Trisura : Q1 2024 MD&A

Trisura Group Ltd.

Management's Discussion and Analysis

For the quarter ended March 31, 2024

TRISURA GROUP LTD.

Management's Discussion and Analysis for the first quarter of 2024

(in thousands of Canadian dollars, except per share numbers and as otherwise noted)

MANAGEMENT'S DISCUSSION AND ANALYSIS

Our Management's Discussion and Analysis ("MD&A") is provided to enable a reader to assess the results of operations and financial condition of Trisura Group Ltd. for the three months ended March 31, 2024. This MD&A should be read in conjunction with our unaudited Condensed Interim Consolidated Financial Statements for the quarter ended March 31, 2024 and the audited Consolidated Financial Statements for the year ended December 31, 2023.

Unless the context indicates otherwise, references in this MD&A to the "Company" refer to Trisura Group Ltd. and references to "us", "we" or "our" refer to the Company and its subsidiaries and consolidated entities.

The Company's Condensed Interim Consolidated Financial Statements are in Canadian dollars and are prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. In this MD&A, all references to "$" are to Canadian dollars unless otherwise specified or the context otherwise requires.

This MD&A is dated May 2, 2024. Additional information is available on SEDAR+ at www.sedarplus.ca.

1	TRISURA GROUP LTD.

TRISURA GROUP LTD.
Management's Discussion and Analysis for the first quarter of 2024
(in thousands of Canadian dollars, except per share numbers and as otherwise noted)
TABLE OF CONTENTS
Section 1	- Overview	3
• Our Business
Section 2	- Financial Highlights	4
Section 3	- Financial Performance Review	5

• Income Statement Analysis
• Specialty P&C
• Canada
• United States
• Corporate and Other

Section 4 - Investment Performance Review	19
•	Overview
•	Investment Performance

Section 5 - Outlook & Strategy

21

• Industry
• Outlook and Strategy
• Environmental, Social, and Governance

Section 6 - Financial Condition Review

25

• Balance Sheet Analysis
• Share Capital
• Liquidity
• Capital
• Summary of Cash and Investments

Section 7 - Risk Management	27
•	Risks and Uncertainties
Section 8 - Other Information	28
•	Ratings
•	Cash Flow Summary
•	Segmented Reporting
•	Financial Instruments
Section 9 - Summary of Results	31
•	Selected Quarterly Results
Section 10 - Accounting and Disclosure Matters	32

• Operating Metrics
• Non-IFRSFinancial Measures and Other Financial Measures
• Special Note Regarding Forward-Looking Information
• Glossary of Abbreviations

2	TRISURA GROUP LTD.

TRISURA GROUP LTD.

Management's Discussion and Analysis for the first quarter of 2024

(in thousands of Canadian dollars, except per share numbers and as otherwise noted)

SECTION 1 - OVERVIEW

OUR BUSINESS

Our Company is a leading specialty insurance provider operating in the Surety, Risk Solutions, Corporate Insurance, and Fronting business lines of the market. Our operating subsidiaries include a Canadian specialty insurance company and a US specialty insurance company. Our Canadian specialty insurance subsidiary started writing business in 2006 and has a strong underwriting track record over its 18 years of operation, which now includes a US Surety platform integrated with our Canadian team. Our US specialty insurance company has participated as a hybrid fronting entity in the non-admitted markets since early 2018 and is licensed as an excess and surplus lines insurer in Oklahoma with the ability to write business across 50 states. Our US specialty insurance company can also write business on an admitted basis in 49 states. We continue the process of applying for licenses in the remaining state.

Our Company has an experienced management team, strong partnerships with brokers, program administrators and reinsurers, and a specialized underwriting focus. We plan to grow by building our business in the US and Canada, both organically and through strategic acquisitions. We believe our Company can capitalize on favourable market conditions through our multi-line and multi-jurisdictional platform.

3	TRISURA GROUP LTD.

TRISURA GROUP LTD.

Management's Discussion and Analysis for the first quarter of 2024

(in thousands of Canadian dollars, except per share numbers and as otherwise noted)

SECTION 2 - FINANCIAL HIGHLIGHTS IN Q1 2024

• Insurance revenue of $744.3 million, increased by 16.5% compared to Q1 2023, demonstrating continued momentum across the organization.
• Net income of $36.4 million was substantially higher than Q1 2023 as a result of growth in the business, improved profitability from US fronting, gains from the investment portfolio and higher Net investment income. Operating net income(1) of $33.2 million increased 16.0% over Q1 2023 as a result of growth, improved profitability from US fronting and higher Net investment income.
• EPS of $0.75 in the quarter was greater than Q1 2023 as a result of growth of the business, improved profitability in US fronting, gains on the investment portfolio and higher Net investment income. Operating EPS(2) of $0.68 in the quarter increased by 11.5% demonstrating the profitability of core operations(3) through continued growth despite an increase in shares outstanding.
• ROE(4) was 15.3% as at Q1 2024 demonstrating an increase compared to recent quarters and a return to our mid- teens target despite the impact of the run-off program in 2023. Operating ROE(2) of 20.0% was comparable to Q1 2023.
• BVPS(4) of $13.89 increased by 24.6% over Q1 2023, primarily the result of earnings in the Canadian operations, higher Net investment income, foreign exchange gains, and the equity raise in Q3 2023.
• Canada:
• • Insurance revenue growth of 23.4% in the quarter reflects increased market share, expansion of distribution and fronting relationships, and growth of US Surety.
  • Insurance service result in the quarter grew 14.5% compared to Q1 2023 as a result of growth across all lines and profitable underwriting performance.
  • Combined ratio(2) of 81.8% was strong, although slightly higher than Q1 2023, as claims variability resulted in a marginally higher Loss ratio.
  • Net income of $22.5 million drove a 28.8% ROE. Operating net income of $20.4 million increased 22.7% over Q1 2023 and resulted in a 28.1% Operating ROE.
• United States:
• • Insurance revenue of $522.4 million in the quarter grew by 13.7% over Q1 2023, as a result of favourable market conditions, and maturation of existing programs.
  • Fee income(1) in the quarter of $22.1 million reflects a larger premium base and a 23.0% increase over Q1 2023.
  • Net income of $12.5 million improved substantially compared to Q1 2023 as net income in Q1 2023 was impacted by a higher FOR(5). Operating net income of $13.4 million increased 29.9% as a result of growth and an improved Loss ratio. Operating ROE grew to 14.3%, demonstrating the continued potential of the business.
• Net investment income growth of 66.3% in the quarter was driven by higher yields and a larger investment portfolio.
• In the quarter we closed our US Treasury Listed surety acquisition as part of our expansion of North American surety capabilities, and anticipate expanding licenses across the US in the coming quarters.

1. These are non-IFRS financial measures. Non-IFRS financial measures are not standardized financial measures under the financial reporting framework used to prepare the financial statements of the Company to which the measure relates and might not be comparable to similar financial measures disclosed by other companies. See Section 10 - Accounting and Disclosure Matters for details and an explanation of how it provides useful information to an investor.
2. These are non-IFRS ratios. Non-IFRS ratios are not standardized under the financial reporting framework used to prepare the financial statements of the Company to which the ratio relates and might not be comparable to similar ratios disclosed by other companies. See non- IFRS ratios in Section 10 - Accounting and Disclosure Matters for details on composition, as well as each non-IFRS financial measure used as a component of the ratio, and an explanation of how it provides useful information to an investor.
3. See Section 10 - Accounting and Disclosure Matters, definition of Operating Net Income, for further explanation of "core operations".
4. These are supplementary financial measures. Refer to Section 10 - Accounting and Disclosure Matters for its composition.
5. This is a non-IFRS ratio. See Section 10 - Accounting and Disclosure Matters and Table 10.6 for its composition.

4	TRISURA GROUP LTD.

TRISURA GROUP LTD.

Management's Discussion and Analysis for the first quarter of 2024

(in thousands of Canadian dollars, except per share numbers and as otherwise noted)

SECTION 3 - FINANCIAL PERFORMANCE REVIEW

INCOME STATEMENT ANALYSIS

Table 3.1

	Q1 2024	Q1 2023	$ variance	% variance
Insurance revenue	744,266	639,100	105,166	16.5%
Insurance service expenses	(580,940)	(500,443)	(80,497)	16.1%
Net expense from reinsurance contracts assets	(127,878)	(121,942)	(5,936)	4.9%
Insurance service result	35,448	16,715	18,733	112.1%
Net investment income	16,753	10,071	6,682	66.3%
Net gains (losses)	12,276	(2,215)	14,491	nm
Net credit impairment losses	(1,830)	(149)	(1,681)	nm
Total investment income	27,199	7,707	19,492	252.9%
Finance expenses from insurance contracts	(36,658)	(36,628)	(30)	0.1%
Finance income from reinsurance contracts	32,800	31,902	898	2.8%
Net insurance finance expenses	(3,858)	(4,726)	868	(18.4%)
Net financial result	23,341	2,981	20,360	683.0%
Net insurance and financial result	58,789	19,696	39,093	198.5%
Other income	5,345	5,178	167	3.2%
Other operating expenses	(15,012)	(5,432)	(9,580)	176.4%
Other finance costs	(614)	(600)	(14)	(2.3)
Income before income taxes	48,508	18,842	29,666	157.5%
Income tax expense	(12,075)	(4,866)	(7,209)	148.2%
Net income	36,433	13,976	22,457	160.7%
Operating net income(1)	33,188	28,613	4,575	16.0%
Other comprehensive income	8,939	5,921	3,018	51.0%
Comprehensive income	45,372	19,897	25,475	128.0%
Earnings per common share - diluted - in dollars	0.75	0.30	0.45	150.0%
Operating earnings per common share - diluted - in dollars	0.68	0.61	0.07	11.5%
Book value per share - in dollars	13.89	11.15	2.74	24.6%
ROE	15.3%	4.1%	n/a	11.2pts
Operating ROE(2)	20.0%	20.6%	n/a	(0.6pts)

1. This is a non-IFRS financial measure. See Table 10.2.1 in Section 10 - Accounting and Disclosure Matters for details on composition and an explanation of how it provides useful information to an investor.
2. This is a non-IFRS ratio. See Table 10.4 in Section 10 - Accounting and Disclosure Matters for details on composition, as well as each non- IFRS financial measure used as a component of this ratio, and an explanation of how it provides useful information to an investor.

Refer to Section 10 - Accounting and Disclosure Matters for details regarding the composition of the line items presented below.

5	TRISURA GROUP LTD.

TRISURA GROUP LTD.

Management's Discussion and Analysis for the first quarter of 2024

(in thousands of Canadian dollars, except per share numbers and as otherwise noted)

Insurance Revenue

Insurance revenue increased in the quarter as a result of growth across all lines of business, driven by expansion of Fronting and by growth in Surety, supported by Corporate Insurance and Risk Solutions Warranty.

Insurance Service Expenses

Insurance service expenses increased in the quarter as a result of growth in the business, as commissions and claims expense grew accordingly.

Net Expense from Reinsurance Contracts Assets

Net expense from reinsurance contracts assets increased in the period as a result of growth in the business, and in particular from Canadian and US Fronting.

Insurance Service Result

Insurance service result increased compared to Q1 2023 as a result of growth in the business, and improved profitability in US fronting.

Net Investment Income, Net Gains (Losses) and Net Credit Impairment Losses

See Section 4 - Investment Performance Review.

Finance Expenses from Insurance Contracts

Finance expenses from insurance contracts was an expense in the quarter reflecting the unwinding of discounted claims partially offset by an upward shift in yield curves in the quarter, which impacted the rates at which claims were discounted. Finance expenses from insurance contracts was comparable to Q1 2023, as liabilities for incurred claims has grown which has led to a greater impact from the unwinding of discounted claims, while the impact of the movement in yield curves was significantly greater in Q1 2023 as a result of significant downward movement in yield curves in that period.

Finance Income from Reinsurance Contracts

Finance income from reinsurance contracts was a recovery in the quarter reflecting the unwinding of discounted ceded claims, partially offset by an upward shift in yield curves in the quarter, which impacted the rates at which ceded claims were discounted. Finance income from reinsurance contracts was comparable to Q1 2023, as assets for incurred claims have grown, which has led to a greater impact from the unwinding of discounted claims, while the impact of movement in yield curves was significantly greater in Q1 2023 as a result of significant downward movement in yield curves in that period.

Net Insurance and Financial Result

Net insurance and financial result increased in the quarter compared to 2023 as a result of growth of the business, higher Net investment income, higher Net gains (losses) and greater profitability from US Fronting.

Other Income

Other income consists of fees for surety services. Other income increased over the prior quarter due to growth in the number of surety accounts. Q1 is the most significant quarter for surety fee income.

Other Operating Expenses

Other operating expenses were higher in the quarter than Q1 2023, as a result of growth in the business, and movement in the value of share based compensation ("SBC").

6	TRISURA GROUP LTD.

TRISURA GROUP LTD.

Management's Discussion and Analysis for the first quarter of 2024

(in thousands of Canadian dollars, except per share numbers and as otherwise noted)

The growth in Other operating expenses in the quarter was impacted by SBC, as the change in value of our share price led to an increase in the value of certain outstanding options and other forms of SBC. Other operating expenses excluding SBC(1) increased 37.3% in the quarter reflective primarily of growth in the Canadian and US operations. The movement in SBC was mitigated through a program using derivatives, the movement of which is presented in Net losses. The impact of Corporate and other costs, net of mitigation is shown in Section 3 - Performance Review, Corporate and Other.

Income Tax Expense

Income tax expense was greater in the quarter than 2023 as a result of higher Net income before taxes, and reflected similar effective tax rates in both periods. For additional information, see Note 17 of the Condensed Interim Consolidated Financial Statements.

Net Income, Operating Net Income

Net income was greater in the quarter as a result of growth in the business, higher Net gains (losses), higher Net investment income, and strong profitability as well as the impact of run-off costs in 2023. Operating net income increased in the quarter as a result of growth in Canada and the US, strong underwriting performance in Canada, improved profitability in US fronting and growth in Net investment income.

Other Comprehensive Income

See Section 4 - Investment Performance Review.

EPS, Operating EPS, BVPS, ROE, Operating ROE

EPS of $0.75 in the quarter increased compared to Q1 2023, as the prior period was impacted by the costs of run-off but also as a result of growth in the business, higher Net gains (losses) and greater investment income.

Operating EPS is meant to reflect EPS, adjusted for certain items to normalize earnings in order to reflect our North American specialty core operations. A detailed reconciliation between EPS and Operating EPS is included in Section 10 - Accounting and Disclosure Matters, under Non-IFRS ratios. Operating EPS grew by 11.5% in the quarter, despite an increase in the number of shares outstanding, primarily due to growth in the business in both Canada and the US, higher Net investment income and improved profitability in US Fronting.

BVPS increased by 24.6% over Q1 2023 primarily as a result of strong earnings in the Canadian operations, higher Net investment income, and the equity raise in Q3 2023.

ROE increased compared to the prior year primarily due to improved profitability in the US. Operating ROE was comparable to Q1 2023, as strong profitability from core operations continued.

1. Other operating expenses excluding SBC is a non-IFRS financial measure, see Table 10.1 in Section 10 - Accounting and Disclosure Matters for details on composition.

7	TRISURA GROUP LTD.

TRISURA GROUP LTD.

Management's Discussion and Analysis for the first quarter of 2024

(in thousands of Canadian dollars, except per share numbers and as otherwise noted)

SPECIALTY P&C

Our Specialty P&C business consists of Surety, written in Canada and the US, as well as Risk Solutions Warranty, Canadian Fronting and Corporate Insurance which we primarily write in Canada, together these lines are referred to as Trisura Canada. Our Specialty P&C business also consists of a broad range of admitted and surplus lines in the US written through a fronting model, referred to as Trisura US Fronting.

The table below provides a split of our Specialty P&C Insurance revenue for Q1 2024. Although US Fronting comprises the majority of our insurance revenue, growth was substantial in Canada.

Table 3.2

	Insurance revenue			Q1 2024		Q1 2023			% growth over
						prior year
	Surety		34,851		27,523		26.6%
	Risk Solutions Warranty		29,042		26,519		9.5%
	Canadian Fronting		113,660		86,942		30.7%
	Corporate Insurance		44,303		38,809		14.2%
	US Fronting		522,410		459,307		13.7%
	Total Insurance revenue		744,266		639,100		16.5%

8	TRISURA GROUP LTD.

TRISURA GROUP LTD.

Management's Discussion and Analysis for the first quarter of 2024

(in thousands of Canadian dollars, except per share numbers and as otherwise noted)

CANADA

The table below presents financial highlights for our Canadian operations.

Table 3.3

	Q1 2024	Q1 2023	$ variance	% variance
Insurance revenue	221,856	179,793	42,063	23.4%
Insurance service expense	(154,436)	(114,882)	(39,554)	34.4%
Net expense from reinsurance contracts assets	(46,626)	(46,754)	128	(0.3%)
Insurance service result	20,794	18,157	2,637	14.5%
Net investment income	8,999	5,165	3,834	74.2%
Net gains	4,324	503	3,821	nm
Net credit impairment losses	(1,821)	(28)	(1,793)	nm
Other income(1)	5,345	5,178	167	3.2%
Net income	22,501	16,525	5,976	36.2%
Operating net income(2)	20,395	16,622	3,773	22.7%
Loss ratio	15.6%	14.6%		1.0pts
Expense ratio	66.2%	66.1%		0.1pts
Combined ratio(3)	81.8%	80.7%		1.1pts
ROE	28.8%	28.4%		0.4pts
Operating ROE(4)	28.1%	28.2%		(0.1pts)

1. Other income refers to fees for surety services.
2. This is a non-IFRS financial measure. See Table 10.2.2 in Section 10 - Accounting and Disclosure Matters for details on composition and an explanation of how it provides useful information to an investor.
3. This is a non-IFRS ratio. See Section 10 - Accounting and Disclosure Matters, Table 10.5, and Other Financial Measures for details on its composition, as well as each non-IFRS financial measure used as a component of this ratio, and an explanation of how it provides useful information to an investor.
4. Operating ROE excludes the impact of certain items to normalize earnings in order to reflect our Canadian operations.

Insurance revenue growth continued across all lines, led by Surety and Canadian Fronting. Growth in Surety reflects continued expansion of our market share, higher construction values which increases the amount of premium charged, and strong premium growth from our Surety business in the US. Risk Solutions Warranty insurance revenue grew in the quarter as a result of growth in certain programs. Canadian Fronting continued to grow as a result of continued growth of certain fronting relationships. Growth in Corporate Insurance for the quarter was impacted by balancing market conditions in certain segments of the line, while growth continued due to expansion of our distribution partnerships.

Insurance service expense was higher in Q1 2024 than Q1 2023, as a result of growth in the business, as well as a slightly higher Loss ratio. The Expense ratio remained approximately the same in Q1 2024 as Q1 2023.

Net expense from reinsurance contracts assets increased for the quarter as reinsurance ceded increased compared to the prior period, reflecting growth in the business.

Insurance service result for the quarter increased over the prior year as a result of growth in the business, and strong underwriting profitability. The Loss ratio increased slightly in the quarter as a result of a higher Loss ratio in Surety, which had an exceptionally low Loss ratio in Q1 2023. The quarterly Expense ratio was approximately the same as the prior year.

Other income, which reflects fees for surety services, was higher than the prior year which reflects a higher level of fee- generating activity in that period.

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