Trisura Group Ltd.

Good morning. Welcome to Trusher Group's limited fourth quarter and full year 2021 earnings conference call. On the call today are David Clear, Chief Executive Officer, and David Scotland, Chief Financial Officer. David Clear will begin by providing a business and strategic update, followed by David Scotland's results for the quarter and year. Following the formal comments, lines will be open for analyst questions. I'd like to remind participants that in today's comments, including in responding to questions and in discussing new initiatives related to financial and operating performance, forward-looking statements may be made. including forward-looking statements within the meaning of Canadian and U.S. securities laws. These statements reflect predictions of future events and trends and do not relate to historic events. They're subject to known and unknown risk in future events, and results may differ materially from such statements. For further information on those risk and potential impacts, please see Trashera's filings with securities regulators. Thank you. I'll now turn the call over to David Clare.

Thank you. Good morning, everyone, and welcome. Our business reformed very well in 2021, which represented an inflection point on our path to building a leading specialty insurance company of scale. Despite the challenges of a global pandemic, progress made across the organization yielded a more robust infrastructure, a more diversified earnings base, and the nascent benefits of increased scale. A commitment to specialty lines and deliberate expansion of our strategies across North America met favorable market conditions and strong adoption of our products. Premium growth in the fourth quarter continued our momentum from the first nine months of 2021, producing again our largest premiums to date following sequential records in Q2 and Q3. Claims experienced in the quarter and the impact of one-time items weighed on net income, which fell 6% versus a strong prior year comparison. Importantly, adjusted quarterly net income grew 32% over Q4 2020, and return on equity remained strong at 19%, more impressive in the context of significant growth. Our team continues to demonstrate resilience and a healthy pipeline of opportunities as we scale an increasingly sophisticated and diversified specialty insurance platform. Results were particularly strong in Canada, with 85% premium growth in the quarter, supported by profitable underwriting. Momentum was sustained in the US as premiums again hit a quarterly record, increasing 39% over the fourth quarter of 2020 and reaching $1 billion for the year. We observed significant premium increases in Canada. The standout was again risk solutions, where fronting arrangements and new warranty programs drove a 123% rate of growth in the quarter versus 2020. Corporate insurance continues to benefit from a hard market. Growth in premiums and momentum with distribution partners produced a 46% growth over the prior period. Surety growth of 18% was strong as the business benefits from tailwinds in established lines, expansion of a U.S. practice, and a new home warranty segment with a full year of operation. More importantly, Canadian loss ratio of 26% improved versus the 30% achieved in Q4 2020, driven by strong experience in corporate insurance and risk solution. Surety's 31% loss ratio rose versus what has been exceptional performance in the last year and was the result of a claim in contract surety. Profitability was supported by corporate insurance's growth in premium and a 26% loss ratio, as well as more than doubling of underwriting income in risk solutions. Combined ratio in the quarter was 91%, compared to 87% in Q4 2020, driven by an increase in expense ratio following the change in our surety reinsurance structure, mitigated by an improvement in loss ratio. Despite a higher combined ratio, net underwriting income increased 12% in the quarter, driven by growth in the business. Taking into account growing investment income, the Canadian platform maintained a strong 30% return on equity. With the extension of our U.S.-style fronting, our Canadian entity now generates attractive fee-based earnings to complement a heritage of profitable underwriting. We have made progress on our U.S. surety platform, adding experienced team members and local offices in Stanford, Denver, and Philadelphia. We are excited at the early potential, expanding the product line where we have demonstrated expertise in a geography with promising infrastructure tailwinds. U.S. fronting premium grew 39% over Q4 2020. Maturation of existing programs and new relationships drove top line. U.S. fronting generated $293 million in gross premiums written and $12 million in fronting fees. We recorded $26 million in deferred fee income at the end of the quarter, indicative of future fees to be earned. Loss ratio in the quarter increased as a result of weather events in certain programs, and fronting operational ratio increased from the cost of reinsurance on non-scaled programs. Importantly, We believe that the current size of impacted programs and an improved structure going forward will result in enhanced profitability. Despite marketing conditions driving opportunities to excess and surplus lines, we wrote $24 million in admitted premiums in the quarter, mitigated by slower approvals by state regulators and the longer ramp times of admitted programs. It is important to acknowledge the scale of the U.S. business. Similar to our Canadian platform, the U.S. business may exhibit seasonality, making sequential comparisons less relevant than when the business was in startup mode. Annual growth potential remains strong, and we view the business on a 12-month basis. In the quarter, we negotiate an ovation of our life annuity reinsurance contract, resulting in the end of our participation on the contract and a one-time $3 million loss. Although we realize the loss on this today, we benefit from elimination of exposure to European interest rates and management's focus on core North American businesses. We will continue to provide capacity for our U.S. fronting operation. Maturation of our business and growth of our balance sheet led AMBEST to increase our rating size category to nine, which ranks our platform as one of the most significant funding participants in the U.S. It is expected to support our trajectory in the years to come. The strength of our growth has also catalyzed historic levels of hiring, though we admittedly face the same difficulties in hiring that many industries are facing today. An important focus through this expansion continues to be increasing operational leverage while maintaining appropriate resources to manage and underrate the business. Interest and dividend income increased year over year, the result of growth's impact on our portfolio. We continue to allocate conservatively, acknowledging an uncertain environment as we navigate a transition to a post-pandemic world and the unwind of monetary stimulus. Despite these dynamics, we have defended a 3% yield on our investment portfolio. The hardening market continued through year-end, and we expect this trend to sustain through 2022, albeit at a reduced pace. The majority of our growth has been achieved through enhanced distribution relationships and new volumes, and as such, we expect to navigate any eventual rate normalization smoothly. Although excess and surplus markets remain strong, our admitted capabilities will be important going forward. With the continued expansion of the admitted platform, maturation of Canadian fronting, and the launch of a U.S. surety strategy, we have ample and attractive opportunities to grow. Following our inaugural debt issuance earlier this year, we are well positioned to support that growth. Our platforms have become complementary sources of lead generation for one another. As we gain market share in one geography, our presence in and capabilities of our companion offices provide opportunities to generate new business and service our partners in both Canada and the U.S. Increasingly diverse and fee-based earnings help reduce volatility and support access to capital. Growth and performance in Canada has been a highlight this year and is providing momentum for the enterprise beyond the profitable maturation demonstrated in U.S. frontings. As we look to 2022, environmental, social, and governance considerations are front of mind and an important part of Tricia's development. We are focused on better communicating existing initiatives, identifying areas in which there is room for improvement, and adopting best practices. We remain an insurance company in growth mode and must focus on the skills and practices that brought us to this point. We will concentrate in business lines we know, continue to underwrite conservatively, and execute on detailed structuring. As we've acknowledged in the past, our business can experience volatility and severity in claims, seeing this quarter in surety. I know that we do not view the experience in the fourth quarter as indicative of a future trend, and we are proud of our accomplishments over the past year. We are optimistic for the years ahead. With that, I would like to turn it over to David Scotton for a more detailed review of financial results.

Thanks, David. I'll now provide a brief walkthrough of some financial results for the quarter. Gross written premium was $485 million for the quarter, which reflects growth of 54% over Q4 2020. Fee income, which is primarily related to fronting fees from our US operations, grew by 31% in the quarter, reflecting growth of fronted premium in the US. Net claims expense in the quarter was greater than the prior year, primarily as a result of growth in the business, higher claims in our surety operation, and a higher loss ratio in the US business. Net commissions expense increased by 91% over Q4 2020 and operating expense in the quarter increased by 56% over Q4 2020, both reflecting growth in both the Canadian and US operations. That underwriting income in Canada for Q4 was higher than the prior year as a result of growth in the business mitigated by higher combined ratio in the quarter. That underwriting income for the US for Q4 2021 was greater than Q4 2020, largely as a result of growth in new and existing programs as well as improved operational efficiency. This was mitigated by higher loss ratio and the impact of additional CAAT reinsurance purchases, which were required for a group of programs which had yet to build sufficient scale. In Q4 2021, the combined ratio in Canada was 91% and the fronting operational ratio in the U.S. was 79%. Net investment income was greater in Q4 2021 than Q4 2020 as a result of an increase in interest and dividend income. The increase was primarily related to an increase in the size of the investment portfolio associated with growth in operations and contributions to capital from the debt offering in June 2021, and was mitigated by reduced market yields. Net gains were $3.7 million in the quarter, which were greater than Q4 2020, largely as a result of greater realized gains as well as derivative income. Income tax expense was approximately the same in Q4 2021 as Q4 2020, reflecting similar income before tax in each of those quarters. Net income generated from the reinsurance operations was lower in Q4 2021 than Q4 2020 as a result of a loss from the novation of the life annuity reinsurance contract. This event will simplify reporting of our operating results going forward. Net income for the group was $10.3 million in the quarter, which was approximately the same as Q4 2020. Results were driven by growth in the business, which was offset by higher claims in both Canada and the U.S., as well as the impact of the novation at Trishura International. Diluted EPS was $0.24 in Q4 2021, which was approximately the same as the prior year. Consolidated ROE on a rolling 12-month basis was 19% at the end of Q4 2021, which was greater than the rolling 12-month ROE at the end of Q4 2021. Assets in the year-to-date period grew by $1.3 billion as a result of growth in Canada and the U.S. Recoverable from reinsurers have increased, primarily 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. Investments have grown as well, reflecting the additional capital generated as a result of the debt offering in Q2 2021, as well as capital generated from operations. Liabilities in the year-to-date period grew by $1.2 billion, primarily as a result of growth in unearned premium and unpaid claims and loss adjustment expenses, which have grown as a result of growth in both Canada and the U.S. As discussed, growth in these balances is largely offset by growth in reinsurance recoverables. Equity has grown for the year by $69 million, reflecting growth in net income as well as growth in other comprehensive incomes. Other comprehensive income increased in 2021, primarily as a result of opportunistic conversion of Canadian cash to fund U.S. operations. Book value per share was $8.70 at December 31st and is greater than December 31st, 2020, as a result of profit generated year-to-date and unrealized gains on the investment portfolio. As of December 31st, 2021, debt to capital was 17.3%, which has increased after the debt offering in the second quarter, but 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 turn things back over to you.