SiriusPoint(SPNT) - 2021 Q3 - Quarterly Report

Filing Information This section details SiriusPoint Ltd.'s Form 10-Q filing information, including its registrant status and common shares outstanding - SiriusPoint Ltd. filed its Form 10-Q for the quarterly period ended September 30, 2021, as an accelerated filer[1][2][3] Registrant Status | Status | | :--- | | Accelerated filer ☒ | - As of November 1, 2021, the registrant had 161,935,588 common shares issued and outstanding[3] INDEX The report's index outlines two main parts: Part I - Financial Information and Part II - Other Information, detailing various items and their corresponding page numbers PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents SiriusPoint Ltd.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income, shareholders' equity, cash flows, and related notes for the specified periods Condensed Consolidated Balance Sheets (Unaudited) This section provides the unaudited condensed consolidated balance sheets, detailing assets, liabilities, and shareholders' equity as of September 30, 2021, and December 31, 2020 Condensed Consolidated Balance Sheets (Unaudited) - Key Figures (in millions of U.S. dollars) | Metric | September 30, 2021 | December 31, 2020 | | :------------------------------------------------- | :------------------- | :------------------ | | Assets | | | | Total investments | $5,073.5 | $1,160.9 | | Cash and cash equivalents | $701.2 | $526.0 | | Restricted cash and cash equivalents | $1,482.3 | $1,187.9 | | Insurance and reinsurance balances receivable, net | $1,621.4 | $441.9 | | Total assets | $10,715.3 | $3,535.2 | | Liabilities | | | | Loss and loss adjustment expense reserves | $4,862.3 | $1,310.1 | | Unearned premium reserves | $1,215.4 | $284.8 | | Debt | $827.0 | $114.3 | | Total liabilities | $8,077.3 | $1,969.9 | | Shareholders' Equity | | | | Total shareholders' equity | $2,638.0 | $1,565.3 | | Total liabilities, noncontrolling interests and shareholders' equity | $10,715.3 | $3,535.2 | - Total assets significantly increased to $10,715.3 million as of September 30, 2021, from $3,535.2 million at December 31, 2020, primarily due to the acquisition of Sirius Group[9] - Shareholders' equity attributable to SiriusPoint shareholders rose to $2,638.0 million from $1,563.9 million, reflecting the impact of the acquisition[9] Condensed Consolidated Statements of Income (Loss) (Unaudited) This section presents the unaudited condensed consolidated statements of income (loss), outlining revenues, expenses, and net income (loss) for the three and nine months ended September 30, 2021 and 2020 Condensed Consolidated Statements of Income (Loss) (Unaudited) - Key Figures (in millions of U.S. dollars, except per share) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net premiums earned | $512.1 | $141.7 | $1,234.4 | $428.9 | | Net investment income | $199.8 | $122.0 | $463.7 | $74.1 | | Total revenues | $732.6 | $263.7 | $1,745.2 | $503.0 | | Loss and loss adjustment expenses incurred, net | $581.7 | $110.5 | $984.9 | $287.4 | | Total expenses | $793.0 | $194.3 | $1,583.7 | $489.5 | | Income (loss) before income tax (expense) benefit | $(60.4) | $69.4 | $161.5 | $13.5 | | Net income (loss) | $(47.4) | $68.7 | $155.1 | $9.1 | | Net income (loss) available to SiriusPoint common shareholders | $(48.0) | $68.7 | $147.4 | $9.1 | | Basic earnings (loss) per share | $(0.30) | $0.74 | $0.94 | $0.10 | | Diluted earnings (loss) per share | $(0.34) | $0.73 | $0.92 | $0.10 | - For the three months ended September 30, 2021, the company reported a net loss of $47.4 million, a significant decline from a net income of $68.7 million in the prior year, primarily due to increased loss and loss adjustment expenses[11] - For the nine months ended September 30, 2021, net income increased substantially to $155.1 million from $9.1 million in the prior year, driven by higher net premiums earned and net investment income[11] Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) This section details the unaudited condensed consolidated statements of comprehensive income (loss), including net income (loss) and other comprehensive income (loss) components for the specified periods Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Key Figures (in millions of U.S. dollars) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $(47.4) | $68.7 | $155.1 | $9.1 | | Change in foreign currency translation, net of tax | $(1.8) | — | $(0.3) | — | | Total other comprehensive loss | $(1.8) | — | $(0.3) | — | | Comprehensive income (loss) | $(49.2) | $68.7 | $154.8 | $9.1 | | Comprehensive income (loss) available to SiriusPoint | $(45.8) | $68.7 | $156.6 | $9.1 | - Comprehensive income for the three months ended September 30, 2021, was a loss of $49.2 million, compared to an income of $68.7 million in the prior year, primarily due to the net loss and foreign currency translation losses[13] - For the nine months ended September 30, 2021, comprehensive income increased to $154.8 million from $9.1 million in the prior year, reflecting the higher net income[13] Condensed Consolidated Statements of Shareholders' Equity (Unaudited) This section presents the unaudited condensed consolidated statements of shareholders' equity, showing changes in common shares, preference shares, additional paid-in capital, and retained earnings Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - Key Figures (in millions of U.S. dollars) | Metric | Sep 30, 2021 (3 months) | Sep 30, 2020 (3 months) | Sep 30, 2021 (9 months) | Sep 30, 2020 (9 months) | | :------------------------------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Series B preference shares (end of period) | $200.0 | — | $200.0 | — | | Common shares (end of period) | $16.2 | $9.5 | $16.2 | $9.5 | | Additional paid-in capital (end of period) | $1,654.3 | $932.0 | $1,654.3 | $932.0 | | Retained earnings (end of period) | $767.8 | $486.0 | $767.8 | $486.0 | | Total shareholders' equity (end of period) | $2,638.0 | $1,428.5 | $2,638.0 | $1,428.5 | - Total shareholders' equity increased to $2,638.0 million as of September 30, 2021, from $1,428.5 million at September 30, 2020, primarily driven by the issuance of preference shares and common shares for the Sirius Group acquisition, and an increase in additional paid-in capital[17] - Net income (loss) for the nine months ended September 30, 2021, was $155.1 million, contributing to retained earnings, while dividends on preference shares totaled $9.5 million[17] Condensed Consolidated Statements of Cash Flows (Unaudited) This section outlines the unaudited condensed consolidated statements of cash flows, detailing cash generated from operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020 Condensed Consolidated Statements of Cash Flows (Unaudited) - Key Figures (in millions of U.S. dollars) | Metric | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $26.6 | $45.3 | | Net cash provided by (used in) investing activities | $410.0 | $(68.1) | | Net cash provided by (used in) financing activities | $33.0 | $(15.7) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $469.6 | $(38.5) | | Cash, cash equivalents and restricted cash at end of period | $2,183.5 | $1,615.5 | - Net cash provided by operating activities decreased to $26.6 million for the nine months ended September 30, 2021, from $45.3 million in the prior year, primarily due to transaction-related payments and increased loss payments[20][497] - Investing activities generated $410.0 million in cash, a significant improvement from a net outflow of $68.1 million in the prior year, largely driven by the acquisition of Sirius Group, which included $740.3 million of acquired cash and restricted cash[20][498] - Cash, cash equivalents and restricted cash at the end of the period increased to $2,183.5 million from $1,615.5 million, reflecting the overall net increase in cash[20] Notes to the Condensed Consolidated Financial Statements (UNAUDITED) 1. Organization This note describes SiriusPoint Ltd.'s incorporation, global multi-line operations, the Sirius Group acquisition, and the resulting change in reportable segments - SiriusPoint Ltd. was incorporated in Bermuda on October 6, 2011, and provides global multi-line reinsurance and insurance products through its subsidiaries[22] - On February 26, 2021, the Company completed the acquisition of Sirius International Insurance Group, Ltd. and changed its name from Third Point Reinsurance Ltd. to SiriusPoint Ltd., integrating Sirius Group's operations from the acquisition date[23] - Effective January 1, 2021, the Company changed its reportable segments to Accident & Health, Specialty, Property, and Runoff & Other, reflecting expanded operations post-acquisition[27] 2. Significant accounting policies This note details significant accounting policy changes, including premium recognition, and the adoption of new accounting standards, along with their retrospective impact on financial statements - Effective January 1, 2021, the Company changed its accounting policy for assumed written premium recognition to recognize premiums ratably over the policy term, aligning with cedent recognition and reducing uncertainty[30][32] Retrospective Impact of Accounting Policy Change on Balance Sheet (December 31, 2020, in millions) | Metric | As previously reported | Adjustment | As adjusted | | :------------------------------------------ | :--------------------- | :--------- | :---------- | | Insurance and reinsurance balances receivable, net | $559.4 | $(117.5) | $441.9 | | Deferred acquisition costs, net and value of business acquired | $134.3 | $(65.7) | $68.6 | | Unearned premiums ceded | $27.7 | $(7.2) | $20.5 | | Total assets | $3,725.6 | $(190.4) | $3,535.2 | | Reinsurance balances payable | $80.4 | $(2.3) | $78.1 | | Unearned premium reserves | $472.9 | $(188.1) | $284.8 | | Total liabilities | $2,160.3 | $(190.4) | $1,969.9 | | Shareholders' equity attributable to SiriusPoint common shareholders | $1,563.9 | — | $1,563.9 | - The change in accounting policy had no impact on previously reported net income (loss) or shareholders' equity attributable to SiriusPoint common shareholders[36] - The Company adopted ASU 2019-12 (Income Taxes) and ASU 2020-01 (Investments—Equity Securities) effective January 1, 2021, neither of which had a material impact on its financial statements[48][49] 3. Acquisition of Sirius Group This note outlines the details of the Sirius Group acquisition, including the total purchase price, the resulting bargain purchase gain, and the identifiable intangible assets recognized - On February 26, 2021, SiriusPoint completed the acquisition of Sirius Group, expanding underwriting capabilities, geographic footprint, and product offerings[53] Total Purchase Price for Sirius Group (February 26, 2021, in millions) | Component | Amount | | :---------------------------------------------------------------- | :----- | | Cash consideration | $100.4 | | Common Shares issued by SiriusPoint | $595.6 | | Series A Preference Shares issued, at fair value | $40.8 | | Series B Preference Shares issued, at fair value | $200.0 | | Merger warrants issued, at fair value | $53.4 | | Private warrants issued, at fair value | $7.3 | | Sirius Group Public Warrants, at fair value | $2.6 | | Upside Rights issued, at fair value | $6.5 | | CVRs issued, at fair value | $27.0 | | CVR waiver restricted shares | $0.7 | | Fair value of replaced Sirius Group equity awards | $37.5 | | Transaction fee reimbursement | $8.0 | | Total purchase price | $1,079.8 | - The acquisition resulted in a bargain purchase gain of $12.9 million, reflecting Sirius Group's shares trading at a discount to book value and the need for ownership diversification[74] Identifiable Intangible Assets at September 30, 2021 (in millions) | Asset | Amount | | :---------------------------------------- | :----- | | Distribution relationships | $75.0 | | MGA relationships | $34.0 | | Lloyd's Capacity - Syndicate 1945 | $41.8 | | Insurance licenses | $7.0 | | Trade name | $16.0 | | Internally developed and used computer software | $5.0 | | Net identifiable intangible assets at Sep 30, 2021 | $173.7 | 4. Significant transactions This note describes significant transactions, specifically the sale of Cedar Insurance Company and the resulting gain recognized by the Company - On August 5, 2021, the Company sold 100% of Cedar Insurance Company, a New York-domiciled insurer with a run-off book of business, for $20.5 million, recognizing a $5.8 million gain[80] 5. Segment reporting This note details the Company's four operating segments: Accident & Health, Specialty, Property, and Runoff & Other, and presents their financial results for the specified periods - The Company reports four operating segments: Accident & Health (A&H), Specialty, Property, and Runoff & Other, reflecting expanded operations post-Sirius Group acquisition[81][27] Operating Segment Results (Three months ended September 30, 2021, in millions) | Metric | A&H | Specialty | Property | Runoff & Other | Total | | :------------------------------------------ | :---- | :-------- | :------- | :------------- | :------ | | Gross premiums written | $118.1 | $350.9 | $182.0 | $2.7 | $653.7 | | Net premiums earned | $111.7 | $240.6 | $150.8 | $9.0 | $512.1 | | Net underwriting income (loss) | $15.2 | $(6.4) | $(264.7) | $(9.9) | $(265.8) | | Combined ratio | 86.4% | 102.6% | 275.6% | NM | 151.9% | Operating Segment Results (Nine months ended September 30, 2021, in millions) | Metric | A&H | Specialty | Property | Runoff & Other | Total | | :------------------------------------------ | :---- | :-------- | :------- | :------------- | :------ | | Gross premiums written | $343.5 | $807.9 | $457.3 | $(25.7) | $1,583.0 | | Net premiums earned | $250.4 | $610.7 | $385.4 | $(12.1) | $1,234.4 | | Net underwriting income (loss) | $23.6 | $(6.8) | $(229.1) | $(11.5) | $(223.8) | | Combined ratio | 90.6% | 101.2% | 159.4% | NM | 118.1% | 6. Cash, cash equivalents, restricted cash and restricted investments This note provides a breakdown of cash, cash equivalents, restricted cash, and restricted investments, highlighting the significant increase primarily due to the Sirius Group acquisition Cash, Cash Equivalents, Restricted Cash and Restricted Investments (in millions) | Metric | September 30, 2021 | December 31, 2020 | | :------------------------------------------------- | :------------------- | :------------------ | | Cash and cash equivalents | $701.2 | $526.0 | | Restricted cash securing letter of credit facilities | $577.1 | $306.0 | | Restricted cash securing reinsurance contracts | $889.2 | $881.9 | | Restricted cash held by managing general underwriters | $16.0 | — | | Total cash, cash equivalents and restricted cash | $2,183.5 | $1,713.9 | | Restricted investments securing reinsurance contracts and letter of credit facilities | $997.1 | $86.4 | | Total cash, cash equivalents, restricted cash and restricted investments | $3,180.6 | $1,800.3 | - Total cash, cash equivalents, restricted cash and restricted investments increased significantly to $3,180.6 million as of September 30, 2021, from $1,800.3 million at December 31, 2020, primarily due to the Sirius Group acquisition and increased collateral requirements[101][492] 7. Investments This note details the Company's investment portfolio, including debt securities and related party investment funds, and their fair values and duration Debt Securities Fair Value by Type (in millions) | Type | September 30, 2021 | December 31, 2020 | | :--------------------------------- | :------------------- | :------------------ | | Asset-backed securities | $494.6 | $1.3 | | Residential mortgage-backed securities | $349.2 | $8.7 | | Commercial mortgage-backed securities | $121.9 | — | | Corporate debt securities | $608.2 | $37.7 | | U.S. government and government agency | $368.9 | $53.2 | | Non-U.S. government and government agency | $134.8 | — | | Preferred stocks | $22.8 | — | | Total debt securities | $2,100.9 | $101.3 | - The Company's total debt securities increased substantially to $2,100.9 million at September 30, 2021, from $101.3 million at December 31, 2020, primarily due to the Sirius Group acquisition[105][106] - The weighted average duration of the Company's debt securities (including short-term investments) decreased to approximately 1.6 years as of September 30, 2021, from 10.5 years at December 31, 2020[107] Investments in Related Party Investment Funds (in millions) | Fund | September 30, 2021 (Fair Value) | December 31, 2020 (Fair Value) | | :---------------------------------- | :------------------------------ | :----------------------------- | | Third Point Enhanced LP | $1,430.4 | $1,055.6 | | Third Point Venture Offshore Fund I LP | $26.4 | — | | Total | $1,456.8 | $1,055.6 | - Investments in related party investment funds increased to $1,456.8 million, with Third Point Enhanced LP being the largest component, reflecting its investment strategy in long and short investments across various asset classes[120][122] 8. Fair value measurements This note explains the Company's fair value measurement hierarchy and presents the fair value of investments and liabilities categorized into Level 1, 2, and 3 inputs - The Company categorizes its fair value measurements into a three-level hierarchy (Level 1, 2, and 3) based on the observability of inputs, with Level 3 inputs being significant unobservable assumptions[131] Fair Value Hierarchy of Investments (September 30, 2021, in millions) | Category | Level 1 | Level 2 | Level 3 | Total | | :--------------------------------- | :------ | :------ | :------ | :------ | | Assets | | | | | | Total debt securities | $372.0 | $1,706.1 | $22.8 | $2,100.9 | | Total equity securities | $3.4 | — | — | $3.4 | | Short-term investments | $1,054.5 | $3.4 | — | $1,057.9 | | Other long-term investments | — | — | $328.1 | $328.1 | | Derivative assets | — | — | $2.5 | $2.5 | | Investments in funds valued at NAV | | | | $1,583.0 | | Total assets | $1,429.9 | $1,709.5 | $353.4 | $5,075.8 | | Liabilities | | | | | | Total securities sold, not yet purchased | — | $2.9 | — | $2.9 | | Liability-classified capital instruments | — | $26.1 | $77.3 | $103.4 | | Derivative liabilities | — | — | $2.8 | $2.8 | | Total liabilities | — | $29.0 | $80.1 | $109.1 | - The majority of debt securities are classified as Level 2, utilizing observable inputs, while a significant portion of other long-term investments and liability-classified capital instruments are Level 3, requiring significant management judgment[132][148][150] 9. Derivatives This note describes SiriusPoint's use of derivative financial instruments for risk management and investment purposes, and their fair values - SiriusPoint uses derivative financial instruments for both risk management (e.g., foreign currency risk) and investment purposes (e.g., equity warrants), with changes in fair value recognized in earnings[164][166][167] Fair Value of Derivatives Not Designated as Hedging Instruments (September 30, 2021, in millions) | Derivative Type | Derivative Assets at Fair Value | Derivative Liabilities at Fair Value | Notional Value | | :-------------------------- | :------------------------------ | :--------------------------------- | :------------- | | Interest rate cap | — | — | $250.0 | | Foreign currency swaps | — | $(1.8) | $40.0 | | Foreign currency forwards | — | $(0.6) | $85.3 | | Weather derivatives | $1.1 | — | $20.4 | | Foreign currency futures contracts | — | — | $115.4 | | Equity warrants | $0.2 | — | $0.2 | - Underwriting-related derivatives, primarily reinsurance contracts accounted for as derivatives, had a fair value of $1.2 million in assets and $0.3 million in liabilities as of September 30, 2021[172] 10. Loss and loss adjustment expense reserves This note details the activity in loss and loss adjustment expense reserves, highlighting the significant increase due to the Sirius Group acquisition and prior year development Loss and Loss Adjustment Expense Reserves Activity (Nine months ended September 30, in millions) | Metric | 2021 | 2020 | | :------------------------------------------------- | :----- | :----- | | Gross reserves for loss and loss adjustment expenses, beginning of period | $1,310.1 | $1,111.7 | | Net reserves for loss and loss adjustment expenses, beginning of period | $1,289.7 | $1,099.5 | | Total incurred loss and loss adjustment expenses | $984.9 | $287.4 | | Total net paid losses | $(706.0) | $(216.9) | | Amounts acquired as a result of Sirius Group acquisition | $2,467.8 | — | | Gross reserves for loss and loss adjustment expenses, end of period | $4,862.3 | $1,186.2 | - Gross reserves for loss and loss adjustment expenses significantly increased to $4,862.3 million at September 30, 2021, from $1,186.2 million at September 30, 2020, primarily due to $2,467.8 million acquired from the Sirius Group acquisition[174] - For the nine months ended September 30, 2021, the Company recorded $25.9 million of net favorable prior year loss reserve development, mainly from legacy Sirius Group companies' A&H and Property segments[177] 11. Third party reinsurance This note explains the Company's use of third-party reinsurance for risk protection and details the increase in ceded premiums and recoverable loss and loss adjustment expenses - The Company uses third-party reinsurance to protect against concentrated risks and catastrophic events, remaining liable for reinsured risks if the reinsurer defaults[181] - Premiums ceded increased significantly to $322.4 million for the nine months ended September 30, 2021, from $29.2 million in the prior year, with loss and loss adjustment expenses recoverable rising to $843.5 million[182] 12. Allowance for expected credit losses This note discusses the increase in the allowance for expected credit losses, primarily due to the Sirius Group acquisition, and the credit quality of counterparties - The Company's allowance for expected credit losses increased to $15.9 million as of September 30, 2021, from $0.6 million at December 31, 2020, primarily due to the acquisition of Sirius Group assets[186] - Approximately 65% of total gross assets in scope for credit loss assessment were with counterparties rated by AM Best or S&P, with 82% of those rated A- or better[187] 13. Deposit accounted contracts This note presents the activity and balance of deposit liabilities, which remained relatively stable for the reporting periods Deposit Contracts Activity (Nine months ended September 30, in millions) | Metric | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Balance, beginning of period | $153.0 | $172.3 | | Consideration received | $0.4 | $0.5 | | Consideration receivable | $6.9 | — | | Net investment expense allocation | $3.9 | $0.9 | | Payments | $(9.8) | $(20.8) | | Foreign currency translation | $(0.4) | $0.1 | | Balance, end of period | $154.0 | $153.0 | - The balance of deposit liabilities remained relatively stable at $154.0 million as of September 30, 2021, compared to $153.0 million at December 31, 2020[188] 14. Debt and letter of credit facilities This note details the Company's debt obligations and letter of credit facilities, highlighting the significant increase in debt due to the Sirius Group acquisition and related interest expense Summary of Debt Obligations (in millions) | Debt Obligation | September 30, 2021 (Carrying Value) | December 31, 2020 (Carrying Value) | | :-------------------------------- | :---------------------------------- | :--------------------------------- | | 2017 SEK Subordinated Notes | $306.3 | n/a | | 2016 SIG Senior Notes | $406.3 | n/a | | 2015 TPRUSA Senior Notes | $114.4 | $114.3 | | Total debt | $827.0 | $114.3 | - Total debt increased significantly to $827.0 million as of September 30, 2021, from $114.3 million at December 31, 2020, primarily due to the assumption of Sirius Group's 2017 SEK Subordinated Notes and 2016 SIG Senior Notes[189][190] - Total interest expense for the nine months ended September 30, 2021, was $24.4 million, up from $6.2 million in the prior year, reflecting the increased debt obligations[200] - As of September 30, 2021, the Company had $1,054.0 million in issued letters of credit, fully collateralized by $1,174.1 million in cash, cash equivalents, and debt securities[201][488] - Effective February 26, 2021, the Company entered into a three-year, $300.0 million senior unsecured revolving credit facility, with no outstanding borrowings as of September 30, 2021[202][203] 15. Net investment income This note presents the components of net investment income and realized/unrealized gains (losses), emphasizing the strong performance from related party investment funds Net Investment Income (in millions) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net investment income from investments in related party investment funds | $202.4 | $110.6 | $401.2 | $8.3 | | Other net investment income | $9.1 | $4.4 | $18.8 | $11.2 | | Net investment income | $199.8 | $122.0 | $463.7 | $74.1 | - Net investment income increased to $199.8 million for the three months ended September 30, 2021, from $122.0 million in the prior year, primarily driven by strong performance from investments in related party funds[204][360] - For the nine months ended September 30, 2021, net investment income surged to $463.7 million from $74.1 million, largely due to a 38.3% return from the TP Enhanced Fund and unrealized gains from Pie Insurance and other private equity/hedge funds[204][362] Net Realized and Unrealized Investment Gains (Losses) (in millions) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net realized gains on investments | $5.7 | $3.5 | $23.0 | $44.4 | | Net unrealized gains (losses) on investments | $(17.4) | $3.5 | $20.7 | $10.2 | | Net realized and unrealized investment gains (losses) | $(11.7) | $7.0 | $43.7 | $54.6 | 16. Income taxes This note discusses the Company's income tax status, its operations in various taxable jurisdictions post-acquisition, and the income tax expense (benefit) and effective tax rate - SiriusPoint and its Bermuda subsidiaries are exempt from Bermuda income or capital gains taxes until March 2035[209] - Post-Sirius Group acquisition, the Company operates in various taxable jurisdictions globally, including Australia, Canada, Germany, Hong Kong, Ireland, Luxembourg, Malaysia, Singapore, Sweden, Switzerland, the UK, and the US[210] Income Tax Expense (Benefit) and Effective Tax Rate (in millions) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Income tax (expense) benefit | $13.0 | $(0.7) | $(6.4) | $(4.4) | | Pre-tax income (loss) | $(60.4) | $69.4 | $161.5 | $13.5 | | Effective tax rate | 21.5% | (1.0)% | 4.0% | (32.6)% | - As of September 30, 2021, the Company recorded a net deferred tax asset of $42.0 million, with a net increase of $11.8 million in valuation allowance against deferred tax assets in Swedish and UK subsidiaries[215][216] 17. Shareholders' equity This note details changes in common shares and preference shares, including issuances related to the Sirius Group acquisition and declared dividends Common Shares Issued and Outstanding | Metric | 2021 | 2020 | | :------------------------------------------------- | :----------- | :----------- | | Common shares issued, beginning of period | 95,582,733 | 94,225,498 | | Issuance of common shares for Sirius Group acquisition | 58,331,196 | — | | Issuance of common shares to related party | 6,093,842 | — | | Common shares issued, end of period | 161,949,037 | 95,314,893 | - The number of common shares issued and outstanding significantly increased to 161,949,037 as of September 30, 2021, from 95,314,893 at September 30, 2020, primarily due to the Sirius Group acquisition[220] - The Company issued 8,000,000 new Series B preference shares on February 26, 2021, with cumulative quarterly dividends at an initial rate of 8.0% per annum[222] - Dividends of $4.0 million and $8.1 million were declared and paid to Series B preference shareholders for the three and nine months ended September 30, 2021, respectively[225] 18. Share-based compensation This note outlines the Company's share-based compensation expense, unamortized expense, and details of granted Restricted Share Units (RSUs), Performance Share Units (PSUs), and outstanding options - Total share-based compensation expense increased to $7.7 million for the three months ended September 30, 2021, from $1.5 million in the prior year, and to $17.0 million for the nine months, from $4.7 million[228] - As of September 30, 2021, unamortized share compensation expense was $45.4 million, expected to be amortized over a weighted average period of 2.6 years[229] - The Company granted 6,083,318 Restricted Share Units (RSUs) and 1,154,863 Performance Share Units (PSUs) during the nine months ended September 30, 2021, with RSUs vesting over three years and PSUs subject to service and performance conditions[232][235] - Options outstanding as of September 30, 2021, totaled 10,808,025, with a weighted average exercise price of $12.81 and a remaining contractual life of 1.6 years[237] 19. Variable interest entities This note identifies SiriusPoint's consolidated Variable Interest Entities (VIEs) and its role as a passive investor in certain non-consolidated VIEs, detailing associated financial exposures - SiriusPoint consolidates Alstead Re, Arcadian Risk Capital Ltd., and Joyn Insurance Services Inc. as Variable Interest Entities (VIEs) where it is the primary beneficiary[240][241][242] - The Company's financial exposure to Arcadian is limited to its investment in common shares and financial support up to $18.0 million, while for Joyn, it's limited to preferred shares and a term loan up to $16.5 million[241][242] - SiriusPoint is a passive investor in certain non-consolidated VIEs (hedge and private equity funds), with exposure to loss limited to the carrying value of investments[244][246] - Third Point Enhanced LP (TP Enhanced Fund) is a VIE but not consolidated, as TP GP controls investment decision-making, limiting SiriusPoint's power to direct its economic performance[247] 20. Investments in unconsolidated entities This note details the Company's other long-term investments, including significant stakes in equity method eligible unconsolidated entities valued at fair value Components of Other Long-Term Investments (in millions) | Metric | September 30, 2021 | December 31, 2020 | | :------------------------------------------------- | :------------------- | :------------------ | | Equity method eligible unconsolidated entities, at fair value | $274.5 | — | | Other unconsolidated investments, at fair value | $180.0 | $4.0 | | Total other long-term investments | $454.5 | $4.0 | - The Company holds significant investments in equity method eligible unconsolidated entities, valued at fair value, including stakes in BE Reinsurance Limited, BioVentures Investors, and various tranches of Pie Insurance[254][255] 21. Earnings (loss) per share available to SiriusPoint common shareholders This note presents the basic and diluted earnings (loss) per share for SiriusPoint common shareholders, along with the number of shares outstanding for the specified periods Earnings (Loss) Per Share (in millions, except per share) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) available to SiriusPoint common shareholders | $(48.0) | $68.7 | $147.4 | $9.1 | | Basic earnings (loss) per share | $(0.30) | $0.74 | $0.94 | $0.10 | | Diluted earnings (loss) per share | $(0.34) | $0.73 | $0.92 | $0.10 | | Basic number of common shares outstanding | 159,225,772 | 92,613,393 | 145,095,270 | 92,466,813 | | Diluted number of common shares outstanding | 160,240,888 | 92,969,646 | 147,597,964 | 92,877,674 | - Basic earnings per share for the three months ended September 30, 2021, was a loss of $0.30, a significant decrease from $0.74 income in the prior year, while diluted EPS was a loss of $0.34[258] - For the nine months ended September 30, 2021, basic EPS increased to $0.94 from $0.10, and diluted EPS to $0.92 from $0.10, reflecting improved net income[258] - Options, warrants, and Upside Rights were excluded from diluted EPS computation for the three and nine months ended September 30, 2021, as the average share price was below their exercise or reference price[258] 22. Related party transactions This note outlines related party transactions, including reinsurance contracts with affiliates, common share purchases, and management and performance fees paid to related parties - Post-Sirius Group acquisition, reinsurance contracts with affiliates generated gross written premiums of $151.3 million for the nine months ended September 30, 2021, with $65.3 million in receivables from affiliates[261] - Third Point Opportunities Master Fund L.P. purchased 6,093,842 common shares of the Company for $7.9828 per share upon the closing of the Sirius Group acquisition[262] Management and Performance Fees to Related Parties (in millions) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Management fees | $5.3 | $3.5 | $14.1 | $10.6 | | Performance fees (before loss carryforward) | $50.3 | $25.3 | $99.7 | $4.9 | | Total management and performance fees to related parties | $55.6 | $20.4 | $113.8 | $27.5 | - Total management and performance fees to related parties significantly increased to $113.8 million for the nine months ended September 30, 2021, from $27.5 million in the prior year, driven by higher performance fees[264] 23. Commitments and contingencies This note details the Company's commitments and contingencies, including debt obligations, letter of credit facilities, liability-classified capital instruments, and loan agreements with strategic partners - The Company has commitments including debt obligations, letter of credit facilities, and liability-classified capital instruments related to the Sirius Group acquisition[275][276][277] - As of September 30, 2021, the Company had reserved for issuance common shares underlying warrants to purchase up to 3,494,979 common shares for founding investors and advisors, expiring December 22, 2021[278] - The Company has loan agreements with Arcadian ($18.0 million committed, none drawn) and Joyn ($11.5 million lent, with an option for an additional $5.0 million), both accruing interest at 8.0% per annum[279][280] - Operating lease expense for the nine months ended September 30, 2021, was $7.6 million, with future minimum rental commitments totaling $21.1 million, excluding one material lease not yet commenced[283][284] 24. Subsequent event This note describes a subsequent event, specifically the execution of a loss portfolio transfer (LPT) agreement with Pallas Reinsurance Company Ltd. and its expected financial impact - On October 29, 2021, the Company executed definitive agreements for a loss portfolio transfer (LPT) with Pallas Reinsurance Company Ltd., covering $369 million of loss reserves for a premium of $388 million[286] - The LPT is expected to result in an estimated net charge of $23 million, including $4 million of federal excise tax expense, in the fourth quarter of 2021[286] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of SiriusPoint's financial condition, results of operations, liquidity, and capital resources, focusing on the Sirius Group acquisition, segment performance, investment results, and critical accounting policies Overview This section provides an overview of SiriusPoint Ltd.'s global multi-line insurance and reinsurance business, its key subsidiaries, and strategic investments in managing general underwriters (MGUs) - SiriusPoint Ltd. is a Bermuda-domiciled holding company providing global multi-line insurance and reinsurance, aiming for a highly diversified portfolio and enhanced scale post-Sirius Group acquisition[297] - Key insurance and reinsurance subsidiaries include SiriusPoint Bermuda, SiriusPoint International, and SiriusPoint America, alongside managing general underwriting (MGU) subsidiaries like IMG and Armada[299][301] - The Company has made strategic investments in MGAs such as Arcadian Risk Capital Ltd., Banyan Risk Ltd., and Joyn Insurance Services Inc., and provides insurance paper and capacity to these ventures[302][303] Products and Services This section describes SiriusPoint's reinsurance products and primary insurance business, emphasizing its detailed selection process and underwriting standards for MGU partners - SiriusPoint offers reinsurance products (excess of loss, quota share, prospective, retroactive) and primary insurance business, primarily through MGUs in accident and health, and casualty lines[304][305] - The Company emphasizes a detailed selection process for MGU partners and narrowly defined underwriting standards, closely monitored by staff[305] Reportable Segments This section outlines the Company's four operating segments—Accident & Health, Specialty, Property, and Runoff & Other—and their respective business lines, effective January 1, 2021 - Effective January 1, 2021, the Company's business is classified into four operating segments: Accident & Health (A&H), Specialty, Property, and Runoff & Other, following the Sirius Group acquisition[306] - A&H includes insurance, reinsurance, and MGU operations; Specialty covers unique risks like Aviation & Space, Marine & Energy, and Casualty; Property includes Catastrophe Excess Reinsurance and Agriculture; and Runoff & Other manages legacy liabilities and retroactive reinsurance[307][308] Investment Management This section details the Company's investment management strategy post-Sirius Group acquisition, focusing on portfolio repositioning, outsourced fixed income, and the role of Third Point LLC - Post-Sirius Group acquisition, the investment portfolio was repositioned for lower volatility and improved risk-adjusted returns, with fixed income investments outsourced to third-party managers[309][310] - Third Point LLC continues to manage the majority of alternative investment allocation and specialty asset classes, leveraging its strategic partnership[310] - The investment objective is to maximize total return over the long-term without jeopardizing the insurance franchise, with a focus on matching material liabilities with assets in various currencies[311][312] Recent Developments Acquisition of Sirius International Insurance Group, Ltd. This section summarizes the Sirius Group acquisition, including the total purchase price, the resulting bargain purchase gain, and associated corporate expenses - The acquisition of Sirius Group on February 26, 2021, for $1,079.8 million, resulted in a $12.9 million bargain purchase gain, reflecting Sirius Group's shares trading at a discount to book value[313] - The Company incurred $49.5 million in corporate expenses related to the acquisition, including $29.7 million in professional and advisory fees and $19.8 million in compensation-related expenses[315] COVID-19 Pandemic This section discusses the ongoing impact of the COVID-19 pandemic on the (re)insurance industry and SiriusPoint's recorded COVID-19 related losses - The COVID-19 pandemic continues to significantly impact the (re)insurance industry, leading to uncertainties in losses, supply chain issues, labor shortages, and market volatility[316] - SiriusPoint recorded $2.4 million and $8.1 million in COVID-19 losses for the three and nine months ended September 30, 2021, respectively, primarily from earned premium recognition[319] Recent Strategic Investments This section highlights SiriusPoint's strategic investments and partnerships in 2021, aimed at supporting innovative businesses and driving disruptive change in the (re)insurance industry - SiriusPoint made strategic investments and partnerships in 2021, including Hestia Capital (structured specialty insurance), Outdoorsy (insurtech for RV rental), Joyn (digital commercial insurance MGA), Banyan Risk (D&O MGA), Vouch Insurance (startup insurance platform), Corvus Insurance (commercial insurance products), and Parameter Climate (climate underwriting)[320][321][322][323][324][325][326] - These partnerships aim to support innovative businesses, provide underwriting capacity, and drive disruptive change in the (re)insurance industry[327] Loss Portfolio Transfer This section details the Loss Portfolio Transfer (LPT) agreement with Pallas Reinsurance Company Ltd., its coverage, and expected financial impact on net loss reserves and capital allocation - On October 29, 2021, SiriusPoint finalized a Loss Portfolio Transfer (LPT) with Pallas Reinsurance Company Ltd. (Compre Group), covering $369 million of loss reserves for a $388 million premium[328][329] - The LPT is expected to result in a $23 million net charge in Q4 2021 and reduced net loss reserves from Runoff business by 46%, optimizing capital allocation and rebalancing towards higher margin lines[329][330] Key Performance Indicators Annualized Return on Average Common Shareholders' Equity Attributable to SiriusPoint Common Shareholders This section analyzes the annualized return on average common shareholders' equity, highlighting changes due to underwriting losses and improved net income and investment results Annualized Return on Average Common Shareholders' Equity (in millions, except ratio) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) available to SiriusPoint common shareholders | $(48.0) | $68.7 | $147.4 | $9.1 | | Average common shareholders' equity | $2,459.1 | $1,392.5 | $2,001.0 | $1,420.9 | | Annualized return | (7.8)% | 19.7% | 9.8% | 0.9% | - The annualized return on average common shareholders' equity decreased to (7.8)% for the three months ended September 30, 2021, from 19.7% in the prior year, primarily due to higher underwriting losses from catastrophe events[336] - For the nine months ended September 30, 2021, the return increased to 9.8% from 0.9%, driven by improved net income and investment results, despite higher underwriting losses and acquisition costs[337] Net Underwriting Income (Loss) This section defines net underwriting income (loss) as a pre-tax measure of underwriting profitability, considering net premiums earned, service fee revenue, and various underwriting expenses - Net underwriting income (loss) is a pre-tax measure of underwriting profitability, considering net premiums earned, service fee revenue, and various underwriting expenses[339] Combined Ratio This section defines the combined ratio as a key indicator of underwriting profitability, calculated by dividing the sum of net loss and loss adjustment expenses, acquisition costs, and other underwriting expenses by net premiums earned - The combined ratio, a key indicator of underwriting profitability, is calculated by dividing the sum of net loss and loss adjustment expenses, acquisition costs, and other underwriting expenses by net premiums earned[340] Basic and Tangible Basic Book Value Per Share This section analyzes the basic and tangible basic book value per share, noting decreases primarily due to net loss and the dilutive impact of shares issued for the Sirius Group acquisition - Basic book value per share decreased by 1.8% to $15.31 as of September 30, 2021, from $15.59 at June 30, 2021, primarily due to a net loss in the current period[342] - Tangible basic book value per share decreased by 15.8% to $14.22 as of September 30, 2021, from $16.88 at December 31, 2020, mainly due to the dilutive impact of shares and securities issued for the Sirius Group acquisition[343] Diluted and Tangible Diluted Book Value Per Share This section examines the diluted and tangible diluted book value per share, attributing decreases to net loss and the dilutive impact of shares and intangible assets from the Sirius Group acquisition - Diluted book value per share decreased by 1.5% to $15.14 as of September 30, 2021, from $15.37 at June 30, 2021, due to a net loss[345] - Tangible diluted book value per share decreased by 15.8% to $14.07 as of September 30, 2021, from $16.71 at December 31, 2020, primarily due to the dilutive impact of shares and intangible assets from the Sirius Group acquisition[346] - The method for calculating the dilutive effect of restricted shares, RSUs, and options was changed in Q1 2021 to align with the treasury stock method for EPS[344] Consolidated Results of Operations—Three and nine months ended September 30, 2021 and 2020 Net Underwriting Loss This section analyzes the increase in net underwriting loss for the three and nine months ended September 30, 2021, primarily due to catastrophe losses and accelerated expenses in the Runoff & Other Segment - Net underwriting loss increased for both the three and nine months ended September 30, 2021, primarily driven by catastrophe losses from European floods and Hurricane Ida[349] - The Runoff & Other Segment also contributed to the increased loss with $7.1 million of accelerated expenses related to interest crediting features in reinsurance contracts[349] Other Revenues This section details other revenues, including changes in fair value of liability-classified capital instruments and the bargain purchase gain from the Sirius Group acquisition - Other revenues for the three months ended September 30, 2021, included $18.8 million from changes in fair value of liability-classified capital instruments and a $1.9 million bargain purchase gain[350] - For the nine months ended September 30, 2021, other revenues included $34.2 million from changes in fair value of liability-classified capital instruments and a $12.9 million bargain purchase gain from the Sirius Group acquisition[351] Investments Investment Portfolio This section provides an overview of the Company's investment portfolio, including related party investment funds, debt securities, and cash, highlighting the significant increase post-Sirius Group acquisition Total Investments, Cash, and Cash Equivalents (in millions) | Metric | September 30, 2021 | December 31, 2020 | Change | | :------------------------------------------------- | :------------------- | :------------------ | :----- | | Investments in related party investment funds | $1,456.8 | $1,055.6 | $401.2 | | Debt securities | $2,100.9 | $101.3 | $1,999.6 | | Short-term investments | $1,057.9 | — | $1,057.9 | | Equity securities | $3.4 | — | $3.4 | | Other long-term investments | $454.5 | $4.0 | $450.5 | | Total investments | $5,073.5 | $1,160.9 | $3,912.6 | | Cash and cash equivalents | $701.2 | $526.0 | $175.2 | | Restricted cash and cash equivalents | $1,482.3 | $1,187.9 | $294.4 | | Total invested assets and cash | $7,257.0 | $2,874.8 | $4,382.2 | - Total invested assets and cash increased by $4,382.2 million to $7,257.0 million as of September 30, 2021, primarily driven by the acquisition of Sirius Group and the performance of the TP Enhanced Fund[353][355] Investment Results This section presents the Company's investment results, including net realized and unrealized gains (losses) and net investment income, emphasizing strong performance from related party investment funds Investment Results (in millions) | Metric | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net realized and unrealized investment gains (losses) | $(11.7) | $7.0 | $43.7 | $54.6 | | Net investment income from investments in related party fund | $202.4 | $110.6 | $401.2 | $8.3 | | Other net investment income | $9.1 | $4.4 | $18.8 | $11.2 | | Net investment income | $199.8 | $122.0 | $463.7 | $74.1 | - Net investment income increased by $77.8 million for the three months and $389.6 million for the nine months ended September 30, 2021, primarily due to strong performance from related party investment funds[357] Investment Returns This section details the net investment returns across various investment categories, highlighting the strong performance of the TP Enhanced Fund and contributions from private equity and hedge fund investments Net Investment Returns | Investment | Three months ended Sep 30, 2021 | Three months ended Sep 30, 2020 | Nine months ended Sep 30, 2021 | Nine months ended Sep 30, 2020 | | :------------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | TP Enhanced Fund | 16.3% | 14.6% | 38.3% | 1.0% | | Collateral and other investments managed by Third Point LLC | (0.1)% | 0.6% | 0.2% | 3.8% | | Fixed income investments acquired as part of Sirius acquisition | (0.1)% | —% | 0.5% | —% | | Equity securities and other long-term investments acquired as part of Sirius acquisition | 1.2% | —% | 14.4% | —% | - The TP Enhanced Fund generated a 16.3% return for the three months and a 38.3% return for the nine months ended September 30, 2021, driven by strong performance in long event/fundamental and activist equities[358][360][362] - Unrealized gains of $35.4 million from Pie Insurance and $18.1 million from other private equity and hedge fund investments significantly contributed to investment income for the nine-month period[362] Net Corporate and Other Expenses This section analyzes the increase in net corporate and other expenses, primarily due to compensation-related expenses and professional fees associated with the Sirius Group acquisition, partially offset by a gain from asset sale - Net corporate and other expenses increased for both the three and nine months ended September 30, 2021, primarily due to compensation-related expenses and professional/advisory fees associated with the Sirius Group acquisition[366][367] - The Company recorded $49.5 million in corporate expenses for the Sirius Group acquisition during the nine-month period, and $15.3 million in current expected credit losses[368][369] - A $5.8 million gain from the sale of Cedar Insurance Company partially offset these expenses for the three and nine months ended September 30, 2021[370] Amortization of Intangible Assets This section details the amortization expense for intangible assets, directly resulting from those recognized in the Sirius Group acquisition - Amortization of intangible assets for the three and nine months ended September 30, 2021, was $2.0 million and $4.1 million, respectively, directly resulting from intangible assets recognized in the Sirius Group acquisition[371] Interest Expense This section analyzes the increase in interest expense, primarily due to the assumption of Sirius Group's senior and subordinated notes post-acquisition - Interest expense increased to $9.7 million for the three months and $24.4 million for the nine months ended September 30, 2021, from $2.1 million and $6.2 million respectively in the prior year[200] - This increase was due to the assumption of Sirius Group's senior notes and SEK subordinated notes post-acquisition[373] Foreign Currency Translation This section discusses foreign exchange gains and losses, primarily from international operations and SEK subordinated notes, and the impact of currency revaluation - Foreign exchange gains of $16.1 million and $16.5 million were recorded for the three and nine months ended September 30, 2021, respectively, primarily from international operations and SEK subordinated notes[375] - In the prior year, foreign exchange losses for the three months ended September 30, 2020, were due to the revaluation of British pound-denominated loss reserves against a weakening U.S. dollar[376] Income Tax (Expense) Benefit This section analyzes the income tax expense (benefit), reflecting the proportional operating losses or income in taxable jurisdictions post-Sirius Group acquisition - The Company recorded an income tax benefit of $13.0 million for the three months ended September 30, 2021, reflecting proportionally more operating losses in taxable jurisdictions[378] - For the nine months ended September 30, 2021, income tax expense increased, reflecting proportionally more operating income in taxable jurisdictions post-Sirius Group acquisition[379] Segment Results — Three and nine months ended September 30, 2021 and 2020 A&H This section details the A&H segment's gross premiums written, net underwriting income, and combined ratio, highlighting growth from legacy Sirius Group companies and favorable loss ratio trends - A&H gross premiums written increased by $117.9 million for the three months and $340.7 million for the nine months ended September 30, 2021, primarily due to new premiums from legacy Sirius Group companies[410][413] - The segment generated net underwriting income of $15.2 million (combined ratio 86.4%) for the t