Trisura Group Reports Fourth Quarter and 2021 Annual Results
TORONTO, Feb. 10, 2022 (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, 2021.
David Clare, President and CEO of Trisura, stated, “Our business performed very well through 2021, recording earnings of $62.6 million, an increase of 92.8% compared to 2020. Persistent growth and strong underwriting, supported by investment gains, generated a 19.0% return on equity(1), despite continued investment in growth.
Expansion of market share, maturation of our platform and new products drove premium growth of 54.3% in the quarter and 68.7% for the year. In Canada, focused underwriting resulted in an 81.1% combined ratio for the year, despite higher than trend claims activity in Q4. Our US business bound a quarterly record $293.3 million of gross premiums, supporting $6.8 million in net income and significant deferred fee income.
We continued the rationalization of our Reinsurance platform, negotiating a novation of our life annuity reinsurance contract to a third party, which reduces our exposure to variability in European interest rates and allows management to direct focus to core North American businesses. The novation drove the $2.6 million loss(2) from life annuity contracts in the quarter.”
Highlights
EPS of $0.24 in Q4 2021 and $1.49 for the full year compared to $0.26 and $0.82 respectively in 2020. Adjusted EPS(3) of $0.31 for the quarter and $1.47 for the full year compared to $0.24 and $0.84 in prior periods.
Book value per share(1) of $8.70 increased by 23.2% from December 31, 2020, driven by significant earnings and unrealized gains in the investment portfolio.
Gross written premiums growth of 54.3% in Q4 2021, and 68.7% for the full year, was supported by continued growth in Canada and strong momentum in US fronting.
Net income of $10.3 million in the quarter fell 6.0% compared to Q4 2020, negatively impacted by novation of our life annuity reinsurance contract and higher claims in the quarter. Adjusted net income(2) of $13.2 million in the quarter grew by 31.6% compared to Q4 2020. Net income for the full year grew by 92.8% to $62.6 million, a result of both growth and strong underwriting in Canada, increasing fee income from the US, and appropriate asset liability matching in our Reinsurance business.
ROE of 19.0% compared to 13.4% in 2020, exceeding our mid-teens target despite significant growth.
GPW in Canada increased by 84.9% in Q4 2021 and 102.1% for the full year. Strong underwriting performance across all lines contributed to a combined ratio(1) of 91.2% for the quarter and 81.1% for the year, and a 29.8% ROE.
New fronting arrangements in Canada contributed $96.3 million in the quarter and $198.2 million for the full year.
US premium grew by 39.2% and fee income grew by 41.2% in the quarter compared to Q4 2020, reaching $293.3 million and $11.9 million, respectively. For the year, premium grew by 54.4% to $1.0 billion and fee income grew by 76.6% to $43.0 million. This contributed to improved net income of $6.8 million in the quarter and $27.2 million for the full year, contributing to a 14.0% ROE despite an increase in the capital base.
Amounts in C$ millions | Q4 2021 | Q4 2020 | Variance | 2021 | 2020 | Variance |
Gross premiums written | 484.7 | 314.2 | 54.3% | 1,563.2 | 926.4 | 68.7% |
Net income | 10.3 | 10.9 | (6.0%) | 62.6 | 32.4 | 92.8% |
EPS - diluted, $ | 0.24 | 0.26 | (7.7%) | 1.49 | 0.82 | 81.7% |
Adjusted EPS - diluted, $ | 0.31 | 0.24 | 29.2% | 1.47 | 0.84 | 75.0% |
Book value per share, $ | 8.70 | 7.06 | 23.2% | 8.70 | 7.06 | 23.2% |
Debt-to-Capital ratio(1) | 17.3% | 8.7% | 8.6pts | 17.3% | 8.7% | 8.6pts |
ROE | 19.0% | 13.4% | 5.6pts | 19.0% | 13.4% | 5.6pts |
Adjusted ROE(4) | 18.8% | 13.8% | 5.0pts | 18.8% | 13.8% | 5.0pts |
Combined ratio – Canada | 91.2% | 87.3% | 3.9pts | 81.1% | 85.5% | (4.4pts) |
Fronting Operational Ratio – US(1) | 79.0% | 68.5% | 10.5pts | 72.7% | 70.6% | 2.1pts |
COVID-19
We have begun a gradual return to work in some jurisdictions based on local guidance, following increased safety measures and increased levels of vaccination.
Despite demonstrated resilience, we acknowledge that, uncertainty regarding variants, economic reopening, normalization of government support and the potential for a weaker than anticipated economic recovery continue to threaten momentum.
Premium generation and claims activity may be impacted depending on the length and depth of any future pandemic-related economic slowdown, as well as the effectiveness of government support programs and vaccines in driving a sustained re-opening. Depending on these factors, premium growth could slow and claims activity could increase.
Insurance Operations
Disciplined underwriting in Canada contributed to a loss ratio(1) of 26.2% for the quarter and 21.2% for the year, which were both improved over 2020, while premiums grew by 84.9% in the quarter and 102.1% for the full year.
Growth continued in the US, with GPW of $293.3 million in the quarter, compared to $210.7 million in Q4 2020, and fee income of $11.9 million in the quarter compared to $8.4 million in Q4 2020. Growth was the result of maturing and new programs.
Reinsurance business simplified following the novation of our life annuity contract.
Capital
The minimum capital test (“MCT”) ratio(5) of our regulated Canadian subsidiary was 229% as at December 31, 2021 (249% as at December 31, 2020), which comfortably exceeded regulatory requirements(6) of 150%.
Capital in our US operations of $212.7 million at December 31, 2021 ($156.0 million at December 31, 2020) was in excess of the various Company Action Levels of the states in which Trisura is licensed.
Consolidated debt-to-capital ratio of 17.3% as at December 31, 2021 is below our long-term target of 20.0%, providing incremental capacity for growth.
Investments
Interest and dividend income rose 25.8% in the quarter compared to Q4 2020 and 17.6% for the full year compared to 2020. The Canadian and US portfolios benefited from improved diversification and increased capital generated from strong operational performance.
Corporate Development
Launched Bricktown Specialty Insurance Company, a companion Excess and Surplus balance sheet to support growth of our hybrid fronting platform.
AM Best reaffirmed A- ratings for both Canada and the US, as well as introduced a group financial size rating increasing our financial size category to size IX, which is expected to be helpful as we continue to pursue admitted opportunities.
Trisura continues to pursue admitted licenses in all 50 states.
Financial Statement Presentation – Update
Adjusted EPS and Adjusted ROE were introduced in Q4 2020, to adjust for certain items to normalize earnings of core operations in order to better reflect our North American specialty operations.
Earnings Conference Call
Trisura will host its Fourth Quarter Earnings Conference Call to review financial results at 9:00 a.m. ET on Friday February 11th, 2022.
To listen to the call via live audio webcast, please follow the link below:
https://edge.media-server.com/mmc/p/zi8qnky5
A replay of the call will be available through the link above.
Footnotes
(1) This is a supplementary financial measure. Refer to 2021 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) 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.
(3) This is a non-IFRS ratio, see table 10.2 in 2021 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.
(4) This is a non-IFRS ratio. See table 10.4 in 2021 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.
(5) This measure is calculated in accordance with the Office of the Superintendent of Financial Institutions Canada’s (OSFI’s) Guideline A, Minimum Capital Test.
(6) This target is in accordance with OSFI’s Guideline A-4, Regulatory Capital and Internal Capital Targets.
About Trisura Group
Trisura Group Ltd. is an international 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”), as well as Barbados (“Trisura International”). 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, 2021 and December 31, 2020
(in thousands of Canadian dollars, except as otherwise noted)
As at | December 31, 2021 | December 31, 2020 |
Cash and cash equivalents | 341,319 | 136,519 |
Investments | 641,140 | 503,684 |
Premiums and accounts receivable, and other assets | 311,629 | 178,883 |
Recoverable from reinsurers | 1,375,354 | 676,972 |
Deferred acquisition costs | 304,580 | 188,190 |
Capital assets and intangible assets | 17,109 | 13,907 |
Deferred tax assets | 9,223 | 8,577 |
Total assets | 3,000,354 | 1,706,732 |
Accounts payable, accrued and other liabilities | 216,633 | 57,343 |
Reinsurance premiums payable | 335,673 | 151,707 |
Unearned premiums | 965,245 | 592,711 |
Unearned reinsurance commissions | 152,003 | 100,281 |
Unpaid claims and loss adjustment expenses | 897,011 | 487,271 |
Debt outstanding | 75,000 | 27,555 |
Total liabilities | 2,641,565 | 1,416,868 |
Shareholders' equity | 358,789 | 289,864 |
Total liabilities and shareholders' equity | 3,000,354 | 1,706,732 |
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 2021 | Q4 2020 | 2021 | 2020 | |
Gross premiums written | 484,740 | 314,200 | 1,563,206 | 926,442 |
Net premiums written | 115,941 | 88,400 | 398,137 | 241,324 |
Net premiums earned | 82,768 | 51,091 | 277,909 | 160,684 |
Fee income | 12,625 | 9,659 | 49,879 | 29,719 |
Net investment income | 7,430 | 5,922 | 7,605 | 27,779 |
Net gains | 3,726 | 2,822 | 14,484 | 8,450 |
Total revenues | 106,549 | 69,494 | 349,877 | 226,632 |
Net claims and loss adjustment expenses | (36,823) | (23,096) | (82,330) | (72,562) |
Net commissions | (33,341) | (17,484) | (107,757) | (55,915) |
Operating expenses | (21,957) | (14,037) | (77,709) | (57,560) |
Interest expenses | (578) | (222) | (1,638) | (1,113) |
Total claims and expenses | (92,699) | (54,839) | (269,434) | (187,150) |
Income before income taxes | 13,850 | 14,655 | 80,443 | 39,482 |
Income tax expense | (3,555) | (3,706) | (17,884) | (7,040) |
Net income | 10,295 | 10,949 | 62,559 | 32,442 |
Other comprehensive (loss) income | (2,173) | 2,800 | 4,897 | 96 |
Comprehensive income | 8,122 | 13,749 | 67,456 | 32,538 |
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 2021 | Q4 2020 | 2021 | 2020 | |
Net income | 10,295 | 10,949 | 62,559 | 32,442 |
Non-cash items | 5,205 | (3,628) | 20,270 | 2,378 |
Stock options granted | 354 | 189 | 1,309 | 729 |
Change in working capital | 113,822 | 23,958 | 244,047 | 81,412 |
Realized gains | (2,261) | (1,223) | (4,096) | (22,666) |
Income taxes paid | (4,537) | (1,860) | (15,705) | (9,808) |
Interest paid | (1,079) | (223) | (1,535) | (1,144) |
Net cash from operating activities | 121,799 | 28,162 | 306,849 | 83,343 |
Proceeds on disposal of investments | 27,384 | 37,776 | 135,730 | 238,827 |
Purchases of investments | (52,559) | (50,152) | (280,918) | (331,933) |
Net purchases of capital and intangible assets | (481) | (673) | (3,460) | (1,296) |
Net cash used in investing activities | (25,656) | (13,049) | (148,648) | (94,402) |
Shares issued | 456 | - | 1,315 | 65,143 |
Shares purchased under Restricted Share Units plan | 44 | - | (2,011) | - |
Proceeds from issuance of debt | - | - | 75,000 | - |
Loans received | - | 11,459 | 26,970 | 44,159 |
Loans repaid | - | (11,459) | (54,525) | (44,159) |
Principal portion of lease payments | (442) | (318) | (1,596) | (1,515) |
Net cash from (used in) financing activities | 58 | (318) | 45,153 | 63,628 |
Net increase in cash | 96,201 | 14,795 | 203,354 | 52,569 |
Cash at beginning of year | 245,332 | 124,875 | 136,519 | 85,905 |
Currency translation | (214) | (3,151) | 1,446 | (1,955) |
Cash at end of year | 341,319 | 136,519 | 341,319 | 136,519 |
Non-IFRS financial measures
Reconciliation of Reported Net Income to Adjusted Net Income - reflect net income, adjusted for certain items to normalize earnings to core operations in order to better reflect our North American specialty operations
Q4 2021 | Q4 2020 | 2021 | 2020 | |
Net income | 10,295 | 10,949 | 62,559 | 32,442 |
Adjustments | ||||
Add: impact of share-based compensation | 1,942 | 745 | 10,224 | 7,469 |
Add: loss on sale of structured insurance assets | - | - | 1,336 | - |
Less: net gains | (3,726) | (2,822) | (14,484) | (8,450) |
Less: net loss from life annuity | 2,591 | 592 | 559 | 4,588 |
Less: impact of CAT Programs Reinsurance(7) | 2,158 | - | 2,158 | - |
Less: tax impact of above items | (49) | 575 | 474 | 352 |
Less: adjustments relating to income tax benefits | - | - | (936) | (3,127) |
Adjusted net income | 13,211 | 10,039 | 61,890 | 33,274 |
(7) Refer to December 31, 2021 MD&A, section 4 - Performance Review, United States, for details.
Reconciliation of Average equity to LTM average equity - LTM average equity is used in calculating adjusted ROE
Q4 2021 | Q4 2020 | |
Average equity(8) | 324,327 | 240,097 |
Adjustments: days in quarter proration, equity raise - Q2 2020 | 4,221 | 1,391 |
LTM average equity | 328,548 | 241,488 |
(8) Average equity is calculated as: 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 year ended December 31, 2021. 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.
