Trisura Group Ltd.
(TSU-T) C$35.94
Q1/23: Strong Underlying Fundamentals Drive Solid Growth Event
Trisura reported operating EPS of $0.61 vs. our estimate and consensus of $0.49 (prior to releasing preliminary results of $0.57-$0.62). Note that operating EPS excludes losses on the run-off U.S. program. Reported EPS was $0.30/share. The EPS beat was spread across multiple line items, including stronger-than-expected underwriting revenue (mostly premiums), higher investment income, and a lower- than-expected loss ratio in Canada. Operating ROE (TTM) was a strong 20.6%.
The company announced that it will be hosting its inaugural investor day on June 1 in Toronto. Management teams from Canada and the U.S. will be presenting in a fireside-chat format discussing long-term strategies and market conditions.
Impact: POSITIVE
Despite the stock being up over 20% from recent lows, Trisura's share price remains ~17% below where the stock was trading prior to the Q4/22 earnings delay announcement. We believe this reflects a cohort of investors taking the wait-and- see approach with regard to the run-off program, providing an attractive entry point to a company with a strong growth profile and high profitability. As the company continues to execute against its long-term strategy, we expect the stock to gradually re-rate higher.
While there was some noise associated with the transition to IFRS 17 (for the insurers generally), we believe that should not take away from the strong underlying results at Trisura in the quarter. Gross premiums written (GPW) of $660mm were relatively stable q/q and up 37% y/y (consistent with last quarter) and were above our forecast of $644mm, mostly driven by higher-than-expected premiums in the U.S. and strong growth in Canada.
TD Investment Conclusion
Trisura continues to demonstrate its 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 and Surety 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.