TSX:TSU - Post Discussion
Post by
retiredcf on Aug 06, 2024 9:24am
RBC 2
Current and upside scenario targets are $52.00 and $56.00. GLTA
August 2, 2024
Trisura Group Ltd.
Premium growth picks up led by the Canada unit
Our View: We think that the story of the quarter was strong premium growth in Canada across key areas. Overall underwriting profitability remains good in Canada (80s combined ratio albeit up from Q1) while U.S. profitability was in line with our forecast. We expect Trisura to focus on growing across Canada where underwriting profitability remains strong and expanding US fronting/programs and surety where it makes sense. Book value growth was solid in the quarter. There is no change to our Outperform rating.
We are revising our 2025 EPS forecast to $2.66 (from $2.75), reflecting Q2 results and slight assumption tweaks to investment income and unit profitability for 2H24. Our 2025 EPS forecast of $3.10 remains unchanged.
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 vs. our estimate was mostly in the U.S. segment and driven by lower-than-modeled earned premium and net investment income.
Key Takeaways: 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. The Canada combined ratio 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. 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 for the Canada unit grew +30.5% y/y to $314.4 mm vs. $240.8 million last year (RBC estimate was +22.0%) while GWP for the U.S. unit grew 14.4% y/y to $641.7 mm vs. $560.9 million last year (RBC estimate was +8.0%). Management remains focused on growing its US business through expanding relationships with partners (and new programs). Trisura is now targeting retentions averaging 5% to 15% on programs (previously 5% to 10%). The debt/cap. ratio increased to 12.4% in Q2 (from 10.2% in Q1) and reflected increased borrowings to capitalize its US surety balance sheet.
1) Premium growth trends remained strong in Canada; 2) Solid sequential book value growth; and 3) Good underlying profitability in the U.S. and Canada.
1) Investment income light of our expectations; 2) Higher expense ratio in Canada; and 3) U.S. earned premiums trailed our forecast.
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