SiriusPoint Ltd.
Q1 2021 Earnings Call Transcript

Published: 14 May 2021

[Operator:]

Good morning, ladies and gentlemen, and welcome to the SiriusPoint Limited First Quarter 2021 Earnings Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to Ms. Clare Kerrigan, Head of Investor Relations for SiriusPoint. Please go ahead.

[Clare Kerrigan:]

Thank you, operator. Welcome to the SiriusPoint Limited earnings call for the first quarter of 2021. Last night, we issued our first quarter Form 10-Q, an earnings press release and financial supplement, which are available on our website, www.sirius.pt.com. With me here today are Sid Sankaran, our Chairman and Chief Executive Officer; and David Junius, our Chief Financial Officer. Before we begin, I would like to remind you that many of the remarks today will contain forward-looking statements based on current expectations. Actual results may differ materially from those projected as a result of certain risks and uncertainties. Please refer to the earnings press release and the company's other public filings, including the most recent Form 10-Q where you will find risk factors that could cause actual results to differ materially from these forward-looking statements.

[Sid Sankaran:]

Thank you, Clare, and good morning, everyone. I'm very pleased to be here today to officially introduce SiriusPoint following the completion of Third Point Re's merger with Sirius Group in February. Our combined company has the capital, platform, capabilities, culture and expertise to take advantage of changing market conditions and compete in a differentiated and effective fashion in the global insurance and reinsurance marketplaces. I'm extremely pleased that by the closing of our transaction, we've added world-class talent to our team, strengthened the quality of our balance sheet and refocused our underwriting strategy, allowing us to benefit from strong market conditions. We are creating an entrepreneurial and innovative company that is just at the beginning of its transformation. Today, SiriusPoint is a meaningful player in the insurance and reinsurance markets, comprising a global platform that serves clients and brokers in almost 150 countries. And it has an outstanding team of experienced leaders and underwriters, many of them long-tenured with us, and a robust balance sheet, comprising more than $3 billion of capital. We still view ourselves as a start-up company, where we see the insurance industry is ripe for change. SiriusPoint is going to be at the forefront of that change. COVID-19 has dramatically changed the world's perception of risk. Over the past few years, the spectrum of realistic disaster scenarios has become more apparent. And the insurance industry response to that requires product innovation, better risk management and capital. With the start-ups mentality, and a responsive team of experienced underwriters, we can quickly develop solutions to help our clients manage this new risk environment. Our vision is to grow our business, create value and positively impact the change in world by being the most adaptive and responsive reinsurer in the market. We are aiming to enhance our existing relationships and improve the economics of our key lines of business, while looking at ways that we can grow intelligently and leverage technology to improve how we underwrite and manage risk, use data and develop new strategic opportunities. As a new company with an entrepreneurial approach and abundant energy to embrace and drive industry disruption and positive change, we are very much a start-up insurer, but a company with the 75-year history in relationships that we view -- and we are part of the class of 2020. We feel we have a head start over the other new entrants in the market as we have existing sticky relationships and business, a broad product offering, existing infrastructure and global reach. We also have a solid foundation, with a strong balance sheet, as can be seen in our A minus ratings, which were confirmed by A.M. Best, S&P and Fitch during the first quarter 2021. As a result, we're big enough to matter while having the ability to remain nimble, responsive and collaborative. This approach is at the heart of our entrepreneurial culture and is what drives our team.

[David Junius:]

Thanks, Sid. Since the formal merger on February 26, SiriusPoint has had a strong start to 2021. Importantly, we have had good feedback from rating agencies, investors, employees, clients and prospective partners. While much was accomplished in these initial weeks, much work remains to be done to re-underwrite our portfolio, establish a good operating rhythm for the combined company, assess and address talent gaps and overall, our IT infrastructure. We are excited with our plan and the opportunity that we see ahead. Turning to our first quarter results. We reported net income of $131 million, which includes $9 million of bargain purchase gain or $1.05 per diluted share. Our annualized return on average equity was 26.4% and ending shareholders' equity was $2.6 billion. We ended the first quarter of 2021 with tangible diluted book value per share of $13.97, a decrease of 16% from year-end due to share issuances related to our acquisition of Sirius Group. Our results were driven by our strong investment returns, highlighted by the TP enhanced funds return of 14.6% in the first quarter, and a $35 million increase in the valuation of our investment in Pie. These results were above our investment return expectations, and we do not expect them to be recurring. To Sid's point on investment derisking TP enhanced funds plus other invested assets were 1/4 of total invested assets at March 31, down from more than 1/3 at year-end for TPRE stand-alone. Turning to underwriting. Our primary focus for the year is to deliver an underwriting profit, and the first quarter was a good first step in fulfilling this goal. Gross premiums written, as reported, were $367 million, reflecting only 1 month of Sirius Group contribution. Including a full 3 months of Sirius Group, GPW was $949 million in the quarter. Overall, we are seeing market conditions stabilize around the world driven by underwriting discipline and positive rate improvement. That said, the rate story continues to differ by product, with heavily impacted lines such as aviation, seeing strong rate increases, while less differentiated lines such as workers' comp, that have seen strong rate adequacy in the past few years, starting to soften. These rate trends continued in the first quarter and for April 1 renewals, where some lines showed double-digit rate improvements. Property cat reinsurance also continues to see risk-adjusted rate increases in most global markets but at a declining pace. However, the market has not yet fully digested the impact of the high levels of cats in the first quarter. While property cat is a core part of the portfolio, we are focused on growth in the noncat lines to continue to improve our balance as well as carefully evaluating the allocation and utilization of our cat PML to improve portfolio return. Underwriting income in the first quarter was $9 million, generating a combined ratio of 96.6%. Our reported results include only 1 month of results for Sirius Group and Sirius Group's Texas Storm Uri losses fell into the premerger stub period. Total catastrophe losses that include a full 3 months of Sirius Group were $40 million and the associated accident year combined ratio on that basis was 99.8. Breaking out underwriting further, I'd like to discuss our 4 segments

[Sid Sankaran:]

Thanks, David. I'm truly proud to be leading Sirius' plan. We've built a truly exciting new company with a differentiated culture and approach, and we're set up to challenge the status quo to create new ways of conducting business. We remain committed to establishing a more balanced and diversified business through a prudent mix of underwriting and investment risk. As we execute and deliver more consistent results over time, we expect to build sustained long-term value for our shareholders. I believe that we have a bright future ahead of us build with enormous potential. Thank you for your time, and I'll turn the call back over to the operator.

[Operator:]

Thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.

[End of Q&A:]