TSX:TSU - Post Discussion
Post by
retiredcf on Aug 11, 2023 12:19pm
TD
Maintain their $56.0 target. GLTA
Trisura Group Ltd.
(TSU-T) C$32.81
Q2/23: Strong Underlying Results and U.S. Surety Acquisition Event
Trisura reported Q2/23 results and is hosting a conference call this morning at 9:00 a.m. (webcast).
Impact: POSITIVE
Trisura reported operating EPS of $0.56 vs. our estimate/consensus of $0.50 (prior to releasing preliminary results of $0.53-$0.56 last week). Note that operating EPS excludes gains/losses on the run-off U.S. program ($5.3mm after-tax gain this quarter). The EPS beat was spread across multiple line items including much stronger-than-expected underwriting revenue, higher investment income, and a lower-than-expected loss ratio. Operating ROE (TTM) was strong at 19.2%.
Alongside the earnings release, TSU announced a U.S. Surety acquisition of a Treasury-listed platform that is expected to expand distribution relationships and enhance TSU's offering for its recently launched U.S. Surety business. Recall, TSU executed a Surety acquisition in Canada last year and is a major player in the Canadian Surety market.
Gross premiums written (GPW) of $802mm were up 21% q/q and 37% y/y and were well above our forecast of $729mm, mostly driven by higher-than-expected premiums in the U.S. and strong growth in Canadian fronting and Surety.
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U.S.: GPW were up $78mm sequentially; the second-highest q/q growth in the segment's history. On a year-over-year basis, premium growth was a strong 25%. Note that while this is down from the 41% growth last quarter and ~70% y/y growth rate (on average) over the prior four quarters, it is approaching what the company considers to be a more sustainable long-term growth rate of ~20% (and significantly above industry growth rates). This reflects the maturation of existing programs and new program additions. Included in GPW was $61mm of admitted premiums ($53mm LQ and $44mm LY). The fronting operational ratio (a key profitability metric) was sub-80% for the first time since Q1/22 and improved six- points from last quarter.
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Canada: Top-line growth remained solid, with premiums up 24% y/y. Canadian fronting continues to experience good momentum with premiums up 41% y/y, and we saw strong growth in Surety reflecting contribution from the nascent U.S. platform and the Sovereign acquisition as well as organic growth. The combined ratio was up 2-3 points vs. LQ and LY but remains healthy at 82.9%.
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