SiriusPoint Ltd. (NYSE:SPNT) Q3 2023 Earnings Call Transcript

SiriusPoint Ltd. (NYSE:SPNT) Q3 2023 Earnings Call Transcript November 9, 2023

SiriusPoint Ltd. beats earnings expectations. Reported EPS is $0.32, expectations were $0.2.

Operator: Good morning, ladies and gentlemen and welcome to the SiriusPoint Limited Third Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Dhruv Gahlaut, Head of Investor Relations and Chief Strategy Officer. Please go ahead, sir.

Dhruv Gahlaut: Thank you, operator and good morning, good afternoon to everyone listening. I welcome you to the SiriusPoint earnings call for the 2023 nine months and third quarter results. Last night, we issued our earnings press release and financial supplement, which are available on our website, www.siriuspt.com. Additionally, our webcast presentation will coincide with today’s discussion and is available on our website. With me here today are Scott Egan, our Chief Executive Officer and Steve Yendall, our Chief Financial Officer. Before we start, I would like to remind you that today’s remarks contain forward-looking statements based on management’s current expectations. Actual results may differ. Certain non-GAAP financial measures will also be discussed.

Management uses the non-GAAP financial measures in its internal analysis of results and believes that they are informative to investors in gauging the quality of our financial performance and identifying trends in our results. However, these measures should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. Please refer to Page 2 of our investor presentation for additional information and the company’s latest public filings. At this time, I will turn the call over to Scott.

Scott Egan: Thank you, Dhruv and good morning, good afternoon, everyone. Thank you, as always, for joining our third quarter results call. This has been another strong quarter of results for SiriusPoint, and we’ve delivered our first ever underwriting profit in the third quarter since the group was formed and our fourth consecutive quarter of positive underwriting results. The actions we have been taking are having a demonstrable impact and our performance is improving. Our results and balance sheet are getting stronger, and their overall quality is improving, which serves us well as a platform for further improvement in 2024, which is our aim. I am pleased with our progress, but I also recognize there is much more to do. There is much determination, but no complacency.

I’d like to provide some comments on two areas before we get into the results. We entered into a standstill agreement with Mr. Daniel Loeb in August. This agreement comes after Mr. Loeb and certain affiliates filed a 13-D regarding a potential transaction to acquire the company in April and a subsequent 13-D filing with the decision to conclude the exploratory discussions in May. The standstill agreement removes any lingering uncertainty and underlines Mr. Loeb’s full support for the strategy and progress he outlined in his 13-D. Secondly, I want to reflect on my first 12 months at SiriusPoint. I believe we have made significant progress and performance has improved. We remain committed to building a strong unified culture in order to achieve our ultimate ambition of being a best-in-class insurer reinsurer.

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Q&A Session

We know we have a way to go but the last 12 months is a good start. We continue to operate with an underwriting first approach. It’s important to create the right blend of culture, leadership and inclusion to attract and retain talent. We’ve strengthened our team with many high-quality senior appointments within underwriting, claims, human resources, finance and other parts of the organization, and we will continue to invest in our people. They are our most important asset. We have created real shareholder value over the past 12 months, and our ambition is to continue to do so. We importantly believe there is material opportunity to do more. As we build a track record of success at SiriusPoint, I am very proud and grateful to my colleagues who have worked incredibly hard.

Their efforts have helped us to achieve a good deal in a short period of time. I’m excited to see out 2023 and continue our progress in 2024. Before sharing key messages relating to the results for the last 9 months of 2023, I’d like to point out that we have revised our 2023 interim financials. This was driven primarily by a manual calculation relating only to the second quarter property cap business and also an overnight data transfer are resulting in the incorrect recognition of net premiums and net income. We have now implemented an additional control to ensure the accuracy of the net premiums calculations, and we expect to complete the remediation expeditiously. Slide 8 provides a summary of the changes to our KPIs. The impact to book value was less than 1% per share.

There is also no impact on the financial statements for discrete third quarter or on the first 9 months results. In an effort of continued transparency, we elected to revise the company’s historical consolidated statements despite not being required to do so, recognizing this need for transparency and accuracy as we continue our performance improvement journey. Moving now back to the strong quarter results. I would like to focus on the key messages, which I outlined on Slide 5 and provide an update on our strong progress across our strategic initiatives. Overall, we are very pleased to report continuing performance improvement in the third quarter and another period of positive capital generation across all parts of our business, underwriting, MGAs and investments.

Underwriting income for the 9 months was strong as we delivered a combined ratio of 87.6% for our core business. This is inclusive of $102 million of one-off reserve releases linked to the LPT we did earlier this year, offset in part by the reallocation of $29 million of expenses to the combined ratio from outside of the underwriting result. Adjusting for these one-offs, we delivered 12 points of like-for-like improvement on the core combined ratio year-over-year. Third quarter core catastrophe losses of $7 million were significantly down compare to $115 million a year ago and supported by the decisive actions taken in the portfolio. As an example, our property cap premiums are down around $300 million and contributing to an approximately 60% reductions in PMLs for a 1 in 100-year event since the second quarter 2021.

We continue to take further underwriting actions targeting specific parts of the portfolio, and we will continue to prioritize underwriting profits over premium growth during 2024. Our underwriting results are supported by favorable prior year development of $130 million for the 9 months ended 2023 and $30 million in the discrete third quarter. During quarter three, we had an adverse development of $80 million with regards to workers’ comp within the insurance segment. I wanted to call this out given the market-wide focus on casualty lines. For us, this strengthening is very specific and relates to the same program, which had an adverse reserve development during 2022. Consequently, we have completed a comprehensive review of the program and made a decision to exit the underwriting relationship at 1/1 next year.