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

Good morning, everyone, and thank you for joining us. Today, we've got David Clare, the CEO of Trisura. David, thank you for doing this.

Thanks for having me, Mario.

Yes. Thanks, everyone, for joining us as well. There are plenty of good growth elements to this story right now. But before we get into that, I do want to address the things that are probably most topical. And when I canvassed investors for what they were interested in, there were plenty of questions around the growth. But it's clear that investors still want some kind of confidence and clarity. It's been -- we're 2 months older or 2 months wiser. You've learned 2 months more things about your business. Is there anything you can offer on the exited lines in the U.S., the US Programs and anything you can offer there that maybe provides greater comfort and confidence that the exited lines issue has been addressed?

Yes. I don't think anything that we've seen in the last couple of months since year-end or since reporting has changed that message that I gave around our year-end reporting. The exercise completed around exited lines was meant to drive or set us up for much less material impacts from exit lines going forward. We're not expecting any of those impacts, certainly, what we're seeing from the results since the year-end. So Mario, I don't think anything -- any change there. No difference in what we'd expect from Q4 or even earlier. So if anything, what we've seen since then has just been consistent with what our setup and expectations were previously.

And it sounds like you've added some talent. There's the new Chief Underwriting Officer. There's a new team around reserving. Could you speak to the new talent and how that provides a little more comfort around reserving and underwriting?

Yes. I think this has been a constant evolution of our business, right? Anytime you've got a growing business, you're moving talent around the organization, you're adding new people. So the new person that you referenced, this Chief Underwriting Officer, is actually not a new person to Trisura. Richard Grant has been running our Corporate Insurance practice and our Fronting practice in Canada since about 2005. So he's been with the entity for a long, long time. You've seen the quality and skills of his underwriting. He is now responsible and this is an evolution you'll continue to see. We're moving people up in the organization to group roles where they've got responsibility across, now a North American platform. So Richard Grant midway through last year, took responsibility for underwriting across the entire organization, including US Programs. That's now been supplemented by some teams in the U.S. around reserving, so providing a new team to look at and review our reserving approaches. We've actually added some other people, right? We've got a new Chief Risk Officer at the group level. We've got new legal resources across the organization. So this is -- I mean any time you've got a growing entity, you're adding new people constantly. But I think there's been some -- in the last, let's say, 12 to 18 months, some really good additions of talent, both from internal capacities and external hires.

What sort of drove the change in your mind? Why did it feel like this was the right time for it? Was it just growth or anything else?

No. I think the entity, we would like -- and we've been consistent in this message. We would like to become and be known as a North American insurance company, North American specialty insurer. And Historically, when this platform was started, right, if you turn back the clock to when we spun out from Brookfield, the platform was really 2 separate vehicles, right? You had a Canadian specialty platform and you started up a US Programs focused business. And they grew together, right? There was infrastructure sharing across those 2 entities, but management was a little bit separate. And today, if you look at the entity, there's a lot more sharing of resources, a lot more sharing of balance sheets. We've got consolidated finance investment, risk governance functions. And it felt like a really natural evolution to then have shared leadership across those organizations, right? And so we've done that at the finance level. We've got David Scotland, who's the CFO, across the entire organization. You've got myself, who chairs all of our subsidiary boards. We wanted to now start adding that management level of consistency of approach of let's say, oversight on other parts of the organization. So you see now Surety has run out of the Toronto office across North America. Corporate Insurance is run across North America into the Toronto office. Underwriting now has consistent reporting lines to a group role. So that consistency of market approach, how brokers interact with us and brokers think about us, we wanted to extend that to Reinsurance, to Programs to all parts of the way Trisura feels.

And so that consistency now across North America extends into Reserving as well? Or is that still 2 separate entities?

No, that's the hope, right? We've seen a very mature platform in Canada with a very consistent history of positive reserve development. I think it's relatively normal as an entity matures from a start-up entity to a much more significant one. You've got some learnings along the way in terms of how you run that entity and that can extend from risk appetite to reserving to how you access the market. And so the goal here, as we've built out, let's say, a little bit more substantial reserving team, that is meant to drive a little bit more consistent approaches across the organization. So everything you're seeing here is just a live view of an insurance company moving from a relatively small Canadian-focused entity to a North American one. And we'd like to do that with consistent approaches across the group.

Okay. Before we get into the growth start, let me remind everyone, you're welcome to ask questions. You can use the chat. I'm going to look over my left shoulder once in a while for e-mails as well. So feel free to submit them. The chat might be easier for me because that's the one that's front and center on my screen. But yes, please submit some questions. Before we move on to the more growthy side of this discussion, let's go to the topic of the day or the topic of the week, which is tariffs. I appreciate that the tariff story is evolving. We don't know the duration and the magnitude, the nature of how these tariffs will unfold. But maybe you could speak to the direct and indirect effects tariffs may have on Trisura?

Yes. I think there's 2 ways to think about it, right? At the highest level, insurance as an industry is a GDP levered industry. And so if you think about entities who participate in this space, anything on a macro level that provides uncertainty or weakness in growth outlooks for the broader economy, let's say, Canada or the U.S., which we participate in both. If that environment slows or becomes less certain, there can be knock-on effects to insurance. Now if you're a smaller entity that's growing, those knock-on effects can be differentially felt. At a larger entity, you participate across the market than a smaller entity who's growing a lot faster. But we should acknowledge economic uncertainty drives usually slower growth at a really high level. Now if you go through the hierarchy of impacts in financial institutions, P&C is probably on the lower end of direct impacts from tariffs and specifically specialty lines which is where we participate, it's more difficult to point exactly to where you see impacts. From my perspective, the biggest driver, the biggest change could be if you see some change in input costs around claims, I would say our most pro-cyclical line of business would be aligned like Surety. And if you see some change in the construction environment because construction supplies are rather harder to get and more expensive to get, that can have knock-on effects to the surety industry as a whole. It's important to note these contracts do -- they do contemplate events like this, right? So there are usually adjustment factors or changes in contracts that allow for tariffs or for changes in the environment. All that to say, at this stage, and we've talked to our business leaders about this, we don't expect a material change in our business as a result of the current tariff environment. And I say current because it seems to change a lot. But when we review our business, when we review our expectations, when we talk to our partners, we're not seeing a change really in outlook for the overall platform.

And I suspect it's far too early to suggest that there's anything on the ground you're seeing today. I mean...

No, no, absolutely not. I mean at this stage, really, we haven't seen any changes in the way our people or our partners are navigating the market. Again, it's one, too early; and two, not necessarily the industry that has that direct effect. So you'd be looking for more secondary or tertiary impacts in time.

This next question is interesting because it's a question I've answered on the Canadian banks repeatedly, and it's now being asked of Trisura. It's interesting, let me read this one to you. It says you speak to the proportion of revenue in U.S. dollars versus the cost base in Canada. I think what he's getting at here is, if a lot of functions are centralized in Canada for the North American platform, the cost base should benefit from a weakened Canadian dollar, and I get it. He's saying these U.S. dollar revenues and earnings are going to translate into higher Canadian dollars but the cost will be contained in Canadian dollars. Could you speak to -- maybe just speak to that split of expenses and revenue, Canada versus the U.S?

Yes, I would say the majority of our expense-based capital base operations is Canadian, but a growing portion of revenue income and opportunity is coming from the U.S. So there's 2 ways to think about this from a Trisura perspective. We run and manage a lot of our U.S. functions out of a Canadian head office. So there's a marginal benefit from a currency perspective there of growing sort of revenues in U.S. dollars and an expense base in Canadian dollars. We are candidly hiring people in the U.S. So that's going to offset over time. What I would say is interesting from a Trisura perspective and may be different than most companies of our size or good companies in our industry, is we do have quite a natural long USD position in our U.S. dollar balance sheets, in a growing U.S. surety organization, in a growing sort of US Programs profitability platform. So one of the items that's a bit of a tailwind that I don't point to as something we plan for is if the U.S. dollar stays strong versus the Canadian dollar, there's a natural tailwind from translation, right? We've got investment income in the U.S. now. We've got income from Surety practice that's a bit more mature. And we've got a higher rate environment in the U.S. So if you think about investments in that U.S. entity, they are being translated back not only in higher currency level, but there's an opportunity to differentially capture interest income. So that narrative of "Listen, there's a tailwind here of a stronger U.S. dollar." That certainly exists in Trisura. It will be around the edges on an income basis, but it will be meaningful on a book value basis.

Yes. Let's actually go to book value because there's a question just came through that kind of ties it all together. The book value objective for this company is a big one. I think what's the number, $1 billion in book by 2027?

That's right.

I felt just playing with the numbers, looking at the growth in your book value so far, looking at the deterioration of the Canadian dollar, it's conceivable and certainly knock this down if you don't think it's right, but it's conceivable that, that $1 billion happens a little sooner than 2027. Things are just moving into that direction, like an 18% -- 17% ROE without a dividend, the decline in the Canadian dollar, lower interest rates in Canada, a lot of these things could be quite beneficial to the book. Now I'm not suggesting investors should reward book value growth that just comes from a declining Canadian dollar, but let's talk about that $1 billion outlook. And am I pushing it too far to suggest it could happen sooner?

I think, Mario, it's a very fair exercise to look at our historic results and our historic growth in book value and model that going forward. And that would certainly imply a faster achievement of that book value target that we put out for the end of 2027. Listen, I never asked for and never ask our investors to give us credit for macro movements. And so currency impacts here, we don't try to put into our forecast, but they benefited us in the short term. Now if I take those out and I look at where we are today and where we could be in a year or 1.5 years, 2 years, I've got a lot of confidence that we hit that target, that book value target. And I think people have seen sort of the demonstration of our ability to hit that target over the last couple of years, right? When I -- when we put that target out, this is 2 years ago at our Investor Day, I think there was a little bit of surprise that we would put a target out like that. And you can see how quickly an entity with this mid- to high teens ROE threshold or ROE achievement can compound that book value. And I would not disagree that there are scenarios where we see that book value reaching that target ahead of plan. I'm not going to change that target because, as you say, there's -- I don't really know what's going to happen around the edge with currency and rates. But certainly, if everything stays on trend, it is an achievable target.

There's a question that just came here and it's a sort of a broad question about capital allocation. I mean they very specifically refer to the NCIB that was announced in early December. I would add to it. There are plenty of other capital allocation decisions you make. M&A, for example, is -- I mean it could be part of the growth story for this company. So maybe could you speak to capital allocation as a broad question, not just the NCIB as was posed by the question, but just capital allocation generally: M&A, buybacks, organic. Speak to that whole big story about capital?

Yes. I appreciate this question because we did get a question on this on our earnings call, and I think I should sort of acknowledge sort of where our capital allocation priorities are. First and foremost, it's organic growth, right? And we do have a number of opportunities to deploy capital to fund those organic initiatives. I think the change at Trisura versus 2, 3, 4 years ago is that our organic is no longer 50% or 60%, where there was that stress on use of capital. But you're still in that mid- to high teens rate above that in some lines. The biggest use in the near term for capital, either internally generated capital or debt capacity is going to be building out that U.S. Surety platform. And so if you think about the entity today, we would like that U.S. Surety balance sheet to be a bit larger. And so in time, you'll see us probably rotate or shift capital from either the holding company or other entities into that Surety balance sheet to reflect the opportunity of that [ vehicle ]. First and foremost, organic growth, right? You talk about US Surety as the most immediate opportunity for that. US Corporate Insurance as we build that, that's [Technical Difficulty]. And I think today, where we are is a lot more self-funding because rates of growth have just matured. Our ROEs have continued to be very strong. And so that capital source is much more internal than it used to be. If I talk about the next levels or the next opportunities for uses of capital, I think that inorganic use and we've demonstrated a willingness to pursue in the past, right? You've seen us acquire a surety company in the U.S. We acquired an admitted platform. We've done smaller versions of inorganic initiatives like bringing on people or doing book rollovers. So job -- or priority 2 after organic growth is inorganic opportunities. I think today, if you look at that market, we're in a different space than we used to be in terms of being able to consider, let's say, more traditional or larger versions of M&A. We're not an entity that you're likely going to see do something really transformational. We like the niche lines of business that we're in. It's hard to find platforms that are in that space of the market. But if we find one, I think we're in a really good spot to pursue it in sort of the medium term. Finally, if we look out past inorganic, organic, that third one is forms of returning capital to shareholders. And this NCIB, the first instance or the first imperative of that program is really to manage dilution that we have from just ongoing or normal course equity awards to our senior team. We don't want to see some ongoing bleed or dilution as a result of compensation initiatives. But it does give us flexibility to consider opportunistic buybacks if we think that the value is not being properly reflected. Again, the hierarchy here is organic-inorganic capital returns. I think you referenced that dividend earlier in sort of your -- in your comments, we're probably a ways away from that. This is obviously a decision for the Board. We've got a lot of initiatives that we are looking to fund and pursue before we start talking about that dividend concept.

Okay. I'm going to tie in capital, the next capital type question to a decision that was made to shift away from things like the Fronting operational ratio to more of a loss ratio to more of a loss ratio, to even discussions about loss ratios and combined ratios on a consolidated basis. So let's first discuss that decision to move away from a Fronting operational ratio, more of a loss ratio. I suspect it has something to do with retention. Increased retention, certainly, lends itself more to a loss ratio calculation, the Fronting operational ratio. But why don't I let you speak to that decision that was made, especially at a consolidated level in the Q4 disclosures?

Yes. I think this is reflective of that theme we talked about earlier, which is the maturation of the platform. The Fronting operational ratio was created originally to try to give people a heuristic around a relatively novel business, right, which is this at the beginning, a pretty highly ceded Programs business. And in its purest form, that 100% seed or very low retention model just doesn't really translate well to a combined ratio. And part of that is the leverage in that model versus the leveraging of the traditional model. So you've seen as the platform has matured as it's grown in both scale, diversification and retention, a concept of a more traditional combined ratio started to make more sense on that, let's say, the US Programs business. We've always had that concept in the Canadian platform. And more and more now, we're able to bridge those 2 and look at a consolidated combined ratio. So this, I would say, is not reflective of a change in the business. I would say it's reflective of a maturation of the business, maybe a shift a little bit in retention as that platform has matured and an attempt to give investors a more simplified and comparable metric that they can look at versus peers, right? The criticism or the concern I get from a lot of investors is, listen, it's an interesting business, but we don't really know how to compare you to other entities. And a combined ratio metric can be very, very easily compared to other insurance companies. And today, we're in a stage where you can look at that combined ratio on a consolidated standpoint.

Is there -- is the intention to move toward a higher retention model in US Programs?

I think we're likely pretty consistent between that 10% and 15%. Anecdotally, you might see us move up on certain opportunities. But that is higher than where we were 2 or 3 years ago. And so you'll likely see us bounce in that range. But as you've earned out those premiums, earned out those policies in the last couple of years, you've just seen a more natural expansion of our earned premium line in that U.S. business. And that's what you sort of need to drive a rational combined ratio as a level of earned premium that's consistent and a little bit more significant.

Let's focus on US Programs for a moment and now more from a growth perspective because this is one of the questions that came through. It's about U.S. growth. The resumption of U.S. growth when anticipated, like the growth in that core business because the business is still strong at a core level, and the question sort of is around that U.S. core growth, but the question goes one step further and asks if you have any share or market position goals for U.S. programs?

Yes. I would say. So the first part of the question on growth resuming, I think we started to think second half of this year just based on the pace of growth we see in that core book of business. That's when you're going to lap some of those comparables from last year with those exited lines. So you should think about the second half of 2025 has seen some growth in that business. When we talk about market share in the U.S., let's say, Program space or the U.S. space that utilizes business models like ours, we think we have about a 10% share in that marketplace. I think there's been a lot of evolution of this market in the last few years. We were obviously one of the first to jump into this market and to lead it in a really significant way. There's been a lot of entrants who come into the space who failed to reach scale. And in that time line, there's been a lot of investment from a secular perspective in the MGA space, right? So in the last 5 or 6 years, MGA originated premium in the U.S. has gone from about $35 billion to over $100 billion. Our -- this is U.S. dollars. Our U.S. platform writes about $1.5 billion in that space. We think that business models like ours account for about $15 billion of that broader MGA market. So you're looking at a relatively significant amount of premium that's being accessed through a specific business model in a pretty small way still. And so there's 2 avenues of growth for us. It's one that MGA market continues to grow or two, market share of our business models continue to grow. So that's a macro level. On a micro level, what's our market share within that space? I think we would expect and continue to target greater market share within that space of business models who participated in the MGA market. I think we'd like to be somewhere between 10% and 15% of that market. Beyond sort of that 20% level, you might run into some channel conflict. But that means we've got a lot of runway to grow. And I think the avenues or the levers that we have to pull in sort of the next couple of years are going to be around differentiating ourselves as a larger, more substantial, more sophisticated insurance company who participates in this market, right? A lot of the people that we compete against are monoline private equity-backed, fronting companies who don't have a permanent capital base and don't have a diversified business model. That allows us to differentiate a little bit in the market and compare well to the biggest leaders in the space.

We could still make a sound argument that there are secular tailwinds in this business. Still -- this business still has something?

Yes, the trends of investment in the MGA community, the pace of growth in the E&S segment of the market, none of that's changed. And in fact, I would openly acknowledge that I probably underestimated in the last couple of years, the momentum in that space, right? We've been actively building out an admitted platform with the assumption that if at some stage this changes, we want to be ready for that. But that trend of risk shifting from the admitted market to the E&S market, that's disproportionately benefited us and it's disproportionately benefited players who participate in the E&S market. That trend of capital and talent going into the MGA community, that's continued. And that's -- that, I would say, has been a massive driver of sophistication of risk selection of growth in this MGA community. We're not seeing a reversal of those trends. And I'm not trying to set up some massive expectation for the market and the opportunity, but I also don't want to imply that something has changed in this market that drives a different posture for us.

Yes. And I think that was one of the risks for me. When you see sort of the -- like what happened in Q4 2024. It sort of makes you think there's a problem with the market. And I think when you drill back, you've got to remember that there's still some pretty strong growth, particularly E&S. So I just didn't want to leave that. Now one sort of related question to this is about risk selection in US Programs. Talk about how your -- with your Chief Underwriting Officer and his new team. Has there been a shift in what you want to focus on in the US?

I think that shift has been happening. We've talked openly about this probably since 2022. When you start a new business, and we're building a new business model, which is effectively what we tried to do starting 2018, your risk appetite or the types of things you would consider at the very beginning is just naturally a bit wider, right? You're trying out business lines, you're looking at new partners. And as you get more mature, more scale, more experience, where you like and where you see success naturally narrows. And so we're at a stage now in the U.S. where we've got a relatively significant amount of premium coming through. And we've seen some of these partners and some of these business lines run for 6 or 7 years. And so our appetite just as we've grown has started to narrow or focus on those areas that we like. So the first instance of this was in 2022 when we actually pulled back from, let's say, concentrated cat exposed lines of business. You saw that sort of pretty consistently. We've never been a big player in like California property market. So an example would be us sort of avoiding any impacts from these California wildfires. What you're seeing today in some of this evolution around an exited lines is, I think, a natural extension of that. Now in let's say, a little bit longer tail line, where you've got some casualty programs, which, candidly, for one reason or another, just aren't performing in the way that we wanted to. And as we've gotten more scale as we've gotten more significance, I think our ability to say, "Listen, this just doesn't meet in our hurdle rates." That's become a lot more directed. And so when you talk about okay confidence in the book going forward, those programs that have had maybe challenges in the last couple of years from a performance perspective, you sort of cut them off, right? And what you've got now going forward is a lot more informed group of people, just by natural experience over the last 6 or 7 years of operating in this market, now being collaborated -- or collaborating with a senior team that's looking at consistent underwriting appetites across the group. So listen, the setup here is not different or not significantly different than what we've done in the past, but it's informed by a lot more experience and now a few more senior management participants around the table.

The next sort of question -- I think we're going to go to Canada soon. I'm going to leave out a half hour for Canada because I -- I shouldn't say, sorry, I should say specialty because, of course, that includes U.S. as well. But before we go there, there's a question here on Reinsurance pricing, US reinsurance pricing, which, of course, feeds into the success of the US Programs. Is there anything you can offer there? Does it seem like a firmer market? Or how is pricing shaping up?

It's line by line, but I would say both at July 1 renewals of 2024 and January 1 renewals of 2025, we generally saw softer pricing. So reductions in pricing from reinsurance perspective. Most of that is simply a pass-through. But around the edges, there is margin expansion for us if reinsurance pricing reduces. We take a belt and suspenders approach to our Reinsurance where we buy reinsurance for individual program usually through a quota share. And then we also purchase extra protection horizontally across our programs. And that horizontal protection or any extra protection that we buy is simply out of our own P&L. So if the pricing on that comes down, there is generally expansion in margin. So that's a net positive for the group. One of the items or one of the questions I get a lot is how do these models evolve or behave in hard versus soft market cycles. And candidly, when we started the US Programs or Fronted model, it was a relatively soft reinsurance market. And that's an environment that is very positive for this type of model. The reinsurers have a lot of capital. They're looking to deploy that capital. Terms and conditions are a little bit more favorable for primaries, and that's when you look to build and expand this business. The most difficult time to be or adopt a business model like this is when reinsurance capacity is not available, right? And so when that environment is tight, when pricing is difficult, you see a lot of stress in the market. We were lucky that we had scale and we had a number of partners and programs that have very dedicated reinsurance panels, but that's the hard part. The last 3 years have been a very difficult time to write that business model. What we're looking for and what we're wondering about in time is, to the extent capital and capacity comes back in that reinsurance market, how do these models evolve, right? How do they change in this environment. And the first one that we've seen is in the event that we have property exposure, and 30% of our book is property, and if the extra protection that we purchase around that book costs less and we actually saw, in some instances, up to almost a 10% reduction in reinsurance pricing, that's a helpful narrative for our margin and for our business. So I'd say the casualty market is a little bit in transition right now. You'd probably pass the torch from a hard market and property to a harder market in casualty. That's interesting from our perspective for 2 ways. One, to the extent the primary lines business are increasing in price, obviously, 70% of our book is casualty, so that drives a little bit of rate momentum. But then what happens in the reinsurance markets. The item that's up in the air right now, a little bit is how reinsurers are being impacted and will change appetite post the L.A. wildfires. But I think the trend over the last couple of years has been there's more capital in the reinsurance markets than there has been previously. That generally drives better terms for purchases of reinsurance.

Yes, you just addressed exactly the follow-up question. They were asking more about casualty -- sorry, casualty reinsurance, but I think you've addressed here. There are a few other questions like this, but I'm going to -- I want to move on to Canada -- I keep saying Canada because it used to be Canada, but I guess you're talking about Specialty. This is where things have gone extremely well, of course. And so what I want to do now is focus on the opportunity set. The opportunity set for growth in Surety, which has been clearly a place where there's been some success. And what I'm going to do is, I'm going to have my model open while I do this because I'm going to quote some numbers that have come through in the last little while. Let's go to Canada Specialty, of course, Surety. So very strong growth. Gross written premium -- gross premiums written, 31% growth in '23; 37% growth in '24. I have that coming down a fair bit in '25, maybe just a law of large numbers. It's a bigger business. Why don't you speak to what was driving that growth in '24 and your outlook for '25 in Surety, Specialty?

Yes. I think 1 thing I'd just like to say before we get into the Specialty discussion. I know there's a lot of focus and attention on sort of US Programs business. I do want to just level set everyone on the call, 2/3 of our business is this Trisura Specialty platform, right, which is the Surety Corporate Insurance kind of warranty business. And it has been a very, very strong performer over the last couple of years. Let's acknowledge that there's been more volatility in the US Program space than we'd hoped. But I don't want that to take away from what has been a really spectacular execution on behalf of our Trisura specialist team. There are not a lot of platforms with the ROE profile of that entity and not a lot of entities that can grow with that ROE platform. Sometimes I think it sort of gets missed in some of the other headlining numbers. But I do want to just candidly acknowledge how strong that team has been. Mario, on your surety point, the biggest driver that we saw in 2024 was obviously a bit better execution in our U.S. Surety platform than we had anticipated. So you've got a relatively small platform or what was a small platform in the U.S. growing at a pretty healthy rate. So I think there was almost a doubling of premium into the U.S. last year, coming from a small base, but for our entity, that can be very significant. So that was a big driver of growth for us in 2024. We are expecting and actually seeing in the first couple of months of 2025 continued growth out of that North American Surety platform. So I think our expectation for the full year is likely coming down a little bit from that 37% range, but you're still expecting a high teens, low 20s percent growth out of that Surety business, driven significantly from the U.S. but also with some opportunities out of Canada. It's just candidly a much, much larger market in the U.S., and we've now been in it for 5 years. So you're starting to get some momentum. I will say we're still relatively handcuffed in the U.S. without, let's say, a larger balance sheet; without, let's say, a larger AMS size rating without an A rating. So there are a lot of levers for us to pull as we get into, let's say, a top 20 Surety player in the U.S. But this market is very significant and has been one that our team has been able to access well.

And when you think about US Surety, and the growth we're seeing there, is it simply because Trisura is a small player with capabilities, and it's just sort of picking up more of a natural market share? Or is there something underlying that growth in US Surety beyond market share?

Trisura historically, and you can look at this trend in our Canadian business as well, has expected out of itself a bit faster than market growth. So taking market share as you're building the platform, right? If you look at our size and our shift in scale from 2023 to 2024, you're sort of a top 50 player, maybe a top 60 player in 2023, you're kind of the top 35 in 2024, that's faster or better expansion of market share than you just expect in taking your own component of it. The driver of that is candidly a lot of the same drivers that we have in Canada, right? We are smaller. We need to be very specialized. We need to be very responsive to our brokers. And that approach, generally, around the edges has to be expected by our front lines. That's resulted in some very, very fortunate growth or additions of brokerage partners or distribution partners that has disproportionately driven the business. So this is grounded pound execution of our frontline's employees going out there and working to originate business in a market that is very, very significant.

What would you say in terms of runway for the US Surety. Could -- presumably, we're not going to see 20% growth forever. But it sounds like in the -- if the U.S. continues to -- if you continue to move up to that share, maybe you make a top 20 as you suggested. Is there -- are there several years of growth -- is there several years of growth left in US Surety business, maybe 4 or 5 years?

Yes. And we sort of plan on a 5-year basis. So we are expecting and certainly building the entity to reflect an expectation of growth for a number of years here. We are the fourth largest surety in Canada. So it's sort of naturally you see a little bit of -- a little bit lower sort of natural mature growth rate. We are nowhere close to tapping out on sort of opportunity or potential in the U.S. And I would say that, that extends for -- that extends for the next 3 to 5 years. It would not be unreasonable for us to see that US Surety platform grow to be larger than our Canadian platform. And you've got a few of those metrics that we need to hit off administratively before we get there. But the market opportunity, right, the US Surety market would be about $6.5 billion. The Canadian space is probably $800 million or $900 million. Those top 3 players in the U.S. write more than the entire Canadian market individually. So we think that this opportunity if we can keep executing will be very significant in the medium to long term.

Okay. And then combined ratios in Surety remain pretty attractive. Is there anything there on the horizon that you would steer us? Was it unusually good in the last couple of years? Or is that -- those sort of 79, 80 combined ratios makes sense?

Yes. I mean surely, individually, that level kind of the low 80s is generally what we expect. I think the best way to model the business is around that 20% loss ratio through the cycle. And I've had some questions or some attention on the fact that we've been quite a bit below that for a number of years. We generally just think that it's best for us to provide sort of a through-the-cycle loss ratio. Obviously, we've had some demonstration of performing ahead of that. Nothing is on the horizon to me that significantly changes that, and that includes some volatility around tariffs in the short term. But I think that combined ratio expectation for that Surety business should be in that high 70s, low 80s. That's how we build and budget the business. I don't think -- the one thing I always am conscious of, like you saw Q4 loss ratio that was very, very low; you saw Q1 2024 loss ratio that is very, very low; you can have those quarters when you have a very, very strong loss ratio, but I think it's best for people to model this over the full term.

Okay. Now Canadian Surety, I don't want to leave that out. There's still growth potential in Canadian Surety. Can you speak to that business?

Yes. Our Canadian platform has been -- and this has been a 17-year buildout in that Canadian platform. We're still not quite in that top 2 or 3, which is where we'd like to be in that Canadian Surety market. And what we referenced a little bit on our call at Q4 was that there's a big part of the market we don't play in at this stage, right? And that's the larger limit bonding space. And part of that's just been our balance sheet. It's not quite -- it hasn't been quite there yet. Part of it has been we didn't have the talent internally to do that. Both of those are moving towards being solved. I think that $1 billion balance sheet, if we can get to that, that opens up a bigger part of the market for us. We've been able to attract some new talent that has opportunities to expand in this space. And the broker community recognizes that Trisura is a larger and larger participant in this market. So there are lots of levers. It's a pull here. It is a -- it's been a great contributor to both book value and earnings over the last few years, and we certainly expect that to continue.

There's also a US Corporate Insurance strategy here. The growth hasn't been as strong in Corporate Insurance. Can we talk about like where are you in that life cycle of becoming a corporate insurance provider in the U.S. And maybe speak to why or your impression of the market?

Yes. So the market in the U.S. for US Corporate Insurance is a bit different than Surety from a ramp-up perspective. We're in a very similar stage to where we were in, let's say, 2021 with US Surety with our U.S. corporate insurance practice. So I'm not surprised not to see a meaningful or material contribution from a premium perspective. The difference in US Corporate Insurance versus US Surety is there's a really heavy lift off the hop of filing rates with all of your state regulators. So getting licensed with your state regulator and then filing your rates and forms with each of those state regulators. We had to do that on a product-by-product basis in the U.S. And so each product, D&O, E&O, fidelity, employment practices liability, you've got a different form that you're filing across the U.S. We're probably up to about 35 states in the U.S. with those forms filed and are starting to see the trickle of premium come in, you're likely not going to see a big lift on that until sort of the latter half of this year or beginning of next year. But candidly, we don't want our team going out and writing business hand over fist, right? This is the same buildout that we had in Canada, same buildout that we had in Surety, you want to be writing profitable business and business that you think over the long term is contributing, and that's the platform that we are setting up. And we're really fortunate. If you look at the combined ratios in Canada, right, we've supported over the last couple of years a buildout in US Surety. We're expecting now to support a buildout in Corporate Insurance. You've got a drag from that, right? And so if you can get this platform up and running and contributing premium and profitability, I think we view those as really attractive levers to sustain and hopefully improving those metrics of profitability.

So are you suggesting that there's sort of a drag on the Specialty ROE from these buildouts? Is that be a reasonable thing to suggest? And how much of a drag?

Yes. I mean we've talked in the past about there being a couple of points at least of combined ratio drag. That's fairly easy to translate to ROE drag, tougher to quantify on an ROE basis because there's some leverage there. But if you were not investing in, let's say, US Corporate Insurance platform or had not been investing in the US Surety platform, you'd obviously have higher earnings and higher contribution. Now the other side of that is we are definitively and expect to continue to be a growth entity. And so we're not backing those costs out because I think if you -- like we believe that in time Trisura becomes a scaled North American player, we want to be making these investments to build up the platform.

And I mean sort of a related question around the ROE, and we'll get back to Canada or specialty in a moment. The notion here that Trisura remains under levered. Is there room to just improve the ROE through leverage? Or is that not how this works? You would use the leverage to support growth, not use the leverage to drive the ROE higher?

I think in a perfect world, if we are doing our job as capital allocators, those 2 are not mutually exclusive, right? You should be funding accretive growth opportunities with less expensive capital as you deliver and develop that capacity, right? Because if I take us back 4 years, we had a lot of these growth opportunities that we are pursuing. We didn't have the scale or flexibility to fund those with internally generated capital or debt, right? We had one debt issuance that was very attractively priced. Everything else was equity funded. Equity is the most expensive form of capital. So if you look at, "Okay, what's our goals going forward?" The goal is to find attractive opportunities to expand. We've got a pretty high hurdle rate what those opportunities are. If we can fund those opportunities with more accretive capital, which I would qualify internally generated and debt capital is 2 versions of that, you're going to see an increase in ROE. The question, I think in the near term that I get a lot is, "Okay, what's the run rate? What's the long-term expectation for something like a Trisura specialty platform?" We believe there's been a bit of over-earning there. We've talked a lot about that being up in the 27%, 28% range. You're likely not seeing that in perpetuity. But it's not unreasonable. I think Trisura Specialty can do a low 20s ROE, right? And that's a platform that now is more diverse, larger than it was historically and so it has a little bit more confidence in achieving those metrics.

Let's flip over to -- sticking with the Corporate Insurance. Do you -- I mean you offered an outlook on Surety and what growth could be like in 2025. I'm just looking, again, growth hasn't been that great. You've talked a little bit about that already. Can you offer an outlook? Does 2025 look a little better because it was around -- gross premium written growth in 2024 is around 1%. So clearly, that's something you can improve on. Maybe speak to 2025 of that?

Yes. I think Corporate Insurance would be a piece of our business that's probably most directly impacted by balancing market trends. So we see certain lines that are a bit softer than they have been historically, coming candidly off a very high base. They've got 3 or 4 years of rate increases. So our team is tasked with writing profitable business. And so if we see pricing our lines of business that are not within our risk appetite from a price perspective, we're very happy to let those go and build the business for the long term. I think just looking under the hood a bit at 2024 versus 2025, we would have an expectation for probably mid- to high single-digit growth in Corporate Insurance. You've still got a bit of an impact from softer rate environment, but you lap some of those renewals. And you've seen some of the harder hit lines of business sort of reset or move away. So I think, listen, I'm not going to point to mid-teens growth in Corporate Insurance space. It's likely going to be in that single-digit range. We think kind of mid-single digits to high single digits and importantly, driving very profitable contribution from that. The upside, I will say, or the risk that I'm under expressing the potential of that platform will [Technical Difficulty].

We lost, David. We'll see if you come back for a second.

I think until the latter part of this year. But if that happens or if that starts to happen more meaningfully, you'll see upside to that expansion.

Okay. We lost you there for a second. You went silent. You said upside to the mid-single-digit growth.

Yes. Can you hear me now?

We can, yes.

Okay. I would say the only upside if I'm being too conservative on that mid-single-digits growth rate in Corporate Insurance would be if US Corporate Insurance comes online, right, because we're not pricing in a lot of contribution from that platform. If that starts to happen, you will likely see upside to that. I think the timing of it though is not until the latter part of this year.

That's helpful. Moving on to the other important one, Warranty. We have seen good growth in Warranty. I sort of refresh my memory here, 16% in '23; 25% top line in '24. I have that obviously coming down a fair bit. Maybe we could speak to what's driving? What are the tailwinds in that business. The one you referred to in the past, and certainly in your MD&A was Auto. So maybe speak to that as well?

Yes. We've seen a bit of a return to growth in that Warranty business. If you look at this platform, last 3 or 4 years, it was not growing significantly, probably our weakest growth vector. That's catching up now. And part of that is a bit a normalizing auto environment. Part of that is just getting a bit more market share with some of our partners. I've seen that, especially in the latter half of last year, right, Q3 and Q4, started to see pickups in that growth rate. We're seeing that to start the year as well. So from an expectation perspective, for the full year, we're sort of expecting Warranty to come in at that high teens, low 20s level of growth, which is maybe a bit lower than last year, but a pretty healthy level of growth for 2025.

Is this one of those businesses that could prove to be procyclical in a sort of down economy?

Procyclical or countercyclical?

No, procyclical.

Well, I would say this is our business that's most exposed to consumer behaviors. And so one of the items that we always highlight here is generally, our business is not levered to consumption. But autos and auto purchasing behavior is going to be the biggest driver of Warranty purchases. So if you see some change in that environment, and maybe this is when you talk a little bit about what happens with tariffs and auto...

That's what I was getting at, yes.

Yes, what happens with the health of the consumer in Canada? Does a recessionary or slower growth environment change purchasing behaviors? That's one where you might see a little bit of a shift in auto purchasing. But given that the majority of this driver, at least a good part of this driver has been just increased market share, we are pretty confident in sort of a bigger base of that business. Around the edges, I think we'll monitor, and I think everyone on this slide will continue to monitor what happens to the Canadian economy and the Canadian consumer. This is probably a part of our business that has the most direct tie to that.

That's what I was thinking. And then the market share gains, again, is that just the blocking and tackling you referred to in the past?

Yes. This is -- I mean this is years, right? This is years of working with partners. This is changing appetites of competitors or competitors not providing what our partners needed. And so it's -- I don't want to imply some change. Some of these relationships are expansion of relationships we've been working on for 3 or 4 years. And they can be lumpy when they come on, which is what you're seeing right now.

Let's finish up with Canadian Fronting. How is that -- where in the life cycle is Canadian Fronting relative to all these other initiatives you have in place? And how is the Canadian business different from the U.S. business?

Yes. So the life cycle point, I think you're seeing a lot more maturity in this Canadian line. This has been one that for the first couple of years of the cycle grew very, very quickly. This is one sort of like Corporate Insurance that has a bit of impact from softening market trends. But you really have to [Technical Difficulty] Canadian Fronting's impact because there can be big gross movements in this line, but relatively small on the bottom line. So if we think about Canadian Fronting, we probably think the slide of business is mid-single to high single-digits growth this year on a gross basis. But you could have quarters that are moving around. We saw a little bit of weakness or at least comparative weakness in Q4 in this line of business. I think we would not be surprised to see a little bit of change in momentum in this business quarter-to-quarter. But this platform has developed into a really, really great diversifier and baseline contributor of ceding commissions to the entity, right? This is a bit different than our U.S. platform where you've got a higher retention and bigger driver from loss ratio. Most of our Canadian platform is much more pure fronting relationship. So you got a lot more, I don't want to say pure fee-driven business, but you've got a lot more from the Canadian business coming from those reinsurance ceding commissions, those analogous fee income lines than you do in the U.S. It's -- Canada continues to be a very difficult market for entities to access from a foreign perspective. I would say the one nuance we see that change that in the future is Lloyd's capacity coming back into the Canadian market. So if that comes back in a big way, you might see people accessing this through Lloyd's syndicates, but we've got a great stable of partners that does a lot of business with us right now.

I want to take a step back and we've sort of drilled down into all the lines. And I want to follow that theme, the theme that we talked about earlier, which is that Q4, the company has introduced the loss ratio as a more -- maybe a more meaningful ratio for the company, the combined ratio. We're talking about things at a consolidated level as well, which makes a lot of sense because that does make it easier to compare to some of the other P&C companies I cover. So with that in mind, I'm looking at the total company combined ratio in 2024. The number I see here, and I think this is cleaned up for some of the adjustments, something like 88%. Does that seem little high to you? Or is that not the cleaned-up number?

So 88% is unadjusted. That includes all...

Unadjusted?

Yes, all of the impacts of, let's say, lines exercise or reserving exercises. Now it's worth noting 88% even with all those impacts is not a terrible combined ratio. If you normalize that combined ratio for some of those items we referenced, you're in the low 80s. And so that 81%, 82% on a consolidated basis is sort of where we'd see the business. Now Canada -- or I did the same thing you're doing, Trisura Specialty, you should expect that business to sort of be in mid-80s combined ratio. The win there or the outperformance can come with a bit better loss ratio. US Programs now that we've got a combined ratio concept for that should be in the low 80s. So your consolidated basis, your consolidated platform should be in that low to mid-80s combined ratio.

So you wouldn't -- like I'm just -- again, I'm looking right at my model, the numbers that are published, none of this is private. This is everything I've published. I'm around 83%. So you'd say that's reasonable, maybe even a little on the high side?

I would say it's reasonable for next year, right? If you look at our internal expectations, right? And this is all contingent on where your loss ratio comes in, where your sort of build outs go. But what we set up and what we expect for ourselves in the long term is that type of performance.

And then also at the consolidated level, let's talk about investment income. I appreciate entirely that tariffs could upset this apple cart pretty easily. But in a more steady-state world, what are you guiding the Street in terms of growth in net investment income?

I think mid-single digits growth in investment income. I think we've -- if I've changed -- if anything's changed recently, it's been that we've seen a little bit higher rate environment in the U.S., which just drives a little bit more momentum or sustaining of those investment yields. We've seen a bit lower, a bit faster cuts in Canada, which offsets that. But given the growth of the platform, you can see pretty easily a pathway to that mid-single-digit range of growth. I think our entity, Trisura, specifically, grew a little bit faster than the rest of the industry, raised capital ahead of the industry and it refreshed or we rotated our portfolio a little bit faster. So you saw massive increases in investment income last year, right? You were, in some cases, up 50% on an investment income perspective. Those types of increases are likely behind us. But I think just a steady increased contribution from this portfolio is a good expectation.

And then we only have a couple of minutes left. So I'm going to stop at around 11. I'd like to sometimes take a step back and ask the CEO of a company, what do you sort of see in the next 5 years? How much bigger could this company be? How might it change? Will it look a lot different from what it does today? Or will it look very much like these lines only much bigger? Is that maybe the right way to look at Trisura?

Yes. I think there's been a historic association of Trisura with certain lines of business in the public sphere. So the size and scale and rapidity of growth in, let's say, a US Programs business or Canadian Fronting business has sort of obfuscated, I think, for people what the core drivers of this platform are. I think if you talk to me in 5 years, the evolution of this business will be sort of continued growth in those US Programs, Canadian Fronting lines of business, but a proportional shift in the contributors of that business. So Surety as a North American platform, Corporate Insurance as a North American platform, you should just see a larger specialty business in those traditional lines. And the entity, again, it won't be in much different lines than we are today. But hopefully, we've just scaled up our participation in those lines. I think there's going to be disproportionate growth in things like Surety and Corporate Insurance over the next couple of years as we build out those U.S. platforms, that should shift a little bit the business. But I don't think you'll see us move away from or change exactly where we're playing. What you're not going to see and we get this question sometimes, you're not going to see us move into lines of business that we're not experts in. So it's unlikely to see us become a personal lines insurer. We're not going to expand into annuities or things like that. We definitely are going to be a specialty P&C company and hopefully a larger one in the lines of business that we play in today.

Listening to that mix of business that you've described, the shift to Surety North America Corporate, I look at the sort of somewhat underleveraged business as well. It doesn't strike me as the kind of company where ROE is going to go down or book value is going to -- book value growth will slow materially. It does seem like this is a company that can maintain high teens, maybe even 20% ROE, especially if you use some of that leverage capacity. And then without a dividend, the book value growth could very well be in that high teens, maybe even 20% range. Is that plausible to you?

Yes. I mean I think none of those assumptions are outside of the range of what we look at internally. So I would say all of this is coming down to execution, but this business model, if it's executed properly, those metrics are achievable.

Yes. So bringing it all back to the very beginning. If exiting the lines are tightening up, which it certainly feels like they are, and the ROE remains -- that core ROE remains high, we're talking about very significant growth in book. And I often say book is -- book value growth for insurance companies, how do that litmus test of value is the word -- the turn of phrase I use. Growing that book, absent those anything unusual, drive some serious value accretion for investors and I suspect that's a view you would share?

Yes. And I would say just, operationally, the nuance or the impact of growing book is that we can do more of what we've done in the past, right? If we think about a larger platform to operate from, a more diversified platform to operate from, a larger book value just supports all of that, right? And all these initiatives that we're talking about, they wouldn't have been possible 3 or 4 years ago when the entity was much, much smaller. And to your point and to a point some investors have made to me differently than maybe some other industries, we've sort of got this new threshold we've reached and you're operating now from a higher level of confidence, right? Your investment income, we've got a ton of confidence in what our investment income number is going to be next year, and that's just going to grow our book value, right? That allows us to then reinvest in the business and continue to drive what we believe is hopefully value for the entity and value for our shareholders. So I would say we feel pretty comfortable and excited about the next couple of years. And I think that goal, that touchstone of growth in book value, that's what drives us, right? We are going to shift around kind of where that growth comes from, from a top line perspective, but our touchstone is always expanding that book value year after year.

I appreciate that. Thanks, David, and thank you to everyone who joined us and submitted questions.

Thanks very much, Mario.

A great afternoon to everyone. Thank you.