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Trisura Group Reports Third Quarter 2022 Results

T.TSU

TORONTO, Nov. 03, 2022 (GLOBE NEWSWIRE) -- Trisura Group Ltd. (“Trisura” or “Trisura Group”) (TSX: TSU), a leading specialty insurance provider, today announced financial results for the third quarter of 2022.

David Clare, President and CEO of Trisura, stated, “Trisura extended its track record of performance, reporting income of $23.7 million, a new quarterly record. Growth in premium and profitable underwriting supported by increased investment income generated a 19.9% return on equity(1) despite investments in infrastructure.

“Expansion of market share and maturation of our platform resulted in premium growth of 59.3% in the quarter. In Canada, disciplined underwriting and greater scale generated an 83.1% combined ratio(1). Our US business bound a quarterly record $465.6 million of gross premiums and reported deferred fee income of $40.7 million.

“In July we raised $144.0 million in equity capital, the proceeds of which are to support growth across the platform. We also closed the acquisition of a book of surety business in Canada, adding to our momentum in the years to come.”

Financial Highlights

  • EPS of $0.51 in Q3 2022 compared to $0.38 in Q3 2021. Adjusted EPS(2) of $0.45 for the quarter compared to $0.41 in the prior period.

  • Book value per share(1) of $11.47 increased 35.1% from September 30, 2021, driven by our recent equity raise, strong earnings, and foreign currency movements, but diluted by unrealized losses on investments in the quarter.

  • Gross written premiums growth of 59.3% in Q3 2022 reflected sustained growth in Canada and expansion in US fronting.

  • Net income of $23.7 million in the quarter grew 47.9% compared to Q3 2021, driven by growth and profitable underwriting in Canada and the US.

  • ROE of 19.9% compared to 20.4% in Q3 2021, exceeding our mid-teens target despite significant growth and a larger capital base.

  • Consolidated combined ratio is 81.6%, and consolidated loss ratio(1) is 29.9% for Q3 2022.
Amounts in C$ millions Q3 2022 Q3 2021 Variance Q3 2022 YTD Q3 2021 YTD Variance
Gross premiums written 644.8 404.7 59.3 % 1,768.4 1,078.5 64.0 %
Net income 23.7 16.1 47.9 % 65.0 52.3 24.4 %
EPS – diluted, $ 0.51 0.38 34.2 % 1.50 1.24 21.0 %
Adjusted EPS – diluted, $ 0.45 0.41 9.8 % 1.37 1.16 18.1 %
Book value per share, $ 11.47 8.49 35.1 % 11.47 8.49 35.1 %
Debt-to-Capital ratio(1) 12.5 % 17.7 % (5.2pts ) 12.5 % 17.7 % (5.2pts )
LTM ROE 19.9 % 20.4 % (0.5pts ) 19.9 % 20.4 % (0.5pts )
Adjusted LTM ROE(3) 19.2 % 18.9 % 0.3pts 19.2 % 18.9 % 0.3pts
Combined ratio – Canada 83.1 % 79.3 % 3.8pts 81.2 % 76.9 % 4.3pts
Fronting operational ratio – US(1) 83.4 % 73.0 % 10.4pts 80.5 % 70.1 % 10.4pts

Insurance Operations

  • GPW in Canada increased by 24.3% in Q3 2022. Strong underwriting performance across all lines contributed to a combined ratio of 83.1% and an ROE of 30.6%.

  • Fronting arrangements in Canada contributed $72.5 million premiums in the quarter.

  • GPW in the US of $465.6 million in the quarter, increased by 78.7%, compared to $260.5 million in Q3 2021, and fee income of $18.2 million in the quarter increased by 72.6% compared to $10.5 million in Q3 2021. Growth was the result of maturing and new programs and contributed to improved net income of $8.6 million in the quarter and a 13.6% ROE.

Capital

  • The Minimum Capital Test ratio(4) of our regulated Canadian subsidiary was 232% as at September 30, 2022 (229% as at December 31, 2021), which comfortably exceeded regulatory requirements(5) of 150%.
  • The Risk-Based Capital of the regulated insurance companies of Trisura US was in excess of the various Company Action Levels of the states in which it is licensed at September 30, 2022.
  • Consolidated debt-to-capital ratio of 12.5% as at September 30, 2022 is below our long-term target of 20.0%.

Investments

  • Interest and dividend income rose 53.7% in the quarter compared to Q3 2021. The portfolio benefited from higher yields and increased capital generated from strong operational performance and the equity raise.

Corporate Development

  • In July 2022, the Company raised $144.0 million in equity capital to support growth across the platform.
  • In September 2022, Trisura announced the acquisition of Sovereign Insurance’s surety business in Canada.

Earnings Conference Call

Trisura will host its Third Quarter Earnings Conference Call to review financial results at 9:00 a.m. ET on Friday November 4th, 2022.

To listen to the call via live audio webcast, please follow the link below:
https://edge.media-server.com/mmc/p/oma9f9sv
A replay of the call will be available through the link above.

About Trisura Group

Trisura Group Ltd. is a specialty insurance provider operating in the surety, risk solutions, corporate insurance, fronting and reinsurance segments of the market. Trisura has investments in wholly owned subsidiaries through which it conducts insurance and reinsurance operations. Those operations are primarily in Canada (“Trisura Canada”) and the United States (“Trisura US”). Trisura Group Ltd. is listed on the Toronto Stock Exchange under the symbol “TSU”.

Further information is available at http://www.trisura.com/group. Important information may be disseminated exclusively via the website; investors should consult the site to access this information. Details regarding the operations of Trisura Group Ltd. are also set forth in regulatory filings. A copy of the filings may be obtained on Trisura Group’s SEDAR profile at www.sedar.com.

For more information, please contact:
Name: Bryan Sinclair
Tel: 416 607 2135
Email: bryan.sinclair@trisura.com


Trisura Group Ltd.
Condensed Interim Consolidated Statements of Financial Position
As at September 30, 2022 and December 31, 2021
(in thousands of Canadian dollars, except as otherwise noted)

As at September 30, 2022 December 31, 2021
Cash and cash equivalents 384,553 341,319
Investments 740,548 641,140
Premiums and accounts receivable, and other assets 437,804 311,629
Recoverable from reinsurers 2,150,255 1,375,354
Deferred acquisition costs 412,805 304,580
Capital assets and intangible assets 20,280 17,109
Deferred tax assets 19,254 9,223
Total assets 4,165,499 3,000,354
Accounts payable, accrued and other liabilities 100,121 216,633
Reinsurance premiums payable 472,482 335,673
Unearned premiums 1,376,791 965,245
Unearned reinsurance commissions 245,763 152,003
Unpaid claims and loss adjustment expenses 1,369,026 897,011
Debt outstanding 75,000 75,000
Total liabilities 3,639,183 2,641,565
Shareholders' equity 526,316 358,789
Total liabilities and shareholders' equity 4,165,499 3,000,354

Trisura Group Ltd.
Condensed Interim Consolidated Statements of Comprehensive Income
For the three and nine months ended September 30
(in thousands of Canadian dollars, except as otherwise noted)

Q3 2022 Q3 2021 Q3 2022 YTD Q3 2021 YTD
Gross premiums written 644,820 404,678 1,768,415 1,078,466
Net premiums written 106,414 104,631 360,517 282,196
Net premiums earned 111,996 75,489 303,016 195,141
Fee income 18,855 11,358 53,393 37,254
Net investment income 6,583 2,712 15,683 175
Net gains 3,723 2,123 4,690 10,758
Total revenues 141,157 91,682 376,782 243,328
Net claims and loss adjustment expenses (33,457 ) (20,010 ) (86,117 ) (45,507 )
Net commissions (48,510 ) (29,527 ) (129,929 ) (74,416 )
Operating expenses (28,263 ) (19,001 ) (73,499 ) (55,752 )
Interest expenses (823 ) (592 ) (2,056 ) (1,060 )
Total claims and expenses (111,053 ) (69,130 ) (291,601 ) (176,735 )
Income before income taxes 30,104 22,552 85,181 66,593
Income tax expense (6,358 ) (6,495 ) (20,190 ) (14,329 )
Net income 23,746 16,057 64,991 52,264
Other comprehensive (loss) income (218 ) 2,473 (43,653 ) 7,070
Comprehensive income 23,528 18,530 21,338 59,334

Trisura Group Ltd.
Condensed Interim Consolidated Statements of Cash Flows
For the three and nine months ended September 30
(in thousands of Canadian dollars, except as otherwise noted)

Q3 2022 Q3 2021 Q3 2022 YTD Q3 2021 YTD
Net income 23,746 16,057 64,991 52,264
Non-cash items (4,401 ) 6,228 2,937 16,020
Change in working capital 16,735 58,122 70,405 130,225
Realized gains (1,494 ) (354 ) (6,979 ) (1,835 )
Income taxes paid (7,305 ) (3,981 ) (28,829 ) (11,168 )
Interest paid (110 ) (99 ) (1,606 ) (456 )
Net cash from operating activities 27,171 75,973 100,919 185,050
Proceeds on disposal of investments 22,228 48,066 120,083 108,346
Purchases of investments (156,651 ) (53,682 ) (333,318 ) (228,359 )
Net purchases of capital and intangible assets (1,328 ) (454 ) (1,734 ) (2,979 )
Net cash used in investing activities (135,751 ) (6,070 ) (214,969 ) (122,992 )
Shares issued 143,494 - 145,160 859
Shares purchased under Restricted Share Units plan (61 ) (125 ) (2,167 ) (2,055 )
Issuance of note payable - - - 75,000
Loans received - - 30,000 26,970
Loans repaid (30,000 ) - (30,000 ) (54,525 )
Lease payments (477 ) (466 ) (1,424 ) (1,154 )
Net cash from (used in) financing activities 112,956 (591 ) 141,569 45,095
Net increase in cash and cash equivalents 4,376 69,312 27,519 107,153
Cash and cash equivalents, beginning of period 367,966 172,817 341,319 136,519
Currency translation 12,211 3,203 15,715 1,660
Cash and cash equivalents, end of period 384,553 245,332 384,553 245,332

Non-IFRS Financial Measures

Table 1 – Reconciliation of reported Net income to Adjusted net income(6): reflect Net income, adjusted for certain items to normalize earnings to core operations in order to better reflect our North American specialty operations.

Q3 2022 Q3 2021 Q3 2022 YTD Q3 2021 YTD
Net income 23,746 16,057 64,991 52,264
Adjustments:
Impact of share based compensation 441 1,117 (2,507 ) 8,282
Loss on sale of structured insurance assets - 1,336 - 1,336
Net gains (3,723 ) (2,123 ) (4,690 ) (10,758 )
Net gains from life annuity - (633 ) - (2,032 )
Tax impact of above items 470 1,272 1,484 524
Adjustments relating to income tax benefits - 285 - (936 )
Adjusted net income 20,934 17,311 59,278 48,680

Table 2 – ROE and Adjusted ROE: a measure of the Company’s use of equity.

Q3 2022 Q3 2021
LTM net income 75,286 63,213
LTM average equity 377,778 310,551
ROE 19.9 % 20.4 %
LTM net income 75,286 63,213
Adjustments:
Impact of share based compensation (565 ) 9,027
Loss on sale of structured insurance assets - 1,336
Net gains (8,416 ) (13,580 )
Net losses (gains) from life annuity 2,668 (1,440 )
Impact of Catastrophe programs reinsurance 2,158 -
Tax impact of above items 1,358 1,099
Adjustments relating to non-recurring income tax benefits - (936 )
Adjusted LTM net income(3) 72,489 58,719
LTM average equity 377,778 310,551
Adjusted LTM ROE 19.2 % 18.9 %

Table 3 – Reconciliation of Average equity(7) to LTM average equity: LTM average equity is used in calculating adjusted ROE.

Q3 2022 Q3 2021
Average equity 438,032 312,807
Adjustments: days in quarter proration (60,254 ) (2,256 )
LTM average equity 377,778 310,551

Footnotes

(1) This is a supplementary financial measure. Refer to Q3 2022 MD&A, Section 10, Operating Metrics table for its composition. To access MD&A, see Trisura’s website or SEDAR at www.sedar.com.

(2) This is a non-IFRS ratio, see table 10.2 in Q3 2022 MD&A for details on composition, as well as each non-IFRS financial measure used as a component of ratio, and an explanation of how it provides useful information to an investor. Non-IFRS ratios are not standardized under the financial reporting framework used to prepare the financial statements of the Company to which the ratio relates and might not be comparable to similar ratios disclosed by other companies.

(3) This is a non-IFRS ratio. See table 10.4 in Q3 2022 MD&A for details on composition, as well as each non-IFRS financial measure used as a component of ratio, and an explanation of how it provides useful information to an investor.

(4) This measure is calculated in accordance with the Office of the Superintendent of Financial Institutions Canada’s (OSFI’s) Guideline A, Minimum Capital Test.

(5) This target is in accordance with OSFI’s Guideline A-4, Regulatory Capital and Internal Capital Targets.

(6) See section on Non-IFRS financial measures, Reconciliation of reported Net income to Adjusted net income. Adjusted net income is a non-IFRS financial measure. Non-IFRS financial measures are not standardized financial measures under the financial reporting framework used to prepare the financial statements of the Company to which the measure relates and might not be comparable to similar financial measures disclosed by other companies. Details and an explanation of how it provides useful information to an investor can be found in the reconciliation table.

(7) Average equity is calculated as the sum of opening equity and closing equity over the last twelve months, divided by two.

Cautionary Statement Regarding Forward-Looking Statements and Information

Note: This news release contains “forward-looking information” within the meaning of Canadian provincial securities laws and “forward-looking statements” within the meaning of applicable Canadian securities regulations. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, include statements regarding the operations, business, financial condition, expected financial results, performance, prospects, opportunities, priorities, targets, goals, ongoing objectives, strategies and outlook of the Company and its subsidiaries, as well as the outlook for North American and international economies for the current fiscal year and subsequent periods, and include words such as “expects,” “likely,” “anticipates,” “plans,” “believes,” “estimates,” “seeks,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would” and “could”.

Although we believe that our anticipated future results, performance or achievements expressed or implied by the forward-looking statements and information are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements and information because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, which may cause the actual results, performance or achievements of our Company to differ materially from anticipated future results, performance or achievement expressed or implied by such forward-looking statements and information.

Factors that could cause actual results to differ materially from those contemplated or implied by forward-looking statements include, but are not limited to: developments related to COVID-19, including the impact of COVID-19 on the economy and global financial markets; the impact or unanticipated impact of general economic, political and market factors in the countries in which we do business; the behaviour of financial markets, including fluctuations in interest and foreign exchange rates; global equity and capital markets and the availability of equity and debt financing and refinancing within these markets; strategic actions including dispositions; the ability to complete and effectively integrate acquisitions into existing operations and the ability to attain expected benefits; changes in accounting policies and methods used to report financial condition (including uncertainties associated with critical accounting assumptions and estimates); the ability to appropriately manage human capital; the effect of applying future accounting changes; business competition; operational and reputational risks; technological change; changes in government regulation and legislation within the countries in which we operate; governmental investigations; litigation; changes in tax laws; changes in capital requirements; changes in reinsurance arrangements; ability to collect amounts owed; catastrophic events, such as earthquakes, hurricanes or pandemics; the possible impact of international conflicts and other developments including terrorist acts and cyberterrorism; and other risks and factors detailed from time to time in our documents filed with securities regulators in Canada.

We caution that the foregoing list of important factors that may affect future results is not exhaustive. When relying on our forward-looking statements, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements or information, whether written or oral, that may be as a result of new information, future events or otherwise.

Cautionary Non-IFRS and Other Financial Measures

Reported results conform to generally accepted accounting principles (GAAP), in accordance with IFRS. In addition to reported results, the Company also presents certain financial measures, including non-IFRS financial measures that are historical, non-IFRS ratios, and supplementary financial measures, to assess results. Non-IFRS financial measures, such as adjusted net income, are utilized to assess the Company’s overall performance. To arrive at adjusted results, the Company adjusts for certain items to normalize earnings to core operations, in order to better reflect our North American specialty operations. Non-IFRS ratios include a non-IFRS financial measure as one or more of its components. Examples of non-IFRS ratios include adjusted diluted earnings per share and adjusted ROE. The Company believes that non-IFRS financial measures and non-IFRS ratios provide the reader with an enhanced understanding of our results and related trends and increase transparency and clarity into the core results of the business. Non-IFRS financial measures and non-IFRS ratios are not standardized terms under IFRS and, therefore, may not be comparable to similar terms used by other companies. Supplementary financial measures depict the Company’s financial performance and position, and are explained in this document where they first appear, and incorporates information by reference to the Company’s current MD&A, for the three and nine months ended September 30, 2022. To access MD&A, see Trisura’s website or SEDAR at www.sedar.com. These measures are pursuant to National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure.



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