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Trisura Group Ltd T.TSU

Alternate Symbol(s):  TRRSF

Trisura Group Ltd. is a specialty insurance provider. The Company is engaged in operating in surety, risk solutions, corporate insurance, and fronting business lines of the market. It has investments in subsidiaries through which it conducts insurance and reinsurance operations. Those operations are primarily in Canada (Trisura Canada) and the United States (Trisura US). Its segments include the operations of Trisura Canada, comprising surety business underwritten in both Canada and the United States, and risk solutions, fronting and corporate insurance products primarily underwritten in Canada and Trisura US, which provides specialty fronting insurance solutions underwritten in the United States. The main products offered by its surety business line are contract surety bonds, commercial surety bonds, developer surety bonds, and new home warranty insurance. Its contract surety bonds, such as performance and labor and material payment bonds, are primarily for the construction industry.


TSX:TSU - Post by User

Post by retiredcfon Apr 07, 2023 8:01am
219 Views
Post# 35384457

TSI Wealth Daily Advice

TSI Wealth Daily Advice

Earnings just rocketed 47.9% at Trisura Group

Trisura Group

On June 22, 2017, Brookfield Asset Management Inc. (Toronto symbol BAM.A) spun off its specialty insurance business as a separate company, Trisura Group. 

Today this specialty insurer is a sterling example of why we love spinoffs and the power they have to outperform their competitors. We first recommended this firm on December 2017 at $27.00—just $6.75 when you adjust for a subsequent 4-1 share split. 

This power growth stock is now up 373% for our subscribers, including 299% since the start of the pandemic.

TRISURA GROUP LTD. (Toronto symbol TSU; www.trisura.com) took its current form on June 22, 2017, when Brookfield Asset Management Inc. (old Toronto symbol BAM.A) spun off its specialty insurance business as Trisura. Investors received one Trisura share for every 170 Brookfield shares they held.

The company provides specialty insurance and services not available through traditional insurers.

Claims under these policies are less frequent, but can be much higher.

Trisura cuts that risk with reinsurance contracts. The company uses that coverage, purchased from another insurance provider, to insulate itself (at least in part) from the risk of a major claims event.

Trisura has three main subsidiaries: Trisura Canada sells property and casualty insurance products in Canada; Trisura U.S. focuses on the U.S. market; and Trisura International, based in the Barbados, sells reinsurance products.

The company’s revenue rose strongly between 2018 and 2022 on a mix of increased business for its existing operations as well as its acquisition of smaller specialty insurers and brokerages. Revenue jumped 104.6%, from $219.0 million in 2018 to $448.3 million in 2019. Revenue then increased 106.7% in 2020, to $926.4 million, before climbing a further 68.7% in 2021, to $1.6 billion. In 2022, revenue then shot up 55.7%, to $2.4 billion.

Trisura’s earnings before one-time items also jumped over the five years—from $8.6 million, or $0.32 a share (adjusted for Trisura’s 4-for-1 share split in July 2021), in 2018 to $83.0 million, or $1.87 a share, in 2022.

In the quarter ended December 31, 2022, the company’s gross premiums jumped 37.2%, to $664.8 million from $484.7 million a year earlier. That gain was due to higher premiums written in both Canada and the U.S.

The higher revenue, as well as higher-than-expected investment income, boosted the company’s earnings (excluding one-time items) by 79.5%, to $23.7 million, up from $13.2 million. Due to more shares outstanding, earnings per share improved 64.5%, to $0.51 from $0.31.

The combined ratio for Trisura’s Canadian business improved to 83.5% in the latest quarter from 91.2% a year earlier. (The ratio represents claims that the company paid out divided by the premiums it took in. The lower, the better).

The higher combined ratio was due to strong underwriting performance—especially for Trisura’s Canadian business, which had its best year to date.

Growth Stocks: Modest Valuation And Visibility Suggest Even Higher Share Prices For Trisura Group

Trisura is also using acquisitions to fuel its growth. For example, it recently paid an undisclosed sum for the Canadian surety operations of Sovereign Insurance. In 2021, this business generated premiums of over $16 million.

Moreover, the company has no controlling shareholder, so its improving market share and relatively small market cap could make it a highly attractive takeover target for a larger financial-services firm. That’s not reason enough to buy, but it adds to the stock’s appeal.

While the stock has declined 33% since its recent peak of $47.90 in December 2022, it’s still up an impressive 488% since the 2017 spinoff. Our subscribers who bought the stock when we first recommended it in December 2017 at $27.00 (or $6.75 when you adjust for a subsequent 4-1 share split) have enjoyed a 373% gain! We think they can expect much more growth in the coming years.

Trisura’s outlook remains bright. That’s partly because of its acquisition of Sovereign Insurance’s Canadian surety operations (which guarantee specific tasks are completed). They should help lift Trisura’s earnings by about 12.8%, from $1.87 a share in 2022 to a forecast $2.11 for 2023. The stock trades at a reasonable 15.1 times the 2023 forecast.

And yet the stock gets little coverage. That illustrates the importance of the third part of our multi-prong approach to investing—to downplay stocks in the media/broker limelight. (The other two parts are to (1) invest in well-established companies; and (2) spread your money across most if not all of the five main economic sectors.)

We feel Trisura’s strong prospects could push the stock even higher. Its relatively small size could also turn it into an attractive takeover target for a larger industry player.

 

Recommendation in Spinoffs & Takeovers: Trisura Group Ltd. is a buy.

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