Trisura Group Ltd T.TSU

RBC

[retiredcf]

Can't believe that someone sold their shares for $39 this morning. Kudos to the purchaser. GLTA

August 1, 2024

Trisura Group Ltd.
Q2 First Glance, Growth remained strong

TSX: TSU | CAD 44.60 | Outperform | Price Target CAD 52.00

Sentiment: Neutral

Trisura reported Q2/24 operating EPS of $0.65 vs. $0.56 in Q2/23, which trailed our $0.67 estimate but matched the consensus expectation. The modest shortfall versus our estimate was mostly in the US segment and driven by lower than modeled earned premium and net investment income. 

Initial thoughts: Trisura's premium growth remained strong across both segments during the June quarter as the company is seeing strong growth across the board (particularly in Canada where growth was +30%). The U.S. segment's variance to our estimate was more retention driven (earned premiums) along with net investment income. The Canada combined ratio was a bit higher than the recent run rate (albeit expense ratio driven) and fairly in line ex that impact. The company will hold a conference call tomorrow morning at 9AM ET. We expect key areas of focus on the Q2 call to include the growth outlook for 2H24, views on the fronting business, color on the U.S. marketplace, and Canadian profitability.

Canada Segment:  Overall operating income for the Canada segment totaled $18.4 mm vs. $16.1 million last year, which was shy of our $19.9 million assumption was 89.8% vs $82.9%, which was above recent quarters and our 84.7% assumption. The big variance there was on the expense ratio (at 70.2% vs. in the mid 60s in recent quarters) but that included a few one-time type items. The loss ratio in the Canada segment was 19.6%, in line with our 19.5% assumption. Gross written premiums grew +30.5% y/y to $314.4 mm vs. $240.8 million last year (RBC estimate was +22.0%) while net written premiums increased +27.8% y/y to $153.5 mm (RBC estimate was +22.4%).

U.S. segment: Overall operating income for the U.S. segment totaled $10.4 mm vs. $11.1 million last year, which compared with our  $14.0 million assumption. The U.S. fronting operational ratio was 85.5%, consistent with our assumption. Gross written premiums grew 14.4% y/y to $641.7 mm vs. $560.9 million last year (RBC estimate was +8.0%) while net written premiums were far better than expected at $76.8 mm vs. $17.8 million (RBC estimate was +2.3%). Net earned premium in the U.S. segment was $49.6 million vs. our $57.6 million assumption. Fee income in the U.S. segment totaled $20.2 million, close to our $21.2 million assumption.

Other: Book value per share rose 4.8% sequentially to end Q2 at $14.56/share. Overall companywide net investment income grew to $16.9 million from $11.9 million (RBC assumption was $19.3 million), reflecting higher reinvestment yields. The Corporate & Other segment produced a loss of around ($0.6) million, which compares to our $(1.4) million loss assumption