity to expand relationships with distribution partners. Management also stressed increased diversification (mix and fee income), service levels, and risk management. We remain at Outperform on the shares (there are no changes to our estimates). Below are key takeaways:

US expansion: The expansion of the Corporate Insurance platform was a focal part of the discussion. Trisura is still planning to offer similar lines of business in U.S. Corporate Insurance that it does already in its Canadian operation (its expansion of U.S. surety was used as a guidepost). In other words, it is about geographic expansion. Management reiterated that the company isn't planning for top-10 market shares in U.S. insurance lines but simply increasing share would be a growth driver. Trisura is contemplating whether offering warranty insurance in the U.S. will meet return hurdles.

Surety: Surety was highlighted as a key area of emphasis in the years ahead particularly in the U.S. The objective is to generate premium levels in U.S. surety that are similar to its Canadian surety business (Trisura's U.S. surety operation wrote $25 mm in premium in 2023). Trisura expects the recently closed acquisition of a Treasury listed vehicle to provide a platform for growth in U.S. surety over time (the company noted that the U.S. surety market is 11x the size of the Canadian surety market).

Fronting: Management sees opportunities for premium growth in both its Canadian and U.S. fronting operations. We view Trisura's Canadian fronting operation as in a good spot because they are well known (with likely less competition) to take advantage of global players wanting to participate in the Canadian insurance marketplace. In U.S. fronting, the company noted that there is some increased competition in U.S. fronting but they are less impacted compared to some of the other players. With the Atlantic Hurricane season underway, Trisura reiterated that its book has little property catastrophe risk (and the property risk it does have has significant reinsurance protection). Trisura believes that the company is well situated in U.S. fronting (3rd largest U.S. fronting company) and is targeting mid-teens growth while introducing 10 new programs annually.

Financial targets & Other: Trisura is targeting mid-to-high teens ROEs as well as revenue growth and book value growth in the same range. Trisura also reiterated its previous target of reaching $1 billion in ending book value by the end of 2027 (vs. $662 billion now). Importantly, it expects near term growth plans to be funded internally with existing capital levels. Organic growth remains the preference although M&A could be considered in certain cases.