SiriusPoint core UW income soars to $82mn on favorable PPD and no cats

SiriusPoint’s second quarter core underwriting income increased by $72mn to $82mn as the core business benefited from $25mn of favourable reserve development and no cat losses, while its core loss ratio rose 240bps to 63.6 percent.

The Bermuda specialty company reported $0.37 in diluted net earnings per share after markets closed on Wednesday, beating analysts’ $0.10 per share consensus estimate, and improving from its year-ago $0.38 per share net loss.

The improved result was driven by stronger underwriting profits and a shift to positive net investment income in the quarter.

Core underwriting income grew to $82mn from $10mn last year, driven by positive reserve development, no cat losses and expense ratio improvement, which offset the core loss ratio deterioration. The Bermudian had suffered $16mn of cat losses in Q2 2022.

The better result was also driven by SiriusPoint growing net earned premiums by 17 percent in the quarter to $660mn.

The company lowered its total expense ratio by 6.6pts to 27.9 percent. The (re)insurer’s reported combined ratio improved to 87.7 percent from 98.3 percent, and on an underlying basis to 91.4 percent from 98.3 percent.

Net services fee income dipped to $9mn from $12mn, which the company said was impacted by “one-off items” with underlying revenues growing by 5 percent and the running at a 20 percent service margin.

SiriusPoint has now generated $189mn in underwriting profits through the first half of the year from its core business at a 84.4 percent combined ratio, compared with a $22mn underwriting gain through the same period last year, a 6.9pt improvement from the year before.

SiriusPoint recorded no catastrophes in the second quarter, and its earnings release highlighted the fact that it has cut its 1-in-100 year PML by 58 percent since the end of Q2 2021 from $274mn to $116mn.

Earlier this year, SiriusPoint completed a $1.3bn loss portfolio transfer deal walling off legacy international property cat exposure, which has had a $115mn positive benefit to SiriusPoint’s underwriting results from the favourable reserve development associated with the deal.

The Bermudian also disclosed Wednesday that the number of equity stakes in its MGA portfolio has been cut to 33 from 36 at the end of last year, including two sold since Q1 2023.

The Insurer broke the news earlier this week that SiriusPoint was selling its stake in the insurtech platform Broker Buddha to UK-based e-trading business Acturis.

With its results, SiriusPoint also showcased that it lowered combined underwriting and corporate expenses by $25mn to $130mn, which the company said resulted in $35mn - $40mn underlying/run rate cost reduction.

The cost reductions were driven in part by the firm’s decision to either close or repurpose five of its 10 offices globally, a move reported by The Insurer in November of last year.

In its core business, SiriusPoint increased gross premiums written (GPW) by 5 percent to $850mn from $812mn, driven by $29mn in new insurance and services premium (to $463mn GPW) and $9mn in new reinsurance premium (to $387mn GPW).

The core loss ratio in reinsurance increased to 60.1 percent from 57.6 percent and rose to 66.8 percent from 65.9 percent.

The (re)insurer generated $69mn in net investment income in the quarter after reporting a $142mn investment loss in the year-ago quarter.

Building credibility over time

“This quarter has been a positive one for SiriusPoint with all three areas of our business performing well as we continue our journey to improve the performance of the company,” CEO Scott Egan said in a statement Wednesday.

“Our investment portfolio remains focused on high quality, fixed income instruments and we are tracking to the top-end of our full year 2023 net investment income guidance of $220mn to $240mn,” he added.

On top of existing expense reductions, Egan said his management team was “confident” the company would reach $50mn in run-rate savings by 2024, as he also reiterated guidance that the (re)insurer would post a double-digit return on equity for the year in 2023.

“We are also making significant progress to improve culture and employee engagement with the intention to create a high performing organization,” Egan continued.

“We have great talent across the organization and I am proud of their efforts in delivering these results,” he added.

Egan noted that exploratory discussions with investor Daniel Loeb regarding a potential acquisition began and concluded in the second quarter, expressing appreciation for the support by a special committee established to review a potential deal of SiriusPoint’s current strategy.

Egan also highlighted the addition of former Hiscox CEO Bronek Masojada to the firm’s board of directors in the quarter.

“Our focus on executing well against our strategy continues and with each quarter that passes, we build more credibility and track record,” Egan added.

“Our aim is to keep doing this and I look forward to sharing further progress later in the year,” he concluded.