Trisura Group Ltd

TSX:TSU

Earnings Call Transcript 2022-Q4

[Operator]

Good morning. Welcome to Trisura Group’s Limited Fourth Quarter and Full-year 2022 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 and here. 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 historical 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.

Thank you. I will now turn the call over to David Clare.

[David Clare, Chief Executive Officer]

Thank you, Operator. Good morning everyone and welcome. Despite strong earnings and operating performance, results were impacted by a onetime write down of reinsurance recoverable in our U.S. funds business in the fourth quarter.

Notwithstanding the impact of this write down treasurer has a larger, more diversified entity than at any stage in our history. We believe firmly that it is write down as an isolated event. And we remain confident in the rest of the portfolio and in our ability to scale the platform profitably in the long-term.

Especially P&C operations delivered strong performance in 2022, with $2.4 billion in gross premiums written a 56% increase following growth from 2019 to 2021. In the context of significant top-line growth, expansion of our capital base, in uncertain operating environments, we are proud to have generated a 20% adjusted return on equity. Although I acknowledge a lower 6% reported return on equity taking into account nonrecurring items.

The write down in the fourth quarter was related to a disagreement over obligations under a quota share reinsurance contract. The program was unique in our portfolio, and included captive participation which means to reinsurer associated with the MGA and required catastrophe reinsurance.

This year, the prices of catastrophe reinsurance increased dramatically, which reduced the amount of collateral available and contributed to the write down. It is important to note that the driver of the write down was not claimed experienced but these higher catastrophe costs.

This program had a multi year history with pressure when it had performed as expected. However, a unique mix of factors drove the experience this year. The reinsurer does not participate on any other programs and the program is now in runoff.

We are confident in our remaining reinsurance recoverable with 83% represented by rated reinsurance and holding collateral for unrated reinsurance. This experience has informed the infrastructure development that was already underway at treasurer.

We introduced a dedicated in-house Chief Risk Officer in the middle of 2022, who oversees an actuarial team and a group monitoring collateral. This event has been highlighted to these groups and although we have reviewed our remaining portfolio, and believe that there are no comparable situations, it is critical to acknowledge these experiences as we continue to grow.

It is important to know that although this issue caused the delay in our financial statements, treasurer’s own team highlighted the situation to our auditors who reviewed the situation alongside us. Unfortunately, at this stage, we can’t share many more details about situation as we explore options with counsel. What I would reiterate is the unique and isolated nature of this event.

Results across the rest of the operations were strong, and particularly so in Canada, with 30% premium growth in the year, supported by profitable underwriting and an 82% combined ratio. Momentum was sustained in the U.S. as premiums again had an annual record increased 70% over 2021.

In Canada, all three business lines contributed to growth, with fronting, a standout growing 61% compared to 2021. Corporate insurance continues to benefit from strong market conditions, growth and programs and momentum with distribution partners producing 33% growth over the prior period.

Surety growth to 22% in the year was strong as the business benefits from tailwinds and established line expansion of a U.S. practice and a new home warranty segment begin to mature. We also saw the benefits of a recent sovereign acquisition and the growth of surety in Q4.

Importantly, loss ratio of 17% for the year improved versus 21% in the prior period, driven by strong experience in corporate insurance and resolutions, combined ratio for the year with 82% comparable to the 81% in 2021. The slight increase was driven by an increase in expense ratio given by a shift in the business mix towards fronting and mitigated by an improvement in our loss ratio.

Despite a higher combined ratio, net underwriting income actually increased by 36% in the year, driven by growth in the business. With growing investment income, the Canadian platform maintained a strong 30% return on equity. Our Canadian entity now generates attractive fee based earnings to complement the heritage of profitable underwriting.

We have made important progress in our U.S. surety platform. Added an experienced team members in Connecticut, Denver, Philadelphia and Chicago. We are excited at the potential of this platform expanding a product line where we have demonstrated expertise in a geography with promising infrastructure tailwind.

For the year, we wrote $17 million in surety premiums from a U.S. platform. U.S. fronting grew 70% over 2021 with maturation of existing programs and new relationships driving top-line, U.S. fronting generated $1.7 billion in gross premiums written and $67 million in fronting fees.

We recorded $40 million of deferred fee income at the end of the year indicative of future fees to be earned. Apologize, we are hard at $35 million in the first few income at the end of the year indicative of future fees to be earned.

Loss ratio in the year decreased as a result of compatibly higher rent weather events in the prior period. Renting operational ratio increased as a result of the write down in the fourth quarter and the cost of reinsurance of non-skilled programs.

Despite the market driving opportunities to excess and surplus lines, we wrote $165 million in admitted premiums in the year mitigated by slower approvals by state regulators and the longer ramp times of admitted programs.

I have already received questions about our premiums capital ratio, which has been quoted at about seven times. In fact, in the fourth quarter, we injected $25 million of surplus notes into the entity that is effectively equity and takes our accounts or takes our target ratio closer to our target range.

Interesting dividend income increased significantly in the year and by over 100% in the quarter, the results of growth and higher yields impacting our portfolio. We continue to allocate conservatively acknowledging an uncertain environment as central banks navigate inflation in a tight labor market.

We are steadfast in our approach on achieving profitable growth, especially P&C markets. We continue to expand our reach in Canada and the U.S. supported by a history of disciplined underwriting, growing investment returns and newly enhanced risk management infrastructure.

The hardening market in certain corporate lines sustained through 2022 and although we don’t anticipate surplus capacity to drive a soft market in the near-term, we do not expect the level of rate increases demonstrate in 2022 to be repeated.

The majority of our growth was achieved through enhanced distribution relationships and new volume. And as such, we expect to navigate any change in rate or pricing smoothly. With the continued maturation of fronting development of U.S. surety strategy and ongoing expansion of our core lines, we have ample and attractive opportunities to grow.

Our platforms continue to act as complementary sources of revenue for one another, and distribution partners have increasingly recognized our broader offering. As we gain market share in one geography, our presence and capabilities elsewhere offer opportunities to generate new business.

As we look to 2023 environmental, social and governance considerations are front of mind, an important part of Trisura development. In the last year, we enhanced our governance framework welcoming the new director to the board.

We anticipate further progress here in the near future. We continue our focus on better communicating ESG initiatives identified opportunities for enhancement and working diligently to improve.

In closing despite an impactful experience in the fourth quarter, we are optimistic for the years ahead. The operational trends that we have been excited about for years are intact and demonstrating progress.

We are keen to build on the strengths of the organization and learn through evolution. Trisura maintains financial flexibility through a 13% debt to capital ratio and capital available at the holding company.

I would like to again thank our employees, partners and shareholders for their support. As we continue to grow and mature, we look forward to demonstrating progress on our way to building the North American specialty insurance provider of scale.

With that, I would like to turn it over to Dave Scotland for a more detailed review of financial results.

[David Scotland, Chief Financial Officer]

Thanks, David. I will now provide a brief walkthrough of some financial results for the quarter. Gross written premium was 664 million for the quarter and 2.4 billion for the year, which reflects growth of 57% and 56% respectively.

Net claims expense in the quarter and full-year were greater than the prior year primarily as a result of growth in the business. We also experienced elevated claims expense in the fourth quarter of 2021 and it claims recovery for the full-year of 2021 associated with our life annuity reserves, which have since been notated, and which increased claims expense in the quarter and reduced claims expense for the full-year of 2021, affecting the comparatives.

Net commission expense increased by 43% in the quarter and 65% for the full-year reflecting growth in the business in both Canada and the U.S. operations as well as a shift in this business mix towards certain lines of higher commissions.

In the quarter there was a write down of reinsurance recoverable of 81.5 million as a result of a determination that these recoverable are no longer collectable. This had a significant impact on that income for the quarter and full-year.

Operating expense grew by 29% in the quarter and 31% for the full-year reflecting growth in both the Canadian and U.S. operations. And underwriting income in Canada for Q4 and the full-year were both greater than the prior year as a result of growth in the business and consistently strong underwriting.

Net underwriting income in the U.S. for Q4 and the full-year was lower than the prior year as a result of the write down. Without the impact of the write down that underwriting income was greater than the prior year as a result of growth in the business, but mitigated by certain reinsurance purchases during the quarter.

In Q4 2022, the combined ratio in Canada was 84% and for the full-year it was 82%. In Q4 2022, the fronting operational ratio in the U.S. was over 100% as a result of the write down. Without the impact of the write down it was a 2% for the quarter and 81% for the full-year.

Net investment income was greater in Q4 and for the full-year of 2022 and 2021 as a result of an increase in interest in dividend income. The increase was primarily related to an increase in the size of the investment portfolio, but also benefited from higher yields.

Net investment income for Q4 2021 was positively impacted as a result of the movement in investments supporting the life annuity reserves, which was offset by the corresponding movement in claims expense in that quarter. For the full-year 2021 movement in the investments supporting the life annuity reserves was negative.

Net gains were to 4.1 million in the quarter primarily as a result of realized gains on investments disposed of during the period as well as movement on swap agreements used to hedge share based compensation. Net gains were 8.8 million for the year primarily as a result of realized gains on investments disposed of during the year and foreign exchange movement.

Income tax expense in Q4 was in a recovery position as a result of the loss in the U.S. operations in the quarter. And for the full-year 2022, income tax expense was lower than the prior year as a result of the lower net income before tax.

Net income for the group was a loss of 40 million for the quarter and a gain of 25 million for the full-year. Without the impact of the write down net income would have been 23 million for the quarter and 83 million for the full-year, which would have been greater than 2021 as a result of growth in the business and the strong underwriting results.

Diluted earnings per share was a loss of $0.86 in Q4 2022 and a gain of $0.56 a share for the full-year, which are lower than the prior year as a result of the write down. Consolidated ROE are on a rolling 12-month basis was 5.9% at the end of 2022, which was lower than the rolling 12-month basis of the prior year. However, without the impact of the write down ROE would have been 20% which was greater than the prior year.

Assets year-to-date grew by 1.3 billion, cash in the period increase as a result of the equity offering. Investments also increased as a result of the equity offering though were offset by unrealized losses incurred in the year.

Premiums and accounts receivable and other assets has grown as a result of growth in GPW particularly in the U.S. recoverable from reinsurers have increased primarily as a result of growth in the U.S. fronting business as well as certain fronting programs in Canada where claims liabilities are largely offset by expected recoveries from the reinsurance to whom we see the business.

Liabilities in the year-to-date grew by 1.2 billion primarily as a result of growth and 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 discussed growth in these balances is largely offset. By growth in reinsurance recover, both accounts payable accrued and other liabilities has decreased in the period as a result of the settlement of assets from innovation in 2021 as well as a number of large payments in the year.

Equity is greater than the prior year-end, reflecting the impact of the equity offering and growth in net income offset by a reduction in other comprehensive income. Other comprehensive income decreased in 2022, primarily as a result of unrealized losses on the bond portfolio due to rising interest rates that was mitigated by strengthening of the U.S. dollar which drove higher Canadian dollar valuations of the capital we hold outside of Canada.

Book value per share was 10.53 at December 31, 2022, and is greater than December 31, 2021, as a result of the equity offering as well as profit generated year-to-date and mitigated by unrealized losses in the investment portfolio in the quarter, sorry, in the year.

As of December 31, 2022, debt to capital was 13.4%, which was lower than December 31, 2021. As a result of the equity offering, the company remains well capitalized, and we expect to have sufficient capital to meet our regulatory capital requirements.

David, I will now turn things back over to you.

[David Clare, Chief Executive Officer]

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

[Operator]

Thank you. [Operator Instructions] And that comes from Nick Priebe from CIBC Capital Markets. Nick, please go ahead.

[Nick Priebe, CIBC Capital Markets]

Okay thanks. As you think through the impact of higher reinsurance costs more broadly in the U.S. entity, is this something that could put underwriting margins at risk for other programs in the portfolio where there could be a risk of non-renewal even in the case of larger counterparties with rated platforms?

[David Scotland, Chief Financial Officer]

Hey Nick, thanks for the question. We have talked about this a little bit in the past and seen the impact of some of these higher reinsurance rates in Q3 and Q4 as we navigated this environment. I think generally, what you are talking about would pertain to a small part of the market.

So parts of the market that would be struggling to find reinsurance at this stage would be mostly CAD exposed programs. So Southeast wind exposed programs or wildfire exposed programs in California.

We don’t have a lot of exposure to those programs and in fact, our property programs that we do participate in have been renewed so far this year, but that is a risk as the environment continues to navigate this type of reinsurance landscape. For us, certainly, we are not expecting our property programs to grow significantly this year.

This reinsurance market and sort of our caution in this space has changed a little bit the expectation around those property programs, but we don’t see a broader systemic issue in the ability to navigate capacity for those entities

[Nick Priebe, CIBC Capital Markets]

And does this experience change your strategy or your approach with respect to the way that you engage with or select reinsurance counterparties in the U.S.?

[David Scotland, Chief Financial Officer]

I think we have, we have certainly made a lot of observations through this process and we have got a pretty defined appetite of who our counterparties are and will be. I think there is going to be some observations we make to this protest about the relative size of certain types of counterparties. That will take on our programs.

But I would highlight outside of this experience, which I don’t want to shy away from was impactful. We have got a large amount of partners, who have been very strong, good partners to us across the entity and we will continue to believe that they will that case.

So certainly, I don’t want to imply that, that we are not making observations and taking notes about this experience. But we are feeling very good about the remainder of our partners across our portfolio.

[Nick Priebe, CIBC Capital Markets]

Okay. Those are my two. Thank you

[Operator]

Your next question comes from Jeff Fenwick from Cormark Securities. Jeff please go ahead.

[Jeff Fenwick, Cormark Securities]

Hi good morning everyone. David just wanted to touch on the investment, portfolio and dividend and interest income. Obviously, it is taking a nice step up here just on growth and higher yields. What is the outlook going forward from here? Is there some thinking on maybe rebalancing a little bit as well, I noticed you have got about a third that are of your assets that are in cash and short-term. Like the mix change at all, I think you have been adding a little bit of alternative product as well. How should we think about that, and in the context of the dividend and interest income?

[David Clare, Chief Executive Officer]

I appreciate it, Jeff, it is a good question. We were happy to see the step up in investment income in the quarter investment income rose about 102% in Q4. As you know, that is driven by a combination of factors, so we have been deploying a new capital that we have raised, we have been pulling new capital as a result of growth. And that is been deployed into a relatively healthy market.

I think, going forward, the pace of that increase quarter-over-quarter and sequentially, will likely slow down, but you still do have a healthy amount of reinvestment opportunities in the market. As you have noted, in the past, we have changed a little bit our posture, including things like alternatives, including a broader mix of portfolio assets.

I will say, interestingly, in this environment, we found ourselves more often deploying into investment grade bonds. And that is a healthy evolution of our portfolio, because essentially, what is happened is we have hydrated our portfolio and also benefited from higher yields, at the same time.

So when we think about the quality of our balance sheet, when we think about the segmentation of our portfolio, we have never had a higher quality portfolio in terms of our allocation to investment grade bonds. And we have also never had a higher level of interest and dividend income so that that combination is powerful.

As portfolio continues to mature as we turn over the maturing bonds in our portfolio, we would continue to expect to allocate those to higher yielding opportunities, which should be a positive lift for us going forward.

[Jeff Fenwick, Cormark Securities]

Okay, great. Thank you, I will pass it on.

[Operator]

Your next question comes from Stephen Boland from Raymond James. Stephen please go ahead.

[Stephen Boland, Raymond James]

Yes, if I just follow-up with that, on the fixed income, the credit quality, you are still had, when I looked at your supplement 9%, BB and lower. You mean is that a number that it should substantially come down do you think over the next six to 12-months? Like is there a need to be in noninvestment grade bonds at all at this point with yields so strong on the investment grade side?

[David Scotland, Chief Financial Officer]

Yes it is important to note Stephen that 9% you are quoting is as a percentage of our fixed income portfolio, not as a percentage of our entire portfolio. So the actual allocation there is quite a bit lower, what I would say is we have not deployed into new high yield securities in recent past.

So I think your observation is absolutely correct. As we continue to deploy in the portfolio, there are better opportunities on a risk adjusted basis right now in investment grade bonds, than we do in high yield. And I would not expect us to be increasing those allocations in that high yield section or even maintaining them as the portfolio grows.

So I think it is a good point to raise, we haven’t deployed incremental capacity into either high yield bonds or equity. In recent past, all of this new deployment has been going into relatively short duration investment grade bonds, which has had a very healthy impact on the portfolio.

We are positioned pretty defensively today, in the investment portfolio, as you know, it is a pretty volatile market. And with the yield that we can get right now, on relatively short duration bonds, we think that is a safer place to sit.

[Stephen Boland, Raymond James]

Okay. Maybe the second question I go back to the premiums to capital. I would say you mentioned you have dumped another 25 million into the U.S. sub. But thinking back, you raised over 140 million of equity on a certain growth plan that was evident last year. You have written off 80. So despite the fact that you put 25 in, is there going to be a need or does this impact your growth plan that you had the next couple years? In terms of what is going to happen in the U.S.?

[David Scotland, Chief Financial Officer]

Yes. At this stage, we don’t think there is a change in the near-term to our growth plan. That 25 that you are referencing was specifically a surplus note, we also put another 25 in the quarter in as equities so there is $50 million dropped into the entity and in Q4 that effectively takes our premiums to capital ratio, down to our target range. And what is going to be a benefit this year. In that U.S. entity is obviously those reinvested earnings come in and support that vehicles growth trajectory on a six times levered basis.

So every dollar earning that you have in the U.S., produces about six times, or $6 of premium capacity. So we think that given the profitability, the entity given the trajectory of the vehicle, you have got a lot of opportunity to fund that internally.

Beyond that, we have obviously got a relatively healthy debt to capital ratio, and we have got a bit of surplus capital still sitting at the holding company. So there are opportunities to fund this entity internally, both through reinvested earnings as well as capacity available elsewhere.

[Stephen Boland, Raymond James]

Okay, that is great. Thanks David.

[Operator]

Your next question comes from Tom MacKinnon from BMO Capital Markets. Tom please go ahead.

[Tom MacKinnon, BMO Capital Markets]

Yes, thanks good morning. Just a question with respect to stepping back against the fronting model in the U.S. As I understand it, an MGA would originate a program and you would bind it with like a third-party reinsurer like a Swiss Re or Munich Re. I mean, in some cases here you though you are having an MGA originate a program, and then you go on, bind it with a captive reinsurance company that is actually related to the MG&A or spun out of the MG&A.

So I’m wondering, what role do you really play in transferring or in binding that contract between an MG&A and a captive of the MG&A or of the MGA. And so, how - and what are the margins like on that business versus the ones that you bind with third-party reinsurers and has this experience that you had with this one program influenced your thinking about dealing with the MGA captives going forward?

[David Clare, Chief Executive Officer]

Yes. So on the economic question, Tom, the economics of these relationships are comparable to traditional reinsurance relationships, the value of the treasurer brings to any vehicle, or any structure that includes either third-party relationships or captive relationships is consistent. So economically, they look very similar.

Traditionally, when you have captive participation to participation by an entity related to the originator on those premiums, it is something that the positive, right because you want to see that MGA that producer participant in the profitability of its business.

And we have other versions of captor participation on other programs although on a much smaller basis than then was on the program that that we are referencing on this write down. So it is not I don’t think an indictment of a model that includes captive participation, but it does highlight some of the risks of situations where those captive participations get a bit larger.

[Tom MacKinnon, BMO Capital Markets]

I mean, in the first example, with a third-party, you are bringing two parties together. And in this one, the MGA really has its own captive. So why doesn’t the MGA just deal with the captive and what value do you bring by fronting it between these two related parties?

[David Clare, Chief Executive Officer]

There is a bunch of nuance to these situations, but at a high-level often for an entity to be able to write reinsurance in a certain state or a certain business line, they require a certain level of licensing and sometimes a certain level of rating.

And so those captives are often unrated vehicles, and they often don’t have licenses in the states that they are looking to operate in. And so a fronting vehicle, both provides a lot of infrastructure law monitoring a lot of systems around those programs. But critically, we have balance sheets that are rated and licenses in all the states of the U.S.

[Tom MacKinnon, BMO Capital Markets]

And to what extent do you have it programs with MGA captives that would be in any kind of property related business going forward? Is this just one of the 69 programs that you have that was the culprit here?

[David Clare, Chief Executive Officer]

Yes, we don’t have any other material captive participation on property program. So this was very much a unique situation.

[Tom MacKinnon, BMO Capital Markets]

Okay, thanks.

[Operator]

Your next question comes from Jaeme Gloyn from National Bank Financial. Please go ahead.

[Jaeme Gloyn, National Bank Financial]

Yes, thanks good morning. First question, just want to dig in a little bit more on the lessons learned. What sort of policy changes, what sort of monitoring changes reporting, what kind of changes or lessons have you learned and/or I guess, what lessons have you learned and what changes are you expected to implement before the situation recurring?

[David Clare, Chief Executive Officer]

It is important to note, Jaeme, that in the context of this experience, which I don’t want to shy away from that this experience is something that is been highlighted at every level of our organization.

We have talked a lot about the infrastructure build out that is already existing in the U.S. and we talked a lot about that last year as we are making investments into that platform. So we do have a lot more people now in the U.S., we do you have dedicated risk management groups, dedicated collateral collection groups, all of those processes, all of those systems that were already in place.

And in fact, working to monitor the other 68 programs that we have, that we feel there is no issue with all of those programs and processes. And people are looking at this situation as a real informative one to watch out for signs of risks going forward. So it is a very much a program in a situation that was unique, that we don’t think is present in other parts of the portfolio. But it is not one that we are shying away from.

I think Trisura as an entity has grown a lot, in the past five-years, we have learned a lot as we have grown as we have evolved our structure, and this experiences is going to be one that certainly we benefit from in discussing and learning about the risks of the business.

I don’t want to say that in any way this risk process, this infrastructure changes dramatically as a result of this experience. We have a lot of established processes that that we continue to invest in, but certainly the learnings of this process, highlight some of the areas that that can be a risk in this model.

[Operator]

[Operator Instructions] Your next question comes from Marcel McLean from TD Securities. Marcel please ahead.

[Marcel McLean, TD Securities]

Okay thanks, good morning. I had to jump off, if you have already gone over this, just let me know, go to the transcript after. But just curious on the U.S. entity, now that this mature program is in run off, and you have a number of programs still ramping, how should we be thinking about premium growth in the U.S. for 2023?

[David Clare, Chief Executive Officer]

At this stage, Marcel, we are still feeling confident in achieving growth in the U.S. platform for 2023. There is going to be a bit of an impact as this program rolls off, obviously, but we do have other opportunities that we expect to come on.

So I think in the past, we have talked about the U.S. is having kind of high teens levels of growth, maybe a low-20s level of growth, we think at this stage, that is a fair range to model it for the business and we will update you sort of quarter-to-quarter as we see that evolving.

[Marcel McLean, TD Securities]

That is even with this netted out of the premiums that you are going to be losing from this program?

[David Clare, Chief Executive Officer]

That would be with an assumption of this rolling off. Now, the timing of some of the ramp up is obviously going to affect what the ultimate level is, but as a base, that is our starting point for the year.

[Marcel McLean, TD Securities]

Okay, thanks. And then secondly, I want to just the capital, so you got $3.5 million. Just so that is a whole coin, like I know, the corporate level can think of sort of negative equity. I’m just curious, what level of capital do you still have at the whole call that could be downstream, if it is required?

[David Clare, Chief Executive Officer]

So at the end of the year, Marcel, we had probably about $50 million of capital at the holding company that can be downstream we have actually already downstream some of that in the first quarter to the entity. So there is there is capital sitting at the holding company for these initiatives and some that is already been sent down to the U.S.

[Marcel McLean, TD Securities]

Okay, alright. That is it for me. Thank you.

[Operator]

We have a follow up question from Jaeme Gloyn from National Bank Financial. Jaeme please go ahead.

[Jaeme Gloyn, National Bank Financial]

So I wanted to touch on the Canadian platform and not miss out on the still very, very strong growth there. Maybe similar to Marcel’s question around what you are thinking about for the U.S. business. Can this Canadian business continue to post this rapid growth rate, maybe separate fronting from the rest of the platforms in your commentary?

[David Clare, Chief Executive Officer]

Yes, I appreciate the question, Jaeme because the one item that I think was worth highlighting this quarter is the strength of the Canadian business. From a performance perspective, the Canadian entity had its best year ever. If you look at the growth in the business, the profitability of the business, the execution that team had and expanding their platforms, it was an incredibly strong year.

And I would say our assumptions of growth for the Canadian platform are obviously not to produce these levels of growth annually, but we still do feel competent about achieving growth in these lines. And we have talked a little bit about those expectations by business line. And in surety, we are thinking that low teens level of growth in corporate insurance, sort of high teens level of growth.

As you know, fronting is a little bit tougher to predict but we think that business again is kind of between the mid to high teens and low 20s. We are feeling very good about the setup for the Canadian business in 2023. And I think, despite the impact of this write down in Q4, one of the best narrative that we had in the quarter and in the year is the strength of that Canadian franchise and we are very proud of the team for achieving this year.

[Jaeme Gloyn, National Bank Financial]

Okay, great. Thank you.

[Operator]

There are no further questions at this time. I will turn it back to David Clare for closing remarks.

[David Clare, Chief Executive Officer]

Thank you. I appreciate everyone joining today and would note that if you have further questions, we are always available to connect, to address those. Don’t hesitate to reach out to us or any of your bank contact and we will be happy to expand on anything we have talked about today.

Thanks very much operator and we will end the call there.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.