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Shares of Trisura Group Ltd. (TSU-T) have been volatile this year but the sell-off may be creating a buying opportunity for long-term investors.

Last quarter, the company surprised the Street, reporting an $81.5 million write-down, which management says was a unique event. However, investors have not been buying the dip with the share price now down 30 per cent year-to-date, making it the worst performing stock in the S&P/TSX financials index.

On Thursday, the company will be releasing its first quarter financial results. Barring any additional negative surprises, the share price may be at or near a bottom.

Analysts are expecting a big comeback for the stock. The forecast average one-year return is nearly 70 per cent, and the stock has a unanimous buy recommendation from seven analysts.

A brief outline on Trisura is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.

The company

Toronto-based Trisura is a specialty insurance provider with operations in Canada and the United States.

In terms of its geographic gross premiums written breakdown, 70 per cent stemmed from the U.S. in 2022 and 30 per cent came from Canada.

Investment thesis

  • A significant $81.5 million write down reported in the fourth quarter placed the stock in the “penalty box.”
  • Low valuation relative to historical levels.
  • Attractive growth profile. Gross premiums written came in at $448-million in 2019, $926-million in 2020 $1.56-billion in 2021 and $2.43-billion in 2022. The company reported earnings per share of 17 cents in 2019, 82 cents in 2020 and $1.49 in 2021 and $1.87 in 2022.
  • Senior management ownership stands at approximately 6 per cent of the shares outstanding.

Quarterly earnings and outlook

After the market closed on Feb. 28, the company reported better-than-expected fourth-quarter financial results.

Adjusted earnings per share came in at 51 cents, above the consensus estimate of 39 cents per share, and up 65 per cent year-over-year. Gross premiums written (premiums earned through sales of insurance) came in at $664.8-million, up 37 per cent year-over-year.

In Canada, the combined ratio, which is loss ratio plus expense ratio with a lower result seen as more attractive, was 83.5 per cent, down from 91.2 per cent reported during the same period last year. In the U.S., the adjusted fronting operational ratio was 82.2 per cent, up from 79 per cent reported last year. Management’s longer-term target for its fronting operational ratio is around the mid-70-per-cent level.

As of Dec. 31, book value per share stood at $10.53, up 21 per cent year-over-year, but down 8 per cent from $11.47 as of Sept. 30, 2022 due to a large write down. Adjusted return on equity climbed to 20 per cent.

The following day, the share price rallied 7 per cent on high volume, closing at $37.12. However, this strength was short-lived. Since then, the share price has declined 14 per cent, closing at $31.75 on May 8 and is now down 30 per cent year-to-date.

The company reported a large one-time write down of $81.5 million related to its U.S. fronting business, causing investors to put the stock in the penalty box until there is further evidence that there are no additional write downs from its other property programs and run-off losses come to an end. Confidence will need to be restored.

In the 2022 annual report, management remarked, “The write down in the fourth quarter was related to a disagreement over obligations under a quota share reinsurance contract. The program included captive participation and required catastrophe reinsurance making it unique in our portfolio. Higher catastrophe reinsurance costs had the effect of depleting collateral and contributed to the write down. This program had a multi-year history with Trisura, and a unique mix of factors drove the experience this year. The reinsurer does not participate on any other programs. We believe firmly that this is an isolated event, and remain confident in our ability to scale the platform in the long term.”

After the market closes on May 11, the company will be releasing its first quarter financial results.

On May 4, management reiterated the one-time hit to net income of between $11-million and $13-million in the first quarter related to the run-off of this U.S. program and guided to earnings per share of between 57 cents and 62 cents. According to Bloomberg, the consensus earnings per share estimate currently stands at 53 cents.

Dividend policy

The company does not pay its shareholders a dividend.

Analysts’ recommendations

The stock has a unanimous buy recommendation from seven analysts.

The firms that provide research coverage on the company are: BMO Nesbitt Burns, CIBC World Markets, Cormark Securities, National Bank Financial, Raymond James, Scotiabank, and TD Securities.

Revised recommendations

All analysts have revised their target prices in recent months.

  • BMO’s Tom MacKinnon to $49 (the low on the Street) from $52 in April
  • CIBC’s Nik Priebe to $55 from $60 in March.
  • Cormark’s Jeff Fenwick to $51 from $56.50 in March.
  • National Bank’s Jaeme Gloyn to $62 from $69 in March.
  • Raymond James’ Stephen Boland to $52 from $56 in March.
  • Scotiabank’s Phil Hardie to $53 from $52 in April.
  • TD’s Marcel McLean to $53 from $57 in April.

Financial forecasts

According to Bloomberg, the consensus earnings per share estimates are $2.17 in 2023, up from $1.87 reported in 2022, and $2.55 in 2024.

At the start of 2023, the Street was forecasting earnings per share of $2.13 in 2023 and $2.47 in 2024.


The stock is trading at a low valuation relative to historical levels.

According to Bloomberg, the stock is trading at price-to-earnings (P/E) multiple of 12.4 times the 2024 consensus estimate. This valuation is well below the stock’s five-year historical average P/E multiple of 16.9 times, and currently near levels last seen at the start of the COVID pandemic in 2020.

The average 12-month target price is $53.57, implying the stock has 69 per cent upside potential over the next year. Individual target prices are: $49 (from BMO’s Tom MacKinnon), $51, $52, two at $53, $55, and $62 (from National Bank’s Jaeme Gloyn).

Insider transaction activity

On March 31, president and chief executive officer David Clare sold 7,500 shares at a price per share of $32.03, trimming this particular account’s position to 144,683 shares. Proceeds from this sale exceeded $240,000, not including trading fees.

Chart watch

Year-to-date, the share price is down 30 per cent, making it the worst performing stock in the S&P/TSX financials [sector] index.

Looking at key technical support and resistance levels, the share price is currently trading near a major support level, around $30. In 2022, the share price bounced off this level multiple times. On a recovery, there is a major ceiling of resistance around $40.

ESG Risk Rating

According to risk provider Sustainalytics, Trisura has an environmental, social and governance (ESG) risk score of risk score of 27.6 as of Feb. 25, 2023. A risk score of between 20 and 30 reflects a “medium risk” rating.

The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Follow Jennifer Dowty on Twitter: @jennifer_dowtyOpens in a new window

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