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Trisura Group Reports Fourth Quarter and 2020 Annual Results

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Trisura Group Ltd
·13 min read
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TORONTO, Feb. 10, 2021 (GLOBE NEWSWIRE) -- Trisura Group Ltd. (“Trisura” or “Trisura Group”) (TSX: TSU), a leading international specialty insurance provider, today announced financial results for the fourth quarter and year ended December 31, 2020.

David Clare, President and CEO of Trisura, stated, “We are pleased with Trisura’s progress, generating net income of $10.9 million in the fourth quarter and $32.4 million for the year – both significant increases over the prior periods. Strong results in Canada, accelerating profitability in the US, improved asset liability matching in our Reinsurance business and investment gains produced a 13.4% return on equity, approaching our mid-teens target ahead of plan.

In the context of significant top-line growth in Canada, disciplined underwriting generated a strong 85.5% combined ratio for the year. Our US business maintained its trajectory of growth, binding a new record of $210.7 million of gross premiums and generating $5.7 million in net income in the quarter, almost matching our Canadian quarterly profit.

Our balance sheet is well-funded to support future growth, with flexibility afforded by our 8.7% debt-to-capital ratio.”

Highlights

  • EPS of $1.05 in Q4 2020 and $3.28 for the full year compared to $0.47 and $0.69 respectively in 2019.

  • Book value per share of $28.23, an increase of 30.8% from December 31, 2019, driven by strong earnings and a book-value accretive equity raise.

  • Gross and net written premiums growth of 119.4% and 122.9% in Q4 2020, and 106.7% and 69.2% for the full year was supported by momentum in US fronting and continued growth in Canada.

  • Net income of $10.9 million in the quarter and $32.4 million in full year 2020 grew 162.4% and 536.9% compared to prior year, respectively, driven by strong growth and underwriting in Canada, a growing contribution to profitability in the U.S, improved asset liability matching in our Reinsurance business and investment gains.

  • ROE of 13.4%, compared to 3.5% in 2019, approaching our mid-teens target despite dilution from our equity raise in May 2020, and achieved in the context of significant growth.

  • Premiums grew in our Canadian business by 116.5% in Q4 2020 and 51.5% for the full year. Exceptional surety performance contributed to achieving an 87.3% and 85.5% combined ratio for the quarter and year respectively and a 19.9% ROE.

  • Sustained growth in our US business, producing $210.7 million in GPW in the quarter and $647.2 million for the year, contributed to improved net income of $5.7 million and $16.4 million respectively, reaching a 11.7% ROE despite an increase in the capital base.

Amounts in C$ millions

Q4 2020

Q4 2019

Variance

2020

2019

Variance

Gross premiums written

314.2

143.2

119.4

%

926.4

448.3

106.7

%

Net income

10.9

4.2

162.4

%

32.4

5.1

536.9

%

EPS - diluted, $

1.05

0.47

123.4

%

3.28

0.69

375.4

%

Adjusted EPS - diluted, $

0.96

0.57

68.4

%

3.68

1.92

91.6

%

Book value per share, $

28.23

21.58

30.8

%

28.23

21.58

30.8

%

Debt-to-Capital ratio

8.7

%

13.5

%

(4.8pts)

8.7

%

13.5

%

(4.8pts)

ROE

13.4

%

3.5

%

9.9pts

13.4

%

3.5

%

9.9pts

Adjusted ROE

15.0

%

9.4

%

5.6pts

15.0

%

9.4

%

5.6pts

Combined ratio - Canada

87.3

%

82.9

%

4.4pts

85.5

%

87.8

%

(2.3pts)

Fronting operational ratio - US

68.5

%

78.9

%

(10.4pts)

70.6

%

88.9

%

(18.3pts)

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 and through the year, a recent second wave globally, and a 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 and vaccines. Depending on these factors, premium growth could slow and claims activity could increase.

Insurance Operations

  • Disciplined underwriting in Canada, achieving a loss ratio of 25.3% for the year, and strong expense management resulted in a combined ratio of 85.5%.

  • Strong growth in our US platform, with GPW of $210.7 million in Q4 2020 compared to $171.0 million in Q3 2020, and fee income of $8.5 million in Q4 2020 compared to $6.4 million in Q3 2020.

  • Improved asset-liability matching in our Reinsurance business limited volatility through the year.

Capital

  • The minimum capital test (“MCT”) ratio of our Canadian operations was 249% as at December 31, 2020 (258% as at December 31, 2019), which comfortably exceeded regulatory requirements of 150%.

  • Trisura Specialty’s capital of $122.6 million USD as at December 31, 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 8.7% as at December 31, 2020 is below our long-term target of 20.0%.

Investments

  • Investment income was $5.9 million in Q4 2020 and $27.8 million for the year, an increase from a loss of $3.9 million in Q4 2019 and $16.2 million in 2019. These increases were primarily a result of the impact of movements in European interest rates on the longer duration assets supporting our Reinsurance business liabilities, supported by additional interest and dividend income in North America.

  • In Canada and the US, interest and dividend income rose 25.8% and 28.2% in Q4 2020 and for the year versus the prior period, respectively. The US portfolio benefited from improved diversification after rebalancing through COVID-related volatility, and increased capital following the equity raise in May 2020.

  • Net gains were greater in Q4 2020 and for the year as a result of favourable foreign exchange movements and greater realized gains.

Corporate Development

  • Trisura continues to grow its admitted licenses, with 46 state licenses today and the intention of securing admitted licenses in all 50 states.

  • In the quarter Trisura bound $11.2 million USD in admitted premiums; we expect the admitted business to be a more 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 US operations.

Financial Statement Presentation – Update

  • We have adjusted our presentation of the Consolidated income statements to reflect a more representative view of our business, removing net underwriting income, which in the context of a business with life reserves on the Balance sheet, diluted the utility of the measure.

  • Adjusted EPS and adjusted ROE have been introduced, to adjust for non-recurring items and normalize earnings for core operations, providing a more representative depiction of the run-rate operations of the business.

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 Sinclair
Tel: 416 607 2135
Email: bryan.sinclair@trisura.com


Trisura Group Ltd.
Consolidated Statements of Financial Position
As at December 31, 2020 and December 31, 2019
(in thousands of Canadian dollars, except as otherwise noted)

As at

December 31, 2020

December 31, 2019

Cash and cash equivalents

136,519

85,905

Investments

503,684

392,617

Premiums and accounts receivable, and other assets

178,883

86,669

Recoverable from reinsurers

676,972

293,068

Deferred acquisition costs

188,190

104,197

Capital assets and intangible assets

13,907

14,477

Deferred tax assets

8,577

1,460

Total assets

1,706,732

978,393

Accounts payable, accrued and other liabilities

57,343

40,916

Reinsurance premiums payable

151,707

80,186

Unearned premiums

592,711

328,091

Unearned reinsurance commissions

100,281

51,291

Unpaid claims and loss adjustment expenses

487,271

257,880

Loan payable

27,555

29,700

Total liabilities

1,416,868

788,064

Shareholders' equity

289,864

190,329

Total liabilities and shareholders' equity

1,706,732

978,393



Trisura Group Ltd.

Consolidated Statements of Comprehensive Income
For the three and twelve months ended December 31
(in thousands of Canadian dollars, except as otherwise noted)

Q4 2020

Q4 2019

2020

2019

Gross premiums written

314,200

143,212

926,442

448,262

Net premiums written

88,400

39,656

241,324

142,628

Net premiums earned

51,091

29,710

160,684

107,504

Fee income

9,659

3,575

29,719

12,206

Net investment income (loss)

5,922

(3,868)

27,779

16,243

Settlement from structured insurance assets

-

-

-

8,077

Net gains (losses)

2,822

(92)

8,450

1,572

Total revenues

69,494

29,325

226,632

145,602

Net claims and loss adjustment expenses

(23,096)

(687)

(72,562)

(49,936)

Net commissions

(17,484)

(9,677)

(55,915)

(37,516)

Operating expenses

(14,037)

(12,464)

(57,560)

(45,590)

Interest expense

(222)

(341)

(1,113)

(1,361)

Total claims and expenses

(54,839)

(23,169)

(187,150)

(134,403)

Income before income taxes

14,655

6,156

39,482

11,199

Income tax expense

(3,706)

(1,984)

(7,040)

(6,105)

Net income

10,949

4,172

32,442

5,094

Other comprehensive income (loss)

2,800

(1,188)

96

808

Comprehensive income

13,749

2,984

32,538

5,902



Trisura Group Ltd.

Consolidated Statements of Cash Flows
For the three and twelve months ended December 31
(in thousands of Canadian dollars, except as otherwise noted)

Q4 2020

Q4 2019

2020

2019

Net income from operating activities

10,949

4,172

32,442

5,094

Non-cash items

(3,628)

11,406

2,378

9,898

Stock options granted

189

138

729

502

Change in working capital

23,958

9,744

81,412

49,726

Realized gains on investments

(1,223)

(60)

(22,666)

(2,860)

Income taxes paid

(1,860)

(114)

(9,808)

(2,573)

Interest paid

(223)

(354)

(1,144)

(1,410)

Net cash from operating activities

28,162

24,932

83,343

58,377

Proceeds on disposal of investments

37,776

13,805

238,827

55,452

Purchases of investments

(50,152)

(79,741)

(331,933)

(170,817)

Net purchases of capital and intangible assets

(673)

(2,723)

(1,296)

(3,131)

Net cash used in investing activities

(13,049)

(68,659)

(94,402)

(118,496)

Dividends paid

-

(24)

-

(96)

Shares issued

-

-

65,143

55,669

Preferred shares redeemed

-

(1,600)

-

(1,600)

Loans received

11,459

-

44,159

-

Repayment of loan payable

(11,459)

-

(44,159)

-

Lease payments

(318)

(266)

(1,515)

(1,026)

Net cash (used in) from financing activities

(318)

(1,890)

63,628

52,947

Net increase (decrease) in cash

14,795

(45,617)

52,569

(7,172)

Cash at beginning of the period

124,875

131,913

85,905

95,212

Currency translation

(3,151)

(391)

(1,955)

(2,135)

Cash at the end of the period

136,519

85,905

136,519

85,905

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.