SiriusPoint(SPNT) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The acquisition of Sirius Group significantly increased total assets to $10.2 billion and drove a return to profitability Condensed Consolidated Balance Sheet Highlights | Account | March 31, 2021 (in millions) | December 31, 2020 (in millions) | | :--- | :--- | :--- | | Total Investments | $4,628.1 | $1,160.9 | | Total Assets | $10,169.7 | $3,535.2 | | Total Liabilities | $7,560.4 | $1,969.9 | | Total Shareholders' Equity | $2,609.3 | $1,565.3 | Condensed Consolidated Statement of Income Highlights (Three Months Ended) | Account | March 31, 2021 (in millions) | March 31, 2020 (in millions) | | :--- | :--- | :--- | | Total Revenues | $451.1 | $(38.7) | | Net Investment Income (Loss) | $186.5 | $(185.0) | | Total Expenses | $308.9 | $144.5 | | Net Income (Loss) | $132.4 | $(183.6) | | Diluted EPS | $1.05 | $(1.99) | - 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 Ltd[20] - Effective January 1, 2021, the company changed its reportable segments to Accident & Health (A&H), Specialty, Property, and Runoff & Other to reflect expanded operations post-acquisition[24] Notes to the Condensed Consolidated Financial Statements The notes detail the $1.08 billion Sirius acquisition, new accounting policies, and significant balance sheet impacts - Effective January 1, 2021, the Company changed its accounting policy for assumed written premium recognition to recognize premiums ratably over the term of the policy, consistent with the ceding company[27][28][32] Sirius Group Acquisition Purchase Price (February 26, 2021) | Component | Value (in millions) | | :--- | :--- | | Cash consideration | $100.4 | | Common Shares issued | $595.6 | | Series A Preference Shares (fair value) | $40.8 | | Series B Preference Shares (fair value) | $200.0 | | Warrants issued (fair value) | $60.7 | | Upside Rights & CVRs (fair value) | $33.5 | | Other | $46.2 | | Total purchase price | $1,077.2 | - The acquisition resulted in a bargain purchase gain of $8.6 million, representing the excess of the fair value of net assets acquired over the purchase price[66][67] - As a result of the acquisition, the company recognized $175.0 million in identifiable intangible assets, including distribution relationships, MGA relationships, and Lloyd's Capacity[67] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) The discussion focuses on the transformative Sirius acquisition, improved underwriting, and strong investment performance - The acquisition of Sirius Group was completed on February 26, 2021, and its results are included from that date forward, making direct comparisons to prior periods less indicative of ongoing performance[261][262] Key Performance Indicators (Q1 2021 vs Q1 2020) | Indicator | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Annualized return on avg. common equity | 26.4% | (55.5)% | | Net underwriting income | $8.7M | $2.0M | | Combined ratio | 96.6% | 98.6% | | Basic book value per share | $15.19 | $16.88 (at 12/31/20) | | Tangible basic book value per share | $14.10 | $16.88 (at 12/31/20) | - The company incurred $40.4 million in corporate expenses related to the Sirius Group acquisition in Q1 2021, consisting of professional fees and compensation-related expenses[282][312] - The company's investment strategy has been repositioned post-acquisition, with the fixed income portfolio now outsourced to a diversified range of third-party managers to reduce volatility[276][277] Segment Results The company reported total net underwriting income of $8.7 million, driven by the newly acquired A&H and Property segments Net Underwriting Income (Loss) by Segment (Q1 2021) | Segment | Net Underwriting Income (Loss) (in millions) | Combined Ratio | | :--- | :--- | :--- | | A&H | $5.3 | 84.9% | | Specialty | $(0.3) | 100.2% | | Property | $5.4 | 93.3% | | Runoff & Other | $(1.7) | NM | | Total | $8.7 | 96.6% | - Gross premiums written increased by $240.9 million (191.6%) year-over-year, primarily due to new premiums from the legacy Sirius Group companies[327] - Catastrophe losses for Q1 2021 were $5.7 million, net of reinsurance, related to winter storm Uri, adding 2.2 percentage points to the combined ratio[331] Liquidity and Capital Resources The company maintains adequate liquidity post-acquisition, supported by a new credit facility and access to investment funds - The company entered into a new three-year, $300.0 million senior unsecured revolving credit facility, which was undrawn as of March 31, 2021[371] - Sirius International, a Swedish subsidiary, maintains a 'Safety Reserve' of $1.1 billion, with access restricted to covering insurance losses or solvency breaches[365][366] Cash Flow Summary (Three Months Ended) | Activity | 2021 (in millions) | 2020 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | $(48.8) | $(3.2) | | Net cash provided by (used in) investing activities | $624.0 | $(226.8) | | Net cash provided by (used in) financing activities | $54.6 | $(3.1) | Quantitative and Qualitative Disclosures About Market Risk The company is principally exposed to interest rate, equity price, and foreign currency exchange risks - The company's principal market risks are identified as interest rate risk, equity securities and other investments price risk, and foreign currency exchange risk[419][420] Interest Rate Risk Sensitivity on Debt Securities (as of March 31, 2021) | Assumed Change in Interest Rate | Estimated Pre-tax Change in Fair Value (in millions) | | :--- | :--- | | 100 bp decrease | $33.8 | | 100 bp increase | $(45.9) | | 200 bp increase | $(92.3) | - A hypothetical 10% increase or decrease in the value of investments in related party funds would change their carrying value by approximately $120.9 million, pre-tax[424] Controls and Procedures Management concluded disclosure controls were effective, while noting the ongoing integration of Sirius Group's controls - Management concluded that disclosure controls and procedures were effective as of March 31, 2021[427] - The acquisition of Sirius Group is a material change to internal control over financial reporting, and the company has excluded the acquired entity from its current assessment while integration is in process[428][429] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings - There are currently no material legal proceedings to which the company or its subsidiaries are a party[433] Risk Factors Key risks include integration challenges, COVID-19 impacts, investment concentration, and heightened regulatory scrutiny - A primary risk is the potential failure to successfully integrate Sirius Group, which could prevent the realization of anticipated synergies[437] - The COVID-19 pandemic continues to pose significant risks, including increased claims, investment volatility, and potential adverse legislative actions[439][441] - The company has concentrated exposure in the TP Enhanced Fund, which employs an investment strategy with potentially substantial risks greater than traditional fixed-income strategies[520] - A downgrade in the company's 'A-' financial strength ratings could severely limit its ability to write new business and may trigger cancellation clauses in existing contracts[479][481] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any common shares during the quarter, with $61.3 million remaining under its program Share Repurchase Activity (Q1 2021) | Period | Total Shares Purchased | Average Price Paid | Maximum Value Remaining for Purchase | | :--- | :--- | :--- | :--- | | Jan 2021 | 0 | $0.00 | $61,295,462 | | Feb 2021 | 0 | $0.00 | $61,295,462 | | Mar 2021 | 0 | $0.00 | $61,295,462 | Other Information The company appointed Anthony L. LeHan as its new Principal Accounting Officer effective May 6, 2021 - Effective May 6, 2021, Anthony L. LeHan was appointed as Principal Accounting Officer[619][620] Exhibits This section lists all exhibits filed with the Form 10-Q, including acquisition agreements and certifications