Trisura Group Ltd.

Good morning. Welcome to Tresura Group Limited first quarter 2021 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, the line will be open for analyst questions. I'd like to remind participants in today's comments, including in responding to questions and discussing new initiative related to financial and operating performance. Forward-looking statements may be made, including forward-looking statements with the meaning of applicable Canadian and U.S. securities law. These statements reflect prediction of future events and trends and do not relate to historic events. They are subject to known and unknown risks and future events and result may differ materially from such statements. For further information on this risk and potential impacts, please see Tresor's filings and securities regulators. As a reminder, to ask a question, you will need to press star 1 on your telephone keypad. To withdraw your question, just press pound key. Please be reminded, limit your question to one question and one follow-up. Thank you. I will now turn the call over to David Clare. Please go ahead.

Thank you. Good morning, everyone, and welcome. I'll start with a few comments on our progress in our business plan and provide an update on our strategic initiatives following that. In Q1, we produced our largest quarterly premium to date. As importantly, disciplined underwriting and a business model that focuses on recurring fee income yielded the strongest earnings per share and return on equity in our group's history. This demonstrates the strength of our multi-jurisdictional and multi-line specialty insurance platform, as well as the quality of our business today. I should acknowledge that we continue to operate in the midst of a global pandemic and have enjoyed resilience made possible by our committed employees and high-quality partners. All lines experienced strong results in the quarter, with income supported by exceptional underwriting and growth in Canada and continued maturation of business in the U.S. Catalyzed by rising interest rates and helped by retention of U.S. fronting premiums, we benefited from a positive contribution in our reinsurance operations. In Canada, the majority of our staff continue to work from home. January's second wave predicated a closure of our Canadian office to adhere to local guidelines, save for essential staff. We have used the time to expand our footprint in anticipation of a future return. We continue to monitor local guidelines as well as approaches by peers and financial institutions to guide our staff. In Oklahoma City, the base of our U.S. operations, vaccines have been well adopted, and most employees have returned to the office on a voluntary basis. We expect to transition to full-time in-office operations over the coming months. Company-wide productivity continues to impress, and results reflect that. The industry, and our employees specifically, adapted well to this new paradigm. However, we are keen to recapture the advantages of in-person interactions and hope to benefit from the tools and processes we've adopted in the last year. I'm hopeful that comfort with video conferencing and less reliance on travel will produce efficiencies with internal and inter-office collaboration. Claims have yet to observe a material change related to COVID-19. I believe the ultimate impact is yet to be fully understood, and we maintain an increased reserving level on several business lines as a result. In Canada, premiums grew 74% over Q1 2020. We continue to benefit from a hardening market in corporate insurance lines, as well as momentum with existing and new distribution partners. New programs, including fronting, helped risk solutions more than double premium over Q1 2020. supported by auto warranty. Gains in market share and new products in surety drove 33% growth over the prior period. A loss ratio of 13% in the quarter was significantly improved versus Q1 2020, driven by better claims in corporate insurance and continued strong results in surety. Surety's loss ratio benefited from continuation of construction activities through economic shutdowns and government support programs. Profitability was amplified by corporate insurance's 14% loss ratio. Both lines benefited from significant and favorable prior year reserve development. Our U.S. surety practice continued to progress. We have expanded surety licensed states to 46, as well as submitting a business plan to the Treasury Department in pursuit of a T-listing, a necessary step to participate in the federal bond market in the U.S. We have secured office space in Stamford, Connecticut, and are actively building the local teams. We are also gaining momentum in Canadian fronting with opportunities to expand our current presence as well as replicate our U.S. hybrid model. In the quarter, $15 million of premium was generated in risk solutions through fronting, and we continue to evaluate opportunities to grow this business line. We have benefited from our experience in the U.S. in structuring these transactions. Our U.S. platform continued its trajectory of growth in the quarter. Despite strong growth in the prior period and a weaker U.S. dollar, we increased average premium per month to $75 million compared to $70 million in Q4. We recorded $10 million of earned fronting fees and $21 million of deferred fee income at quarter end, indicative of future fees to be earned through our income statement. We have four admitted programs, although admitted premium generation of $8 million remains immaterial versus excess in surplus lines. From our original 13 admitted licenses, the team has expanded our ability to write business to 48 states with the expectation of a fully licensed platform in due course. We are actively evaluating admitted programs and acknowledging a ramp-up period, a longer ramp-up period versus excess and surplus lines are hopeful to demonstrate progress in the second half of the year. In the quarter, we received an investment grade issuer rating of BBB stable from DBRS. This is a milestone for the company and will provide significant and accretive financing opportunities, important as we observe sustained growth in both the U.S. and Canada. We are in the early stages of our admitted platform build-out, and the opportunity in U.S. surety in the coming years is exciting. This quarter, more than any other, demonstrates the potential of our platform when all segments perform. The company continues to evolve, and the increasingly diverse and fee-based nature of our earnings helps to de-risk profitability and supports growth. The hardening market accelerated through the events of 2020, and we expect this trend to sustain in 2021. The combination of established momentum, an introduction of admitted capabilities, and a launch of a U.S. surety strategy provides ample opportunities for us to grow organically. Federal budgets in Canada and the U.S. continue to highlight infrastructure spending as part of their toolkits, something we would like to see enacted and will support growth in our now North American surety platforms. We remain an insurance company in growth mode and must focus on the skills and practices that brought us to this point. Concentration of business lines we know, conservative underwriting, and detailed structuring. Claims in our business can experience volatility and severity. We should expect a claims experience approximating historical averages in the long term, strength and momentum of our current quarter notwithstanding. With that, I'd like to turn it over to Dave Scotland for a review of the financials.

Thanks, David. I'll now provide a brief walkthrough of some financial results for the quarter. GPW for the quarter was $310 million, which reflects growth of 83% over Q1 2020. This reflects growth in the Canadian operations of 74% and growth in the U.S. operations of 86%. Fee income, which is primarily related to fronting fees from our U.S. operations, grew by 83%, reflecting growth in fronted premium in the U.S. and an increase in surety accounts in Canada. Net claims in Canada for the period were lower than the prior year as a result of a lower loss ratio of 13%, driven by strong underwriting results across all lines, but with particular improvement in corporate insurance. Net claims in the U.S. for the period were greater than the prior year as a result of growth in the business, as well as certain CAT losses, which caused the loss ratio to increase to 73% in the quarter. On a consolidated basis, net claims expense in the quarter was lower than the prior year as a result of the reinsurance business reflecting claims recoveries associated with discounting of our life annuity reserves. Those life annuity reserves were impacted by a rise in European interest rates in the quarter. It's important to note that the claims movement associated with those life annuity reserves was largely offset by investment losses derived from the securities supporting those liabilities. Net commissions expense increased by 65%, reflecting growth in the business in both the Canadian and U.S. operations. Operating expense in the quarter grew by 40% over Q1 2020. Part of the increase is related to share-based compensation associated with certain outstanding options for which we have now completed a hedging program. The movement of the hedge is reflected in net gains losses on the income statements. Excluding share-based compensation, which has been hedged, operating expense grew by 23% over Q1 2020, reflecting primarily growth in the Canadian operations. Net underwriting income in Canada for Q1 2021 was higher than Q1 2020 as a result of growth in the business, as well as a lower loss ratio across all three lines. The expense ratio in Canada was also lower than Q1 2020 as a result of certain one-time commission payments from reinsurers associated with modifications of our surety reinsurance program in Canada. The expense ratio was lower as well as a result of improved operational efficiency. Net underwriting income in the U.S. for Q1 2021 was higher than Q1 2020, largely as a result of growth in new and existing programs, as well as improved operational efficiency. The combined ratio in Canada was 65% and the fronting operational ratio in the U.S. was 67%, both improvements over Q1 2020. Net investment income was in a lost position in Q1 2021 as a result of the increase in European interest rates in the quarter, which impacted the Euro-denominated bonds supporting the life annuity reserves. As discussed, the movement in those bonds was largely offset by movement in corresponding claims reserves. In Canada and the US, interest and dividend income increased by 2.3% over Q1 2020. The increase was primarily related to an increase in the size of the portfolio associated with growth in operations and the equity raise in 2020. and was mitigated by reduced market yields. Net gains were $3.8 million in the quarter, which was significantly greater than Q1 2020, primarily as a result of our gains in our share-based compensation hedging program. As discussed previously, these gains were largely offset by share-based compensation expense. Income tax expense was $5.7 million in the quarter, which was greater than Q1 2021. This reflects an effective tax rate of approximately 23%, which is in line with expectations. In Q1 2020, we recognized a deferred tax asset related to previously unrecognized tax losses, which resulted in a one-time tax recovery in that quarter. Net income generated from the reinsurance operations was also greater in Q1 2021 as a result of a slight favorable ALM mismatch, which occurred in the context of rising European interest rates in the quarter. Net income for the group was $19 million for the quarter, which was greater than Q1 2020 by 130%. The increase was largely driven by increased profitability in both Canada and the U.S. operations as a result of growth and improved operating metrics. This growth in earnings led to improvement in a number of key financial metrics over Q1 2020. Diluted EPS was 1.84 in Q1 2021 and greater than the prior year, despite an increase of 1.4 million shares from the equity raise in May of 2020. Consolidated ROE on a rolling 12-month basis was 16% at the end of Q1 2021, which was greater than the rolling 12-month ROE at the end of Q1 2020. Overall, strong growth and improved profitability in both Canada and the U.S. have contributed to an increase in earnings and improved key financial metrics during the quarter. Assets in the quarter grew by $180 million as a result of growth in Canada and the U.S., Recoverables from reinsurers have increased as a result of growth in the U.S. front-end business, where claims liabilities are largely offset by expected recoveries from the reinsurers to whom we see the business. Premiums and accounts receivable and other assets have grown primarily as a result of growth in GPW from the U.S. operations. Growth in this balance is largely offset by growth in reinsurance premiums payable associated with the premiums ceded to third-party reinsurers. Liabilities in the quarter grew by $161 million, primarily as a result of growth in unearned premiums and unpaid claims loss adjustment expenses, which have grown as a result of growth in both Canada and the U.S. As was discussed, the growth in these balances is largely offset by growth in reinsurance recoverables. Equity has grown by $18.9 million, reflecting growth in net income, as discussed, as well as growth in other comprehensive income in the quarter. OCI increased in the quarter primarily as a result of unrealized gains on the investment portfolio, in particular as a result of unrealized gains on equities and preferred shares. This was offset in the quarter by some cumulative translation loss due to the strengthening of the Canadian dollar against the U.S. dollar, which drove lower valuations of capital held outside of Canada. Book value per share was $30.04 at March 31, 2021 and is greater than December 31, 2020 as a result of profit generated in the quarter. As of March 31st, debt to capital was 8%, which remains below our long-term target of 20%. The company remains well capitalized, and we expect to have sufficient capital to meet our regulatory capital requirements. David, I'll now turn things back over to you.