Good morning. Welcome to Trisura Group Limited's third quarter 2026 earnings conference call. On the call today are David Clare, Chief Executive Officer, and David Scotland, Chief Financial Officer. David Clare will begin by providing a business and strategic update, followed by David Scotland, who will discuss financial results for the period. Following formal comments, lines will be open for analyst questions. I would like to remind participants that in today's comments, including in responding to questions and in discussing new initiatives related to financial and operating performance, forward-looking statements may be made, including forward-looking statements within the meaning of applicable Canadian and U.S. securities law. These statements reflect predictions of future events and trends and do not relate to historic events. They are subject to known and unknown risks, and future events and results may differ materially from such statements.
For further information on these risks and their potential impact, please see Trisura's filings with securities regulators. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. Thank you. I will now turn the call over to David Clare.
Thank you. Good morning, everyone, and welcome. Q3 underscored the evolution of our business, writing proportionally more primary lines business with attractive margins, with strong momentum in established and emerging platforms. Surety, Corporate Insurance, and Warranty represented 65% of net insurance revenue in Q3. These lines are lines where our expertise, relationships, and solutions-oriented approach are differentiators. They are also the lines that contribute capital most substantially to our investment portfolio, which is particularly additive in today's rate environment. Today, they are the lines of business growing most substantially, with Surety achieving a 26% growth rate in the quarter and Corporate Insurance growing 13%. The progress we are making in expanding these lines in Canada and the U.S. reinforces our confidence in their ability to generate attractive growth and returns.
Disciplined underwriting and structuring, a collaborative approach to partnership, and a high-performance ownership culture support our aim of being a North American specialty insurer of choice. Operating return on equity was strong, 16%, particularly when acknowledging the impact of excess capital set aside for future growth. Book value per share grew 11% over the past year, despite mark-to- market impact of higher rates on our fixed income portfolio. Operating net income was stable at CAD 35 million, with strong growth in net investment income of 19% offset higher casualty experience in US Programs. Primary lines grew net insurance revenues 13% in the quarter, contributing to growth in underwriting income of 16%, with improved profitability from both U.S. Surety and U.S. Corporate Insurance. Surety underwriting income grew 18%, with 26% growth in premium and improved loss experience. Growth continued across key segments.
In the U.S., our presence continues to expand, with more than $200 million contributed to our treasury-listed Surety entity, and we are evaluating further injections in the fourth quarter. With state licenses secured, we have a strong foundation for future growth. Infrastructure investment and construction activity continues to support demand across North America. Our expanding appetite in Canada and footprint in the U.S. is broadening the addressable market for both our contract and commercial Surety practices at an exciting time. Commercial specialty markets remain competitive, with rate pressures across several lines. We remain selective, prioritizing profitability and growing in areas we know well rather than chasing a softening market. Our Corporate Insurance group delivered solid growth and improved profitability in Q3, with insurance revenue growing 20% and underwriting income more than tripling.
Revenue growth has now accelerated over four quarters, supported by U.S. expansion, strong retention, and disciplined navigation of a competitive Canadian market where we continue to grow. Our U.S. team continues to gain traction, with progress in U.S. Corporate Insurance following the Surety playbook, expanding in areas we know and attracting experienced talent, supported by a centralized head office. Premium momentum continues to reduce the drag of this platform on returns as it approaches profitability. In Canada, we are adding capabilities through team acquisitions, targeting aviation, sports entertainment to bolster our offering. While still early, these growth initiatives are expected to contribute meaningfully over time. Trisura is now doing business with approximately 60 active U.S. brokerages and writing both Surety and specialty insurance with 11 of them, up from six in 2025.
Our strongest growth relationships in the U.S. each have a Canadian connection we are actively leveraging as part of a longer-term North American strategy. In Warranty, net insurance revenue grew 14% in the quarter and is supported by a strong pipeline for 2027. Warranty conditions are somewhat mixed, with softer automobile sales impacted by higher rates weighing on volumes. In US Programs, claims were elevated by conditions in casualty, though we are encouraged by a year-to-date combined ratio in the low to mid-80s, in line with expectations. Growth is muted by longer onboarding of new programs, as well as pruning of underperforming programs. The market is transitioning, and we believe that a class of MGAs can navigate well, benefiting from the sophistication of larger platforms and the creativity and entrepreneurial spirit that defines this segment. We see ample capacity and renewed reinsurer interest in the program space.
As we continue to shift the posture of this segment, we see a widening gap between the performance of a core portfolio of business and programs we no longer write. Exited lines recorded a net loss of $3.9 million in the quarter, increasing reserves on some run-off commercial auto programs, consistent with broader industry trends. In the days before we reported, we were made aware of the bankruptcy of one of our service providers. This service provider is an affiliate of a reinsurer involved with four run-off programs, two of which are in exit lines. Although too early to accurately estimate the impact of the event, it is important to acknowledge our company is meaningfully larger, better capitalized, and more diversified. At this stage, the expected range of negative impact on earnings is smaller than in the past.
It is worth highlighting that we are in the midst of a strategic pivot in programs, unifying leadership of both programs and Canadian Fronting under the banner of structured solutions in the market. We expect to shift the model, seeking higher quality opportunities by leveraging our larger balance sheet and proven underwriting across the firm. We are actively reviewing the portfolios and approach to market, prioritizing partners we expect to grow profitably and adjusting exposure where necessary. We are laser-focused on the segment. With the confidence we have in primary lines, as well as our opportunities to grow, programs will become a smaller part of the business proportionally in the future. Investment income was a key contributor this quarter. The absolute dollar of investment income is striking versus recent history and reinforces our greater scale and earnings predictability.
Today, significantly higher rates offer an opportunity to lock in better yields, supporting investment income for years to come. The meaningful growth in primary lines is driving more capital into our investment portfolio. Trisura has scaled, and we believe the opportunity ahead is significant. We remain committed to the pursuit of profitable growth through the expansion of primary lines and curation of a diverse, high-quality portfolio of programs and fronting business. Although above average underwriting profitability combined with enhanced investment income is expected to drive increases in shareholders' equity over the long term. Our capital position is strong, with a debt-to-capital ratio of 17.4%, well below our 25% long-term target. This gives us financial flexibility to support continued growth across our platform. Our goals are clear: scaling profitably in primary lines, expanding deliberately in the U.S., and maintaining discipline that has underpinned our track record.
The structural tailwind supporting Surety remains intact, and our practice establishes a larger presence across North America. Our U.S. Corporate Insurance platform is gaining traction, as Q3 built on the momentum achieved in the first half of the year. Primary lines continue to grow at attractive margins, and investment income is adding meaningfully to the quality and predictability of earnings. Trisura's increasingly diversified earnings base, capital position, and collaborative culture, as well as the continued investment in technology and talent, position us well for the next phase. With that, I'd like to turn it over to David Scotland for a more detailed review of financial results.
Thanks, David. I'll now provide a walkthrough of financial results for the third quarter, with some additional perspective on the performance and evolving mix of our business and our capital position. In Q3, growth in underwriting income from our primary lines and in net investment income together absorbed a higher loss ratio from US Programs. Operating earnings per share was $0.73 per share, up 3%, for an operating ROE of 16.2%. I'll take those pieces in turn, then cover the consolidated results and book value, where there were a few moving parts. Our primary lines, Surety, Corporate Insurance, and Warranty, together grew underwriting income 15.5% to CAD 15 million, on net insurance revenue growth of 12.5%. Primary lines represents more than two-thirds of net premiums written over the last 12 months, which is why their results meaningfully drive the consolidated outcome.
Surety gross premiums written grew 26%, with momentum in both Canada and the U.S. Approximately 45% of our Surety premium in 2026 is expected to come from the U.S. platform, and we continue to see strong partner engagement, with Trisura ranked among the top 30 U.S. Surety writers. Given the size of the market opportunity, we expect to continue supporting the platform through disciplined and measured capital deployment over time. Importantly, the economics of our U.S. Surety business are broadly consistent with those of our Canadian platform. While business mix differs modestly, returns remain attractive, and we continue to see significant opportunities for profitable growth. Corporate Insurance also continued to make progress in the quarter, where GPW grew 13%. While still relatively small, our U.S. Corporate Insurance platform continues to build scale, and we remain encouraged by its trajectory.
We expect it to increasingly contribute to our profitability and grow its relevance to our top line. Net investment income was CAD 24 million, up 18.5%. The portfolio continues to grow as we retain more premium in our primary lines. Investment income is becoming an increasingly meaningful contributor to earnings as the business scales, while providing additional diversification alongside our underwriting results. The portfolio is built on quality and designed to generate growing durable income. With reinvestment yields above book yields, maturities, new cash, and active management should all lift the portfolio yield, providing good runway for investment income. Turning to U.S. Programs. The segment's loss ratio was higher in the quarter at 80.4%, reflecting unfavorable claims experience on a small number of casualty programs, including programs in runoff.
Our teams have taken action to improve casualty results, including placing certain programs into runoff and working with our MGA partners on rate increases. Excluding the impact of runoff programs, the loss ratio would have been in the low 70s, in line with prior year. We expect the loss ratio to moderate as runoff programs conclude and actions on our ongoing programs take effect. Turning to the consolidated results. Gross premiums written was CAD 802 million, down 6%. The decline came mainly from Canadian Fronting and, to a lesser degree, U.S. Programs, where the runoff programs, some market softening, and delayed onboarding of new programs all weighed on premium. Canadian Fronting continues to face increased competition, and we expect premium to be broadly lower over the near term. We remain committed to the line and expect to see growth again as the cycle turns.
In both lines, most premium is ceded to reinsurers, so the effect on net revenue and underwriting income is less pronounced than the gross figure implies. This is evidenced by the net insurance revenue growing 3% in the quarter. The consolidated combined ratio was 87.5%, 1.5 points higher than last year, driven by the U.S. casualty loss experience. The rest of the portfolio ran in line with our expectations, and underwriting performance continues to support our mid-teens operating ROE objective. The combined ratio on a year-to-date basis was 85.5%. Our operating effective tax rate was 23.1% for the quarter, resulting from the composition of taxable income between Canada and the U.S. Non-operating results in the quarter primarily consisted of unrealized losses on the investment portfolio. We also recognized additional claims experience on Exited lines of CAD 4 million, primarily reflecting industry-wide trends in commercial auto. Turning to book value.
Operating net income added to book value in the quarter, but total book value declined by 1.6% to CAD 989 million, below the CAD 1 billion we achieved in Q2. Two items drove that. The first is unrealized losses on the bond portfolio, driven by increases in yield during the quarter. Those losses unwind as the bonds mature, while higher reinvestment yields continue to work in our favor. The second is share repurchases of CAD 9 million, a modest use of capital that offsets dilution from share-based compensation plans. Book value per share grew 11% over the last 12 months. On capital, our priorities are unchanged, with profitable organic growth first. As the organization scales, a larger capital base provides increasing flexibility to support organic growth initiatives, particularly across our U.S. primary lines, while creating additional opportunities to deploy capital in a disciplined manner.
We remain comfortably above our regulatory capital requirements, and our debt-to-capital ratio was 17%, well below our 25% target. As we enter the final quarter of 2026, we believe our diversified specialty platform, strong capital, and 20-year track record of disciplined underwriting position us well for the opportunities ahead. That track record includes an average combined ratio of 84.7% over the last three years and book value compounding 18% over that same period. We remain focused on deploying capital thoughtfully, growing profitably, and compounding long-term shareholder value. David, I'll now turn things back over to you.
Thanks, David. Operator, we'd now take questions.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We ask that you please limit yourselves to one question and one follow-up. One moment while we compile our Q&A roster. Our first question is going to come from the line of Scott Fletcher with CIBC. Your line is open. Please go ahead.
Hi. Good morning. There's a lot of positive commentary on the primary lines. You're seeing good growth and Surety momentum in the Corporate Insurance platform. When you pair that against the volatility you've seen in the US Programs in the quarter and maybe over the longer term, is there a thought to this role of the fronting businesses as a part of Trisura as you look at it in longer lines? Is there any concern that it doesn't fit given the strength in the primary lines?
Hey, Scott. Thanks for the question. I think that you've seen us actively talk about where we expect growth to come from the business in the future, which disproportionately is in those primary lines. We referenced a strategic pivot around that programs and fronting business, which reflects both a bit of change in appetite and approach in the market, as well as some market trends in Canada. I think right now, we'd like to see some of that strategic pivot play through, as well as some of the benefits we expect to come from that. But rest assured, we are looking at that business very, very closely and making sure that it meets our expectations in the future.
There are a lot of options to consider in this business and a lot of changes that have been made over the past couple years, which I think we'll be able to talk about a lot more excitedly in the future.
Okay, thanks. Just sticking with programs, on the Exited lines, you had the CAD 4 million of after-tax losses there in the quarter, after what was relatively limited in the recent past. Can you just give us a sense of how much remaining exposure there is to maybe further adverse development in the Exited lines piece?
There's no new programs going into that exited lines portfolio. I think since we established that line, the exposure has been about halved since we first started. The expectation is over the next couple years, that continues to run off. I certainly don't like to see development in the quarter. We are reflecting what we're seeing as a tougher environment in commercial auto. And my anticipation, my hope is that continues to shrink in the future.
Okay, thanks. Appreciate it.
Thank you. And one moment for our next question. Our next question will come from Jaeme Gloyn with NBCCM. Your line is open. Please go ahead.
Yeah, thanks. I guess first question on the reserve build, both exited lines and ongoing programs. What gives you confidence that you've covered off the risk in those particular lines where there was reserve strengthening?
I think there's a constant dialogue, Jaeme, with those programs and the underwriting and reserving around those programs. I think some of the changes we've made in the underwriting approach, as well as sort of the run-off of programs we thought were developing unfavorably, helps us inform that view. We are constantly reviewing this, so there's always opportunities to review sort of these assumptions, which we try to do all the time.
Okay. Would you be able to quantify the exposure in the exited lines portion that's remaining?
Yeah, I think we've talked about this relatively openly as coming down by about half since we first established the line. I'm not sure that we've shared figures around that historically, but I'll take a look at a way for us to better guide you on how you think about this going forward, because I understand it's a focus for you and some others.
Okay. Great. I'll leave you.
Thank you. One moment for our next question. Our next question comes from the line of Bart Dziarski with RBC Capital Markets. Your line is open. Please go ahead.
Great. Thanks for taking the questions. Good morning, everyone. I wanted to ask around the DryStone Capital announcement. Dave, you talked about the impact potentially being smaller than in the past. Just wondering what does that mean? It is meaningful enough to put in financials, but it is smaller than in the past. Can you help us dimensionalize that? Thanks.
Hey, Bart. I appreciate the amount of focus and interest in this. We are a bit frustrated at the timing of this event and the ability we have to be clear on how things are evolving. At this point in the stage of the events, there is only so much that we can say, but I do want you and everyone on the call to take confidence in the absolute size of the business historically, the amount of capital and excess capital that we have, and at least today, the expectation that these types of events are far less impactful than they have been in the past. There is not a lot I can say to give you precise figures at this stage, but we are hoping to be able to walk you through that at the appropriate time.
Okay, got it. Thanks. On the follow-up question to Jaeme around the reserve charge, presumably you are going through a Q4 deeper dive on actuarial reserves. If that is right, then what should we expect around that year-end true-up, if anything, based on the trends that you are seeing currently in the book? Thanks.
We're trying to be more proactive about reserving. We're just starting that Q4 process right now, so we'll keep everyone posted as we go through that, if there's anything to flag.
Thanks for taking the questions.
Thank you. One moment for our next question. Our next question is going to come from the line of Doug Young with Desjardins. Your line is open. Please go ahead.
Hi, good morning. I apologize, but I'm going to go to the US Programs business as well. In terms of the reserve pressure, I think you talked about it being casualty and transportation. Can you maybe just talk about it in terms or split it out in terms of how much is from current accident year versus prior year development? In terms of just truing up reserves versus claims coming in. Then can you just size the casualty percentage as a percent of your reserves, or put your casualty risk, because that's where the pressures are coming from? Is there a way you can kind of just give a sense of what percentage that is of reserves or of the risk that's on your books?
Yeah, I think it's a good question on the loss ratio pressures. There's about an equal contribution from prior year's reserve development in the casualty book versus current accident year loss ratio. I will say, as Dave referenced, disproportionately, that development is on programs that have been put in run-off over the last couple years. Casualty as a portion of our book is about 65% of the book. The other component of the book would be property.
Sorry, I didn't catch that. Casualty was what percentage?
65% of our book.
65%.
The remainder is property.
And that's of your total program book? That's not just the runoff, or is that just the runoff, or?
No, the runoff, I would say, is majority casualty. On the total book, or the ongoing book, you're at that 65%.
Yeah. Okay. The claims administrator bankrupt, and I fully get you can't really quantify what the impact might be. I'm sure there's lots going on. But can you maybe just describe what is the risk to TSU from this? Just qualify how it could be a risk to TSU. And I think you talked about maybe tightening up oversight. Can you talk about what you're doing in terms of tightening up oversight as well?
Yeah, so I think the first thing to recognize and acknowledge here is this is already demonstrating the sort of shift in appetite and approach in the business. So, the fact that these types of events is happening on programs that were already previously exited or put in the runoff, I think demonstrates that these types of items have been out of our appetite for some time. I'm not sure your reference there on oversight. We continue to believe that that oversight and that supervision of the practice is always and continually sort of driving in the right direction. And I think the fact that these changes or sort of the situation is evolving is certainly not something that we like to see, but not something that we would expect on the go-forward portfolio. Understand and appreciate the interest in it.
There's just not a lot we can share given the timing right now. We are in an awkward position that the event was announced a few days before our earnings call. We are seeking some of that information right now from all the parties involved.
Okay. Lastly, maybe pivoting a bit, the corporate expansion into the U.S., maybe you can just talk a bit about where you stand in terms of that journey to profitability. Maybe you can quantify the premium level that you're there. When do you expect to break even on that business? Maybe just give a little bit more color on that side.
Yeah. It was really nice to see Corporate Insurance step up so significantly this quarter on its net underwriting income. You're seeing the impact and, I'll say, onboarding a better leverage, operating leverage in that platform. On a premium basis, I don't know if we've broken out the U.S. business, but Dave may have a split of that that he can provide. We are not yet at break-even in the U.S. Corporate Insurance practice, but it is improving quite a bit. The goal in, I'll say, the medium term, Doug, is for that practice to be rivaling or approaching and eventually exceeding the dollar amounts that we write in the Canadian business. That's the same playbook that we built out in Surety.
I think both of these practices, the ability of them to grow, the ability of them to expand is really exciting right now, again, because we retain so much more of both the risk and the capital affiliated with it, which is great in this environment for investment income.
Appreciate the color. Thank you.
Thank you. One moment for our next question. Our next question will come from the line of Tom MacKinnon with BMO Capital. Your line is open. Please go ahead.
Yeah. Thanks. Good morning. Dave, just a few questions here. I wonder if you can quantify the loss ratio impact on US Programs in terms of the reserve actions you took in the quarter. Not on the exited lines, but on the impact that would have been on your, what you call, I guess, your operating business. That is my first question. We saw a loss ratio of around 80, and that has been running probably more like in the 70-ish range. Was that difference 10 points really as a result of these reserve actions?
I think Dave referenced this a little bit in his comments, Tom. One of the best ways to think about this would be sort of segmenting the book. But he did reference a low 70s loss ratio on sort of the core portfolio of the business. I think it is fair to say that bridge is pretty easily pointed to in the difference between what has been reported and that low 70s that he referenced.
Okay. I mean, you use this term runoff, and then you have exited. The exited is below the line. That is just reported and not in your operating results. But you have runoff that is in your operating results as well as ongoing programs. Is that correct then? Just to, right?
Yeah. It is a great point, Tom. We have segmented this exited lines from some actions we took a couple years ago. But as any insurer does, as you are operating the business, you have programs that you maintain, you have programs or policies that you decide not to renew. We are taking an active approach to that US Programs portfolio and looking at those programs that make sense for us going forward and the ones that do not. Those runoff programs are not ones that we have decided to add to the exited lines book. But as you can expect, when we decide to exit a program and put it into runoff, the results are not always as good as the rest of the portfolio. So, we do not want to be seen shifting the business around all the time and creating new buckets.
But I think the reality of these businesses is that you do both start and stop programs all the time. So there will be an active portfolio as well as a runoff portfolio in your core line.
Great. In that core line, how many programs in the US Programs are in runoff?
I don't know if I have that number offhand, but we can certainly get you that figure.
I mean, is it greater than 10, or is it less than 10, or is it greater than 20?
No, I think it would be less than 10 programs, Tom.
Okay
We can get you that exact figure.
Because you mentioned four with DryStone. Is that correct?
No. So, of the four programs affiliated with DryStone, two are in run-off and two are in exited lines.
Okay, good. All right. The other question is, in your exited lines, how many total programs are there?
I think remaining programs, I do not know if we have talked about what is left. There were probably mid-single digits left in that line.
Okay. All right. I guess the other question is, you are not able to quantify any of the reserves that have been ceded, that this TPA would be in charge of administering? Would you have that?
No, at this stage, Tom, we just cannot pull information out of this process. What I can say, I think, and what I am trying to give some comfort on is, given the absolute scale and size of Trisura, the event that you are seeing here should be viewed and should be experienced a bit differently than previous versions of these types of events for Trisura. It is tough for us to give a lot of specific information on it at this stage, but I got confidence in the size of the business and our scale and diversification here that this is a different feeling event than one we have seen in the past.
Just to clarify, when you say it is smaller than what you have done in the past, are you referring to the reinsurance recoverable that you booked in the fourth quarter of 2022?
That is right.
Okay. All right, thanks.
Thank you. As a reminder, to ask a question, please press star one one on your telephone. We have a follow-up question from the line of Scott Fletcher with CIBC. Your line is open. Please go ahead.
Hey, thanks for taking the second question. I wanted to come back to the Surety business and unpack the growth there. You had good, really strong 26% growth in the quarter. I'm wondering, as we look forward, if you could break out the pace of growth between the U.S. and the Canadian platforms. I think the U.S. platform has been driving a lot of the growth this year. If there's anything you can provide, even directionally, on this growth split, that would be helpful in Surety. Thanks.
Thanks, Scott. I think it's a good question because there is quite an exciting trajectory for this Surety business. On a year-to-date basis, growth is pretty split, or pretty evenly split between Canada and the U.S. So, nice to see that there is a good contribution from a Canadian business as well as the expansion of that U.S. business. In the quarter, the majority of the growth was coming from that U.S. business, just given some timing of onboarding and distribution relationships. We're starting to think about what 2027 looks like for that business, and we're confident that we should see mid-to-high teens growth out of the Surety platform overall next year. So, lots of opportunity, lots of momentum in that practice to continue through next year.
And just to clarify, when you say the growth is split, is that on a dollar basis or on a percentage basis?
I think I would say that on a dollar basis on a year-to-date standpoint, then similarly on a quarterly basis.
Great. Thank you.
Thank you. Our next question is a follow-up question from Jaeme Gloyn with NBCCM. Your line is open. Please go ahead.
Yeah, thanks. I just wanted to clarify just on the DryStone stuff. It is specific to the servicer at this point, nothing related to the reinsurance side of it. I would assume there is some collateral as well on the reinsurance side that would give you some protection. But would you be able to clarify what kind of capital, or sorry, what kind of collateral would be covering that DryStone exposure?
Yeah. We do have cash collateral from the reinsurer affiliated with this group. It is worth noting that reinsurer has not declared bankruptcy. The affiliated entity at this stage has. So, that should give you at least some setup of how things are established.
Okay, cash collateral. Okay, good.
Yep.
Thank you.
Thank you. I would now like to hand the conference back over to David Clare for closing remarks.
Thanks very much, everyone, for joining, and appreciate the questions. As always, don't hesitate to reach out if we can provide any more information. I appreciate there's a lot of focus right now on some of the items in the quarter. I don't want to let that take away from the momentum and excitement we have around some of the core evolution of this business. I think primary lines and Surety and Corporate Insurance this quarter are showing some really, really great momentum and evolution for the business. I think we're getting some fair questions around US Programs that we should be able to pivot on and provide you with some comfort on going forward. So, I appreciate the engagement, and as always, hope to talk to you all soon.
This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.