SiriusPoint(SPNT) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements This section presents SiriusPoint Ltd.'s unaudited consolidated financial statements for Q3 and 9M 2023, covering balance sheets, income, and cash flows Consolidated Balance Sheets Consolidated Balance Sheets | Balance Sheet Items | Sep 30, 2023 ($M) | Dec 31, 2022 ($M) | | :--- | :--- | :--- | | Total Investments | 6,026.0 | 5,653.7 | | Total Assets | 12,591.2 | 11,036.3 | | Loss and loss adjustment expense reserves | 5,448.8 | 5,268.7 | | Total Liabilities | 10,325.8 | 8,953.7 | | Total Shareholders' Equity | 2,265.4 | 2,082.6 | - Total assets increased to $12.6 billion from $11.0 billion, primarily driven by a rise in 'Loss and loss adjustment expenses recoverable' and 'Debt securities, available for sale'[9] - Total liabilities grew to $10.3 billion from $9.0 billion, largely due to a significant increase in 'Reinsurance balances payable' from $813.6 million to $1,733.4 million[9] Consolidated Statements of Income (Loss) Consolidated Statements of Income (Loss) | Income Statement Highlights | Q3 2023 ($M) | Q3 2022 ($M) | 9M 2023 ($M) | 9M 2022 ($M) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | 702.6 | 597.5 | 2,091.5 | 1,432.0 | | Total Expenses | 623.5 | 690.2 | 1,770.9 | 1,812.1 | | Net Income (Loss) | 63.8 | (93.6) | 264.0 | (363.0) | | Net Income (Loss) available to Common Shareholders | 57.5 | (98.4) | 245.3 | (376.2) | | Diluted EPS ($) | 0.32 | (0.61) | 1.36 | (2.35) | - The company reported a significant turnaround, with a net income of $63.8 million in Q3 2023 compared to a net loss of $93.6 million in Q3 2022, driven by lower loss expenses and positive investment results[12] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows | Cash Flow Activity (Nine Months Ended Sep 30) | 2023 ($M) | 2022 ($M) | | :--- | :--- | :--- | | Net cash provided by operating activities | 367.9 | 245.3 | | Net cash used in investing activities | (395.3) | (1,363.9) | | Net cash used in financing activities | (75.1) | (18.3) | | Net decrease in cash, cash equivalents and restricted cash | (102.5) | (1,136.9) | - Net cash from operating activities increased to $367.9 million for the first nine months of 2023, up from $245.3 million in the prior year period, influenced by an increase in 'Reinsurance balances payable' and a decrease in 'Loss and loss adjustment expenses recoverable'[20] Notes to the Consolidated Financial Statements Detailed notes cover accounting policies, a Loss Portfolio Transfer, segment performance, and revisions to interim financial statements - On March 2, 2023, the company entered into a Loss Portfolio Transfer (LPT) transaction, ceding estimated loss reserves of $1.3 billion (as of Sep 30, 2022), which were reduced to $905.6 million at closing, resulting in a funds held payable of $862.5 million and an estimated deferred gain of $25.8 million as of September 30, 2023[30][31] - For the nine months ended September 30, 2023, the company recorded $163.1 million of net favorable prior year loss reserve development, primarily due to favorable loss emergence and validated by the pricing of the 2023 LPT[156] - The company identified and corrected immaterial errors in its Q1 and Q2 2023 interim financial statements related to the recognition of Net premiums earned, which reduced previously reported net income for the six months ended June 30, 2023, by $17.1 million[219][223] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses improved Q3 and 9M 2023 financial performance, driven by strong underwriting results, positive investment returns, and strategic actions Key Performance Indicators | Key Performance Indicators | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | :--- | :--- | | Combined ratio | 88.0% | 107.7% | 81.6% | 98.5% | | Core income (loss) ($M) | 50.0 | (79.1) | 245.1 | (31.4) | | Annualized return on avg. common equity | 11.3% | (20.1)% | 16.7% | (24.0)% | - The company is executing a restructuring plan, which includes closing offices in Hamburg, Miami, and Singapore, and reducing its footprint in Liege and Toronto to centralize property catastrophe underwriting in Bermuda[257] - A significant driver of improved underwriting results was lower catastrophe losses, which were $12.0 million in Q3 2023 compared to $114.6 million in Q3 2022 (primarily from Hurricane Ian)[271] - The investment portfolio is being repositioned to be better aligned with the underwriting strategy, resulting in lower volatility, with the weighted-asset duration of the fixed income portfolio extended to 2.7 years from 1.8 years at year-end 2022[248][276] Quantitative and Qualitative Disclosures About Market Risk This section details principal market risks including interest rate, foreign currency, and price risk, providing sensitivity analyses for each Interest Rate Sensitivity Analysis | Assumed Change in Interest Rate | Estimated Pre-tax (Decrease) in Fair Value of Debt Securities ($M) | | :--- | :--- | | 50 bp increase | (72.9) | | 100 bp increase | (145.5) | | 200 bp increase | (290.6) | | 300 bp increase | (435.7) | - A hypothetical 10% increase or decrease in the value of other long-term investments would change their carrying value by approximately $32.6 million[398] - A hypothetical 10% increase or decrease in the value of investments in Related Party Investment Funds would change their carrying value by approximately $11.0 million[399] Controls and Procedures Management concluded disclosure controls were ineffective due to a material weakness in internal control over financial reporting related to premium calculations - A material weakness was identified in internal control over financial reporting related to the calculation of written and earned premiums, stemming from a manual calculation in the property catastrophe business and a data transfer error[403] - This material weakness resulted in an immaterial misstatement of premiums for Q1 and Q2 2023, which the company has elected to revise for transparency[404] - Management has implemented an additional control to ensure the accuracy of Net premiums earned calculations and expects to complete the remediation shortly[405] PART II. OTHER INFORMATION Legal Proceedings The company is subject to various lawsuits and regulatory actions, none expected to materially affect its financial condition or operations - The company is involved in typical industry lawsuits, including disputes over policy coverage, claims handling, and ceded reinsurance, but does not expect any current proceedings to have a material adverse impact[408] Risk Factors A new risk factor highlights potential adverse impacts from Bermuda's expected 15% corporate income tax, effective January 1, 2025 - The Government of Bermuda is expected to enact a 15% corporate income tax, effective from January 1, 2025, which may subject the company to additional income taxes and could have a material impact on its deferred taxes and effective tax rate[410] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase common shares in Q3 or 9M 2023, with approximately $56.3 million remaining under its repurchase authorization - No common shares were repurchased during the third quarter of 2023[412] - The company has approximately $56.3 million remaining under its share and warrant repurchase authorization as of September 30, 2023[412] Other Information No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the third quarter of 2023 - No new or terminated Rule 10b5-1 trading arrangements were reported for directors or officers during the quarter[415] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files