Scott Egan: MGA valuations not fully reflected in SiriusPoint share price

SiriusPoint CEO Scott Egan has described the firm’s MGA relationships as a major factor in its growth story this year, but believes the true valuation of these entities is not fully reflected in the company’s share price.

Speaking to The Insurer TV, Egan described this year’s second quarter as an inflection point for the company as its top line expanded year on year for the first time since he joined in September 2022.

And he highlighted the MGA space as one of the major drivers of this growth.

“It’s a major part of what’s behind the growth story we described as an inflection point in Q2,” he said.

“Our MGAs, when consolidated, generate roughly $40mn to $50mn in profit. They're currently carried on our balance sheet at just under $100mn.

“I’m not going to do the investors’ jobs for them, but I think we can all agree that valuations in the MGA space are typically higher than two times profits.

“If those MGAs were reflected at what I’d call true market value, it would be a significantly larger number,” Egan explained.

“But of course, it's not just as simple as that. We have to keep demonstrating that we can build an underwriting track record,” he continued.

Underwriters, not venture capitalists

The role MGAs play in SiriusPoint’s portfolio has shifted since Egan became CEO in 2022. Previously, the (re)insurer focused on holding equity stakes in MGAs.

However, under Egan’s leadership, SiriusPoint has pivoted to supporting MGAs through underwriting rather than direct investments. As Egan said in a previous interview with the publication: “We’re not a venture capitalist.”

Egan emphasised that this shift to being the balance sheet underwriter for MGAs has required a new approach to how the company brings value.

“I think what people really have to understand is there's a chemistry between the balance sheet company and the MGA. There's a way of working together, sharing information, transparency, data, etc.

“That really means you get the best of both worlds. You get the best of the deep knowledge and the specialism, and then the balance sheet can bring a wider perspective on some of those risks,” he explained

Playing it safe with cyber

One equity stake that SiriusPoint sold as part of its new strategy was its investment in cyber MGA Corvus.

“If you remember, we were invested in Corvus, which was where we had all our cyber exposure. That was sold to Travelers.

“That sale was behind the sharp reduction in our cyber premium,” said Egan.

While SiriusPoint might return to the cyber market, Egan noted that it wouldn’t be a major move, citing concerns about systemic risk.

“We're not against cyber at all. And obviously it's a product that's very important in the marketplace. But I do think you're not going to see anything from SiriusPoint being radical in that space.

“We do worry about the cat risk and the aggregation. It's unproven, but I do understand that it's an area that we will underwrite in, but we won't be one of the large underwriters in cyber.”

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