Trisura Group Ltd

TSX:TSU

Earnings Call Transcript 2021-Q3

[Operator]

Good morning. Welcome to Trisura Group Ltd. Third Quarter 2021 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 quarter. Following formal comments, lines will be open for analyst questions.I'd 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 impacts, please see Trisura's filings with securities regulators. [Operator Instructions] Thank you. I'll now turn the call over to David Clare. Please go ahead.

[David James Clare, President, CEO & Director]

Thank you. Good morning, everyone, and welcome. The third quarter continued our momentum from the first half of the year, producing again our largest premiums to date following sequential records in Q1 and Q2. Importantly, disciplined underwriting and a front-end model that generates recurring fee income yielded strong earnings per share and a 20% return on equity, the highest in our history.Our team continues to demonstrate strength and a healthy pipeline of opportunities as we scale an increasingly sophisticated and diversified specialty insurance platform. Results were particularly strong in Canada with 110% premium growth, supported by profitable underwriting. Momentum was sustained in the U.S. as premiums in the quarter grew 52% over the third quarter of 2020. We observed significant increases across all lines in Canada.The standard in growth was, again, Risk Solutions, where expanded fronting arrangements and new warranty programs drove 155% rate of growth versus 2020. Corporate Insurance continues to benefit from a hard market and momentum with distribution partners, producing 97% growth over the prior period. Surety growth of 49% was similarly strong as the business benefits from tailwinds in our established lines and expansion of a U.S. practice and new home warranty products. More importantly, loss ratio of 18% improved versus the 28% achieved in Q3 2020, driven by strong experience in Corporate Insurance and continued strength in Surety and Risk Solutions.Surety's 8% loss ratio this year continues to sustain better-than-average profitability, amplified by greater retention as a result of our new Reinsurance program. Profitability was enhanced in Risk Solutions -- by Risk Solutions 18% loss ratio and a quadrupling of underwriting income in the line as warranty programs mature, and we observe a growing contribution from new fronting arrangements.Combined ratio in the quarter was 79%, an improvement versus Q3 2020, due primarily to the comparative strength of Corporate Insurance and Risk Solution, and an improved expense ratio. Net underwriting income increased 330% in the quarter, a striking increase and the combined result of the factors already described. Taking into account investment income, the Canadian platform produced a return on equity of over 30%.Our U.S. Surety practice continued to progress. We expanded Surety licensed states to 48, and we bound approximately $2 million in premium in the quarter. We have continued to hire adding staff in both Stanford and Denver. Our U.S. fronting platform grew 52% over 2020, maturation of existing programs and new relationships drove top line. Premiums averaged $87 million per month compared to $74 million in Q2. U.S. fronting generated $261 million in gross premiums written in the quarter and $11 million in fronting fees. Importantly, we recorded $24 million of deferred fee income at the end of the quarter, indicative of future fees to be earned.Our Reinsurance result was a loss in the quarter, driven by a onetime $1 million loss on the sale of our structured insurance assets. Although we realized a loss on the sale today, we benefit from the simplification of our international operations, including reduced compliance costs and improved liquidity from a unique asset. Strong matching and a favorable interest rate environment in our annuity portfolio, which we continue to own, coupled with ceded premium from our U.S. operations mitigated that loss.The strength of our growth has catalyzed the historic level of hiring. An important focus through this expansion continues to be increasing operational leverage while maintaining appropriate resources to manage and underwrite our business. Our premium per employee has increased driven mainly by Risk Solutions as fronting and warranty programs carry large premium bases on a smaller staff contingent.Excluding assets backing our life annuity policies, portfolio performance was marginally positive in Q3 as investment income offset price volatility. We observed a pullback in equity markets in late September driven by fears of slowing growth, inflation and withdrawal of accommodative monetary policy. Rising rates negatively impacted fixed income positions, though it is important to note we've mitigated that impact from maintaining a short duration, approximately 3 years, across our North American portfolios.Interest and dividend income increased year-over-year, the result of growth in our business and corresponding growth in our portfolio. We continue to allocate conservatively, acknowledging a challenging yield environment. We balance our risk appetite between the prevailing rate environment and required yield of our portfolios. Reinvestment risk threatens interest in dividend income and the threat of inflation limits our appetite for longer duration credits. Despite these dynamics, we continue to defend an approximate 3% yield on our investment portfolio.The hardening market continued in the quarter, and we expect this trend to sustain through 2021. Although access in surplus markets remain strong, the introduction of admitted capabilities will be important as the market normalizes the launch of the U.S. Surety strategy and provides opportunities to continue to grow organically. Increasingly diverse and fee-based earnings help to reduce volatility, and supports growth and access to capital. Growth in performance in Canada has been a highlight this year and is providing momentum for the enterprise beyond the profitable maturation demonstrated in the U.S. fronting.We remain an insurance company in growth mode and must focus on the skills and practices that brought us to this point, concentration in business lines with no conservative underwriting and detailed structuring. It must be acknowledged that claims in our experience can experience volatility and severity. We should expect the claims experience approximating historical averages in the long term.With that, I'd like to turn it over to Dave Scotland for a more detailed review of the financial results.

[David Charles Scotland, Chief Financial Officer]

Thanks, David. I'll now provide a brief walk through of some financial results for the quarter. Gross written premium was $405 million in the quarter, which reflects growth of 69% over Q3 2020. Fee income, which is primarily related to fronting fees from our U.S. operations, grew by 71% for the quarter, reflecting growth of fronted premium in the U.S. and an increase in Surety accounts in Canada.Net claims in Canada for the quarter were greater than the prior year as a result of growth in the business despite a lower loss ratio. Mid claims in the U.S. for the quarter were greater than the prior year also, also as a result of growth in the business, while there too the loss ratio decreased, in this case as a result of fewer weather related claims.On a consolidated basis, net claims expense in the quarter was greater than the prior year for the reasons described. Net commission expense increased by 96% in the quarter, reflecting growth in the business in both the Canadian and U.S. operations. Operating expense in the quarter grew by 14% over Q3 2020. Part of the operating expense is related to share-based compensation associated with certain outstanding options for which we have introduced a hedging program. The movement of the hedge is reflected in net gains on the income statement. Excluding share-based compensation, which has been hedged, operating expenses grew by 38% over Q3 2020, reflecting primarily growth in the Canadian operations.Net underwriting income in Canada for Q3 was higher than the prior year as a result of growth in the business, and the lower loss and expense ratios. Net underwriting income in the U.S. for Q3 2021 was higher than Q3 2020, largely as a result of growth in new and existing programs as well as improved operational efficiency.In Q3 2021, the combined ratio in Canada was 79% and the fronting operational ratio in the U.S. was 73%. Net investment income was lower in Q3 2021 as a result of the sale of the structure of insurance assets in our international operations as well as the increase in European interest rates during the year, which impacted the year denominated bond supporting our life annuity reserves.The movement in those bonds was largely offset by movement in corresponding claims reserves. Interest and dividend income increased by 19.6% over Q3 2020. That increase was primarily related to an increase in the size of the portfolio associated with growth in operations and contributions to capital from the debt offering in June 2021 and was mitigated by reduced market yields.Net gains were $2.1 million in the quarter, which was less than Q3 2020, largely as a result of FX movement. Income tax expense was $6.5 million in the quarter, which was greater than Q3 2020, reflecting growth in the business. Net income generated from the Reinsurance operations was also greater in Q3 2021 as a result of a slight favorable asset liability mismatch, which occurred in the context of rising European interest rates and, in general, improved asset liability matching in 2021 compared to 2020.Net income for the group was $16.1 million for the quarter, which was greater than Q3 2020 by 146%. The increase was largely driven by increased profitability in both the Canadian and U.S. operations as a result of growth and improved operating metrics. Diluted EPS was $0.38 in Q3 2021, which was greater than the prior year.Consolidated ROE on a rolling 12-month basis was 20.4% at the end of Q3 2021, which was greater than the rolling 12-months -- rolling 12-month ROE at the end of Q3 2020. Overall, strong growth and improved profitability in both Canada and the U.S. has contributed to an increase in earnings and improvement in key financial metrics during the year.Assets in the year-to-date period grew by $869 million as a result of growth in Canada and the U.S. Recoverable for reinsurers have increased primarily as a result of growth in the U.S. fronting business where claims liabilities are largely offset by expected recoveries from the reinsurers to whom we see the business. Investments have grown, reflecting the additional capital generated as a result of the debt offering in Q2 2021 as well as capital generated from operations.Liabilities in the year-to-date period grew $809 million, primarily as a result of growth in unearned premiums and unpaid claims and loss adjustment expenses, which have grown as a result of growth in both Canada and the U.S. As was discussed, growth in these balances is largely offset by growth in the Reinsurance recoverables.Equity has grown for the year by $60 million, reflecting growth in net income as well as growth in other comprehensive income. Other comprehensive income increased in 2021, primarily as a result of unrealized gains in the investment portfolio. Cumulative translation gain has also contributed to the strengthening of the U.S. currency against the Canadian dollar, which drove out valuations of capital held outside Canada.Book value per share was $8.49 at September 30, 2021 and is greater than December 30, 2020, as a result of profit generated year-to-date and unrealized gains on the investment portfolio. As of September 30, 2021, the debt-to-capital ratio was 17.7%, which has increased after the debt offering in the second quarter, but remained below our long-term target of 20%. The company remains well capitalized, and we expect to have sufficient capital to meet our regulatory capital requirements.David, I'll now turn things back over to you.

[David James Clare, President, CEO & Director]

Thanks, David. Operator, we would take questions now.

[Operator]

[Operator Instructions] And your first question comes from the line of Nik Priebe with CIBC Capital Markets.

[Nikolaus Priebe, Research Analyst]

Okay. Just wondering if you could give us a bit of an update on the ramp of admitted lines in the U.S. It looks like a bit more of a meaningful volume of premiums were bound in the quarter. Could you just give us a sense of how that pipeline appears to be building as we enter Q4 here?

[David James Clare, President, CEO & Director]

Yes. Thanks. So you're right, we wrote $19 million in admitted premium in the quarter, which is a step-up over both Q1 and Q2. We are starting to see more momentum in this space as we found a few more programs in those admitted lines. I will say we do expect the majority of our premiums to remain or still be generated from the excess and surplus lines, although through Q4 and Q1 we're expecting that there is a bit bigger contribution from those admitted lines. I think generally, as a comment on the industry, we continue to see a focus on and more opportunities in the excess and surplus lines, but the work that we've done in broadening our licenses in the admitted space as well as now finding about 10 programs in that admitted platform should drive some momentum through the rest of this year and into next.

[Nikolaus Priebe, Research Analyst]

Okay. And then staying on the U.S. platform, fronting fees as a percentage of ceded premiums was a little bit below trend in the quarter. I think it was at 5.1%. Was there anything to call out there? Or is that just a product of normal variability? And will that ratio be impacted at all by the ramp of admitted premiums?

[David James Clare, President, CEO & Director]

Yes. So there are a few things to call out here that are impacting both the fronting fee ratio as well as a few of the other KPIs that we track. So in the quarter, we do purchase some items in Q2 -- or sorry, in Q3, that could impact this, including cat covers. So those types of purchases that are one-off tend to impact and lower those types of ratios. So you do see that coming through this quarter. If you look through our results through the deferred fee income lines, you'll see that we've got a very healthy increase in that deferred fee income, and we're still expecting fee income in the U.S. platform to be between that 5% and 6% level despite that sort of hit this quarter that's gone a little bit lower.The ramp-up in the admitted platform, we would expect the economics of that platform to be very comparable to the economics of our E&S platform, the fronting fees in general should be comparable. The only area that you'd see somewhat of a difference in those fronting fees is to the extent you start writing much larger programs. So if you see a program in excess of $50 million, you might have rationale to have a bit lower fronting fee, although at this stage the fronting fees are very comparable between the 2.

[Operator]

And your next question comes from the line of Jeffrey Fenwick with Cormark Securities.

[Jeffrey Michael Fenwick, MD & Head of Institutional Equity Research]

So David, I just wanted to focus back on the U.S. program growth there. Could you just sort of speak to the diversification of the programs you're seeing now and the new ones you added? Is that -- it looks like it's expanding in just different areas. So what's your comfort level of moving into some of these other lines?

[David James Clare, President, CEO & Director]

Yes. I would say at a high level, Jeff, we still have the same target for segmentation of our business in the U.S. So that's roughly 60-40 between casualty and property. The expansion of our lines reflects that target pretty closely, although you'll see there's been sort of growth in some of our larger lines, commercial transportation, commercial multi-peril that's driving some of this increase in programs. At a high level, that's what I would expect the platform to continue evolving to. And for the most part, the programs that we're bringing on this quarter as well as through Q2 and Q1 have been hueing to that segmentation.

[Jeffrey Michael Fenwick, MD & Head of Institutional Equity Research]

Okay. And then maybe it's worth touching on, just the cadence of that add. I mean there's a nice step-up here through the third quarter in terms of new programs. I know they tend to take a few months for that to ramp. So maybe some expectations around how those come on board for you through the end of the year and into next. And then maybe a bit around the timing on some of the renewals now and are we going to, maybe as you get bigger, have fewer of the quarters like we saw in Q2, where you're transitioning out of others and waiting for others to ramp and it causes a bit more of a disruption? I'd imagine that's going to slowly fall away in the future.

[David James Clare, President, CEO & Director]

Yes. I would say at a high level on an annual basis, we target adding between 12 and 15 programs on a net basis every year. And so we're sort of on track for that trend this year. I would say that as we get larger and more diversified, it's going to be natural for there to be in our portfolio in terms of programs. But as you say, the idea would be that as we get larger and again, as we continue this diversification, it smooths that line of sort of premiums across our programs. The entity from a momentum perspective, from a timing perspective, you're right, it does take some time for us to ramp up any of those programs once they come on board.So it's usually depending on the business line and the type of business admitted or E&S. It's usually between 3 and 8 months, 3 and 9 months for those programs being put on and generating sort of the level of premium that we think is appropriate. So you're starting to see the benefit of those coming on now in Q3 of those programs we put on in Q1 and Q2. The new programs that we've got on in Q3 really aren't contributing significantly at this stage, but you'd hope that some of that momentum comes through at the end of Q4 and then into 2022.

[Operator]

And your next question comes from the line of Tom MacKinnon with BMO Capital.

[Tom MacKinnon, MD & Analyst]

Just a couple of questions. First, to start with Canada. Top line, really crushing it here, pretty solid across the board. I mean, what's driving this? And how sustainable is it? I mean, it's speaking to the strength of your Canadian franchise, which I think sometimes goes unnoticed. So maybe you can explain why you think you're getting such great top line growth and how sustainable it is.

[David James Clare, President, CEO & Director]

Yes. Thanks very much for the question, Tom. It's a great point. The strength of this Canadian platform we think is a real highlight of this year. I think anytime you see growth in the magnitude that we're experiencing in Canada, it's a great narrative and made more so by the profitability that this platform is generating. The reality is there's a few tailwinds in the Canadian business that differ by line that are driving the momentum in this business. In Corporate Insurance, we're benefiting from increased in broader relationships with distribution partners. So that includes brokers and MGAs as well as some tailwinds from a hard market or hardening market. So we are seeing the benefit of rate increases in that Corporate Insurance line.In the Surety practice, we've got a few items that are driving better growth in the business though the Surety industry as a whole is having a strong year. And as a result of momentum in our products as well as momentum with distribution partners, we're able to grow a little bit better than the broader industry. Amplifying that right now is, obviously, the launch of our U.S. Surety platform, which is adding about $2 million of premium this quarter as well as a new presence in new home warranty. So both of those are newer products that are adding and amplifying to that growth rate.And finally, in Risk Solutions, the big standout in growth in the quarter. Obviously, auto warranty programs that we've put on in the last couple of years are demonstrating some maturation, which is driving premium growth. And those new fronting programs that we talked about a lot last quarter are starting to develop in a meaningful way. So in the quarter, $46 million of additional fronting premium was added in that Risk Solutions group. So I do want to acknowledge the strength of all these platforms. And frankly, the strength of the team in Canada and navigating that growth. I will say, on a normalized basis we certainly don't expect 110% growth every year. We would expect that to normalize back to the levels that we saw sort of more on a long-term basis in Canada. So you've got sort of mid-teens to low 20s percent growth depending on your business line, although we do enjoy sort of the step-up that we've experienced this year.

[Tom MacKinnon, MD & Analyst]

Great. That's helpful. And then if I go to the U.S. and if I look at the absolute fee income, you had deferred fee income was up quarter-over-quarter, which I think should have would drive an increase in the absolute level of fee income booked in the quarter, but it fell quarter-over-quarter. So maybe you can explain some of those nuances that would have happened in the third quarter that would have driven this observation I'm making.

[David James Clare, President, CEO & Director]

Yes. So the nuance you're seeing there, Tom, is really coming down to timing differences. So if you think about the earnings pattern of fee income, it's very similar to the earnings pattern of premium recognition and the timing of when those premiums are coming on in the last 12 months really matters for how that premium income or that fee income is earned. So you'll notice we had a bit slower growth in Q2 and the timing of some of these premiums in coming on has arrived more at the later end of the quarter, which drives a little bit different earnings pattern when you get down into the nuances of fee income. So that's driving the -- that absolute dollar amount of earned fee income quarter-over-quarter.But really importantly, what we can look to for momentum and for comfort on the trajectory of those numbers is the deferred fee income line. So if you look at deferred fee income in the quarter, indicative of future fee income to be earned, we actually hit our highest level ever. So we're at just below $24 million in deferred fee income, and that should be earned pretty normally over the next 12 months.

[Tom MacKinnon, MD & Analyst]

So it's suffice to say, if we look at the increases in the deferred fee income, you really mean that fee income will generally increase and -- but you might get noise if you're just going to look at increases quarter-over-quarter. Does that summarize what you're trying to say?

[David James Clare, President, CEO & Director]

That's exactly right.

[Tom MacKinnon, MD & Analyst]

Okay. And the last is, just in terms of retention in the U.S., maybe around 7%, but year-to-date, it's been 8%, and I think it was more like 8% in the quarter prior. How should we be thinking about retention?

[David James Clare, President, CEO & Director]

Yes. So we still target our retention between 5% and 10% in the U.S. We have seen some opportunities to increase that retention on mature programs that we see are operating very profitably. We will be opportunistic on those programs. As the platform has evolved and it's gotten a little bit better, we've obviously become more comfortable in taking those retentions. And so I would expect the average across the platform, depending on the quarter and the business mix, will still be in that 5% to 10% range, although we're more comfortable these days taking a little bit above that 5% low end range.

[Operator]

And your next question comes from the line of Marcel Mclean from TD Securities.

[Marcel Mclean, Associate]

Okay. Maybe going back to the U.S. side with those 8 new programs added, are you able to provide the split of which of those were admitted versus E&S of the [ 6 or of the 8 ]?

[David James Clare, President, CEO & Director]

Yes, the majority of those would be E&S. So there's a couple in there that are admitted. We don't have that split in our materials, but it's safe to say that we are still seeing more submissions and more opportunities in the E&S space than admitted.

[Marcel Mclean, Associate]

Okay. And then so with the admitted, it sounds like you guys are kind of getting up programs at this point online to start your ramp as expected probably next quarter. Even this quarter, we saw a nice step-up in premium. Just in terms of guidance, I know it's kind of hard because it's still early days, but anything you can give, maybe what you -- a range of what you expect for 2022 in terms of admitted premiums or anything an offer there.

[David James Clare, President, CEO & Director]

Yes. I would -- as a starting point, I would take what our quarterly premiums are this quarter and maybe take a look on where we come into for Q4 and take that as a base annualized rate for those admitted premium levels in 2022. And hopefully, that ramp continues, but as a starting point, that should be a good place to base your estimates. The reality is the admitted ramp-up is a bit slower than the E&S. So I struggle to give you perfect guidance on that. But I think as a starting point, that's a good place to anchor yourself.

[Marcel Mclean, Associate]

Okay. And then what about expenses in the U.S.? How should we think about that? Is there going to be a higher expense growth related to this? Or is there not a lot of incremental since you already have a lot of those MGA relationships? How do we think about that?

[David James Clare, President, CEO & Director]

Yes. So the investments that we're making in the admitted platform, the increases in expenses, we've been addressing this year. So a lot of those in terms of licensing, in terms of filing rates have been established and addressed through this year. I would say, in general, as we expand this platform, both in the admitted and E&S space, the more programs and premium we get. We'll have to make some investments around monitoring and administration of those programs, but there is operational leverage as you do that. So from a modeling perspective, Marcel, what I would be thinking about is taking your OpEx line or your G&A line as a percentage of gross written premiums and hopefully seeing that demonstrate some improvements as the top line ramps.

[Marcel Mclean, Associate]

Okay. That's helpful. And one last one for me on the Canadian side, you know what, in Risk Solutions. I was taking a look at it. If you strip out the new fronting premium, it looks like gross premiums written were up only about 6% year-over-year, assuming that there was no fronting premiums in Q3 '20. Is the fronting premiums -- are they being generated as expense of your other premiums or check, think of them as one of the same? How do we think about growth, maybe excluding this fronting going forward?

[David James Clare, President, CEO & Director]

Yes. I certainly don't want to imply that fronting premiums in any way are taking away from growth in the rest of the platform. These are very separate businesses, very separate platforms from a growth perspective. You do see some nuances, some variability in quarter-to-quarter growth in the warranty programs. You're seeing some of that come through last year and this year. Some of that variability relates to COVID, opening or closing the types of dealerships that distribute some of these warranty products. So it's a tough comparison year-over-year. Q3 2020 was actually a big quarter for warranty because of a backup in premiums that were not written in Q2 2020. So that comparison year-over-year is a tough one that we've done in the last beat. So I'd expect that on a normalized basis going forward to have a little bit easier time comparing quarter-over-quarter or year-over-year, but you've got some noise that's still legacy of the scenario we're in with COVID.

[Operator]

[Operator Instructions] Your next question comes from the line of Jaeme Gloyn of National Bank.

[Jaeme Gloyn, Analyst]

A bit of a different theme. One of the growth strategies is to pursue inorganic or M&A as well as like strategic partnerships to grow the business. Can you elaborate a little bit on what you're seeing maybe in the pipeline there or some high-level comments on what you would expect in maybe the near-term momentum?

[David James Clare, President, CEO & Director]

Yes. Thanks, Jaeme. I would say our narrative and approach here is pretty consistent to the last couple of quarters. We do think that at some stage, it would be an interesting strategy and an attractive strategy for us to add capacity and scale through inorganic acquisitions, although our criteria for those acquisitions are quite strict. And at this stage, we've not yet been able to find a partnership or a target that is either transactable or available for us to pursue.That being said, I think we've got a lot of great opportunities on the organic side that we continue to pursue. And so in the background, we will continue to evaluate supplemental growth through inorganic, while we prioritize that organic trajectory. The challenge today, frankly, is that a lot of these lines, the lines that we are writing, the lines that we focus on, the areas that we would expand into are very attractive lines to be in. And so many of the owners of these assets are holding the entities closer today than they used to, which makes inorganic expansion more difficult.

[Jaeme Gloyn, Analyst]

Got it. Great. And then second one on the U.S. Surety strategy. Can you elaborate on how that's progressing? And what are some of the next steps here in the coming quarters that's going to show the expansion of that platform?

[David James Clare, President, CEO & Director]

Yes. So the U.S. platform -- the U.S. Surety platform is still relatively early stage. So we're very much in build-out mode in the U.S. You've seen us invest in teams and physical locations in the States, and we're going to continue building that out. So I would expect us to open up more offices, more physical presence in the U.S. as well as building out the team.The other nuance that we'll have to navigate in the States is around licensing and treasury listing. Those types of initiatives will be important for us to continue to navigate as we build out that U.S. practice. So in terms of monitoring that process or that build-out, it would be both expansion of physical presence as well as progress in achieving things like [ tea ] listings and additional balance sheet.So we're still pretty early stage in that build-out. This is a platform and a strategy that we've got full commitment to and are expecting to be a significant part of the business in the long term. But today, it's relatively early.

[Operator]

And your last question comes from the line of Stephen Boland of Raymond James.

[Stephen Boland, MD & Equity Research Analyst]

Just one question. You mentioned monitoring, I guess, your MGAS, your auditing, monitoring. Can you just talk about putting some more investment in there? Has anything changed in the way that you have done the monitoring in terms of frequency, the number of auditors that you have, anything just to help support that, nothing has changed despite the growth that you've experienced over the past year.

[David James Clare, President, CEO & Director]

Yes. I would say that our process for monitoring, Stephen, it's very similar. So we -- every program that we write, we audit a random sampling of files, between 5 and 10 every month. So we've got a team that continues to do that. I would say the comments I'm making around growth and investment in that monitoring function don't really pertain to the method of the monitoring, but really the fact that we no longer have 30 programs or 40 programs were up to 61 programs. And so that function just takes more people. And so for us to reliably and practically have a handle on the underwriting and the performance of our programs that are in force. We just want to make sure that we've got the right amount of people looking at them. And so that's a function that's very important for us as we take risk and view ourselves as underwriters of these programs and would like to continue differentiating ourselves that way.

[Stephen Boland, MD & Equity Research Analyst]

I presume the Canadian operations operation. So the Canadian operations now with the fronting fee model and MGA relationships, that's getting similar monitoring. Is it done by the same group? Or is it divided by geography?

[David James Clare, President, CEO & Director]

There are separate groups today, although the infrastructure and sort of processes that they follow are very similar. More and more as we grow these platforms, as we grow the entity as a whole, I'd like the vehicle to become more sort of collaborative across North America. But today, reflective of different regulatory environments, reflective of slightly different opportunity sets, the groups are run separately.

[Operator]

And I'm showing no further questions in the queue at this time. I'll hand the call back to David Clare for closing remarks.

[David James Clare, President, CEO & Director]

Thanks very much, operator, and thanks, everyone, for joining today. If you have any further questions, don't hesitate to reach out to myself or Dave Scotland or Brian Sinclair.

[Operator]

Thank you. And ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.