TSE:TSU Trisura Group Q1 2023 Earnings Report C$37.75 +0.50 (+1.34%) As of 04/28/2025 04:00 PM Eastern Earnings HistoryForecast Trisura Group EPS ResultsActual EPSC$0.61Consensus EPS C$0.49Beat/MissBeat by +C$0.12One Year Ago EPSN/ATrisura Group Revenue ResultsActual Revenue$639.10 millionExpected Revenue$136.00 millionBeat/MissBeat by +$503.10 millionYoY Revenue GrowthN/ATrisura Group Announcement DetailsQuarterQ1 2023Date5/11/2023TimeN/AConference Call DateFriday, May 12, 2023Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress ReleaseEarnings HistoryCompany ProfilePowered by Trisura Group Q1 2023 Earnings Call TranscriptProvided by QuartrMay 12, 2023 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good morning. Welcome to Tricura Group Limited's First Quarter 2023 Earnings Conference Call. On the call today are David Clare, Chief Executive Officer and David Scotland, Chief Financial Officer. David Clare will begin by providing a business and strategic update followed by David Scotland, who will discuss financial results for the quarter. Following formal comments, lines will be open for analyst questions. Operator00:00:24I'd like to remind participants that in today's comments, including in responding to questions and in discussing new initiatives related to financial and operating performance. Forward looking statements may be made, including forward looking statements within the meaning of applicable Canadian and U. S. Securities laws. These statements reflect predictions of future events and trends and do not relate to Doric Events. Operator00:00:46They are subject to known and unknown risks, and future events and results may differ materially from such statements. For further information on these risks and their potential impacts, please see TriShera's filings with securities regulators. Please be advised that today's conference is being recorded. Thank you. I'll now turn the call over to David Clare. Speaker 100:01:20Thank you. Good morning, everyone, and welcome. Our business reported strong operating performance in the Q1, growing insurance revenue 58% compared to Q1 2022 supporting 21 percent operating return on equity. Momentum has sustained as we scale an increasingly diversified specialty insurance platform. Results again were particularly strong in Canada with 33% growth in insurance revenue supported by profitable underwriting. Speaker 100:01:47Our U. S. Fronting business produced $459,000,000 of insurance revenue, an increase of 71% over the prior year. In Canada, top line growth was demonstrated across all business lines. Canadian fronting and surety led the way. Speaker 100:02:01Brenting, driven by a more mature platform and surety by market share gains as well as contribution from both our Sovereign acquisition and U. S. Expansion. Corporate Insurance continued to benefit from expansion of distribution partnerships and stable pricing. We saw our warranty practices grow as auto inventory importantly, disciplined underwriting drove a 15% loss ratio, an improvement over strong comparative year supported by our particularly impressive results in surety. Speaker 100:02:29We are proud of our 81% combined ratio in the quarter, but did not beat a strong comparative period set in Q1 2021 of 77% due to a higher expense ratio as a result of the shift in mix. I apologize that reference was the Q1 2022. The Canadian business generated a 28% return on equity. With the expansion of our U. S. Speaker 100:02:49Front end expertise, U. S. Fronting generated $459,000,000 in insurance revenue in the quarter. Maturation of existing programs drove the top line. Although we generated $53,000,000 in admitted revenue in the quarter, the market continues to drive opportunities to excess and surplus lines. Speaker 100:03:14U. S. Fronting generated $18,000,000 in fees, a 30% increase and recorded $36,000,000 of deferred fee income indicative of future fronting fees to be earned. Loss ratio in the quarter adjusted for the impact of runoff increased due to certain reinsurance costs incurred in the quarter as well as a decrease in yields used to discount claims reserves. Frontion operational ratio adjusted for the impact of runoff increased as a result of similar factors. Speaker 100:03:39The impacts of IFRS 17 added approximately 5 points to both loss ratio and Frontion operational ratio, which otherwise are within expected ranges. On a last 12 month basis and adjusting for the runoff program, of the U. S. Produced a 13% operating ROE. A historic rise in interest rates coincided with an increase in capital managed at Trasura. Speaker 100:04:00A combination of growth and profitability and a recent capital raise has resulted in increased contributions to the investment portfolio. The combination of higher rates and the larger portfolio has been very positive for the contribution from the investment portfolio. We began realizing these benefits through Q4 and observed continued momentum in Q1 with net investment income increasing 150% over the prior year. We are excited about the enhanced risk adjusted yields we are capturing for years to come. As we progress our strategic priorities, environmental, social and governance considerations are front of mind and an important part of Treysura's maturation. Speaker 100:04:37We are focused on better communicating existing initiatives and believe we have taken steps in the right direction with enhanced ESG related disclosure in our management information circular. We also continue to progress in enhancing our ESG commitments, and I'm excited to introduce Anna Clamphyay, our newest Director to our shareholders at our upcoming AGM. She is an important and skilled addition to our team. We observed continued healthy pricing trends across most lines in the quarter, although expect hardening trends in insurance pricing to balance, although not reverse later this year. This will be informed by the state of the reinsurance market as well as economic and interest rate trends, and we feel well equipped to navigate the environment. Speaker 100:05:17I should acknowledge our Q4 experience and note we expect to see impacts from the runoff through 2023. We will endeavor to share guidance on the expected future impact as they become available. In response to investor and analyst feedback, we are introducing an Investor Day on June 1st, immediately following our Annual General Meeting. We will be introducing the management teams of our Canadian and U. S. Speaker 100:05:38Entities in a fireside chat format, providing the opportunity for investors to meet a broader group of Trexure members. The event will be in person as well as streamed online. We remain committed to disciplined underwriting and structuring standards as well as conservative reserving. Although we have not seen signs of recession in our results to date, we acknowledge economic risks are skewed to the downside. It is our hope that volatility will provide opportunities for us to win business and strengthen our reputation, and we feel confident that we can navigate any potential changes in economic outlook. Speaker 100:06:10We are planning for growth and with a strong capital base and comparatively greater scale, Feel cautiously optimistic for the years ahead. Our equity base has grown to $513,000,000 a healthy increase from year end and almost reaching levels achieved in Q3. With that, I'd like to turn it over to David Scotland for a more detailed review of financial results. Speaker 200:06:31Thanks, David. I'll now provide a brief walk through of some financial results for the quarter. The Q1 results reflect the Q1 of the implementation of IFRS 17, the new accounting standard for insurance contracts, which has been applied retroactively and as a and the company's financial reporting standard for insurance contracts, which has been applied retroactively and as a result, our 2022 results have been restated to reflect the new standard. Q1 2023 also reflects the Q1 of the implementation of IFRS 9, the new accounting standard for financial instruments, which has not been restated retroactively. The new standards have led to a number of changes, particularly with respect to presentation of both the income statement and the balance sheet. Speaker 200:07:06Insurance revenue, which replaces gross premiums written as the new top line revenue balance was $639,000,000 for the quarter, which reflecting growth of 58% over Q1 2022. Insurance service expense, which consists of amortization of insurance acquisition Cash flows such as commissions, claims expense and other operating costs increased in the quarter primarily as a result of growth in the business, which is led to an increase in claims and commissions expense. Net expense from reinsurance contracts, which includes both premium paid to reinsurers as well as recoveries from reinsurers increased as a result of growth in the business, of insurance service expense as this balance includes recoveries from claims ceded to the reinsurers. Net service results in Canada for the quarter was greater than prior year as a result of losses generated from a program in Runoff. Without the impact of the Runoff business, insurance service result was greater than the prior year as a result of growth in the business as a result of growth in the business. Speaker 200:08:16In Q1 2023, the combined ratio in Canada was 80.7%. In 2022 as a result of an increase in interest and dividend income. The increase is primarily related to an increase in the size of the investment portfolio, but also benefited from higher yields. Net loss for investments was $2,200,000 in the quarter, primarily as a result of movement on swap agreements used to hedge share based compensation. Excluding the impact of derivative used to hedge share based compensation, there were gains in the period of 1,600,000 Net finance expense from insurance and reinsurance contracts, which reflects the time value of money and changes the time value of money, with a loss of $4,700,000 in Q1 2023 rather than the gain of $700,000 in Q1 2022, which was the result of a decrease in the yield curve used to discount claims reserves in Q1 2023. Speaker 200:09:26In Q1 2022, there was an increase in the yield curve used to discount claims of claims reserves and as a result, the impact to net income was positive in that quarter. Other income, which represents fees for surety services, grew by 19% in the quarter, reflecting growth in the number of surety accounts. Other operating expense grew by 25% in the quarter, reflecting growth in both Canadian and U. S. Operations. Speaker 200:09:48Excluding the impact of share based compensation, which was mitigated through a hedging program, the increase was 17% for the quarter. Income tax expense was lower than the prior year as a result of lower net income before tax. Net income for the group was $14,000,000 for the quarter. Operating net income, which adjusts for certain items to reflect income from core operations and excludes the impact of the Runoff business was 28,000,000 which is greater than the adjusted net income from Q1 2022 as a result of strong underwriting and growth in the business. Diluted earnings per share was $0.30 a share in Q1 2023, which was lower than the prior year as a result of the run off program Operating EPS, which reflects core operations and excludes the impact of the runoff portfolio was $0.61 a share, reflecting a 24% increased over the prior quarter. Speaker 200:10:36Consolidated ROE on a rolling 12 month basis was 4.1% at Q1 2023. However, operating ROE was 20.6%, which was a slight increase over the prior year. The balance sheet has also changed as a result and the implementation of IFRS 17 with premiums receivable, deferred acquisition costs, unpaid claims and unearned premiums presented together now as a single line item referred to as Insurance Contract Liabilities. In addition to this, reinsurance assets, reinsurance premiums payable and unearned reinsurance and the preceding commission are now presented as a single line item referred to as reinsurance contract assets. Cash in the period decreased as a result of additional purchases of investments in the period. Speaker 200:11:18Investments have increased as a result of more cash having been deployed into the portfolio as well as unrealized gains on the portfolio. Reinsurance contract assets have increased as a result of growth in the business in both Canada and the U. S. Insurance contract liabilities have increased also as a result of growth in the insurance revenue in both Canada and the United States. Growth in these balances on the liability side is largely offset by growth in the reinsurance contract asset balance. Speaker 200:11:42Equity is greater than the prior year end as a result of positive net income in the period as well as unrealized gains on the investment portfolio. In addition to this, implementation of the new standards has led to a one time increase in equity of $10,300,000 as a result of the conversion to IFRS 17, primarily driven by an increase in deferred acquisition costs in Tricher Canada. Book value per share was $11,150,000 at March 31, 2023, and is greater than December 31, 2022, as a result of profit generated from insurance and investment income in the period as well as unrealized gains and the opening equity adjustment. As at March 31, 2023, debt to capital was 12.8%, which was lower than December 31, 2022 as a result of the increase in equity during the period. The company remains well capitalized and we expect to have sufficient capital to meet our regulatory capital requirements. Speaker 200:12:33David, I'll now turn things back over to you. Speaker 100:12:37Thank you, David. Operator, we take questions now. Operator00:12:461, 1. Our first question comes from the line of Nik Priebe with CIBC Capital Markets. Speaker 300:12:56I just wanted to start with a question on the program in Runoff. Is it fair to assume that the earnings impact in the second half of the year Should be relatively more muted than the first half, just given that the program there is expected to roll off by year end? Or Is there anything else that we should be aware of that could create a little bit of additional noise in H2? Speaker 100:13:19Hi, Nick. Thanks for the question. In the second half of the year, the impact of that runoff program will mostly be informed by reinsurance that we purchase to protect ourselves through storm season. So we would expect there to be an impact, but the ultimate size will really be determined by the amount of program left in force and the price of protection that we're purchasing. So we'll provide some updates on that through the latter half of the year, probably closer to our Q2 reporting date. Speaker 100:13:46I don't know yet that it's appropriate for me to give magnitude of size, but we can provide some of those updates in short order. Speaker 300:13:56Understood. Okay. And then are you able to expand a bit on the composition of Growth that you're expecting within the U. S. Entity this year, like I think you had previously signaled that property programs wouldn't be a large contributor because of some of the challenges in the Are you expecting other lines without property catastrophe exposure to make up for that? Speaker 300:14:18How do you see the split between admitted and not admitted Market premium evolving. Just any additional color there would be helpful. Speaker 100:14:26Yes. At this stage, I think most of the growth and the business is still going to be coming from excess and surplus lines or non admitted lines. We do see some expansion of our admitted practice, but it has been Slower given the tone in the market and given the disproportionate share of new business being accounted for by E and S. I would say although our property exposure, So our ultimate, PML or TIV is not growing or attempting not to grow in the property space. Prices in that property space have been significantly increased this year. Speaker 100:14:59So rates in the property space, especially in E and S Are increasing. So that can be a contributor to growth. Although I'd say generally the E and S market has been a relatively healthy place. That differs by line. There are some lines where those trends are more pronounced than others. Speaker 100:15:16But This space in the U. S, the excess and surplus lines market continues to see decent momentum. And so that growth from our book as it focuses on E and S is likely more so on older mature programs than it is on new programs. I would say that that's been the contributor of our growth In 2022, and we'd expect that growth driver for 2023 to continue. Speaker 300:15:42Yes. Okay. That makes sense. All right. Thanks very much. Speaker 300:15:45I'll pass the line. Speaker 100:15:46Thanks, Dan. Operator00:15:49Our next question comes from the line of Stephen Volund with Raymond James. Speaker 400:15:57Good morning, everyone. Just the first question is on corporate insurance in Canada. The language in the MD and A mentions moderate increases, a stable pricing. It seemed a little bit more Conservative than what we've seen across the industry in terms of words like firm and hard markets. I'm just wondering if that is just is it unique to that business line? Speaker 100:16:27I think generally, Stephen, we have seen healthy markets, healthy rate in the broader commercial insurance space, and I think those comments reflect that. I would note Our lines of business tend to be a little bit more specialized than the broader market. We generally have higher profitability Then the broader market does. So we've seen very, very healthy rate environment, healthy rate increases for the past few years. And I think those are appropriate in the context of the uncertainty in the market. Speaker 100:16:54But I do note that the rate increases we're seeing in Q1 are not as substantial as what we've seen in 2021 or 2022. So That language attempts to reflect that. I don't mean to imply that the environment isn't healthy or isn't attractive. We've had a few years now of rate increases that we think are appropriate for our business, but it's not the magnitude that it used to be. Speaker 400:17:19Okay. And then the second question is, You can just remind us about the what your growth expectations are for the U. S. Business again? And is it all impacted by the amount Speaker 200:17:34of capital that you have available? Speaker 100:17:36Yes. Our growth expectations this year for the U. S. Business again are on a top line basis and I would apply this to insurance revenue as well as the old metric, which is gross written premiums. Think about that in the high teens and that would include, we believe, the impact of this runoff program. Speaker 100:17:54We don't think that that is limited in any way by the capital in the business. We've got on an adjusted basis, I know our supplement reports about a 7 times of Capital Surplus. We've got some surplus notes in the vehicle that drops that ratio down to closer to 6 times. So we think there's healthy runway internally with the capital available in the business as well as quite a bit of surplus capital at the holding company and debt capacity. So That growth rate is not limited at all by the amount of capital we have in the business and is informed more by an acknowledgment of The maturity of the platform, the size and scale that we've achieved today, as well as some of the notes we've already talked about around the property space. Speaker 400:18:38Okay. That's great. Thanks. Operator00:18:52Our next question comes from the line of Marcel MacLean with TD Securities. Speaker 500:19:00Hello. I think they sent me a kind of can you guys hear me? Speaker 100:19:04We can. Hey, Marcel. Speaker 500:19:06Okay. So a couple of quick ones for me. Just on the runoff program, so substantially all of this is going to be complete by Q4 2023. I just want to confirm that there's nothing Longer tail, I know that could creep into the yearly part of next year or later. Speaker 100:19:23No, the vast majority of these policies, Substantially all will be run off by December 31, 2021. There's about a 6 month period where you can make claims on these policies following those, The last date, the runoff date. And so you can see claims experience for about 6 months after that. The biggest exposure for this line of business is through storm season. So if you think about the runoff exposure post December 31, 2021 or December 31, 2023, Really, it's through a relatively benign period of the year, and so we would expect our usual reserving to reflect any claims experience. Speaker 100:20:01So We are thinking about this program very much as being sort of run off by the end of this year. There can be reinsurance costs that you amortize slightly past at the year end, but substantially the exposure in the program should be out of our system by the end of the year. Speaker 500:20:19Okay, got it. Then the remainder of my questions are more on the underlying business here. So the you called out Strong growth from the U. S. Surety platform. Speaker 500:20:30I know it's coming up probably off a pretty small base, but just wondering if you can provide maybe the level of premiums or how that's Tracking versus your expectations in these early days. Speaker 100:20:43Yes. The progress Platform has demonstrated in the surety space. It is a slower build. That's a practice and platform that takes some time to build up, but we are happy with the expansion there with the level of premium that we're seeing. It's I think in the quarter just under US5 $1,000,000 which is I'm sorry, Canadian US5 $1,000,000 in the quarter, which is alongside our expectations. Speaker 500:21:13Okay, perfect. And then just final one for me. Just sort of looking at the overall business, we've seen strong momentum in the Canadian fronting platform really since it's been launched and that continues. And Same with the opportunities in the U. S. Speaker 500:21:29Space. So how do you view the evolution of the company's earnings over the next longer term like 5 or 10 years? Like what was the What of fee income versus the more traditional underwriting look like? Speaker 100:21:42It's a great question, Marcel. And this is something we've seen internally changing pretty substantively over the past 5 years. The contribution that we have to earnings from what we qualifies as more fee based earnings, has substantially stepped up. So I think about fee based I think about our earnings in 3 categories. Really, there's the underwriting based earnings from the primary lines of business that we have, so surety, corporate insurance, on the warranty products. Speaker 100:22:11There's a fee based business that we have from fronting products, which are more recurring and predictable. And then there's investment income, which generally is fairly predictable in how you earn it. A greater proportion of our earnings going forward are expected to be coming from those recurring sources of business, so the fee income and the investment income. I will admit, I had anticipated A larger proportion to be represented by fee income than the underwriting income sooner, but our Canadian and primary lines practice has grown quickly. If I combine fee income and investment income, looking forward over the next few years, it's probably approaching 50% of our earnings and on a composition basis as you get out in these next couple of years, but that will be informed by the relative growth of each platform. Speaker 100:23:00All that to say, the composition and diversification of our earnings today versus 3 years ago or especially 5 years ago is very, very different. And I think it's a positive move for the company to generate both more diversified earnings and more stable and predictable earnings. Speaker 500:23:25Okay, that's helpful. Thanks. That's all for me. Speaker 100:23:27Thanks, Marcel. Operator00:23:42I'm showing no further questions in queue. I'd like to turn the call back to David Clare for closing remarks. Speaker 100:23:47Thanks very much, operator, and thank you for everyone who's joined. I do acknowledge this quarter with the adoption of IFRS 17, there's a different framework, different paradigm for investors to reinterpret our results. We have attempted to provide these in as much a clear way and rational way as we can. But to the extent you have questions for us on how to read these, how to interpret them, don't hesitate to reach out. We are here to help. Speaker 100:24:16With that, operator, I'd like to close the call. Operator00:24:20This concludes today's conference call. Thank you for participating. You may now disconnect. Speaker 100:24:26Thanks.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallTrisura Group Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release Trisura Group Earnings HeadlinesFY2025 EPS Estimates for Trisura Group Reduced by DesjardinsApril 29 at 2:11 AM | americanbankingnews.comCormark Comments on Trisura Group's Q1 Earnings (TSE:TSU)April 29 at 1:18 AM | americanbankingnews.comTrump’s betrayal exposed Trump’s Final Reset Inside the shocking plot to re-engineer America’s financial system…and why you need to move your money now.April 29, 2025 | Porter & Company (Ad)Trisura Group (TSE:TSU) shareholders have earned a 29% CAGR over the last five yearsMarch 28, 2025 | finance.yahoo.comShoreOne, Trisura join forces to enhance coastal homeowners’ insuranceMarch 25, 2025 | msn.comRBC Capital Sticks to Their Buy Rating for Trisura Group Ltd (TSU)February 19, 2025 | markets.businessinsider.comSee More Trisura Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Trisura Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Trisura Group and other key companies, straight to your email. Email Address About Trisura GroupTrisura Group (TSE:TSU) Ltd is a Canadian based company engages in the provision of specialty insurance. The company's operations currently include specialty property and casualty insurance (Surety, Risk Solutions, and Corporate Insurance business lines), underwritten predominantly in Canada. The operating business segments are Trisura Guarantee, Trisura Specialty, and Trisura International. The Trisura Guarantee segment generates maximum revenue, which offers Surety, Risk Solutions and Corporate Insurance products underwritten in Canada as well as the operations of Trisura Warranty.View Trisura Group ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Alphabet Rebounds After Strong Earnings and Buyback AnnouncementMarkets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial Earnings Upcoming Earnings AstraZeneca (4/29/2025)Booking (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Regeneron Pharmaceuticals (4/29/2025)Starbucks (4/29/2025)American Tower (4/29/2025)América Móvil (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 6 speakers on the call. Operator00:00:00Good morning. Welcome to Tricura Group Limited's First Quarter 2023 Earnings Conference Call. On the call today are David Clare, Chief Executive Officer and David Scotland, Chief Financial Officer. David Clare will begin by providing a business and strategic update followed by David Scotland, who will discuss financial results for the quarter. Following formal comments, lines will be open for analyst questions. Operator00:00:24I'd like to remind participants that in today's comments, including in responding to questions and in discussing new initiatives related to financial and operating performance. Forward looking statements may be made, including forward looking statements within the meaning of applicable Canadian and U. S. Securities laws. These statements reflect predictions of future events and trends and do not relate to Doric Events. Operator00:00:46They are subject to known and unknown risks, and future events and results may differ materially from such statements. For further information on these risks and their potential impacts, please see TriShera's filings with securities regulators. Please be advised that today's conference is being recorded. Thank you. I'll now turn the call over to David Clare. Speaker 100:01:20Thank you. Good morning, everyone, and welcome. Our business reported strong operating performance in the Q1, growing insurance revenue 58% compared to Q1 2022 supporting 21 percent operating return on equity. Momentum has sustained as we scale an increasingly diversified specialty insurance platform. Results again were particularly strong in Canada with 33% growth in insurance revenue supported by profitable underwriting. Speaker 100:01:47Our U. S. Fronting business produced $459,000,000 of insurance revenue, an increase of 71% over the prior year. In Canada, top line growth was demonstrated across all business lines. Canadian fronting and surety led the way. Speaker 100:02:01Brenting, driven by a more mature platform and surety by market share gains as well as contribution from both our Sovereign acquisition and U. S. Expansion. Corporate Insurance continued to benefit from expansion of distribution partnerships and stable pricing. We saw our warranty practices grow as auto inventory importantly, disciplined underwriting drove a 15% loss ratio, an improvement over strong comparative year supported by our particularly impressive results in surety. Speaker 100:02:29We are proud of our 81% combined ratio in the quarter, but did not beat a strong comparative period set in Q1 2021 of 77% due to a higher expense ratio as a result of the shift in mix. I apologize that reference was the Q1 2022. The Canadian business generated a 28% return on equity. With the expansion of our U. S. Speaker 100:02:49Front end expertise, U. S. Fronting generated $459,000,000 in insurance revenue in the quarter. Maturation of existing programs drove the top line. Although we generated $53,000,000 in admitted revenue in the quarter, the market continues to drive opportunities to excess and surplus lines. Speaker 100:03:14U. S. Fronting generated $18,000,000 in fees, a 30% increase and recorded $36,000,000 of deferred fee income indicative of future fronting fees to be earned. Loss ratio in the quarter adjusted for the impact of runoff increased due to certain reinsurance costs incurred in the quarter as well as a decrease in yields used to discount claims reserves. Frontion operational ratio adjusted for the impact of runoff increased as a result of similar factors. Speaker 100:03:39The impacts of IFRS 17 added approximately 5 points to both loss ratio and Frontion operational ratio, which otherwise are within expected ranges. On a last 12 month basis and adjusting for the runoff program, of the U. S. Produced a 13% operating ROE. A historic rise in interest rates coincided with an increase in capital managed at Trasura. Speaker 100:04:00A combination of growth and profitability and a recent capital raise has resulted in increased contributions to the investment portfolio. The combination of higher rates and the larger portfolio has been very positive for the contribution from the investment portfolio. We began realizing these benefits through Q4 and observed continued momentum in Q1 with net investment income increasing 150% over the prior year. We are excited about the enhanced risk adjusted yields we are capturing for years to come. As we progress our strategic priorities, environmental, social and governance considerations are front of mind and an important part of Treysura's maturation. Speaker 100:04:37We are focused on better communicating existing initiatives and believe we have taken steps in the right direction with enhanced ESG related disclosure in our management information circular. We also continue to progress in enhancing our ESG commitments, and I'm excited to introduce Anna Clamphyay, our newest Director to our shareholders at our upcoming AGM. She is an important and skilled addition to our team. We observed continued healthy pricing trends across most lines in the quarter, although expect hardening trends in insurance pricing to balance, although not reverse later this year. This will be informed by the state of the reinsurance market as well as economic and interest rate trends, and we feel well equipped to navigate the environment. Speaker 100:05:17I should acknowledge our Q4 experience and note we expect to see impacts from the runoff through 2023. We will endeavor to share guidance on the expected future impact as they become available. In response to investor and analyst feedback, we are introducing an Investor Day on June 1st, immediately following our Annual General Meeting. We will be introducing the management teams of our Canadian and U. S. Speaker 100:05:38Entities in a fireside chat format, providing the opportunity for investors to meet a broader group of Trexure members. The event will be in person as well as streamed online. We remain committed to disciplined underwriting and structuring standards as well as conservative reserving. Although we have not seen signs of recession in our results to date, we acknowledge economic risks are skewed to the downside. It is our hope that volatility will provide opportunities for us to win business and strengthen our reputation, and we feel confident that we can navigate any potential changes in economic outlook. Speaker 100:06:10We are planning for growth and with a strong capital base and comparatively greater scale, Feel cautiously optimistic for the years ahead. Our equity base has grown to $513,000,000 a healthy increase from year end and almost reaching levels achieved in Q3. With that, I'd like to turn it over to David Scotland for a more detailed review of financial results. Speaker 200:06:31Thanks, David. I'll now provide a brief walk through of some financial results for the quarter. The Q1 results reflect the Q1 of the implementation of IFRS 17, the new accounting standard for insurance contracts, which has been applied retroactively and as a and the company's financial reporting standard for insurance contracts, which has been applied retroactively and as a result, our 2022 results have been restated to reflect the new standard. Q1 2023 also reflects the Q1 of the implementation of IFRS 9, the new accounting standard for financial instruments, which has not been restated retroactively. The new standards have led to a number of changes, particularly with respect to presentation of both the income statement and the balance sheet. Speaker 200:07:06Insurance revenue, which replaces gross premiums written as the new top line revenue balance was $639,000,000 for the quarter, which reflecting growth of 58% over Q1 2022. Insurance service expense, which consists of amortization of insurance acquisition Cash flows such as commissions, claims expense and other operating costs increased in the quarter primarily as a result of growth in the business, which is led to an increase in claims and commissions expense. Net expense from reinsurance contracts, which includes both premium paid to reinsurers as well as recoveries from reinsurers increased as a result of growth in the business, of insurance service expense as this balance includes recoveries from claims ceded to the reinsurers. Net service results in Canada for the quarter was greater than prior year as a result of losses generated from a program in Runoff. Without the impact of the Runoff business, insurance service result was greater than the prior year as a result of growth in the business as a result of growth in the business. Speaker 200:08:16In Q1 2023, the combined ratio in Canada was 80.7%. In 2022 as a result of an increase in interest and dividend income. The increase is primarily related to an increase in the size of the investment portfolio, but also benefited from higher yields. Net loss for investments was $2,200,000 in the quarter, primarily as a result of movement on swap agreements used to hedge share based compensation. Excluding the impact of derivative used to hedge share based compensation, there were gains in the period of 1,600,000 Net finance expense from insurance and reinsurance contracts, which reflects the time value of money and changes the time value of money, with a loss of $4,700,000 in Q1 2023 rather than the gain of $700,000 in Q1 2022, which was the result of a decrease in the yield curve used to discount claims reserves in Q1 2023. Speaker 200:09:26In Q1 2022, there was an increase in the yield curve used to discount claims of claims reserves and as a result, the impact to net income was positive in that quarter. Other income, which represents fees for surety services, grew by 19% in the quarter, reflecting growth in the number of surety accounts. Other operating expense grew by 25% in the quarter, reflecting growth in both Canadian and U. S. Operations. Speaker 200:09:48Excluding the impact of share based compensation, which was mitigated through a hedging program, the increase was 17% for the quarter. Income tax expense was lower than the prior year as a result of lower net income before tax. Net income for the group was $14,000,000 for the quarter. Operating net income, which adjusts for certain items to reflect income from core operations and excludes the impact of the Runoff business was 28,000,000 which is greater than the adjusted net income from Q1 2022 as a result of strong underwriting and growth in the business. Diluted earnings per share was $0.30 a share in Q1 2023, which was lower than the prior year as a result of the run off program Operating EPS, which reflects core operations and excludes the impact of the runoff portfolio was $0.61 a share, reflecting a 24% increased over the prior quarter. Speaker 200:10:36Consolidated ROE on a rolling 12 month basis was 4.1% at Q1 2023. However, operating ROE was 20.6%, which was a slight increase over the prior year. The balance sheet has also changed as a result and the implementation of IFRS 17 with premiums receivable, deferred acquisition costs, unpaid claims and unearned premiums presented together now as a single line item referred to as Insurance Contract Liabilities. In addition to this, reinsurance assets, reinsurance premiums payable and unearned reinsurance and the preceding commission are now presented as a single line item referred to as reinsurance contract assets. Cash in the period decreased as a result of additional purchases of investments in the period. Speaker 200:11:18Investments have increased as a result of more cash having been deployed into the portfolio as well as unrealized gains on the portfolio. Reinsurance contract assets have increased as a result of growth in the business in both Canada and the U. S. Insurance contract liabilities have increased also as a result of growth in the insurance revenue in both Canada and the United States. Growth in these balances on the liability side is largely offset by growth in the reinsurance contract asset balance. Speaker 200:11:42Equity is greater than the prior year end as a result of positive net income in the period as well as unrealized gains on the investment portfolio. In addition to this, implementation of the new standards has led to a one time increase in equity of $10,300,000 as a result of the conversion to IFRS 17, primarily driven by an increase in deferred acquisition costs in Tricher Canada. Book value per share was $11,150,000 at March 31, 2023, and is greater than December 31, 2022, as a result of profit generated from insurance and investment income in the period as well as unrealized gains and the opening equity adjustment. As at March 31, 2023, debt to capital was 12.8%, which was lower than December 31, 2022 as a result of the increase in equity during the period. The company remains well capitalized and we expect to have sufficient capital to meet our regulatory capital requirements. Speaker 200:12:33David, I'll now turn things back over to you. Speaker 100:12:37Thank you, David. Operator, we take questions now. Operator00:12:461, 1. Our first question comes from the line of Nik Priebe with CIBC Capital Markets. Speaker 300:12:56I just wanted to start with a question on the program in Runoff. Is it fair to assume that the earnings impact in the second half of the year Should be relatively more muted than the first half, just given that the program there is expected to roll off by year end? Or Is there anything else that we should be aware of that could create a little bit of additional noise in H2? Speaker 100:13:19Hi, Nick. Thanks for the question. In the second half of the year, the impact of that runoff program will mostly be informed by reinsurance that we purchase to protect ourselves through storm season. So we would expect there to be an impact, but the ultimate size will really be determined by the amount of program left in force and the price of protection that we're purchasing. So we'll provide some updates on that through the latter half of the year, probably closer to our Q2 reporting date. Speaker 100:13:46I don't know yet that it's appropriate for me to give magnitude of size, but we can provide some of those updates in short order. Speaker 300:13:56Understood. Okay. And then are you able to expand a bit on the composition of Growth that you're expecting within the U. S. Entity this year, like I think you had previously signaled that property programs wouldn't be a large contributor because of some of the challenges in the Are you expecting other lines without property catastrophe exposure to make up for that? Speaker 300:14:18How do you see the split between admitted and not admitted Market premium evolving. Just any additional color there would be helpful. Speaker 100:14:26Yes. At this stage, I think most of the growth and the business is still going to be coming from excess and surplus lines or non admitted lines. We do see some expansion of our admitted practice, but it has been Slower given the tone in the market and given the disproportionate share of new business being accounted for by E and S. I would say although our property exposure, So our ultimate, PML or TIV is not growing or attempting not to grow in the property space. Prices in that property space have been significantly increased this year. Speaker 100:14:59So rates in the property space, especially in E and S Are increasing. So that can be a contributor to growth. Although I'd say generally the E and S market has been a relatively healthy place. That differs by line. There are some lines where those trends are more pronounced than others. Speaker 100:15:16But This space in the U. S, the excess and surplus lines market continues to see decent momentum. And so that growth from our book as it focuses on E and S is likely more so on older mature programs than it is on new programs. I would say that that's been the contributor of our growth In 2022, and we'd expect that growth driver for 2023 to continue. Speaker 300:15:42Yes. Okay. That makes sense. All right. Thanks very much. Speaker 300:15:45I'll pass the line. Speaker 100:15:46Thanks, Dan. Operator00:15:49Our next question comes from the line of Stephen Volund with Raymond James. Speaker 400:15:57Good morning, everyone. Just the first question is on corporate insurance in Canada. The language in the MD and A mentions moderate increases, a stable pricing. It seemed a little bit more Conservative than what we've seen across the industry in terms of words like firm and hard markets. I'm just wondering if that is just is it unique to that business line? Speaker 100:16:27I think generally, Stephen, we have seen healthy markets, healthy rate in the broader commercial insurance space, and I think those comments reflect that. I would note Our lines of business tend to be a little bit more specialized than the broader market. We generally have higher profitability Then the broader market does. So we've seen very, very healthy rate environment, healthy rate increases for the past few years. And I think those are appropriate in the context of the uncertainty in the market. Speaker 100:16:54But I do note that the rate increases we're seeing in Q1 are not as substantial as what we've seen in 2021 or 2022. So That language attempts to reflect that. I don't mean to imply that the environment isn't healthy or isn't attractive. We've had a few years now of rate increases that we think are appropriate for our business, but it's not the magnitude that it used to be. Speaker 400:17:19Okay. And then the second question is, You can just remind us about the what your growth expectations are for the U. S. Business again? And is it all impacted by the amount Speaker 200:17:34of capital that you have available? Speaker 100:17:36Yes. Our growth expectations this year for the U. S. Business again are on a top line basis and I would apply this to insurance revenue as well as the old metric, which is gross written premiums. Think about that in the high teens and that would include, we believe, the impact of this runoff program. Speaker 100:17:54We don't think that that is limited in any way by the capital in the business. We've got on an adjusted basis, I know our supplement reports about a 7 times of Capital Surplus. We've got some surplus notes in the vehicle that drops that ratio down to closer to 6 times. So we think there's healthy runway internally with the capital available in the business as well as quite a bit of surplus capital at the holding company and debt capacity. So That growth rate is not limited at all by the amount of capital we have in the business and is informed more by an acknowledgment of The maturity of the platform, the size and scale that we've achieved today, as well as some of the notes we've already talked about around the property space. Speaker 400:18:38Okay. That's great. Thanks. Operator00:18:52Our next question comes from the line of Marcel MacLean with TD Securities. Speaker 500:19:00Hello. I think they sent me a kind of can you guys hear me? Speaker 100:19:04We can. Hey, Marcel. Speaker 500:19:06Okay. So a couple of quick ones for me. Just on the runoff program, so substantially all of this is going to be complete by Q4 2023. I just want to confirm that there's nothing Longer tail, I know that could creep into the yearly part of next year or later. Speaker 100:19:23No, the vast majority of these policies, Substantially all will be run off by December 31, 2021. There's about a 6 month period where you can make claims on these policies following those, The last date, the runoff date. And so you can see claims experience for about 6 months after that. The biggest exposure for this line of business is through storm season. So if you think about the runoff exposure post December 31, 2021 or December 31, 2023, Really, it's through a relatively benign period of the year, and so we would expect our usual reserving to reflect any claims experience. Speaker 100:20:01So We are thinking about this program very much as being sort of run off by the end of this year. There can be reinsurance costs that you amortize slightly past at the year end, but substantially the exposure in the program should be out of our system by the end of the year. Speaker 500:20:19Okay, got it. Then the remainder of my questions are more on the underlying business here. So the you called out Strong growth from the U. S. Surety platform. Speaker 500:20:30I know it's coming up probably off a pretty small base, but just wondering if you can provide maybe the level of premiums or how that's Tracking versus your expectations in these early days. Speaker 100:20:43Yes. The progress Platform has demonstrated in the surety space. It is a slower build. That's a practice and platform that takes some time to build up, but we are happy with the expansion there with the level of premium that we're seeing. It's I think in the quarter just under US5 $1,000,000 which is I'm sorry, Canadian US5 $1,000,000 in the quarter, which is alongside our expectations. Speaker 500:21:13Okay, perfect. And then just final one for me. Just sort of looking at the overall business, we've seen strong momentum in the Canadian fronting platform really since it's been launched and that continues. And Same with the opportunities in the U. S. Speaker 500:21:29Space. So how do you view the evolution of the company's earnings over the next longer term like 5 or 10 years? Like what was the What of fee income versus the more traditional underwriting look like? Speaker 100:21:42It's a great question, Marcel. And this is something we've seen internally changing pretty substantively over the past 5 years. The contribution that we have to earnings from what we qualifies as more fee based earnings, has substantially stepped up. So I think about fee based I think about our earnings in 3 categories. Really, there's the underwriting based earnings from the primary lines of business that we have, so surety, corporate insurance, on the warranty products. Speaker 100:22:11There's a fee based business that we have from fronting products, which are more recurring and predictable. And then there's investment income, which generally is fairly predictable in how you earn it. A greater proportion of our earnings going forward are expected to be coming from those recurring sources of business, so the fee income and the investment income. I will admit, I had anticipated A larger proportion to be represented by fee income than the underwriting income sooner, but our Canadian and primary lines practice has grown quickly. If I combine fee income and investment income, looking forward over the next few years, it's probably approaching 50% of our earnings and on a composition basis as you get out in these next couple of years, but that will be informed by the relative growth of each platform. Speaker 100:23:00All that to say, the composition and diversification of our earnings today versus 3 years ago or especially 5 years ago is very, very different. And I think it's a positive move for the company to generate both more diversified earnings and more stable and predictable earnings. Speaker 500:23:25Okay, that's helpful. Thanks. That's all for me. Speaker 100:23:27Thanks, Marcel. Operator00:23:42I'm showing no further questions in queue. I'd like to turn the call back to David Clare for closing remarks. Speaker 100:23:47Thanks very much, operator, and thank you for everyone who's joined. I do acknowledge this quarter with the adoption of IFRS 17, there's a different framework, different paradigm for investors to reinterpret our results. We have attempted to provide these in as much a clear way and rational way as we can. But to the extent you have questions for us on how to read these, how to interpret them, don't hesitate to reach out. We are here to help. Speaker 100:24:16With that, operator, I'd like to close the call. Operator00:24:20This concludes today's conference call. Thank you for participating. You may now disconnect. Speaker 100:24:26Thanks.Read morePowered by