Trisura Group Reports Third Quarter 2020 Results
November 04 2020 - 5:46PM
Trisura Group Ltd. (“Trisura” or “Trisura Group”) (TSX: TSU), a
leading international specialty insurance provider, today announced
financial results for the third quarter of 2020.
David Clare, President and CEO of Trisura,
stated, “In the third quarter Trisura generated net income of $6.5
million - over 150% greater than Q3 2019 - driven by strong results
in Canada, continued profitability in the U.S., and investment
gains.
In Canada, disciplined underwriting and
consistent investment returns generated an industry-leading 20%
return on equity. Our U.S. business maintained its trajectory of
growth, binding a new record of $171.0 million of quarterly gross
premiums and generating $3.7 million in net income. Stronger asset
liability matching in our Reinsurance operations also supported
results.
Our balance sheet is well-funded to support
growth, with flexibility afforded by our 9.5% debt-to-capital
ratio.”
Highlights
- Gross and net written premiums
growth of 109.5% and 72.4% in Q3, supported by momentum in our U.S.
operations and continued growth in Canada.
- Net income of $6.5 million in the
quarter grew 157.0% compared to prior year, driven by strong
underwriting in Canada, continued profitability in the U.S and
investment gains.
- Consolidated LTM ROE of 11.7%,
which includes dilution from the equity raises in September 2019
and May 2020, compared to 1.9% at Q3 2019.
- Book value per share of $26.86, a
24.5% increase from December 31, 2019, driven by the equity raise
in May and supported by positive net income.
- EPS - diluted of $0.62 in Q3 2020
was impacted by share-based compensation as a result of rising
share price but compared favourably to $0.37 in Q3 2019.
- Premiums grew in our Canadian
business by 58.9% in Q3 2020. Exceptional surety performance
contributed to achieving a 91.5% combined ratio and a 20.0% LTM
ROE.
- Continued growth in our U.S.
business, producing $171.0 million in GPW in the quarter and $3.7
million in net income, and reaching a 9.7% LTM ROE despite two
significant capital injections.
- Sufficient capital in our US
operations supported an increase in A.M. Best size category from
size VII to size VIII.
Amounts in C$ millions |
Q3 2020 |
|
Q3 2019 |
|
Variance |
|
Q3 2020 YTD |
|
Q3 2019 YTD |
|
Variance |
|
Gross premiums written |
239.6 |
|
114.4 |
|
109.5 |
% |
612.2 |
|
305.1 |
|
100.7 |
% |
Net premiums written |
64.5 |
|
37.4 |
|
72.4 |
% |
152.9 |
|
103.0 |
|
48.5 |
% |
Net underwriting loss |
(2.2 |
) |
(6.6 |
) |
(67.3 |
%) |
(1.8 |
) |
(23.8 |
) |
(92.6 |
%) |
Net investment income |
7.0 |
|
10.0 |
|
(30.0 |
%) |
21.9 |
|
20.1 |
|
8.7 |
% |
Net income |
6.5 |
|
2.5 |
|
157.0 |
% |
21.5 |
|
0.9 |
|
2,231.1 |
% |
EPS - diluted, $ |
0.62 |
|
0.37 |
|
68.2 |
% |
2.22 |
|
0.13 |
|
1,607.7 |
% |
Book value per share, $ |
26.86 |
|
21.41 |
|
25.5 |
% |
26.86 |
|
21.41 |
|
25.5 |
% |
Debt-to-Capital ratio |
9.5 |
% |
13.6 |
% |
(4.1pts |
) |
9.5 |
% |
13.6 |
% |
(4.1pts |
) |
LTM ROE |
11.7 |
% |
1.9 |
% |
9.8pts |
|
11.7 |
% |
1.9 |
% |
9.8pts |
|
Combined ratio - Canada |
91.5 |
% |
92.6 |
% |
(1.1pts |
) |
84.6 |
% |
89.5 |
% |
(4.9pts |
) |
LTM ROE - Canada |
20.0 |
% |
19.1 |
% |
0.9pts |
|
20.0 |
% |
19.1 |
% |
0.9pts |
|
Fronting operational ratio - US |
73.4 |
% |
76.9 |
% |
(3.5pts |
) |
70.3 |
% |
88.7 |
% |
(18.4pts |
) |
LTM ROE - US |
9.7 |
% |
nm |
|
nm |
|
9.7 |
% |
nm |
|
nm |
|
COVID-19
- Trisura staff
globally continue to work effectively from home. We have introduced
safety measures in physical offices in preparation for a gradual
return to work acknowledging best practices and local jurisdiction
protocols.
- Despite
resilience in the quarter, fears of a second wave in the U.S. and
weaker than anticipated economic recovery may threaten
momentum.
- Premium
generation and claims activity may be impacted depending on the
length and depth of the pandemic-related economic slowdown, as well
as the effectiveness of government support programs. Depending on
these factors, premium growth could slow and claims activity could
increase.
Insurance Operations
- Disciplined
underwriting in Canada, achieving a loss ratio of 28.4% in the
quarter, supported by strong claims experience in Surety, resulting
in a combined ratio of 91.5%.
- Strong growth in
our U.S. platform, with GPW of $171.0 million in Q3 2020 compared
to $144.8 million in Q2 2020, and fee income of $6.4 million in Q3
2020 compared to $5.6 million in Q2 2020.
- A decrease in
European interest rates negatively impacted consolidated net
underwriting income in the quarter, offset by improved
asset-liability matching.
Capital
- The minimum
capital test (“MCT”) ratio of our Canadian operations was 249%
(258% as at December 31, 2019), which comfortably exceeded
regulatory requirements of 150%.
- Trisura
Specialty’s capital of $115.5 million USD as at September 30, 2020
($83.3 million USD as at December 31, 2019) was in excess of the
various Company Action Levels of the states in which Trisura
Specialty is licensed.
- Consolidated
debt-to-capital ratio of 9.5% as at September 30, 2020 is below our
long-term target of 20.0%.
Investments
- Investment
income in Q3 2020 was $7.0 million compared to $10.0 million in Q3
2019. The decrease was the result of smaller decline in European
interest rates in the quarter, which led to a smaller increase in
the value of longer duration assets supporting our Reinsurance
business liabilities. This was partially offset by an increase in
interest and dividend income in North America.
- In Canada and
the U.S., interest and dividend income rose 38.3% in Q3 2020,
versus the prior period in 2019, as we benefited from
diversification of the U.S. portfolio after rebalancing through
COVID-related volatility, and increased capital following the
equity raises in September 2019 and May 2020.
- Net gains were
greater in Q3 2020 and Q3 2020 YTD as a result of favourable
foreign exchange movements incurred in the quarter and greater
realized gains.
Corporate Development
- Trisura
continues to grow its admitted licenses, with 42 state licenses
today and the intention of securing admitted licenses in all 50
states.
- In the quarter
Trisura bound $1.8 million in admitted premiums; we expect the
admitted business to be a significant opportunity for growth in
2021.
- In November
2020, A.M. Best reaffirmed the financial strength rating of A-
(Excellent) for both the Canadian and U.S. operations.
About Trisura
Group
Trisura Group Ltd. is an international specialty
insurance provider operating in the surety, risk solutions,
corporate insurance and reinsurance segments of the market. Trisura
has three principal regulated subsidiaries: Trisura Guarantee
Insurance Company in Canada, Trisura Specialty Insurance Company in
the US and Trisura International Insurance Ltd. in Barbados.
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 SinclairTel: 416 607 2135 Email:
bryan.sinclair@trisura.com
Trisura Group
Ltd.Consolidated Statements of Financial
PositionAs at September
30, 2020 and December
31, 2019(in thousands of Canadian
dollars, except as otherwise noted)
As at |
September 30, 2020 |
December 31, 2019 |
Cash and cash equivalents, and short-term securities |
124,875 |
85,905 |
Investments |
484,700 |
392,617 |
Premiums and accounts receivable, and other assets |
154,581 |
86,669 |
Recoverable from reinsurers |
567,361 |
293,068 |
Deferred acquisition costs |
163,719 |
104,197 |
Capital assets and intangible assets |
13,933 |
14,477 |
Deferred tax assets |
8,347 |
1,460 |
Total assets |
1,517,516 |
978,393 |
Accounts payable, accrued and other liabilities |
48,924 |
40,916 |
Reinsurance premiums payable |
144,691 |
80,186 |
Unearned premiums |
510,200 |
328,091 |
Unearned reinsurance commissions |
91,859 |
51,291 |
Unpaid claims and loss adjustment expenses |
417,107 |
257,880 |
Loan payable |
28,869 |
29,700 |
Total liabilities |
1,241,650 |
788,064 |
Shareholders' equity |
275,866 |
190,329 |
Total liabilities and shareholders' equity |
1,517,516 |
978,393 |
Trisura Group
Ltd.Consolidated Statements of
Comprehensive
IncomeFor the
three and nine
months ended September
30(in thousands of Canadian dollars, except as
otherwise noted)
|
Q3 2020 |
Q3 2019 |
Q3 2020YTD |
Q3 2019YTD |
Gross premiums written |
239,607 |
|
114,354 |
|
612,242 |
|
305,050 |
|
Net premiums written |
64,543 |
|
37,429 |
|
152,924 |
|
102,972 |
|
Net premiums earned |
42,250 |
|
29,719 |
|
109,593 |
|
77,794 |
|
Fee income |
6,652 |
|
2,530 |
|
20,060 |
|
8,631 |
|
Total underwriting revenue |
48,902 |
|
32,249 |
|
129,653 |
|
86,425 |
|
Net claims and loss adjustment expenses |
(19,319 |
) |
(18,092 |
) |
(49,466 |
) |
(49,249 |
) |
Net commissions |
(15,060 |
) |
(10,265 |
) |
(38,431 |
) |
(27,839 |
) |
Operating expenses and premium taxes |
(16,685 |
) |
(10,511 |
) |
(43,523 |
) |
(33,126 |
) |
Total claims and expenses |
(51,064 |
) |
(38,868 |
) |
(131,420 |
) |
(110,214 |
) |
Net underwriting loss |
(2,162 |
) |
(6,619 |
) |
(1,767 |
) |
(23,789 |
) |
Net investment income |
7,015 |
|
10,027 |
|
21,857 |
|
20,111 |
|
Settlement from structured insurance assets |
- |
|
- |
|
- |
|
8,077 |
|
Net gains |
4,178 |
|
476 |
|
5,628 |
|
1,664 |
|
Interest expense |
(224 |
) |
(333 |
) |
(891 |
) |
(1,020 |
) |
Income before income taxes |
8,807 |
|
3,551 |
|
24,827 |
|
5,043 |
|
Income tax expense |
(2,272 |
) |
(1,008 |
) |
(3,334 |
) |
(4,121 |
) |
Net income |
6,535 |
|
2,543 |
|
21,493 |
|
922 |
|
Other comprehensive (loss) income |
(162 |
) |
1,048 |
|
(2,704 |
) |
1,996 |
|
Comprehensive income |
6,373 |
|
3,591 |
|
18,789 |
|
2,918 |
|
Trisura Group
Ltd.Consolidated Statements of Cash
FlowsFor the three
and nine months
ended September
30(in thousands of Canadian dollars,
except as otherwise noted)
|
Q3 2020 |
Q3 2019 |
Q3 2020 YTD |
Q3 2019 YTD |
Net income from operating activities |
6,535 |
|
2,543 |
|
21,493 |
|
922 |
|
Non-cash
items to be deducted |
(1,365 |
) |
(348 |
) |
6,006 |
|
(1,508 |
) |
Stock
options granted |
160 |
|
146 |
|
540 |
|
364 |
|
Change in
working capital operating items |
43,508 |
|
25,704 |
|
57,454 |
|
39,982 |
|
Realized
gains on investments |
(4,245 |
) |
(1,054 |
) |
(21,443 |
) |
(2,800 |
) |
Income
taxes paid |
(4,661 |
) |
(592 |
) |
(7,948 |
) |
(2,459 |
) |
Interest paid |
(226 |
) |
(350 |
) |
(921 |
) |
(1,056 |
) |
Net cash from operating activities |
39,706 |
|
26,049 |
|
55,181 |
|
33,445 |
|
Proceeds on disposal of investments |
60,787 |
|
13,098 |
|
201,051 |
|
41,647 |
|
Purchases
of investments |
(72,855 |
) |
(27,832 |
) |
(281,781 |
) |
(91,076 |
) |
Net purchases of capital and intangible assets |
(117 |
) |
(104 |
) |
(623 |
) |
(408 |
) |
Net cash used in investing activities |
(12,185 |
) |
(14,838 |
) |
(81,353 |
) |
(49,837 |
) |
Dividends
paid |
- |
|
(24 |
) |
- |
|
(72 |
) |
Shares
issued |
- |
|
55,669 |
|
65,143 |
|
55,669 |
|
Loans
received |
- |
|
- |
|
32,700 |
|
- |
|
Repayment of loan payable |
- |
|
- |
|
(32,700 |
) |
- |
|
Lease payments |
(319 |
) |
(265 |
) |
(1,197 |
) |
(760 |
) |
Net cash (used in) from financing activities |
(319 |
) |
55,380 |
|
63,946 |
|
54,837 |
|
Net increase in cash |
27,202 |
|
66,591 |
|
37,774 |
|
38,445 |
|
Cash at
beginning of the period |
99,165 |
|
64,949 |
|
85,905 |
|
95,212 |
|
Currency translation |
(1,492 |
) |
373 |
|
1,196 |
|
(1,744 |
) |
Cash at the end of the period |
124,875 |
|
131,913 |
|
124,875 |
|
131,913 |
|
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,
Trisura Group Ltd. 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.
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