Andrey OmelchakTrisura Group TSU.TOTOP PICKSep 10, 2024

Specialty insurance, with a good presence in Canada (about 30% market share). Growing aggressively in US. He sees tremendous growth for surety and property insurance in the US. A high-ROE business. Growing its book value per share at a very high rate, and he expects this to continue. 

Sitting on a big cash position, which makes it an attractive takeout candidate. High-quality company, top management team. Very attractive valuation. No dividend.

TSU has been under pressure over the years due to its asset impairment from a couple years ago, as well as recently a hardening insurance market. The stock has largely traded sideways for a few years, but it trades at a decent valuation of 12X forward earnings. We think it has potential to turn around and become a growth story again, but it has been quite weak for a while. For an investor seeking a larger, more stable insurance name, we would be comfortable with a switch to the much larger SLF or IFC, but if an investor is looking for a small-cap, Canadian specialty insurer that has the potential to see strong earnings growth, we would still be comfortable holding TSU here.
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TSU has been under pressure over the years due to its asset impairment from a couple years ago, as well as recently a hardening insurance market. The stock has largely traded sideways for a few years, and it trades at a decent valuation of 12X forward earnings. We think it has potential to turn around and become a growth story again, but it has been quite weak for a while. For an investor seeking a larger, more stable insurance name, we would be comfortable with a switch, but if an investor is looking for a small-cap, Canadian specialty insurer that has the potential to see strong earnings growth, we would be comfortable holding TSU here.
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Is cheap, considering the quality of the business. Have a lot of growth opportunities in the U.S. in sureties. They compound its book value at 15-17% annually for years to come. They lead in combined ratios. Is a prime take-out target. Is not worried about Trump who is focused on other industries, not insurance.

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.

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. 

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.

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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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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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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(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.

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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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 65c matched estimates; Revenue of $772M was nicely ahead of estimates. Operating ROE was 19.6% vs 19% expected. Sales rose 16%. Net investment income rose 42%. Book value increased 26.3% to $14.56. Operating ratio was 87.5%. Scotia raised its priced target from $62 to $63. We would consider the results good. 
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