Trisura Group Ltd. (TSU) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. It's now 10:00 a.m. and time to begin the Annual Meeting of Shareholders of Trisura Group Limited. My name is George Myhal, and as Chair of the Board, it is my pleasure to chair today's meeting. On behalf of the Board and management, I would like to extend a warm welcome to everyone attending in person and through the online live stream broadcast today. We are pleased to host the meeting both in person and online, accessible to all our shareholders to participate, submit questions and vote. I will now call the meeting to order and would ask TSX Trust Company by its representatives to act as scrutineers. I will also ask Bryan Sinclair to act as Secretary of today's meeting. It is now my pleasure to introduce the members of management here with me today. Please stand up and give a wave; David Clare, President and Chief Executive Officer of Trisura Group; David Scotland, Chief Financial Officer, Treasurer Group; Chris Sekine, Chief Executive Officer, Trisura Canada; Terry Michalakos, Senior Vice President, North American Surety; and Michael Beasley, Chief Executive Officer of Trisura U.S. As outlined in our management information circular, there are 3 items of business to be considered today. First, to receive the consolidated financial statements of the company for the fiscal year ended December 31, 2023; second, to elect directors who will serve until the next Annual Meeting of Shareholders; and third, to appoint the external auditor and authorize the directors to set their remuneration. In connection with the business to be dealt with today, only registered shareholders who held shares in their name as of April 17, 2024, the record date of this meeting or validly appointed proxy holders are entitled to vote at this meeting. In-person voting will be conducted through the tablets provided. Once voting has opened, the voting tab will appear on the navigation bar at the top of your screen. The resolutions and the voting choices will then be displayed. After you vote, a message confirming vote received will appear. Your vote can be changed by simply clicking the other option. If you wish to cancel your vote, please press cancel. For those voting online, we will conduct the votes on the matters before us by poll. Once the poll is opened, registered shareholders and proxy holders will be able to vote through the webcast portal. Please refer to the instructions on the left side of the webcast page. Polling will be opened for all resolutions at the same time. This will allow you to choose to vote on each resolution immediately or wait until the conclusion of discussion on each resolution prior to casting your vote. If you voted in advance of the meeting and do not wish to revoke your previously submitted proxies, then you do not need to do anything. There will be an opportunity to ask questions on each resolution in turn, for those online, again, please refer to the instructions on the left side of the webcast page for information on voting and how to ask a question. I would note that those joining online or attending in person as a guest will not be able to vote and will only be able to ask questions during management's presentation. Once discussion on all items of business has concluded, I will give you time to enter your votes and then declare voting closed on all resolutions. In the unlikely event of serious technical failure that prevents the meeting from continuing, the meeting will be rescheduled. I now declare the polls open on all resolutions. In order to expedite the formal part of today's meeting, I've asked certain shareholders to move and second various resolutions. Although this procedure will assist in the handling of the formal matters, it is not intended to discourage anyone from speaking in reference to any resolution after it has been proposed and seconded. I'm advised that notice -- that the notice calling this meeting and the Management Information Circular were disseminated to voting shareholders in accordance with all applicable laws. I have asked the Secretary of the meeting to keep a copy of the notice and proof of mailing with the minutes of this meeting. Based upon the scrutineers' preliminary report on attendance, the Secretary has confirmed that in accordance with the company's bylaws, there is a quorum present. I therefore declare the meeting properly constituted for the transaction of business for which it has been called. So turning to the first item of formal business, I will now table the company's 2023 Annual Report to shareholders, which includes the company's consolidated financial statements for the fiscal year ended December 31, 2023, together with the external auditor's report. Copies of our Annual Report have been mailed to shareholders and have -- who have requested the report and are also available on our website. The second item of business at our annual meeting is to elect directors who will serve until our next Annual Meeting of Shareholders. It is my pleasure to introduce the 9 director nominees standing for election this year; Paul Gallagher, Sacha Haque, Barton Hedges, Anik Lanthier, Janice Madon, myself, Lilia Sham, Robert Taylor and David Clare. All nominees are current directors of the company with the exception of Mrs. Haque. Information on all 9 director nominees is set out in our Management Information Circular, which was posted on our website for shareholder review and available from the company upon request. I am pleased to report that based on proxies received by management in advance of the meeting, each director nominee received votes in favor of their election from over 85% of the votes cast. The meeting is now open to receive a nomination for the election of proposed directors.

Mr. Chair, the nominees for election [indiscernible].

Thank you, David.

Mr. Chair, I second the motion.

Thank you, Chris. Are there any further nominations? If not, I declare the nominations closed. As there are 9 directors to be elected and the same number of nominees, I now declare that those nominated have been duly elected as directors of the company. Ladies and gentlemen, some of our directors are with us here today. I hope you will have an opportunity to meet and talk with them after the meeting. The third and final item of business today is the appointment of the company's external auditor and authorizing the directors to set their remuneration. As stated in the Management Information Circular, the Audit Committee of our Board has recommended to shareholders that Deloitte LLP be reappointed as the company's external auditor. It is now in order for someone to move this resolution.

Mr. Chair, that Deloitte LLP be appointed the external auditor of the company until the next annual meeting and that the directors be authorized to set their remuneration.

Thank you, Chris.

Mr. Chair, I second the motion.

Thank you, David. Okay. The resolution has been moved and seconded, and the motion is now before the meeting for discussion. Adoption of this motion requires the favorable vote of at least a majority of the votes cast by shareholders present or represented by proxy at this meeting, management has received proxies representing approximately 70% of the company's common shares. These proxies direct me to vote approximately 100% of those common shares in favor of the resolution. On that basis, I declare the motion carried. For those who have not voted on all of the resolutions, please do so now as I will shortly close the poll. And I will close the poll on all resolutions in about 30 seconds to allow for any delay. [Voting]

All right. Thank you for casting your votes on these matters. The polls are now closed. The final voting results will be available after the meeting and posted to SEDAR at www.sedarplus.ca. Since there is no other business, I declare the meeting terminated. Ladies and gentlemen, that completes the formal part of today's meeting. I will now call on David Clare, who will begin management's information -- Investor Day presentation. At the end of the presentation, management will be available to respond to any questions or comments you may have. Please note that in responding to questions and in talking about our initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on known risk factors, I would encourage you to review the risk management section of the management's discussion and analysis in our annual report. Thank you very much. David, over to you.

Thank you very much, George, and thank you to everyone joining us today. We have better in-person attendance than we did last year. So thank you, everyone, for making the trip downtown. Today, we're going to be running through some brief remarks from an investor presentation perspective, talking through where Trisura has been, where we'd like to go and maybe why and how we do some of the things that we do. Following my formal presentation, we will be going into a fireside chat format, where I'll be inviting some of the senior management team members who are here today to talk about their parts of the business. With that, maybe we'll kick things off. This is the agenda, which I just talked through. Again, I'd like to talk a little bit about who Trisura is and maybe why we're a little bit different than some of the other insurance companies in the market today. If we talk about Trisura today, the entity really spans 2 vehicles, a Canadian platform, and U.S. platform. And within those platforms, multiple different businesses, multiple different balance sheets exist. In Canada, you can see we've got a primary insurance practice that spans surety warranty and corporate insurance lines. And these lines of business, we qualify as niche specialty commercial lines of business. These are the only lines of business that we underwrite. It's the only focus that we have. This is not an insurance practice that is spread across a bunch of different focuses. We're very clear and very definitive on where we play in the market. And so that Canadian business really, this is the heritage of Trisura. Historically, this group has been called Trisura Guarantee in our public materials, it's called Trisura Canada. You can see we also have in Canada a group that we qualify as a Fronting practice that has just under $500 million of premium within that business. That's generally a property and casualty focused business, and it's a practice we're going to talk about a little bit today, which we launched in 2020. Our entity today looks a lot different than it did in 2017 when we spun out from Brookfield. The vehicle also includes a U.S. business. And across that U.S. business, we have multiple balance sheets. A big part of that business involves what we call our program insurance business, which is written something we call a hybrid fronting platform. That platform we'll talk about a little bit later. But you can see from a scale perspective, it is our largest contributor to gross premiums written. So we write about $2 billion in gross premiums written in our U.S. programs insurance practice. But we also have primary insurance now written in the U.S. And this is a new piece of Trisura's narrative. This is a new piece of our business. Last year, we wrote about $25 million in our primary insurance practice. Most of that, if not all of that was, in fact, all of that was Surety business. Today, we're going to talk about how we grow that Surety business, how we expand that practice and maybe how corporate insurance will be a fast follower. One item I'd like to highlight on this page, we've qualified the segments of our business by gross premiums written, and that can be a little bit misleading in terms of the contribution of these businesses to the bottom line. And what we care about at Trisura is profitable underwriting is net income generation, is ROE. And so these platforms although they look very different on a gross premiums written perspective, they'll contribute in a much more equal way to underwriting income to profitability of the platform. So our Canadian business, you can see today, and many of you I can see our investors in the entity, Canadian business generates the majority of our net underwriting income, the majority of our income in the platform despite having lower premiums written. The program insurance business today generates a very healthy contribution of fee income and underwriting income to the platform. But I highlight that difference because often people look at our platform and they think the majority of our business is actually in the U.S. Candidly the majority of our business today, the majority of our people, the majority of our capital is Canadian, but we're expanding into the U.S. And this hybrid Fronting model is a way to do that in partnership with many of our reinsurance groups. I think this primary business is primary insurance practice in the U.S. The surety practice is a really exciting piece of the business that we're going to talk about going forward. One of the other pieces of Trisura that's very important to understand is that we are a specialty P&C insurance and underwriter. And that's different than many of the other investable platforms in Canada. When many people think about insurance, they think about home and auto or they think about life insurance. That is not what Trisura does. Our classes of business are generally difficult to underwrite. They require deep differentiated expertise and a lot of experience to underwrite administer and service. And so many of the people you'll hear from today have been writing this business specifically and diligently for their entire careers. If the business is not necessarily difficult to underwrite if it's falling into maybe our fronted practice or our program insurance practice, we believe it is difficult and complex structure. And these structures have to balance the needs of our distribution and capital partners with appropriate alignment. So our business is evolving. We historically were a dedicated specialty underwriting practice. We've now got this ancillary or complementary practice with the Fronting business. Those are not easy businesses to navigate. They're not easy business to administer. And that complexity of structure and the complexity of underwriting generates a relatively differentiated platform for Trisura. In all this, experience matters a lot. And you're going to see today that many of the people that are governing this firm, many of the people who are navigating the front lines of this business, have been doing so for an excess of 25 or 30 years. And that's a real differentiator for Trisura. Our people matter a lot, and our people are the reason that we're here today. We can talk a little bit about where we've come from. And many of the people in this room have seen and been with Trisura since the very beginning, which is a great thing to see. As a reminder, this entity came into the public sphere, the public markets in 2017 but it's been around for a lot longer than that. The vehicle that forms the base of our operations here in Canada, we started in 2006 within the Brookfield's private equity platform. That was combined with the number of the entities you see today in 2017 and spun out into the public markets. In that year, when we came into the public markets in 2017, we wrote just under $150 million in gross premiums written. So our top line or our revenue is relatively small. And you can see since then, going to the end of 2023, there's been a real, a very material expansion in our premium base. And the reason I'm talking about premiums here is a little bit to give you a sense of our heft, our substantial nature in the markets. This change in how we navigate the markets from a size perspective is a recurring theme you're going to hear me talk about. The vehicle today looks and feels and is a lot different than it used to be, but that heritage of where we came from is something that feeds through into everything we do. You can see, again, we split this bar on the right side between Canadian and U.S. gross premiums written. The majority of those gross premiums written are coming from the U.S. in that hybrid fronting platform. But you can see very significant growth in Canada from a gross premiums written perspective, that 31% now is just under $1 billion in premium in 2023. So going from $150 million to $1 billion in 6 short years is a very material step up in our heft in the market. What we care most about is not just that growth in top line, but candidly, profitability. Net underwriting income, operating income, the results of the business is what we're driving. And what we look for in all of our people and all of our partnerships is a reliable and believable path to an expansion of our profitability. So you can see here today, we wrote just under $100 million in net underwriting income last year. Again, just over 2/3 of that is coming from the Canadian platform. So you can see the majority of that underwriting income profitability is coming from our core Canadian business. But there's growing and very attractive contribution from that U.S. business. I think most striking on this page, if we go back one, you can see this growth in top line is about a 65% CAGR our profitability over that period of time has grown even faster. And that's a great narrative to see in the insurance business you're growing, but you're growing very, very profitably. And that's what we like to see. One of the reasons you can see this coming online is that improvement in our combined ratio. And for those who are generalists or newer to the narrative, combined ratio is a measure of underwriting profitability. And what you want is that number to be below 100%. That's a profitable underwriting. You can see our business is producing about an 83% combined ratio. And that's a very, very strong place for P&C underwriter to be operating. That happily as we've grown, has improved, both in Canada and overall, and that's a great base of operations to be navigating from. All of this has translated to the bottom line. We qualify here as operating net income. You can see that has very materially grown over the past number of years as well. So in 2017, low single-digit millions operating income when we came out, we were a very small platform in the market. At the end of last year, we wrote about $110 million in operating net income. So a very substantial increase in our scale and in our size of income production. What we care about triangulating obviously, is how efficient our entity is from a capital perspective. So we track very closely our operating return on equity. You can see that has very materially expanded, growing from low single digits in 2017 to a very respectable 20% in 2023. Again, the specialty lines that we're in, they are difficult to participate in, and they are -- they require a lot of expertise. But if you do them properly, you can and should expect better than industry average returns, which is what we're seeing out of the platform today. From a shareholder, from a capital allocator perspective, this is what we think about a lot, at the Trisura Group perspective, we want to know that our capital base is growing. And so you can see we've taken this from Q1 2018 to Q1 2024, which is our most recent quarter, we very substantially expanded that capital base. So we started with about $125 million in capital when we came out into the public markets. That's expanded materially. Now just over $660 million in book value. That's also accompanied or come along with greater flexibility. So you can see our debt to capital has actually come down meaningfully, moving from 19% to 10%. This gives us great flexibility. This gives us great optionality to continue doing what you've seen us do, which is grow, expand and capture the opportunities in the markets that we play in. From a shareholder perspective, really importantly, we've been raising some of this capital and expanding this capital base through external capital raises. But you can see on a book value per share perspective, we have been growing very healthily as well. So that growth in book equity is also accompanied by very substantial growth in book value per share, growing at a 20% CAGR over this period of time. So from our perspective, what we want to balance is the deployment of that capital into attractive opportunities and seeing and believing that those opportunities are producing the appropriate returns that we expect. I think this chart, as a summary of where we've come from in the last couple of years, is one we're very proud of because one of the things Trisura struggled with historically, and we continue to navigate as the vehicle is a lot smaller than entities that we come up against. Vehicles in the insurance space tend to be very large. Our entity is definitively smaller than those vehicles. That's something we've always navigated and dealt with. But it's also an opportunity for our entity today. Although we've come a long way, Trisura is in no way finished or tapped out in the growth opportunities that we see. And this trajectory of expansion and book value is going to be a big part of how we continue growing the vehicle in the future. One of the big components of an insurance company is investment income. And for Trisura, we talk a lot about the front lines of the business, the underwriting of the business. The great narrative of expertise and profitability we see from the front lines what that feeds into is a really differentiated opportunity at Trisura to expand investment income. And I think one of the lesser appreciated nuances of Trisura, as we've grown and as we've expanded, we've increased our scale. We've increased our relevance in the market. We've increased our underwriting income, but we've done so in the context of a rising interest rate environment. And what that means is, Trisura has been able to turn over its investment book faster, capture new and higher investment yields, in a differentiated way to the market. And so the reason I highlight this is a huge component of our earnings. Over 1/3 of our earnings is actually now coming from investment income. And that's been quite a differentiator in the way that our earnings have evolved over the past couple of years. You can see from an investment income perspective, we took this from 2020 rather from 2017, just to give a sense of where the platform has gone more recently. Annually in 2023, we produced over $50 million of income. If I look at Q1 of 2024, we should reliably see this number over $60 million this year without a lot of stretch in growth or change in the portfolio. A big part of that has been the fact that we've been growing in a relatively high interest rate environment compared to recent history. And we've been very, very conscious to capture that change. Our new capital is being deployed at yields above 5% and we are very recently now extending that duration to lock in yields for years to come. We are very fortunate that our investment platform is put up against a relatively short duration portfolio of liabilities. So we don't see our portfolio pushed around a lot by the movements you've seen in the interest rate curves in the last couple of years. This narrative, this component of investment income today, is less risky than it's ever been. So we have a higher proportion of our portfolio today in investment-grade bonds. That means our investment income is more reliable and more predictable. And that, for me, makes us -- finds us in a really interesting place from a composition of our earnings. So what you see on this chart is our 2023 operating ROE segmented by different pieces of the business. On the left-hand side, you have our underwriting contribution in the middle and the red box. You see 2 pieces that are probably less highlighted than other insurance companies, our fee-based income and our investment income. And that fee-based component is a real differentiator at Trisura. You can see these are split roughly on an after tax basis 1/3, 1/3, 1/3 across the entity. And from Trisura's perspective, today, that investment income is very, very predictable. Investment-grade bonds today, we know very quickly where they're going to produce income in the next 12 months. But fee-based income is also worth highlighting because, from our perspective, the fees that we collect in our Fronting practices and our hybrid Fronting practices, they're very predictable and they earn out in a very predictable way. And so what you have in Trisura, if you translate this on an earnings per share perspective, is if you look at Q1, from our perspective, roughly 2/3 of our earnings per share is coming from components of the book that are predictable and recurring. And what that means is a lot of our income, therefore, is predictable and should be relied on in a different way than other insurance companies. What this has translated to for us is a very strong operating ROE. But I think the takeaway I want people to come away from today is that ROE is composed of a lot of earnings that are predictable and recurring. And that's a differentiated platform than many in the market. What's been the result of this over the past 6 years. Trisura has had very strong performance and shareholders who have supported us have benefited from that performance. If you look at Trisura since we spun out or just after we spun out it, we actually spun out in June of 2017. So this chart takes us from December until May 2024. The results enjoyed by shareholders have been very strong at Trisura compared to almost any benchmark in the industry. So we included the TSX Financials here, the TSX as well as the S&P 500. So there is alongside a lot of that growth and profitability, a strong relationship to performance in the public markets. Where do we want to go in the next couple of years? I think something that we've highlighted a lot is Trisura is still relatively small in the areas of practice that we focus on today. That being said, we do have a track record of building businesses and there are very strong industry and macro tailwinds in the parts of the markets we want to play in. Strategically, I think that sets us up in a very interesting way for the next few years. What we've built out on this page to contextualize for people is how the entity has evolved since really 2006. You can see the vehicle from a Canadian primary perspective was started in 2006. It's right in about just under $450 million in premiums today. Each of these bubbles on the left-hand side represents a platform or a component of our business that was launched in a de novo way. And what you've got on the right-hand side was what amount of premiums are being written today to demonstrate our track record and our history of building these practices. The reason we're highlighting this is those bottom 2 bubbles on the left side, U.S. surety and U.S. corporate insurance are very new components of the business. So you can think about these practices as being at the 2006 phase of the Canadian primary business. We are going to grow these practices over the next couple of years, and we have a history of doing that very, very profitably. You can see U.S. surety. We've been building this business now for about 2.5 years. We started this really in a dedicated way in 2021. We've written about $25 million in premium, and we're going to talk about today a lot of what we think that opportunity looks like. I think -- you should think about this U.S. surety practice this build-out as a preview of what we're going to try to do in the U.S. corporate insurance practice. And one of the themes you're hearing today is many of what we've done in Canada now is the precursor to replicating these practices in the U.S. If you look at the markets that we're in, what excites me a lot about what we're doing is despite being small and despite our markets being a subcomponent of the broader industry, they are both growing faster and still very attractive sizes in the overall industry. So you see in Canada, we define a subsegment of the market as specialty, it has grown faster than the market and Trisura has grown faster than the industry in that space. So what you can see is despite there being a lot of focus on this industry on this space, we are competing well, and we are winning market share. So this is a narrative on Trisura question we get a lot. We are smaller than many of the people we compete against, but we have been able to outperform in these spaces. I think that theme goes across the entire space. If you look at our U.S. business, our hybrid practice, our hybrid fronting business focuses a lot on that MGA space. You can see that growth rate from MGA premium from 2017 to 2022 is very healthy at about 11% and you've seen a very large market size, a large market opportunity coming from this MGA space at the end of 2022. Really interestingly, what's not shown here is what the share of hybrid Fronting companies and Fronting companies in the U.S. is of that MGA market. We estimate between $11 billion and $12 billion of that market is addressed by Fronting companies like ours in the U.S. today. That's underpenetrated in our mind. And so our vehicle is a very healthy level of premiums in this overall market and we think there's room to grow. That E&S market was disproportionately drives a lot of our premiums, a lot of the MGA markets premiums, has also been growing very strongly. And we think that's a trend that probably doesn't continue at this rate does continue in a secular way in the near term. And so I think what I'm trying to communicate here is, from a Trisura perspective, not only do we have a demonstrated track record of growing well, we're doing it in markets that have really attractive secular trends. A lot of the questions we get these days focuses on the insurance cycle, whether we're in a hard market cycle or a soft market cycle. And one of the things I want to orient everyone today to is the fact that Trisura both acknowledges these cycles, but also tries to operate not agnostically to them, but acknowledging the different parts of these cycles drive different parts of our business. I think first and foremost, one of the conversations you're going to hear in our fireside chat is that specialty insurance practices should outperform the industry through the cycle. And if you think about our primary underwriting practices, surety, corporate insurance, these are practices that really determine our success based on the underwriting expertise of our businesses. They have not navigated the last couple of years in the same way. I think many people assume that hard market cycles or trends have benefited the entire industry. That's actually not true. If you look at our Surety business, it's been a very competitive space over the last couple of years. That's not a space where hard market trends are driving the growth or the profitability that you see in our business. Parts of our business, it's very hard to operate in a hard market. If you think about Fronting practices, they're incredibly reliant on capacity. And in fact, in the last couple of years, especially in the U.S., it's been a relatively hard market. And so this has been a very difficult time to operate in the Fronting space. And what I'm -- what I'm demonstrating here is that the business, as it's built, and this is one of the thesis we had when we spun the entity, is parts of the business, we'll do very, very well in hard markets. Parts of the business will do very well in soft markets. But what we're putting together as a platform that navigates those markets consistently. So we're a lot bigger than we used to be. We're a lot more diversified. And candidly, have a lot better capability of navigating this space in a really consistent way. You can see, I've highlighted on this -- on this page, the different nuances of a hard versus soft market. But I think the core takeaway for everyone here is that this entity has been built in both soft and hard markets and the people that are running this vehicle have a lot of familiarity and expertise in navigating them. So think about this space is one that you should expect outperformance through a cycle. Each of our business lines is a microcosm or has its own nuances pushing performance or trends. And we've walked through each of those here. From a surety perspective, we talked a little bit about the trends in that market. It is a very competitive space. It's a part of the market that's very difficult to get into and requires a lot of expertise to navigate. I think we continue to be very attractive to the Surety marketplace, not only for our history and our track record in this market, but because a lot of the secular tailwinds we believe exists in surety. I think most people here will follow a lot of the political discourse around, population and demographic trends, what that follows on to is a lot of infrastructure investment. And I know it's an election year in the U.S., and there's a lot of political focus in Canada. But I think the consistent trend regardless of where you're looking across the political cycle, is a need for continued infrastructure investment. And the vast majority of Surety bonding focuses on that space. We're in a really interesting environment right now in the Surety market, especially as we launch into the U.S. market because we're about the fourth largest Surety in Canada we've got a huge market to try to support and address in the U.S. And those tailwinds benefit the entire industry. From a corporate insurance perspective, this is one that has benefited in recent years from the harder market trends. But it's important to note, our focus is in a niche specialty component of that market. So think about the tail of a hard market driving less upside in hard markets and less downside in soft markets, you've seen a real expansion in this business, both from a volume and pricing perspective in the last couple of years. We have seen some of that balance recently. And so a lot of what we've talked about in the last probably 18 months of our communication with investors, is that market, we're seeing some balance in that corporate insurance space. For us, we still see that as a very attractive space. It's a very interesting space for us to grow and one that we think we can continue to do so very profitably. Our warranty practice has probably been one that in recent years has grown less than our other practices. In Trisura, warranty really means for almost for all intents and purposes, aftermarket auto warranties. And you can very much think about this practice in Canada is being driven more so by consumer behaviors than any other parts of our business. And many of you will be familiar with the inventory challenges that plagued a lot of dealerships in the last couple of years. Warranty growth has been relatively slow recently, but we are seeing pickups, especially in Q1, in the trajectory of this business. That's not because we're seeing a big change in the market. I would say inventory challenges are being replaced now by higher financing costs. So auto sales haven't really come back, but our team has been very successful in growing market share. So there's been some movements in our competitors. There's been some changes in how the market has been navigated and we've been a beneficiary of that. The Canadian Fronting space, this is the most popular question I get, how big can that market get? How big can it be? Candidly, it's a relatively new space and a difficult one to measure and to monitor. But what I can say is we've seen a really attractive trajectory of growth and profitability in the last couple of years. And we see a lot of runway in this business going forward. So this is a practice that Trisura occupies an interesting niche within. We're one of the only players that really reliably can navigate this market in the way that we do. We're a partner for foreign capacity providers, foreign reinsurers who want to participate in the Canadian marketplace. And we're focused on lines of business that we don't underwrite directly. So you're not Fronting for Surety or corporate insurance lines of business. This is more of the general P&C lines of business that we bring into the market. Again, think about that Canadian marketplace as being very large. We're originating about $450 million today in that Canadian Fronting space. There's a lot of room to grow there. In our U.S. programs space, that we operate in this hybrid fronting model in the U.S., we do see our submissions continually focused on that excess and surplus lines market. But again, one of the items that we've demonstrated is, we're trying to look around the corner. So in 2019, even before this trend of excess and surplus market focus started, our entity bought and built an admitted platform. And what this means is our vehicle can partner with MGAs, partner with stakeholders across the industry in both excess and surplus and admitted lines markets. And it's worth noting many of the people we compete with have bigger admitted practices in the U.S. than we do. So this is an area in the U.S. that continues to have a lot of secular growth in the E&S space. But we've built proactively the infrastructure and the capabilities to support our partners through any sort of cycle that we see coming down the line. What does this all drive to? We've seen some very healthy and very strong profitability over the last couple of years, and that's been enhanced by diversity and scale. So our underwriting practices have very strong loss ratio outperformance. Our fee income, I think, is a differentiator at Trisura versus other insurance companies versus other styles of business. And our investment income is better and more quickly capturing the opportunity of the yield environment that we're in. All this drives a more diversified, more sustainable platform. And what I hope to see, over the next couple of years, is continued leveraging of our cost base to drive better leverage or better operational leverage. What does that mean for you as shareholders? What we drive towards is a sustainable mid- to high-teens operating ROE, and we use that capital that we're generating to reinvest in our growth platforms. Our vehicle has a lot of opportunities to continue growing. On the organic side, we can talk a little bit about inorganic, but we're reinvesting that capital in the business. Some of these growth options or growth alternatives are listed on this slide. The big one, as I've talked about, is organic. And that is how Trisura has grown both since we started the business but also more dramatically in the last couple of years. And this is very important to highlight because that organic growth has been accompanied by better profitability. And I think that's a theme and a narrative that's underappreciated. It's tough to grow in the insurance space without sacrificing. And I think what our group has been able to demonstrate is that growth has come along with really strong focus on the standards that have built this business in the last couple of years. Where else can we grow outside of just expanding our practice? A focus on distribution, a focus on service with our brokers has been a big part of that growth. We want to be more relevant with the partners that we work with. And as I said, Trisura is still a relatively small entity. That means we have opportunities to grow with key distribution partners and expand our presence with partners we don't have the right market share with. From a primary perspective, we are talking a lot about our growth in our U.S. Surety practice and our U.S. corporate insurance practice. These are lines of business the teams have been writing for decades, and we feel very strongly about their capabilities to continue writing and expanding those. Our Fronting platforms are really nice diversifier for the business. They drive scale and relevance with our brokers. They drive fee income for the overall business. And so what you see in Trisura today is a much different business from what you've seen 5 years ago, one that's both larger but importantly more diversified. I get asked the question a lot about inorganic growth. And Trisura, despite not being very, very active on transformational M&A, large-scale M&A. We have been active on smaller scale M&A initiatives. So people and team acquisitions, we are bringing over those people to bring on new capabilities, new skills, capability bolt-ons, you've seen us pursue this in the U.S. market and the Canadian market candidly. We recently closed our acquisition of U.S. treasury-listed vehicle. We've also closed an acquisition in 2019 of an admitted platform. So you see these entities are targeted in a relatively small way when they're acquired, they become very large parts of Trisura. So the admitted platform is a great example. When we bought this vehicle, it was a shell entity, didn't have any premium in it. Today, it's writing $400 million of premium. I would expect the same type of narrative in our Trisura security platform. Today, that entity is very small. It's not going to move the needle for Trisura this year. But in 3 or 4 years, all of our Surety premiums will be written on that platform. And what I'm trying to demonstrate is the small initiatives you see today will be very impactful 4 and 5 years from now. And that's the narrative and trajectory we're trying to build at the entity. I will say, scaling transactions, we look at ways for us to build scale and relevance in the market. Can we find vehicles that are in the specialty P&C space, that are alongside the lines of business that we do. Transformational M&A is lower on our list. You're not going to see us do something that changes the focus of Trisura, changes the parts of the market that we participate in. But those first 3, we both demonstrated a capability on and a willingness to engage in. I think U.S. Surety is a space that will be an exciting part of Trisura's growth in the next couple of years. And what we've tried to do on this slide is give a little bit of context both to our history in the Surety space, but also the scale of the opportunity in the U.S. market. So the -- on the left-hand side of this slide, you can see some of the stats of our Canadian business. We've got the fourth largest Surety player in Canada. We have an 11% market share. Our growth rate historically has been about 20%. And our loss ratio alongside that growth rate is 15%. And these are over a relatively long period of time, right? These are 5-year trends, 5-year metrics, which gives you a sense of the sustainability of this profitability. Our plan is to leverage that expertise alongside some new colleagues that we have in the U.S. to build out a bigger practice. You can see on the top right-hand part of that page, the U.S. surety market is materially larger, about 13x larger than the Canadian business. So that's not to take anything away from what we've built and what we'll continue to build in the Canadian market. But it shows you the scale of the industry in the U.S. Really importantly, one of the good stats we want to see is that industry can perform at the same level as the Canadian space. You see those industry loss ratios. Canada in 2023 was about a 23% loss ratio. The U.S. was 16%. So generally, I would see these as very comparable. There's a little difference there in 2023. But the narrative I want to highlight here is that the loss ratios in that U.S. industry should be generally comparable to the Canadian industry. And so as you're expanding into this market, we should and you should expect at scale, you have comparable economics. One of the big pieces we've talked about is that treasury listed acquisition. We've been operating this business since 2021. You can see the group has done a good job of expanding that practice. But we've been operating without the real infrastructure that we need to be a participant in this space. And that's a dedicated balance sheet and a treasury listing. We have that now. We're now building out those capabilities and expanding our capital and the licenses of that vehicle. I think all of this feeds into that secular and macro trend that we talked about at the beginning. When I think about the next 5 and 10 years, infrastructure investment in North America is a space I want to be involved in. And if I think about where Surety plays in that market, it's a really interesting component of this space and a really differentiated opportunity to build a de novo platform in the U.S. One thing I want to highlight, and we'll talk a little bit about in our fireside chats. We are not targeting in the near term to be a #4 or 3 or even #5 player in the U.S. Surety market. We are just trying to get our equivalent premium to our Canadian space. So what you should think about Trisura target in the U.S. is building a platform that's comparable to our Canadian business on a dollar perspective. And in the U.S. that's just scratching the surface of the market. And so what you'll see in the next couple of years is us expanding into that market, building our credibility and our reputation and then looking at capturing that larger opportunity. What does this mean in the long term for Trisura and our targets and what you should think about the way -- or the way that we think about benchmarking the platform? We are targeting and continue to target revenue growth in the long term at the mid- to high-teens level. That should translate based on our expectation for profitability to an operating ROE again in the mid- to high teens, which very easily translates to book value per share growth in that same range. Those are levels we have demonstrated in recent years, and we certainly expect to continue demonstrating that. I'll reiterate today that the same target I brought out last year, which was we'd like $1 billion in book value by the end of 2027. It's worth noting, when I brought this slide up last year, the entity had below $500 million in capital at the end of 2022. The entity today is sitting at $662 million in capital. So it's been a substantial move in the size of the business already. So we feel very good about getting to this goal. The reason I think this goal is important, again, ties all the way back to those scale components we introduced today. The vehicle won't be the largest insurance company at $1 billion in book value, but it does start to, I think, benefit from some of the economies of scale at that level. One of the slides -- or one of the sections I always like to finish with is why Trisura? And I say this speaking to 2 groups of stakeholders. One, people who partner with us in the front lines of the business, our employees, our broker partners, our stakeholders in the industry. And then how does that translate to why people should invest with us. We are a very service-focused and broker-focused entity. And I know that's a qualitative thing to say to many of our shareholders, but the responsiveness and collaborative nature of our people drives that outsized opportunity that you've seen in growth and profitability. This has been informed by and candidly is enabled by our specialty focused. So the vehicle is not all things to own people. We have a very defined risk appetite, and that's driven a better, I think, than average growth rate and profitability level with our broker partners, that you can't navigate this market in the places that we participate in without underwriting expertise. The reason that's important for our partners is that they know when they come to us, they can rely on our responses. Our people are empowered. We drive and we try to have a relatively flat organization. It's tough to do in the insurance space. But if you think about Trisura versus many of the people that we face in the market, our people are expected to have more expertise, more authority and more ability to navigate this market. That's driven obviously by stability and the depth of leadership and our firms. You're going to hear from some of those people today. But I cannot emphasize enough how important the entities stable of people are. Trisura has done a great job over the past 5 and 10 years, building a group of very, very strong people, not only at the senior level, but the levels right below them. And that gives us a lot of confidence in navigating the market. That last point, I always sort of smile putting this on the page after I spend 25 minutes telling you that we're subscale. I highlight this because we are larger than we used to be. And for our stakeholders, that matters a lot. Trisura used to be relatively small in the markets that we participate. And I talked about those Canadian statistics moving from $150 million to almost $1 billion. That's meaningful increase in scale in the Canadian markets. And so despite not being maybe where we want to be in the long term, we are much larger than we used to be. And that scale and capital has fed into a differentiated size category, a differentiated licensing category across North America. What does this translate to for investors? Why should people care about us as a partner for your capital? We are relatively rare in the markets that we play in. There are not many specialty P&C investable platforms. Certainly, across North America, they're rare, they're relatively rare in Canada. We do believe the entity has demonstrated a stable and strong capital position over its life cycle. So I go back to 2006. This vehicle has a very, very strong track record of navigating markets, economic cycles, insurance cycles, that's built the capital base that you see today at about $662 million. Margin out performance is always a focus for us. That's how we measure the platform. That's how we budget the vehicle. We are driving the entity to continue to deliver what we do as industry-leading profitability. We do continue to believe, as we've talked about, that there are significant growth levers in the vehicle. And one of the items that we've maybe talked about a little bit, but not highlighted specifically today is how we're trying to derisk those growth levers. I talk about that derisking both in the secular nature of the growth opportunities, but also on the investments that we've made. I think one of the rare pieces of Trisura versus other growth entities is, we're a platform that's performing at industry-leading combined ratios, ROEs today while we're investing in growth opportunities. So these are dilutive impacts on the platform. You're seeing us invest in today for opportunities we expect to come in the next couple of years. But we're doing it in the context of very strong current returns. So it's a very tough balance to navigate. And I think a rare one in the markets. And finally, as that experience point. You've seen both at the Board level and our senior management team level, there is a depth and a wealth of experience that we continue to benefit from. So with that, that finishes my formal remarks, but I think we're going to get to the more exciting part of the presentation, which is our fireside chat. So I'm going to invite Chris and Terry to come up on stage and walk us through maybe some of the parts of their business in a little bit more detail.

Hey guys.

Thanks. Yes. Perfect. Perfect. Thanks, guys, for being willing to come up here and talk to some of our partners. I know, to the extent anyone's here last year, you'll know Chris Sekine very well. Terry is a new face to Trisura. So maybe Terry will start with you if you can give us an introduction of you and maybe where you sit within Trisura. It would be a great start.

Yes. So good morning, everyone. Terry Michalakos, I joined the organization back in September. I've been in the industry for 25 years, all of it in Surety. And I oversee the U.S. and the Canadian Surety operation. I guess, a bit of my background, I actually started in the business working alongside Chris. And since joining Trisura, I'm amazed at the number of people that are here, that I worked with at the beginning of my career. I think when Trisura started, some folks came from the organization, I was at before. Started at Trisura, I want a different path. I spent about a decade on the brokerage side. And then from there, joined the second largest Surety company in Canada. While I was there, we grew that organization to be about 3x the size. We diversified both our distribution and our product offering while doing that. And excited to be here. I feel like I've come home a little bit to folks that I started the business with.

It's always nice to see kind of someone joined from a competitor who's larger and maybe more at scale than us. So we're very happy to have Terry come over. Chris, maybe for anyone who hasn't met you before a quick background for you as well.

Yes, sure. Good morning, everybody. Chris Sekine, I'm the President and CEO of Trisura Guarantee, Trisura Canada. I've been with Trisura since the beginning of the company, back in 2006. I started up the Surety division and have experienced the -- I guess, the growth and the transformation of the organization over the past 18 years.

That's great. So Chris, why don't we start with you? Maybe going on some of the comments that I made in the presentation. We do hear a lot of focus on those hard and soft market trends. That does sometimes miss the nuance of our specialty focus. So can you talk to me about specialty lines returns expectations in the long term? How do you think our business compares to the broader industry?

Yes. Over -- I think it's important, and you identified that Trisura is not a general P&C company. We're a specialty insurer. And the last 5 years, I think, has been especially sort of meaningful for us in terms of demonstrating the performance of Trisura as a specialty insurer and the outperformance that we have seen really through a long period of our time even through uncertain economic conditions.

Yes. Yes. And that uncertainty -- that economic conditions that often presents opportunities for us having a dedicated focus.

Absolutely. We've always thought about our business as, when times are good, when customers are getting everything that they want, it's more difficult for you to demonstrate your value proposition. When times get difficult, that's when Trisura really has been able to shine and seize opportunity and show, I think, maybe a little bit more of a creative aspect to our business and also to provide service that others start shying away from.

Yes. So talk to me maybe built in on that, talk to me about where Trisura is today versus 3, 5, even 10 years ago, you've been with the entity a long time. How does it feel navigating the markets today versus maybe where you started?

So you had mentioned and you mentioned the word a couple of times during your presentation about Trisura being relatively small compared to other insurers, subscale. If we rewind the clock back 10 years ago, we were really subscale. And as a small specialty insurance company, what we've always had to be good at is scrapping, scrapping in the corners. We've always had the underdog mentality. But as we gain more scale, especially over the past 5 years, it's not that it's become easier, but we have become more relevant in the marketplace, and we can feel that. But one of the things that we've been able to carry forward is the underdog mentality in terms of our staff and our people really having to scrap and fight and show relevance every day.

That's great. And I mean, Terry, I'm always very interested to hear, maybe how you view Trisura as someone across the table from us or competing for business? How did you see the entity when you were at someone who wasn't us.

Yes, Dave, it's a great question. I mean, the reason why I'm here is because I think a big part of it is that you get tired of when you do lose, I would say Trisura's name popped up more often than not, and that becomes frustrating. But I think for me, the exciting part coming from an organization that we had a lot of rapid growth. They turned their attention maybe to different parts of the business, the enthusiasm and the excitement about specialty lines here is very, very exciting. And it's an old saying, if you can't beat them, join them, a little bit of that as well.

So Chris, you mentioned a little bit, but I want to explore maybe that opportunity to continue enhancing the position because one of the things we've talked about is we've come a long way, but we still do believe there's more to go. Do you think that as we continue building the vehicle, there's more runway to build out these relationships?

Absolutely. In the Canadian market, we have a lot of runway left. There's a lot of opportunity to continue to develop and enhance our distribution relationships. And I think you mentioned in terms of the United States, one of the exciting things is just the relative size of that market compared to Canada. And you mentioned, it's just about scratching the surface. And we don't have to become a top 5 or a top 10 player in the U.S. for any of that growth to be really relevant to Trisura. And so we see it as a great opportunity because we're not expanding doing something that we don't already do. This is a geographic expansion of business lines and product lines and underwriting capabilities that we already have.

That's great. Talk to me a little bit about the economic cycle. I mean there's a lot of focus -- I get a lot of questions from people about what happens to Trisura in an economic downturn? What happens if the market changes? But maybe give me a little sense of what Trisura has done in years past because we've been around for much longer than recent years.

Yes, it's a great question. And at the end of the day, it's a demonstration of performance. The executives at Trisura have seen a bunch of different, call it, macroeconomic events, activities, different cycles. If we think about even back to 2008, the financial crisis. We think about the impact on the drop in oil on the Alberta economy. We think about COVID supply chain challenges, as you mentioned, inflation, rising interest rates, all of those different economic cycles, our team, our underwriters, our executive team, we've had to manage through those cycles. And through all of that uncertainty, we've demonstrated growth and underwriting performance.

And it's worth noting, many of those people who were around the business in 2008, 2016, 2020 when all these macro shocks happen, they're still the people with the business today. There's been a great retention of those skills.

They're exactly the people with the business today.

Yes. So maybe on that note, talk about what you view as Trisura as competitive advantage? The question I get a lot is, how we navigate the market versus larger competitors?

Yes. And so I think of Trisura's advantage of being the softer skills of Trisura. And in my opinion, it is how we behave in the marketplace. It's our decision-making tree. It's -- we've consciously tried to keep the structure of Trisura very flat. And it all comes back to, in my mind, staying nimble and being able to respond quickly. And so when I use sort of the analogy of being the underdog and scrappy, part of that is also being able to move quickly when there's opportunity. So we have to be able to move quicker than our competitors when opportunity presents itself. And in my opinion, it's been that behavior in the marketplace, which, to me comes back to our culture has been the differentiator.

And -- so I mean, in building a growth entity and navigating these people, how do you think about attracting them? It's been a tough employment environment for the last couple of years to hire people. But maybe how does that feel today? And how do you think about building the type of practice you want to navigate those markets?

Yes, it's a great question because the employment environment has been difficult, especially over the last few years. It's been more difficult than it's ever been. I think every company out there has experienced the same thing. But people are attracted to a growth organization, an organization that can offer career opportunities. And I think that compares to organizations maybe that are too risk averse and are -- haven't grown, and they aren't presenting opportunities. One of the things that we can always promise for our people, their people coming in is, with growth, there will be opportunity.

I mean, Terry, you're a great example of someone who's been through that recently. So it's nice to see at a senior level now, we've got that narrative of someone wanted to join from maybe a different style of event today.

But I think for the exact same reasons.

Yes. So Terry, maybe we'll switch a little bit to you and talk more specifically about U.S. surety. Can you give us a sense of what you view as the opportunity in the U.S. surety market?

And David, I think you hit on. I mean the opportunity is significant. I think it's what Chris alluded to as well. We're not looking necessarily to be the biggest. We just want to scratch the surface. But I think to put that opportunity into perspective a little bit, when you look at the 2 largest writers of surety in the U.S., they're both bigger than the entire Canadian industry and we just want our small piece of that buy.

And when you think about going into this market, there's established players, it's a competitive space. How are we going to be able to win business in this new space?

And David, I think it's no different than the strategy we've -- the Trisura strategy year-to-date or life-to-date, it's really in the trenches with our brokers, our clients hiring the best underwriting talent and really just taking the playbook we developed here and grow and take that geographically.

And has the broker focus change across Canada, across the U.S.? Is it the same types of partners?

And -- Dave, great part of our business. I mean, there's been consolidation on the brokerage side, there's a lot of common trading partners on both sides of the business. Or sorry, both sides of the border, even with our insurance business as well. So I think that's great. And we have regional -- there's regional players, and that's where you grow and hire the local underwriting talent to really penetrate those markets as well.

Okay. Can you talk to me a little bit about how you take some of the underwriting standards and expertise we have in Canada, how we combine that with the people we're bringing on in the U.S.?

Yes. Great question, Dave. I position it this way, surety underwrite, we all speak surety, at the end of the day, it really comes down to, the underwriting is very similar. Yes, there are nuances and differences between regions and territories. We need to be aware of those. And I think the U.S. is no different than Canada. We've got a vast geography here as well. And I think we've got a track record and a proven track record of doing that geographically in Canada. It's really take the same playbook and deploy it down in the U.S., and it's really a big part of the -- is just it's collaboration, collaboration with the senior leadership team and the frontline underwriters, the same stuff that Chris alluded to when opportunities come up. We all collectively get together and try to find a solution.

What about from the regulatory side? I mean we talked a little bit about that treasury listing items and the licensing. Can you talk about the expansion from an infrastructure piece of it? How do you think about that?

Yes. I think there's 3 buckets that I call, Dave. There's the regulatory piece. There's licensing and then there's capital. The acquisition of First Founders, I think, was a great start to that. We thank you for the capital piece of it and the investors out there, we need capital in order to use that piece. I think we still have a little bit of work to do also on the licensing, it's state driven. We've got to file rates. So there is a little bit of work in that regard. But we have a game plan. We're executing on it. And I think by the end of the year, we will be putting some premium through that entity and really setting it up for success in future years.

That's great. And maybe on the relative size, I think we talked about this a little bit, but relative to Canada in general terms of sizing, what's your view of the market?

Yes. I mean, as I said earlier, the market is much larger. There's much more opportunity. But also with that, you can be a little bit more selective from a risk perspective. I'd be -- if I'm sitting up here in a few years, and our Canadian -- or sorry, our U.S. business is not the same size as our Canadian business, I'd probably be a little bit disappointed. But again, market conditions factor into there. And I think the other piece, Dave, that I think we're really focused on is we've got a great Canadian franchise, how do we repeat that. And really the focus is the bottom line. And if we can get the same return, and we happen to be the same size as our Canadian business, then I think that's a great outcome.

Well -- and it's top 2 because the Canadian guys have done a good job continuing to grow. So you've got a moving target there to be chasing.

Exactly.

You always need a -- I would say, you set a target you always hit one higher.

Chris, maybe we come back a little bit to the corporate insurance side. It's worth noting -- I should have highlighted Richard Grant is here today, who actually sat up on the stage last year. Richard is going to be leading a lot of the corporate insurance pieces of the business as we expand in the U.S. But maybe, Chris, you can surrogate for Richard today to talk to us a little bit about the corporate insurance market, maybe what the opportunities we see in the U.S. there?

So we think about corporate insurance really as the same way as we think about surety, relative market size, distribution, relationships, and really, it's going to be boots on the ground in key territories for us. So it is going to be a strategy of people, taking a platform that we've had a lot of success within Canada and making sure that we can get really as we onboard people, get them to buy into that strategy. And from a relative size perspective, again, our targets aren't going to be into the top 5 or the top 10. We just need to be able to get our fair share of the market and it will be impactful for Trisura.

Can you talk to me a little bit about Fronting in Canada, maybe the opportunity that we have and the types of risks we're navigating?

Yes, it's a great question because there isn't necessarily a Fronting market like other lines of business. In a lot of ways, it's -- I feel like we've made the market in some ways. And the types of risks that we have written are really risks that Trisura does not write directly ourselves. And so the appetite and the capacity comes from our fronting partners. And so it is very much of a reinsurance relationship and a counterparty relationship as opposed to direct insurance products written by Trisura.

And those reinsurance partners, I'm assuming there's multiple, there's -- many of these partners -- you guys have good relationships with. There's a big group of these entities.

Yes. And a lot of them are foreign insurers looking to deploy capacity in Canada, and it is a better business plan for them to have a relationship with Trisura as opposed to deploying capital directly in Canada and going through the regulatory process.

So maybe this all feeds into -- without talking too much about the warranty business, it all feeds into some of the scalability points that we talked about earlier. How have you been able to scale this Canadian practice and continue to outperform an ROE basis? It's been a very strongly growing platform, but one that's actually increased its ROEs through that period of time.

Yes, absolutely. Our Fronting business has certainly helped us improve our ROEs, but growth -- profitable growth has really been impactful to that on an overall basis. And that's our continued plan for the future is growth, but not just growth for growth sake. It has to be profitable underwriting growth that we target. And that will be our continued formula for outperforming on the ROE side.

Have you seen any change in the team, the evolution of Trisura as a team as we've gotten a little bit larger?

Absolutely. Our team has become deeper, more sophisticated. Just as an example, the team of actuaries that we have today doesn't compare to any of the actuarial ability that we had, say, 6 years ago. And so the depth and the knowledge of our team has improved drastically.

So we're just about to invite Michael up on stage, but can you talk a little bit before we get there about the benefit or the opportunities of having this North American companion platform, this North American entity.

Yes, absolutely. I think from a North American perspective, Michael has different contacts in the industry that we do. And there's not going to be crossover at every turn in our business, but we have experienced already referral business from Michael through some of his context. And there's a couple of programs that we've written through the Trisura Canada platform on a direct basis, that will be fairly impactful to growth.

That's great. Maybe what we'll end with is what you view Trisura or what your vision for Trisura would be in the next 5 years?

It's a great question. It's a vision sort of statement. And when we talk to our own people about what's your vision, we say it's not a budget, it's a vision. And so when I think about Trisura, I think it would be great for the entity that I run through Trisura Canada, if we can take our business from $1 billion to $2 billion, I think that would be a great message for the next 5 years.

That's great. Thank you very much, guys. I'll invite Michael up next.

Thank you.

So I think, Michael, many of you who were here last year would have been familiar with Michael. I think some of you have met him even outside of that. But for those, Michael, who don't know you, can you give just a brief introduction of you, you within Trisura and maybe your history before that?

Sure. My name is Michael Beasley. I run the U.S. operation, what we refer to today is Trisura U.S., which composes to E&S carriers, Trisura Specialty, which we launched in 2018, Bricktown Specialty, which we launched a few years ago, and then Trisura Insurance Company, which, as David pointed out, we launched in 2019. I'm one of the few left in the industry that actually was a reinsurer of the program space before I went into the program space and helped build the State National companies, which is literally the largest Fronting carrier in the U.S. right now.

So talk to me a little bit about how you source your business? Who is originating the deals? And how do you structure your sales pipeline?

We get business literally 3 ways: reinsurance brokers, reinsurers, and then direct relationships that myself and our team that have been in the industry for a while have. Usually, we set it up based on reputational risk based on profitability of the book, the history of the book and what we think reinsurers would be most interested in. So usually, some type of those three make up how we prioritize our list as well as line of business.

And so from your perspective, obviously, there's a bit of a differentiated launch for Trisura. We were one of the first in kind of our launch period to consciously want to take risk alongside those reinsurers. And that obviously was a core component of your business plan.

Yes. Technically, we were the first or second hybrid front carrier. Clear Blue, which is also fairly big now, they got out about a year before us. And then Spinnaker, which was quite a bit smaller, launch as a hybrid front model, taking 5% to 10% risk positions, which we came in 2018 with the same mindset, taking literally 5% to 10% out of the gate. And then as we've hit hard markets, we've pushed that a little bit, but we're still well under 20%, 25% on just about everything that we write.

So what you mentioned hard market there, and I think it's probably worth talking a little bit about your view of the market today, maybe versus the last couple of years. How does the market from a cycle perspective feel right now?

Yes, 2020, 2021, 2022, maybe the most challenging reinsurance cat market in the history of the insurance industry. I started my career as a cat reinsurer. So it was very challenging. And right now, we're kind of at the peak. And we're starting to see some softening. We're starting to see traditional reinsurers come back into the program space, which historically, they've been pretty predominant in the last 3 or 4 years. They had so much influx of business from traditional insurance carriers that they kind of left the MGA space, but now a lot of them are coming back in again, and I think it's going to help us grow in the near future.

What opportunities do you see, it's probably a bit different than Chris' response, but many of the people you participate with or compete with in the U.S. markets are monoline front-end companies. They only do the program insurance space. You're part of a bigger platform that has a more diversified focus. Do you see any benefit to that in your navigation in the market?

Yes. As Chris briefly pointed out, we get a lot of people that call us because we have a North American presence and a company in Canada, that say, we'd like to partner with you because we want access to Canada. And whether that's through an MGA or even through a direct insurance carrier, there's a lot of referrals that go back and forth on both of those between the 2.

What about on the capital side, how does our size compared to some of the other entities in the market?

Size helps quite a bit. We are now, I believe, outside of anybody that's not owned by a large traditional insurance carrier. One of the biggest in terms of capital and surplus, which I think soon we might even be A- 10, which is once you hit that level, it is a differentiator.

How do you think about -- we heard from Chris how he thinks about competitive advantage and navigating the market. You're in earn a different space to the market, but I think many of the same themes apply to the way you've built the team down there. What do you view as your competitive advantage?

Yes. We have a few. One, we set up the company to be very technology-driven. So we try to partner with technology-focused MGAs. That helps. We also have dedicated teams solely for underwriting and the service to the brokers and the MGAs on a day-to-day basis, especially the new opportunities and we have a complete services team. All they do is handle existing business. And that really is a differentiator as no other front carrier does that. Most often, it's the underwriter is doing everything, and it makes our response time and our ability to get back to people a lot more efficient. So like Canada, very service-oriented. And it helps.

And Michael, that focus on technology, I don't want to imply that a focus on specific line of business. But is that driving the focus that you have on monitoring on being able to tell and transition that business from data to conclusions on how reinsurers and you are viewing the business.

Yes. It's a huge component, especially the dashboards we run, which encompasses a bunch of different metrics, across all the programs we do, and we allow our partners, especially our reinsurers to have access to these, and most of the reinsurers are in the weeds looking at these all of the time, and it demonstrates the profitability over time, especially through the soft and hard markets. You can tell when programs are actually increasing in a hard market and then trying to decrease in a soft market to stay profitable, and we monitor that monthly.

What about competition today? There's been a lot going on in terms of the people that we come up against in the market. How do you feel that we're positioned today, even versus a couple of years ago?

Yes. Again, we had the luck of being one of the first movers. So we are one of the largest, I think we're #3 -- third largest Fronting carrier in the U.S. That has really helped. We have a lot of competitors now and a lot of them are fighting with each other, trying to steal business from each other. We haven't had that happen. So we've been in a much better position. And I think you're going to see some significant consolidation here in the next 18 months. I think there's already several decks and books out there that are going around where people just can't get to the scale because of the competition. And it's -- and most programs don't like to leave a company because it's very cost oriented to shift papers and so forth. So I think we're in a very, very good position.

Well -- and despite that, despite your comment, that the preference is not to leave a company, does the volatility around sales processes or uncertainty around capital? Does that provide opportunity for you?

Absolutely. When -- they know you've got a stable book, a lot of programs, a lot of capital, you get to see everything. So we literally see everything that goes on in the marketplace and we get to make that decision. We don't feel any pressure to have to write business just because we need to grow. The market has been hard enough and we're in some very interesting programs where they still continue to get rate and grow.

Talk to me a little bit about that from a life cycle program perspective. How do you move from submission to starting to buy in premium?

Yes, great question. Most of the programs take about 3 to 6 months to onboard and that's assuming everything comes together, the due diligence, the reinsurance and so forth. And then they're fairly sticky. So I would say that most have at least a 3- to 5-year life cycle, sometimes longer. And we tend to grow with large MGAs that have multiple books of business. And several of our programs have now been with us for at least 3 to 5 years. So that's fairly exciting.

What about on the other side of that, when you see a program coming in, into the pipeline or a submission. What's a red flag you look at that would kick it out of your consideration process?

Yes. A lot of it's reputation and then you have a lot of -- if it doesn't have -- we don't think it can attract reinsurance. If it's in a line of business that we don't like, such as workers' comp, long-term liabilities like Med Mal or if it's property cat exposed. We believe this is going to be one of the worst property cat seasons in the history of the insurance industry, and we've completely transformed our book to be mostly out of property cat. And the ones that we have, we're very well protected. So we feel really comfortable about how we're going to navigate this hurricane season.

Last year, there was a little bit of noise around the market with Vesttoo, and that's an entity in a situation that touch many insurance companies beyond the program space. There were a couple of entities within our space that were differentially impacted. Do you think the market is going to evolve differently post that experience?

It should. I can tell you that Trisura has some of the lowest amount of collateralized reinsurance percentage-wise among -- versus our competitors who are heavily reliant on collateralized reinsurance. I think the Vesttoo hit is going to shake them quite a bit on how they look at collateralized reinsurance. We have already changed our practices internally with more verifications on LOCs and so forth. But I do think collateralized reinsurance is here to stay. It's just how are we going to approach it, how we're going to use it and how is it going to be most effective here -- across your diversified platform.

Yes, because there are some partners who participate in that space who are large and significant vehicles. It's just making sure you're with the right ones. Maybe talking about growth a little bit, switching gears. We've had a little bit, I think, planned slowdown in growth last year. What are you seeing in terms of tailwinds supporting the growth in the MGA market, the E&S market, maybe an eventual shift to admitted premiums. How are you seeing the opportunity set today?

Yes. We have a very strong pipeline. We're starting to set up significantly going into the end of last year. And this year, we're starting to see reinsurance capacity that went away for a few years in our space coming back in. So that's really helped. And a lot of our focus now is on casualty versus a few years ago, we were more property-oriented or 50-50. The property market is still a hard market, but you get a lot of volatility with that. And we're trying to avoid that volatility, but we're starting to see more and more submissions coming through and much better quality than we saw a couple of years ago.

And you have a stated goal, right? We're about 30% casuality today, 70% -- sorry, 30% property today, 70% casualty, that's kind of where you'd like to be?

Yes. As a matter of fact, I think in the original business when I presented to Brookfield PVI, we stated that in there that we'd like to be 70% casualty, 30% property over time.

Can you talk to me a little bit about the casualty market today? I know there's been some noise about those earlier years, maybe 2014 to 2019. Is that an area we've got much business or exposure?

We were very fortunate. We came in kind of when the market was changing and starting to harden especially in casualty. So in 2018, 2019, a lot of that business was being let go by traditional insurance carriers because they're starting to find out now that they were under reserve. And what happened is the market started to increase. So we are very fortunate that we were getting a lot of those programs at the top of the price. Yes, and the prices have just continued over the last 3 years, especially in casualty to rise significantly.

Well, I think most importantly, I mean, by luck or by scale, we just weren't in the market in that period of time.

That's correct.

Yes. Maybe that same question I asked to Chris. Your team has grown quite a bit over the last couple of years. I think you're about at 100 now across your organization. How is your team evolved in the last couple of years. Where are you seeing people added, where you're seeing expansion?

Yes. We've added quite a few people. Our operational infrastructure is enhanced tremendously, especially accounting and finance. We manage a lot of programs. so it takes more people. But luckily, we have good training programs. So a lot of our people that started with us 5 or 6 years ago are now in management positions and also now training other people. So I think we are well positioned for the future. I think scalability is there. And I think we're going to get some operational leverage out of this as we move forward. And we've built the company to write over 100 programs. And I can't believe in the last 5 or 6 years, we're actually 2/3 there. That's -- it's pretty amazing what's been going on.

And one of the items, I think we should highlight after this AGM, there's actually a Trisura Summit going on, where many of the people across the globe who are with Trisura, are getting together. That includes some of those management members from the U.S. organization now collaborating on a more formal basis with the Canadian group.

Yes. It's been great. We definitely have great relationships across the entire Trisura portfolio, and it's very impactful to our clients.

Talk to me again to maybe the same question I ended with Chris on about your vision for that U.S. program sort of hybrid fronting practice. Where do you want to be in the next 5 years?

Yes. I don't think it would be crazy to say that we could probably double our business in the next 5 years. I think we're going to see a lot of consolidation. I think you're going to get a flight to quality in the next couple of years, for sure. And I think Trisura is right at the top of the quality list. So I think you're going to see good programs, better programs, better reinsurers, all navigating more towards Trisura and away from some of our competitors. So yes, I think if we can -- like Chris, if we can double in the next 5 years, I think that will be very successful.

That's great. Well, Michael, thank you. Thank you for making it up. Guys, that concludes the formal part of the presentation. And I think Bryan, we're going to move to questions now. Okay. Michael, you can...

Go back. Thank you.

Yes. Thank you. So I know there's an ability now to ask questions either online or in person. I think the intention is to take in-person questions first, and then we'll allow for any online questions to queue and address those.

So to extent anyone likes to, there's a microphone right in the middle there for anyone to ask questions. Yes, come on up.

I'd ask a pair of questions. So I was wondering, with the acquisition of the treasury listed platform, that expands the scope of the types of policies that you can write in U.S. surety. Can you just give us a few tangible examples of the types of policies that you can now write that you otherwise wouldn't have been able to before the integration of the treasury listed platform?

Yes. So there's really 2 ways to think about this at a high level. A treasury listing, can almost be thought of as a heuristic or credential for many of the people in the surety market. So if you think about it in the purest sense of the word, you can't write many of the bonds that are federally financed, or navigated through the federal government if you don't have a treasury listing. But many brokers, even for nontreasury listing, required bonds, look to a treasury listing as a credential to see that you're a surety company of scale and of reputation. And so -- there was a big part of the market last year that we just couldn't write because we didn't have that treasury listing. So brokers wouldn't provide us with those opportunities. That will be the first piece of -- not a type of business maybe, but a component of the surety market we couldn't access. If we go beyond that, beyond just the credential of having treasury listing, that exact type of bond that the government would originate or finance in sort of infrastructure-related investments that pure-play contractor surety business. That's the majority of our Canadian Surety business that's expected to be a big part of our U.S. surety business. We couldn't access it until we had our own treasury listing.

Okay. Very good. And then just as you expand in the U.S. corporate insurance, there has been some talk about some weakness in public D&O. There was a big run up a few years ago. Now it seems like it's softening to some extent. Can you just give us your view on rate adequacy across the lines you expect to participate in and how that would inform your appetite to scale that platform.

Yes, it's a great question because what I would highlight is that, that commoditized part of the market, that public company D&O space, that's not a big part of our business if a material part at all. Where we're playing in the D&O and financial management liability lines is generally again, private enterprise, small policy size limits. So I certainly agree with you. There's been a lot of noise about the public company D&O space that, that market has moved very quickly, especially post the SPAC [indiscernible]. But where we're playing in these specialty niche lines, we think there's a very attractive opportunity for us to access the market that is independent from the trends that you're seeing in that broader space. Thanks, Nik.

Thanks for the presentation. Maybe first question could be for Michael perhaps. But just in terms of the investments that were made in the U.S. Fronting business last year, people systems monitor to improve the risk management processes. Is there any -- are there any initiatives still in play today or that you're developing to ensure continued stability in that franchise?

Yes. Certainly, all the initiatives we talked about last year are permanent initiatives, right? The changes that we made in risk appetite and policy and governance, all of those continue and will continue. I would say the bulk of those investments and changes were made and adopted last year, they're going to continue. So there's not a big wave of continuation or expected investment coming up as a result of that. That being said, as we grow practices, there's always going to be continual investment and expansion in the business. But the big steps that you've seen us make in the last couple of years, they're behind us.

And then in terms of the U.S. market, Michael was talking about some of the smaller players not being able to compete, there's going to be a lot of consolidation. How are you thinking about consolidation in the U.S. Fronting space? Is that something where you look to participate in that consolidation taking some of that market share? Or are you better off stealing that market share organically? What's the view on that dynamic?

Yes. I think we will diligently and logically look at every opportunity that is out there to the extent we find something that we think is attractive and appropriate for us to pursue. We will look at it. Our preference has candidly been for the organic side of growth. To the extent there is that volatility, that Michael referenced in the market, we'd like to be able to compete for that business. But if we find the right opportunity and right partnership, I think we've got an appetite to pursue it to until today or until up to date, I should say, we haven't found that right opportunity.

And then last one, shifting to the Canadian Fronting business. It sounds like it's a lot of foreign reinsurers and it's their demand, and it's really like based on their demand, that's what kind of premiums you're going to be writing. So maybe kind of went through some of the factors that make Canada attractive. But what are some of the factors that could lead to a foreign reinsurer just deciding to turn the tops off one day?

Yes. I think it's a smart question, Jaeme. I mean, the question would be does reinsurance appetite go away for this Canadian business. And we would say 2 things. One, the scale of this business is still very small in this market. And so there's a lot of room for these groups to grow. And they want to grow today, right? Many of the partners that we're working with are keen to continue to do more. That opportunity, we think, again, is still only scratching the surface for those vehicles. But the item that could change that is performance, right? The performance of these programs, the performance of these partnerships, to the extent they're not meeting hurdle rates for us or for those reinsurance partners, that's when you'd start to see a reduction in premium generation. And I would highlight, we look at this a lot in trying to size the market. The absolute size of these premiums coming in both in the context of these reinsurance portfolio but also in the Canadian market, still quite small today. So we do think there's a lot of room to grow. Thanks, Jaeme.

So Jaeme sort of took my question there, but just maybe a follow-up on that one. Can you speak to the diversity of the counterparties you have in the Canadian fronting operation? And what the expectation then for the lumpiness should be? I mean, I think we were all pleasantly surprised by the performance there to date on that. But is that something where, again, a program could end and see a dip and then another one come in that could be substantial the other way?

It is a chunky book, right? There is -- any time you're bringing on a program, they tend to be chunky on the gross line. We tend to look at it on a net basis, what's the net impact of any one of these programs. And there is pretty good diversification on that basis. We probably have Chris or Rich, correct me if I'm wrong here, there's probably 40 to 50 different counterparties on the front end of the business, supported by a pretty big group of reinsurers on the back end. So each of these partnerships is substantial in isolation in sort of individual reinsurance partnership. But the net impact of each one is much smaller. So the more we grow, the more we partner with these groups, the more diverse we'll get and the more diverse those partnerships become.

Okay. And then maybe one on the U.S. business in terms of the capital, the scale that you've gained down there. You did mention that earlier. And you've been stepping through the size categories. Can you just remind us on how close you are to the next tier? And then is that a bit of a turning point for again, incrementally expanding that opportunity in the U.S.?

Yes. So the next tier, Michael referenced it is sized 10 I believe, in the U.S., which is USD 500 million of capital. So we've got CAD 662 million, which is you're approaching that level now, you're not quite at it. But once we get USD 500 million in group capital, that's the next category. Now again, this is the same narrative as we've stepped through previously. It's not a sea change in terms of opportunities, but it's incrementally you'll have bigger counterparties willing to do business with you, larger programs looking to partner with you. So it is substantial. I think the big one that I'd like to highlight is there are not many companies out there with that, right, other than some of the big competitors who are larger or subsidiaries of larger insurance companies. People don't often have that size category in our space. Thanks, Jeff.

Sorry, I do have a question. So David, you mentioned like a 20% consolidated ROE, in spite of the fact that there's been a lot of investment in overhead, SG&A, salaries, leases and infrastructure, ahead of any revenue in all of these growth initiatives. So I'm just curious, what would that ROE look like if you were to ex that out?

Yes. We haven't done sort of a normalized ROE excluding all these investments. But it's fair to say there's an accretive impact of getting to scale, right? If you think about our U.S. platform today, they're underproducing the amount of premium that they should for the expense base of those platforms. You could argue that some of our other platforms are in that narrative as well. So without getting to specific numbers, it's fair to assume to the extent you reliably scale these businesses to the extent you're producing the right amount of premium in U.S. surety, U.S. corporate insurance, there is accretive impacts of that to the overall practice. So I see we've got a question or 2 online. The first one, how do you square growth ambition in U.S. front-end versus recent flat growth, which is a fair question. The entity has been growing on a top line, probably single-digit premium levels in the U.S. in Q4 and Q1. I think that was very much expected and very much natural if you look at the platform, we have I'll say, rationalized some programs that we didn't have appetite for. Michael referenced, we've got much less appetite for programs that are concentrated or have property cat exposure. So that growth that you've seen recently, I think, is very much planned for. I think where we talk about our ambitions for U.S. growth, what's informing that in the long term, is candidly the opportunity we see in the market. So those secular trends of growth that we have in the U.S. programs market, including MGA and E&S premium growth metrics as well as our position in that market. I think Michael referenced some of the preference here for quality, some of the preference here for size. Our platform is one of the only entities with the size of scale, the type of scale that we have in the U.S. If we talk about fronting in the MGA market holding about let's say, 11% of the overall MGA market, there's room for that to grow as well. So if I think about it at a really high level, the macro trends in this industry, the next 3 to 5 years, there is more space for entities like ours to take up market share. If I think about the types of programs, the types of business that we're going to originate, Michael is referencing a pipeline here that's looking very strong today. So we talked about last year as being very much a reset year for that business. Growth isn't going to come back to 50% or 60%. We're very open, and that's not where we return to. But I think targeting that mid-teens growth, onboarding 10 programs a year, that's very much a comfortable place for us to be targeting. I think the last question we've got here, how are we thinking about capital and funding the growth we've spoken about today? This is a question we used to get a lot our entity has been very fortunate to have very good support of the capital markets. I think we are sitting at a differentiated spot today than we used to. If you look at our capital base, it's much larger than we used to. We've actually got a lot, a lot more flexibility on the debt to capital side. So we're running about a 10% debt-to-capital ratio today with now some excess surplus at the group company. So our expectations are in the near term, to the extent our plans pan out for the growth that we're seeing. This trajectory of growth and expansion is an initiative we can fund internally. That's a different narrative maybe than the last couple of years, and I think an important one for shareholders. Looks -- Oh, yes, come up Marcel.

Okay. I just had one on, how you and your upper management team spend your time in the last 5 or 6 years, you've launched 4 new business lines effectively. Just wondering how you manage that balance? And if you're seeing synergies across your business lines, not just between like surety Canada and the U.S. but corporate insurance to surety or any other way? And then I guess the next natural question is, you've replicated all of your business lines except warranty at this point. Do you have more in the hopper? Or is the next 5 years really both taking these subscale businesses up to scale?

Yes. So on the first question, it's an interesting one, right? Because everyone's role is very different. So where I spend my time day to day is going to be different from where Chris or Rich or Michael does. Maybe the easiest way to talk about it is the delineation between what the group thinks about and what the subsidiary or frontline think about. So very much my role day-to-day is on capital allocation, on strategy, on governance, on how we support the entities that are leading the practice of the franchises in the markets, how we support them to do more of what they've shown they can do really well. So to the extent that's finding treasury listed platforms, I spent a lot of time trying to source that entity, navigate that acquisition. To the extent it's improving investment yields, there is ways for us to support the entity's capital base by improving investment yields. We spent a lot of time with the senior management teams day-to-day and on a quarterly basis at the Board meetings, talking about what's evolving in the business. So can I support them by making connections with reinsurers or capacity providers coming in to tell this treasurer story to large and significant brokers. All of that is ways that we can help out the broader business. The guys on the frontline spend their time much differently, right? They're overseeing and managing the production of the business day-to-day, right? What's the premium generation, where are we focusing our relationships, how are we building the business day-to-day? So their days look very different than mine, but we come together in ways that are support of the overall business. The business building point, it goes and fits and starts, right? When you're first launching a new business, there's an intense amount of focus and involvement at the beginning, that business gets up and running, you have to allow those people to manage and navigate that business as it goes on, right? So it moves away from me, as the capital provider, Trisura Group as a capital provider, to the leaders of the business, guys like Terry and Chris on the surety side, George in the U.S., Rich here in Canada. Same thing with corporate insurance for Richard Grant. So as he's building that business at the beginning, there's a lot of focus on hiring, on the types of people we want to partner with, and then allowing those people to expand on the front lines of the business. Your latter question on warranty. I think it's an astute one, One of our strategic goals for the next 5 years is to figure out if we can expand warranty in the U.S. That's a huge market in the States. It's not one that we've really accessed yet, but it's one that we're looking at, at least from a far at this stage. So nothing to say in the near term, but when we set up this vehicle from the spin out, the idea was always, we've got a beachhead in the U.S. regulatory market with our hybrid Fronting platform. We have a fast follow with our core underwriting practices, the surety and corporate insurance practice. There's a very natural build out eventually potentially a warranty business on a North American basis. But today, the focus is those primary lines. Thanks, Marcel. Looks like that's all the questions today. So I do want to thank everyone for coming in person and everyone who joined online. As always, to the extent you have any more questions, don't hesitate to reach out. And hopefully, we'll see you guys next year. Thank you.