Trisura Group Ltd.

Good morning. Welcome to Trishura Group Limited's fourth quarter and annual 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 period. 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 laws. 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 Trishura's filings with securities regulators. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the 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. In the interest of time, we ask that you limit yourself to one question and one follow-up, then rejoin the queue for any additional questions. Please be advised that today's conference is being recorded. Thank you. I'll now turn the call over to David Clare.

Thank you, Operator. Good morning, everyone, and welcome. 2023 operational results give us a lot to be excited about. Although there was a focus on reinsurance and the U.S. runoff through the year, we continued to show growth, profitable underwriting, and an increase in investment income. This drove enhanced operating earnings, particularly from predictable sources. We continue to make meaningful progress towards our goal of being a North American specialty insurer of scale and reiterate our target of growing to a billion dollars in equity value by the end of 2027. Continued expansion of primary lines into the U.S. provides an opportunity to build on this the success of our Canadian franchise, bolstered by the recent regulatory approval to move forward with our U.S. surety acquisition. This will provide a broader base of infrastructure and greater relevance with distribution partners for our team. Canadian fronting sustained momentum and contributed materially to earnings, while U.S. fronting demonstrated balanced growth as favorable market conditions sustained. We continue to expand and enhance our infrastructure in 2023 and have substantially resolved the runoff of a US program which drove higher reinsurance costs through this year. We feel optimistic that the organization is on stronger footing following the experience, having demonstrated our resilience in the last year. We did not expect a significant impact from the program in 2024. Our team maintained their focus on the culture, underwriting, and specialized expertise that have made us preferred partners for our distribution networks for years. We continue to invest in our future, yielding a more robust operational platform, more diversified earnings, and demonstrating the benefits of scale. Specialty P&C operations delivered strong performance in 2023, with 38% growth in insurance revenue, following very strong growth from 2019 to 2022. In the context of this momentum, expansion of our capital base, and uncertain operating environments, we are proud to have generated a 20% operating return on equity, although acknowledge a lower 12% reported return on equity, which was impacted by runoff costs. In Canada, we achieved a full year combined ratio of 81% and 86% in the quarter. Coupled with investment income, we saw a strike in 29% operating return on equity. The expansion of fronting brought in touch points with distribution partners, supporting growth in established lines. The integration of our sovereign surety acquisition, as well as an evolving U.S. presence, resulted in strong growth of a North American-wide surety practice. We saw some balancing of corporate insurance markets, but benefited from strong annual growth and profitable underwriting. Our fronting platform in Canada generated comparable earnings contribution to surety and corporate insurance, striking after only three years in the business. Our warranty line returned to growth in the year, despite headwinds in global automobile markets and higher interest rates. We continue to make progress in growing our U.S. surety platform, adding to our presence through a partnership with an established U.S. surety player and expanding teams in Connecticut, Denver, Philadelphia, and Chicago. Coupled with the anticipated closing of our treasury listed acquisition, we anticipate replicating the success and size of our Canadian entity over the next few years. In our U.S. operations, Momentum in excess and surplus markets continued, and insurance revenue grew 42% for the year and 25% in the quarter. Loss ratio was higher in the quarter as a result of performance of a couple programs, including previously non-renewed programs, which are sure had a higher retention. We increased the conservatism of our provisioning for reinsurance assets, which impacted profitability but is not expected to reoccur. This is a concept introduced under IFRS 17 and applies to both Canada and the U.S. In the quarter, this had a mid-single-digit million-dollar impact on the U.S. This, coupled with the cleanup of two programs put into runoff in 2021 and 2022, drove a higher loss ratio but establishes a clear starting point for 2024. The platform generated a 14% operating return on equity despite these impacts. Although on a net basis we saw a higher than usual loss ratio and on a gross basis our programs performed in line with expectations with a mid to high 60s gross loss ratio for the year as expected and in line with our ongoing expectation for a low 80s to high 70s fronting operational ratio through 2024. Interest rate volatility presented opportunities for a growing portfolio focused on investment-grade bonds to enhance risk-adjusted returns. We benefited from a short-duration posture and reduced allocations to equities and preferred shares, locking in attractive and capital-efficient positions for years to come. Growth in our portfolio and opportunity deployment was impactful this year, producing a 105% increase in net investment income, while unrealized gains supported our capital positions. As we look to 2024 and beyond, we remain steadfast in our focus on profitable growth in specialty P&C markets. We continue to expand our reach in Canada and the U.S. and the U.S., supported by a history of disciplined underwriting, growing investment returns, and enhanced risk management infrastructure. With the continued development of fronting, integration of a U.S. surety practice, and U.S. corporate insurance, as well as ongoing expansion of our core line, we have ample and attractive opportunities to grow. Our platforms have demonstrated the benefit of combined North American presence, acting as complementary sources of revenue and best practices for one another. Our groups increasingly share opportunities and partners have recognized our broader offering. As we gain market share in one geography, our presence and capabilities elsewhere offer opportunities to generate new business. Amplifying the trend is a significant growth in our capital base, reaching almost $620 million at the end of the year, delivering scale and significance in a way we have not experienced before. 2023 was a rebuilding year as we moved beyond the write-down in Q4 of 2022, but momentum was maintained. The U.S. fronting team was successful in defending our book, but were less aggressive in building new business. Greater scale and underwriting accompanied by a larger investment portfolio and the addition of talent positions us well for the next phase. We remain committed to specialized underwriting as well as conservative reserving. It is our hope that volatility will continue to provide opportunities to win business and strengthen our reputation. We are planning for growth. albeit slower than prior years. With a strong capital base and greater scale, we feel optimistic for the years ahead. With that, I'd like to turn it 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 $755 million for the quarter and $2.8 billion year-to-date, reflecting growth of 27% and 38% 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 commission expense. Net expense from reinsurance contracts, which includes both premium paid to reinsurers as well as recoveries from reinsurers, decreased in the quarter as Q4 2022 included the impact of the 2022 write-down on reinsurance recoverables, which under the new accounting standard is reflected as part of net expense from reinsurance contracts. Net expense from reinsurance contracts for the full year increased as a result of growth in the business, which led to more reinsurance seated, particularly from fronting. 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 continued strong underwriting profitability. service result in the U.S. for the quarter was greater than the prior year as a result of the impact of the Q4 2022 write-down of reinsurance recoverables, but was partially offset by a higher loss ratio in Q4 2023. Insurance service result in the U.S. for the full year was greater than 2022, again, as a result of the write-down. Excluding the impact of the write-down and of the 2023 runoff, insurance service result was lower for the quarter compared to the prior year as a result of a higher loss ratio in 2023 as discussed by David earlier. For the full year, it was approximately the same in 2023 as 2022 as a result of growth in the business, which offset a higher loss ratio. For full year 2023, the combined ratio in Canada was 81%, which is approximately the same as the prior year, driven by a low loss ratio of 16% in both years. In 2023, the fronting operational ratio in the U.S. was 110%, and without the impact of the runoff programs was 90% for the full year. which is greater than the prior year, primarily as a result of a higher loss ratio and additional reinsurance costs in 2023. Net investment income increased by 71% in the quarter and more than doubled for the full year as a result of an increase in the size of the investment portfolio, but also benefiting from higher risk-adjusted yields. Net gains from investments was $8.1 million for the quarter, primarily as a result of unrealized gains on fixed income and equity investments held as fair value-through-profit loss under IFRS 9. Net gains for the full year remains a loss as a result of unreal losses from earlier in the year, as well as foreign exchange losses as a result of weakening of the US dollar during the year. The investment portfolio also saw significant unrealized gains in the quarter recorded through other comprehensive income, offsetting unrealized losses from earlier in the year. Other operating expense, which includes the impact of share-based compensation, which is mitigated through a hedging program, increased by 52% in the quarter and 25% for the year-to-date period, This compares to an increase in net operating income for the year of 32%. Net income for the group was $11 million for the quarter and $67 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, such as the runoff business, was $25 million for the quarter and $110 million year to date, which is greater than the prior year as a result of strong underwriting, growth in the business, and higher net investment income. Diluted EPS was $0.23 per share in Q4 and $1.42 for the full year, which is higher than the prior year as a result of the 2022 write-down, growth in the business, and higher net investment income. Operating EPS, which reflects core operations and excludes the impact of non-recurring items and unrealized gains or losses, was $0.54 per share in the quarter and $2.34 cents per share for the year-to-date period, reflecting growth of 8% and 25% respectively over the prior periods. Consolidated ROE on a rolling 12-month basis was 12% at Q4 2023. Operating ROE was 20%, which is approximately the same as where it was last year. Equity at December 31, 2023 was almost $620 million and is greater than the prior year as a result of positive net income in the period, unrealized gains on the investment portfolio, and the impact of the equity offerings. Book value per share was $13.02 at December 31st, 2023, and is greater than December 31st, 2022 as a result of profit generated from insurance and investment income in the period, unrealized gains on the investment portfolio, as well as the equity rate. At December 31st, 2023, our debt to capital ratio was 10.8%, which was lower than the prior year end 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 capital requirements. David, I'll now turn things back over to you.