Trisura Group Ltd.

Good morning. Welcome to Tresher Group Limited's third quarter 2023 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, 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 applicable Canadian and U.S. securities law. These statements reflect predictions of future events and trends and do not relate to historic events. They're subject to known and unknown risks, and future events and results may differ materially from such statements. For further information on these risks and their potential impacts, please see treasurer's filings with securities regulators. To ask a question during the Q&A session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised today's conference is being recorded. Thank you. I'll now turn the call over to David Clare.

Thank you. Good morning, everyone, and welcome. Treasurer's third quarter was strong. Insurance revenue grew 33%, and we reported a 20% operating return on equity. Momentum continues as we scale an increasingly diversified specialty insurance platform. Results were particularly striking in Canada, with 30% growth in insurance revenue supported by a below 80% combined ratio. Our U.S. front-end business produced $510 million of insurance revenue, an increase of 34% over the prior year. In Canada, we saw top line growth across all lines. Fronting and surety led the way. Fronting driven by a more mature platform and the growth and surety supported by market share gains and contribution from our sovereign acquisition and U.S. expansion, as well as continued momentum in core lines. Corporate insurance continued to benefit from expansion of distribution partnerships and stable pricing. With the launch of corporate insurance in the U.S. market, we're excited to see the potential of a North American-wide platform. Importantly, disciplined underwriting drove a 10% loss ratio, improved from a strong comparative year and below long-term averages as we benefited from increased diversification and nuanced risk selection. Our expense ratio improved slightly in the quarter due to lower commission rates in the period and remains in line with expectations. The Canadian platform generated a 75% combined ratio in the quarter, which together with an increased scale and enhanced investment income supported a 30% operating return on equity. U.S. fronting generated $510 million in insurance revenue in the quarter, growing 34% over Q3 2022, despite the cancellation of the program associated with the Q4 2022 write-down. Maturation of existing programs and favorable pricing trends drove top line. We have grown our admitted capabilities and saw $76 million in admitted revenue in the quarter. However, market conditions continue to drive opportunities to access and surplus lines. U.S. fronting generated $21 million in fees, a 14% increase, and recorded $43 million of deferred fee income, indicative of future fronting fees to be earned. Operating results in the quarter were strong and demonstrate progress made on improved profitability in our U.S. platform. Loss ratio was 70% in the quarter, excluding the impact of runoff, and decreased due to lower claims activity, as well as an increase in yields due to discount claims reserves. Front-end operational ratio is 86%, excluding the impact of runoff, higher than we target as a result of evolution of business mix and retention, seasonality, and slightly higher reinsurance costs. We continue to expect front-end operational ratio in the low 80s to high 70s in 2024. Growth, profitable underwriting, and a significant increase in investment income, which rose almost 200%, contributed to a 52% increase in operating net income in the U.S. This supported a 15% operating return on equity, despite capital contributions through the last 12 months. A combination of higher interest rates, growth, profitability, and our August 2023 capital raise resulted in 105% increase in investment income, more than doubling our prior year. On an annualized basis, investment income is expected to reach almost $55 million. Importantly, Our portfolio is more conservatively positioned than ever before, with a lower equity allocation, shorter duration, and higher allocation to investment-grade bonds. We are excited about the enhanced, risk-adjusted yields we are capturing for years to come. Increased investment income, alongside growing profitability from Canadian and U.S. rented operations, are contributing to a higher proportion of earnings from more predictable sources. Combining that with an established track record of industry-leading underwriting results gives us confidence in our goal of $1 billion in book value by the end of 2027. We continue navigating the approval process for the Treasury-listed surety company announced last quarter. This is an important step in our journey to become a more significant player in the U.S. market and build on established momentum in that business. We exceeded $18 million in U.S. surety premiums year-to-date. During the quarter, we raised $53 million in equity capital, with the majority of proceeds bookmarked to capitalize our growing U.S. surety presence. I'd like to thank our partners for the continued confidence. We have never taken the decision to raise equity lightly, and look forward to deploying our new capital efficiently on your behalf. We observed healthy, albeit stabilizing pricing trends across most lines in the quarter, and continue to expect hardening trends in certain lines to balance, although not reverse next year. This will be informed by the state of the reinsurance market, as well as economic and interest rate trends. and we feel well-equipped to navigate this environment. As we did in the first half of the year, we provided an update on the runoff program in advance of quarterly reporting. Accelerated policy cancellations have reduced the exposure of this program, and in conjunction with a strong U.S. dollar, resulted in a slightly higher impact to reported earnings. We believe a conservative posture on protection through runoff resulting in a short-term income hit is a logical trade-off and look forward to the program being substantially runoff by year-end. Treasurer's momentum continues, and we remain committed to disciplined underwriting and structuring standards, as well as conservative reserving. The market remains uncertain, although it is our hope that volatility will provide opportunities to win business and strengthen our reputation, and we feel confident we can navigate changes in economic outlook. We continue to plan for growth, and with a strong capital base and greater scale, feel optimistic for the years ahead. Our equity base is just shy of $600 million, a healthy increase from year end, and a high watermark for Trishura. With that, I'd like to turn the call over to David Scotland for a more detailed review of financial results.

Thanks, David. I'll now provide a walkthrough of financial results for the quarter and year-to-date periods. As a reminder, the 2023 results reflect the implementation of IFRS 17, the new accounting standard for insurance contracts, which has been applied retroactively, and as a result, our 2022 results have been restated to reflect the new standard. 2023 also reflects the implementation of IFRS 9, the new accounting standard for financial instruments, which has not been restated retroactively. The new standards have led to a number of changes in the presentation of both the income statement and the balance sheet. Insurance revenue was $730 million for the quarter and $2 billion year-to-date, reflecting growth of 33% and 43% respectively over the prior year. Insurance service expense, which consists of amortization of insurance acquisition cash flows, such as commissions, claims expense, and other operating costs, increased in the quarter and year-to-date periods, primarily as a result of growth in the business, leading to an increase in volume of claims and commissions expense. Net expense from reinsurance contracts, which includes both premium paid to reinsurers, as well as recoveries from reinsurers, increased in the quarter and year-to-date periods, as a result of growth in the business, which has led to more reinsurance seated, particularly from front-end Insurance service result in Canada for the quarter and year-to-date periods was greater than the prior year as a result of growth in the business and a low loss ratio. Insurance service result in the US for the quarter end and year-to-date periods was lower than the prior year as a result of the impact of losses generated from the runoff program. Excluding the impact of the runoff program, insurance service result was greater than the prior year as a result of growth in the business. For year-to-date 2023, the combined ratio in Canada was 79%, which is lower than the prior year, primarily because of a lower loss ratio. In 2023, the fronting operational ratio in the U.S. was 101%, and without the impact of the runoff program was 83.9% for the year-to-date period, which is greater than the prior year, primarily as a result of some additional reinsurance costs. Net investment income more than doubled in both Q3 and year-to-date 2023 as a result of an increase in the size of the investment portfolio, but also benefiting from higher risk-adjusted yields. Net loss of investments was $8.7 million for the quarter and $17.8 million year-to-date, primarily as a result of unrealized losses on investments held at fair value through profit and loss under IFRS 9, as well as foreign exchange movements. Other operating expenses. excluding the impact of share-based compensation, which is mitigated through a hedging program, increased by 18% for the quarter and 19% for the year-to-date period. Net income for the group was $14.8 million for the quarter and $55.6 million year-to-date. Operating net income, which adjusts for certain items to reflect income from core operations and excludes the impact of non-recurring items, including the runoff business, was $31 million for the quarter and $84 million year-to-date. which is greater than the prior year as a result of strong underwriting and growth in the business and higher net investment income. Diluted EPS was $0.31 a share in Q3 and $1.18 for the year-to-date periods, which was lower than the prior year as a result of losses associated with the runoff program, as well as unrealized losses on the investment portfolio. Operating EPS, which reflects core operations and excludes the impact of non-recurring items and unrealized losses, with $0.67 a share for the quarter and $1.80 for the year-to-date period, reflecting growth of 45% and 30% respectively over the prior periods. Consolidated ROE on a rolling 12-month basis was 2.8% at Q3 2023, while operating ROE was about 20%, which is higher than the prior year. Equity at September 30th, 2023 was almost $600 million and is greater than the prior year as a result of positive net income in the period as well as the impact of the equity offering in the quarter. Book value per share was $12.58 at September 30, 2023, and is greater than December 31, 2022, as a result of profit generated from insurance and investment income in the period, as well as the impact of the equity raise. As of September 30, 2023, the debt-to-capital ratio was 11.1%, which was lower than December 31, as a result of an increase in equity during the period. The company remains well capitalized, and we expect to have sufficient capital to meet our regulatory and capital requirements. David, I'll turn things back over to you.