James Telfser Trisura Group TSU-T WEAK BUY Aug 30, 2023

Highly profitable with one of the highest combined ratios in Canada, and are very profitable in the U.S. Expects them to keep generating returns in the high-teens. Can keep growing for years to come. Trades at an attractive multiple. Could be taken out in the insurance space.

1-2 year performance has been very good. Specialized insurance can be very profitable. Capital appreciation very good - not paying dividends. However, volatility can be hard for some investors. Would recommend for long term investors (can be volatile). 

EPS of 68c missed estimates of 67c; Insurance revenue was $807.6M. Revenue rose 10.5%. ROE was 18.6%, higher than estimates (18.5%). Book value rose to $15.64 from $12.58. Debt to capital 11.6%, better than estimates (11.7%). The company noted strength in Trisura Specialty  and growing earnings from US programs, as well as higher net investment income. The stock is down on the 'miss', but all in we would consider the quarter OK. The stock is still up 20% YTD.
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(Note the short timeframe.)
Keeps delivering. Great management. Good organic growth rate. Focused on profitable growth. Very attractive multiple. Specialty insurer, with a high ROE.

We think TSU is one of the under-the-radar insurance names that possesses both a decent track record of maintaining healthy underwriting discipline and is well-managed. TSU retains most of its earnings for future growth - if the company can grow profitably by underwriting policies conservatively, we would not be surprised if TSU becomes a long-term compounder. The company is trading at 2.5x Price/Book, which we think is a fair valuation for an insurance company with healthy profit margins, and a consistent ROE above 15%.
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TSU is one of the few names that did not move much in 2024, despite decent operating results. TSU tends to move along with the insurance sector overall (especially P&C names). In addition, TSU is the type of compounder that can be flat for some time and then make a move all of a sudden that no one expects (given that the operating results continue to improve).

Although the share price has not moved much recently, TSU is continuing to build value for shareholders brick-by-brick through retained earnings and disciplined underwriting. We would be comfortable holding TSU for the long term here; we think the valuation is quite attractive given the growth and ROE profile of the business.
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Ties to Brookfield, high quality. From market darling to selloff on softer financials. Just below his ideal growth profile, and just above ideal valuation. Good company, well managed, but not his preference in non-bank financial sector. 
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Good pop, but now legging lower. Important support around $30, so don't add yet. Wait to see if it can hold that level; if it can, he'd be more comfortable adding. Other insurance names are quite strong, so a relative underperformer is a warning flag.

Took write downs on non-core business operations. Now focused on growing highly profitable businesses that are generating very good combined ratios, both in Canada and US. Book value per share has increased. Great buying opportunity. 

Has done very well since its spin-off years ago. Any insurer can generate earnings. If TSU revives their reserves down the road it will wipe out any earnings they've accumulated and any retained capital in that business. In insurance, Berkshire-Hathaway and Fairfax. Insurance stocks are more expensive, because they are counter-cyclical and the money that's flowing into this space have increased the valuations.