Trisura Group Ltd. (“Trisura” or “Trisura Group”) (TSX: TSU), a
leading international specialty insurance provider, today announced
financial results for the second quarter of 2020.
David Clare, President and CEO of Trisura,
stated, “In Q2, Trisura generated net income of $6.6 million,
driven by operational strength from our specialty platforms in
North America, investment gains and partially offset by reserve
strengthening in our Reinsurance entity.
In Canada, disciplined underwriting and
consistent investment returns sustained our industry-leading 19.7%
return on equity despite the disruption of COVID-19. Our U.S.
platform maintained its growth trajectory, binding $144.8 million
of quarterly gross premiums and generating $4.0 million in net
income.
We experienced volatility in our reinsurance
operations, the result of heightened market volatility and
redeployment of our assets as the new manager established an
improved portfolio.
Following our equity raise, our balance sheet is
further strengthened and positioned to support growth.”
Highlights
- Gross and net written premiums growth of 85.4% and 26.3% in Q2,
supported by momentum in our U.S. operations and continued growth
in Canada.
- Net income of $6.6 million in the quarter, driven by strong
underwriting in Canada, growing profitability in the U.S and
investment gains.
- Consolidated LTM ROE of 11.8%, which includes the impact of
negative results in our reinsurance business and dilution from the
equity raises in September 2019 and May 2020, compared to 3.3% at
Q2 2019.
- Book value per share of $26.24, a 21.6% increase from December
31, 2019, driven by the equity raise and supported by positive net
income.
- EPS of $0.68 in Q2 2020, compared to $(0.63) in Q2
2019.
- Successfully completed a $65.1 million equity raise to sustain
growth in the US supported by existing and new
shareholders.
- Industry-leading results from our Canadian business, achieving
a combined ratio of 78.9% in Q2 2020, producing a 19.7% LTM
ROE.
- Continued acceleration in our U.S. business, producing $144.8
million in GPW in the quarter and $4.0 million in net income,
driving a 9.5% LTM ROE.
- Improved financial flexibility demonstrated by a
debt-to-capital ratio of 9.9%, below our long-term target of
20.0%.
Amounts in C$ millions |
Q2 2020 |
Q2 2019 |
Variance |
Q2 2020 YTD |
Q2 2019 YTD |
Variance |
Gross premiums written |
202.7 |
|
109.3 |
|
85.4 |
% |
372.6 |
|
190.7 |
|
95.4 |
% |
Net premiums written |
46.9 |
|
37.1 |
|
26.3 |
% |
88.4 |
|
65.5 |
|
34.8 |
% |
Net underwriting (loss) income |
(0.2 |
) |
(8.9 |
) |
(97.7 |
%) |
0.4 |
|
(17.2 |
) |
nm |
|
Net investment income |
6.3 |
|
5.8 |
|
9.3 |
% |
14.8 |
|
10.1 |
|
47.2 |
% |
Net income (loss) |
6.6 |
|
(4.1 |
) |
nm |
|
15.0 |
|
(1.6 |
) |
nm |
|
EPS - diluted, $ |
0.68 |
|
(0.63 |
) |
nm |
|
1.61 |
|
(0.25 |
) |
nm |
|
Book value per share, $ |
26.24 |
|
19.55 |
|
34.2 |
% |
26.24 |
|
19.55 |
|
34.2 |
% |
Debt-to-Capital ratio |
9.9 |
% |
18.7 |
% |
(8.8pts) |
9.9 |
% |
18.7 |
% |
(8.8pts) |
LTM ROE |
11.8 |
% |
3.3 |
% |
8.5pts |
11.8 |
% |
3.3 |
% |
8.5pts |
Combined ratio - Canada |
78.9 |
% |
91.4 |
% |
(12.5pts) |
80.3 |
% |
87.8 |
% |
(7.5pts) |
LTM ROE - Canada |
19.7 |
% |
21.7 |
% |
(2.0pts) |
19.7 |
% |
21.7 |
% |
(2.0pts) |
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 US and weaker than anticipated economic recovery may threaten
momentum. We have observed slowing conditions across the US and
continue to monitor closely.
- 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
16.2% in the quarter, supported by strong claims experience across
all lines. Improvements in expense ratio driven by operational
efficiency resulted in a combined ratio of 78.9%.
- Strong growth in our U.S. platform, with GPW of $144.8 million
in Q2 2020 compared to $120.7 million in Q1 2020, and fee income of
$5.6 million in Q2 2020 compared to $4.1 million in Q1 2020.
- Volatility in the asset-liability matching in our international
reinsurance operations negatively impacted consolidated net
underwriting income in the quarter.
Capital
- The minimum capital test (“MCT”) ratio of our Canadian
operations was 255% (258% as at December 31, 2019), which
comfortably exceeded regulatory requirements of 150%.
- Trisura Specialty’s capital of $112.8 million USD as at June
30, 2020 ($83.3 million USD as at December 31, 2019) was in excess
of the minimum requirement of the states in which Trisura Specialty
is licensed.
- Trisura International’s capital of $11.7 million USD as at June
30, 2020 ($14.2 million USD as at December 31, 2019) was
appropriate in the context the regulatory capital requirements it
is subject to.
- Consolidated debt-to-capital ratio of 9.9% as at June 30, 2020
is below our long-term target of 20.0%.
Investments
- In Q2 2020, net investment income of $6.3 million compared to
$5.8 million in Q2 2019. The improvement was driven by an increase
in interest and dividend income in North America, as well as longer
duration reinsurance assets, which generated strong results in a
declining interest rate environment.
- In Canada, interest and dividend income was consistent in Q2
2020, versus the prior period.
- In the U.S., interest and dividend income increased 80.6% in Q2
2020, over the prior period, as we benefited both from
diversification of the portfolio and increased capital following
equity raises in September 2019 and May 2020.
- European rates fell in Q2 2020, which contributed to a net
investment gain of $3.6 million in Trisura International, offset by
reserve reductions. Investment income at Trisura International
increased 72.7% over the prior YTD period.
- Other comprehensive income was positively impacted by
unrealized gains in the equity, preferred share and fixed income
portfolios in both Canada and the US, following the recovery in
financial markets since the end of Q1 2020.
Corporate Development
- Trisura continues to grow its admitted licenses, with 30 state
licenses today and the intention of securing admitted licenses in
all 50 states.
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 June 30,
2020 and December 31, 2019(in thousands of
Canadian dollars, except as otherwise noted)
As at |
June 30, 2020 |
December 31, 2019 |
Cash and cash equivalents, and short-term securities |
99,165 |
85,905 |
Investments |
465,680 |
392,617 |
Premiums and accounts receivable, and other assets |
136,076 |
86,669 |
Recoverable from reinsurers |
465,215 |
293,068 |
Deferred acquisition costs |
139,873 |
104,197 |
Capital assets and intangible assets |
13,872 |
14,477 |
Deferred tax assets |
7,732 |
1,460 |
Total assets |
1,327,613 |
978,393 |
Accounts payable, accrued and other liabilities |
44,337 |
40,916 |
Reinsurance premiums payable |
109,852 |
80,186 |
Unearned premiums |
445,980 |
328,091 |
Unearned reinsurance commissions |
80,446 |
51,291 |
Unpaid claims and loss adjustment expenses |
348,066 |
257,880 |
Loan payable |
29,494 |
29,700 |
Total liabilities |
1,058,175 |
788,064 |
Shareholders' equity |
269,438 |
190,329 |
Total liabilities and shareholders' equity |
1,327,613 |
978,393 |
Trisura Group
Ltd.Consolidated Statements of Comprehensive
Income (Loss)For the three and six months ended
June 30(in thousands of Canadian dollars, except
as otherwise noted)
|
Q2 2020 |
Q2 2019 |
Q2 2020 YTD |
Q2 2019 YTD |
Gross premiums written |
202,683 |
|
109,313 |
|
372,635 |
|
190,696 |
|
Net premiums written |
46,881 |
|
37,133 |
|
88,381 |
|
65,543 |
|
Net premiums earned |
36,776 |
|
25,982 |
|
67,343 |
|
48,075 |
|
Fee income |
5,867 |
|
1,752 |
|
13,408 |
|
6,101 |
|
Total underwriting revenue |
42,643 |
|
27,734 |
|
80,751 |
|
54,176 |
|
Net claims and loss adjustment expenses |
(15,961 |
) |
(16,263 |
) |
(30,147 |
) |
(31,157 |
) |
Net commissions |
(12,138 |
) |
(9,056 |
) |
(23,371 |
) |
(17,574 |
) |
Operating expenses and premium taxes |
(14,753 |
) |
(11,325 |
) |
(26,838 |
) |
(22,615 |
) |
Total claims and expenses |
(42,852 |
) |
(36,644 |
) |
(80,356 |
) |
(71,346 |
) |
Net underwriting (loss) income |
(209 |
) |
(8,910 |
) |
395 |
|
(17,170 |
) |
Net investment income |
6,308 |
|
5,771 |
|
14,842 |
|
10,084 |
|
Settlement from structured insurance assets |
- |
|
- |
|
- |
|
8,077 |
|
Net gains |
3,504 |
|
533 |
|
1,450 |
|
1,188 |
|
Interest expense |
(267 |
) |
(342 |
) |
(667 |
) |
(687 |
) |
Income (loss) before income taxes |
9,336 |
|
(2,948 |
) |
16,020 |
|
1,492 |
|
Income tax expense |
(2,749 |
) |
(1,190 |
) |
(1,062 |
) |
(3,113 |
) |
Net income (loss) |
6,587 |
|
(4,138 |
) |
14,958 |
|
(1,621 |
) |
Other comprehensive income (loss) |
8,828 |
|
(1,710 |
) |
(2,542 |
) |
948 |
|
Comprehensive income (loss) |
15,415 |
|
(5,848 |
) |
12,416 |
|
(673 |
) |
Trisura Group
Ltd.Consolidated Statements of Cash
FlowsFor the three and six months ended June
30(in thousands of Canadian dollars, except as
otherwise noted)
|
Q2 2020 |
Q2 2019 |
Q2 2020 YTD |
Q2 2019 YTD |
Net income (loss) from operating activities |
6,587 |
|
(4,138 |
) |
14,958 |
|
(1,621 |
) |
Non-cash items to be
deducted |
9,184 |
|
(2,538 |
) |
7,371 |
|
(1,160 |
) |
Stock options
granted |
228 |
|
153 |
|
380 |
|
218 |
|
Change in working
capital operating items |
14,485 |
|
16,713 |
|
13,946 |
|
14,278 |
|
Realized gains on
investments |
(14,377 |
) |
(325 |
) |
(17,198 |
) |
(1,746 |
) |
Income taxes paid |
(8 |
) |
(1,007 |
) |
(3,287 |
) |
(1,867 |
) |
Interest paid |
(259 |
) |
(423 |
) |
(695 |
) |
(706 |
) |
Net cash from
operating activities |
15,840 |
|
8,435 |
|
15,475 |
|
7,396 |
|
Proceeds on disposal of investments |
113,202 |
|
15,009 |
|
140,264 |
|
28,549 |
|
Purchases of
investments |
(175,157 |
) |
(39,451 |
) |
(208,926 |
) |
(63,244 |
) |
Net purchases of capital and intangible assets |
(135 |
) |
(104 |
) |
(506 |
) |
(304 |
) |
Net cash used in investing activities |
(62,090 |
) |
(24,546 |
) |
(69,168 |
) |
(34,999 |
) |
Dividends paid |
- |
|
(24 |
) |
- |
|
(48 |
) |
Shares issued |
65,143 |
|
- |
|
65,143 |
|
- |
|
Loans received |
- |
|
- |
|
32,700 |
|
- |
|
Repayment of loan
payable |
(3,000 |
) |
- |
|
(32,700 |
) |
- |
|
Lease payments |
(398 |
) |
(182 |
) |
(878 |
) |
(495 |
) |
Net cash from (used in) financing activities |
61,745 |
|
(206 |
) |
64,265 |
|
(543 |
) |
Net increase
(decrease) in cash |
15,495 |
|
(16,317 |
) |
10,572 |
|
(28,146 |
) |
Cash at beginning of the
period |
84,352 |
|
82,072 |
|
85,905 |
|
95,212 |
|
Currency translation |
(682 |
) |
(806 |
) |
2,688 |
|
(2,117 |
) |
Cash at the end of the period |
99,165 |
|
64,949 |
|
99,165 |
|
64,949 |
|
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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