SiriusPoint(US:SPNT)2022-03-01 13:42Part I Business SiriusPoint, a global insurer and reinsurer formed in 2021, focuses on re-underwriting reinsurance, growing insurance services, and de-risking investments - On February 26, 2021, the company completed the acquisition of Sirius International Insurance Group, Ltd. ("Sirius Group") and changed its name from Third Point Reinsurance Ltd. to SiriusPoint Ltd17 Company Financial Snapshot (as of Dec 31, 2021) | Metric | Value (USD) | | :--- | :--- | | Common Shareholders' Equity | $2.3 billion | | Total Capital | $3.3 billion | | Total Assets | $10.6 billion | - The company's strategy is based on three pillars: focus and stabilize, revitalize and grow, and modernize and break out, supported by re-underwriting the reinsurance portfolio, growing the insurance & services business, and de-risking the capital investments portfolio23 Gross Premiums Written by Segment (2019-2021) | Segment | 2021 ($ million) | 2020 ($ million) | 2019 ($ million) | | :--- | :--- | :--- | :--- | | Reinsurance | 1,350.4 | 534.1 | 575.3 | | Insurance & Services | 897.9 | 25.5 | 5.5 | | Corporate (Runoff) | (11.8) | 28.9 | 87.6 | | Total | 2,236.5 | 588.5 | 668.4 | - On October 29, 2021, the company closed a loss portfolio transfer (LPT) transaction with Pallas Reinsurance Company Ltd. to cover $362 million of loss reserves, primarily from the legacy Sirius Group runoff portfolio, for a premium of $381 million, reducing net loss reserves from Runoff business by 48%357576 Risk Factors The company faces diverse risks including strategic transformation, COVID-19, integration challenges, underwriting, market, cyber, climate, regulatory, and investment exposures - The company's business is subject to a number of key risks, categorized as: Strategic, COVID-19 & Catastrophe, Integration, Insurance Underwriting, Market/Credit/Liquidity, Competition, Cyber, Climate Change, Operational, Regulatory/Litigation, Investment, and Taxation risks218 - The company may not successfully implement its strategic transformation, which involves shifting from reinsurance to insurance and services, posing risks such as lower near-term premium growth, inability to secure MGA partnerships, and increased operating expenses219220 - The COVID-19 pandemic has adversely affected business through lower premium volumes in certain lines, increased risk of loss (contingency, travel, A&H, workers' comp), and volatility in the investment portfolio, with the ultimate impact remaining uncertain221222223 - A significant portion of the investment portfolio is managed by Third Point LLC, exposing the company to potentially substantial investment risks associated with its event-driven, value-oriented strategy, which may include concentrated positions, leverage, and derivatives327328329 - The company has significant deferred tax assets that could be devalued if future taxable income is insufficient or if corporate tax rates are reduced, and operations are also exposed to potential U.S. federal income tax, the Base Erosion and Anti-Abuse Minimum Tax (BEAT), and risks of being classified as a PFIC or CFC377379381 Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None428 Properties The company leases its principal office in Bermuda and other global locations, deeming current space adequate for operations - The Company leases its principal executive office in Pembroke, Bermuda, and has additional leased office spaces in the United States, Canada, Europe, and Asia429 Legal Proceedings The company faces routine lawsuits and regulatory actions, with management assessing no material adverse financial impact from current proceedings - The Company is subject to lawsuits and regulatory actions in the normal course of business, which are considered in its loss and loss expense reserves, and management believes no individual proceeding is likely to have a material adverse effect on the company431 Mine Safety Disclosures This item is not applicable to the company - Not applicable432 Part II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities SiriusPoint common shares trade on NYSE, with no expected dividends, and a $61.3 million share repurchase authorization remaining available - The company's common shares are listed on the New York Stock Exchange (NYSE) under the symbol "SPNT"434 - The company does not currently expect to declare or pay dividends on its common shares, intending to retain earnings to finance business growth435 - As of December 31, 2021, the company had a repurchase authorization of up to $61.3 million for its outstanding common shares, CVRs, and warrants, with the full amount remaining available440 Management's Discussion and Analysis of Financial Condition and Results of Operations 2021 results reflect the Sirius Group acquisition, with net income of $55.8 million impacted by $329.0 million in catastrophe losses and a 110.0% core combined ratio - The acquisition of Sirius Group was completed on February 26, 2021, for a total consideration of $1,079.8 million, resulting in a bargain purchase gain of $50.4 million, with the company's 2021 results including Sirius Group from this date forward454 - Catastrophe losses for 2021 were $329.0 million, net of reinsurance, primarily from European floods ($133 million) and Hurricane Ida ($100 million), contributing 18.8 percentage points to the core combined ratio458 Consolidated Results of Operations (2021 vs 2020) | Metric | 2021 ($ million) | 2020 ($ million) | | :--- | :--- | :--- | | Total underwriting loss | (156.1) | (71.7) | | Total investment gains and income | 312.5 | 278.9 | | Other revenues | 151.2 | — | | Net income | 55.8 | 143.8 | Key Performance Indicators (2021 vs 2020) | Indicator | 2021 | 2020 | | :--- | :--- | :--- | | Core underwriting loss | ($173.6 million) | ($68.7 million) | | Core combined ratio | 110.0% | 111.9% | | Return on avg. common equity | 2.3% | 9.6% | | Basic book value per share | $14.46 | $16.88 | | Tangible diluted book value per share | $13.27 | $16.71 | Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate, equity price, and foreign currency risks, with a 100 bp rate increase impacting fixed income by $45.2 million and a 10% equity decline impacting equity by $45.9 million and related party funds by $91.0 million - The company's primary market risks are interest rate risk, equity securities and other investments price risk, and foreign currency exchange risk663 Interest Rate Sensitivity on Debt Securities (as of Dec 31, 2021) | Assumed Change in Interest Rate | Estimated Pre-tax Change in Fair Value ($ million) | | :--- | :--- | | 100 bp decrease | $44.0 | | 100 bp increase | ($45.2) | | 300 bp decrease | $129.4 | | 300 bp increase | ($138.3) | - A hypothetical 10% increase or decrease in the value of equity securities and other long-term investments would change their carrying value by approximately $45.9 million, and a similar 10% change in related party investment funds would impact their value by approximately $91.0 million667668 Financial Statements and Supplementary Data This item directs readers to the consolidated financial statements and supplementary data starting on page F-1 - This item directs the reader to the consolidated financial statements and supplementary data commencing on page F-1 of the report671 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure This item is not applicable to the company - Not applicable672 Controls and Procedures Management deemed disclosure controls effective as of December 31, 2021, despite material changes from the Sirius Group acquisition, which excluded 59% of assets and 58% of revenues from the internal control assessment - Management concluded that the Company's disclosure controls and procedures were effective as of December 31, 2021673 - The acquisition of Sirius Group led to material changes in internal control over financial reporting, and management's assessment of internal controls as of December 31, 2021, excluded certain non-integrated controls of Sirius Group674676 - Management concluded that, as of December 31, 2021, the company's internal control over financial reporting was effective based on the COSO 2013 framework677 Other Information On February 23, 2022, the company amended agreements with Third Point LLC, establishing new capital withdrawal rights from TPE for reinvestment into a new TPOC portfolio - On February 23, 2022, the company entered into a Fourth Amended and Restated Exempted Limited Partnership Agreement (2022 LPA) for the Third Point Enhanced LP (TPE)680 - The 2022 LPA adds the right to withdraw capital from TPE according to an agreed schedule for reinvestment into a new TP Optimized Credit (TPOC) portfolio or other Third Point strategies685 - An Amended and Restated Investment Management Agreement (2022 IMA) was also entered into, under which Third Point LLC will manage the new TPOC Portfolio and provide non-discretionary advisory services681682 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable701 Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships, and Principal Accounting Fees Information for these items is incorporated by reference from the company's definitive proxy statement, to be filed within 120 days of fiscal year-end - Information for Items 10 through 14 is incorporated by reference from the registrant's definitive proxy statement to be filed with the SEC within 120 days after the fiscal year ended December 31, 2021704 Part IV Exhibits and Financial Statement Schedules This section presents the company's audited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes for 2021 and comparative periods Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP issued an unqualified opinion on financial statements and internal controls, excluding certain non-integrated Sirius Group elements - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements as of December 31, 2021, and on the effectiveness of internal control over financial reporting725 - The audit of internal controls excluded certain non-integrated elements of the newly acquired Sirius Group, which represented approximately 59% of consolidated assets and 58% of consolidated revenues731 - Critical Audit Matters identified were the valuation of Value of Business Acquired (VOBA) and Distribution Relationships intangible assets from the Sirius Group acquisition, and the valuation of Loss and Loss Adjustment Expense Reserves, due to significant management judgment and complexity734735740 Consolidated Financial Statements This section presents the company's consolidated balance sheets, income statements, comprehensive income, equity, and cash flows Consolidated Balance Sheet Highlights (as of Dec 31) | Account | 2021 ($ million) | 2020 ($ million) | | :--- | :--- | :--- | | Total Investments | 4,529.9 | 1,160.9 | | Total Assets | 10,618.3 | 3,535.2 | | Loss and loss adjustment expense reserves | 4,841.4 | 1,310.1 | | Total Liabilities | 8,115.0 | 1,969.9 | | Total Shareholders' Equity | 2,503.3 | 1,565.3 | Consolidated Income Statement Highlights (Year Ended Dec 31) | Account | 2021 ($ million) | 2020 ($ million) | 2019 ($ million) | | :--- | :--- | :--- | :--- | | Net premiums earned | 1,717.0 | 610.8 | 700.1 | | Total revenues | 2,180.7 | 889.7 | 982.6 | | Loss and loss adjustment expenses incurred, net | 1,326.5 | 465.3 | 403.5 | | Total expenses | 2,135.6 | 737.8 | 781.3 | | Net income | 55.8 | 143.8 | 200.6 | | Diluted EPS | $0.27 | $1.53 | $2.16 | Consolidated Cash Flow Highlights (Year Ended Dec 31) | Cash Flow | 2021 ($ million) | 2020 ($ million) | | :--- | :--- | :--- | | Net cash provided by operating activities | 1.6 | 73.3 | | Net cash provided by investing activities | 208.6 | 6.0 | | Net cash provided by (used in) financing activities | 24.3 | (19.4) | Notes to the Consolidated Financial Statements These notes detail accounting policies, the Sirius Group acquisition, segment performance, investments, loss reserves, and debt obligations - The company changed its accounting policy for assumed written premiums effective January 1, 2021, to recognize premiums ratably over the policy term, consistent with the ceding company, with prior periods retrospectively adjusted782783 Sirius Group Acquisition Purchase Price Allocation (Feb 26, 2021) | | Value ($ million) | | :--- | :--- | | Total purchase price | 1,079.8 | | Total identifiable net assets acquired | 1,130.2 | | Bargain purchase gain | 50.4 | Loss and Loss Adjustment Expense Reserves Roll-Forward (2021) | | Value ($ million) | | :--- | :--- | | Net reserves, beginning of year | 1,289.7 | | Incurred loss and LAE (current year) | 1,369.1 | | Incurred loss and LAE (prior years - favorable) | (42.6) | | Net paid losses | (1,450.1) | | Amounts acquired from Sirius Group | 2,467.8 | | Net reserves, end of year | 3,624.7 | Debt Obligations (as of Dec 31, 2021) | Instrument | Carrying Value ($ million) | | :--- | :--- | | 2017 SEK Subordinated Notes | 296.3 | | 2016 Senior Notes | 406.0 | | 2015 Senior Notes | 114.4 | | Total Debt | 816.7 |