Trisura Group Ltd T.TSU

TD

[retiredcf]

Have a $56.00 target. GLTA

Trisura Group Ltd.

(TSU-T) C$33.17

TSU Preannounced Q2 Op. EPS Beat and Update on Run-off Program

Event

Yesterday after market, Trisura released preliminary operating EPS results and provided an update on the run-off program in the U.S. (written down in Q4/22). Additionally, the earnings release and conference call has been scheduled for August 10 (after-market) and August 11 (9:00am; webcast), respectively.

Impact: MIXED

• Management expects Q2/23 operating EPS to be $0.53-$0.56, above our estimate (and the street) at $0.50 (5%-11% beat). This points to another strong quarter from an underlying business perspective, in our view. We believe the 15%-22% y/y growth was driven by continued momentum in the top-line and possibly improving operating leverage. Additionally, management guided to an operating ROE >19% (our estimate: 18.9%), relatively consistent with the TTM operating ROE of 20.6% in Q1/23. The company also guided to book value of $530mm, up 3.4% q/q and slightly above our estimate of $527mm.

• The estimated Q2/23 net income impact (after-tax) from the run-off program of positive $5mm is consistent with prior guidance of +$4mm to +$6mm and reflects earned premium offset by run-off and protection costs. This puts the net impact in H1/23 at approximately -$6mm-$7mm. With increased visibility for H2/23, management suggested the impact will be negative $18mm-$23mm reflecting a reversal of the factors listed above (earned premium, run-off and protection costs). With the additional protection, management estimates its retention on the run-off program would be 6%-8% of capital in the event of a 1-in-250 year hurricane at peak storm season (September 30). The H2/23 guidance is somewhat higher than we had expected, but not materially so. It is important to note that this program will be substantially run-off by year-end 2023 and is adjusted out of operating EPS.