SiriusPoint Ltd. — Q3 2021 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and nine months ended September 30, 2021. SiriusPoint provides global multiline insurance and reinsurance. The February 26, 2021 acquisition of Sirius Group substantially changed the scale and composition of the business; 2021 results include Sirius Group only from the acquisition date, so year-over-year comparisons are not like-for-like. The company reports Accident & Health, Specialty, Property, and Runoff & Other segments.
Key financial metrics
| Metric (USD millions, except per-share data and ratios) | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | 732.6 | 263.7 | 1,745.2 | 503.0 |
| Net premiums earned | 512.1 | 141.7 | 1,234.4 | 428.9 |
| Net investment income | 199.8 | 122.0 | 463.7 | 74.1 |
| Net income (loss) | (47.4) | 68.7 | 155.1 | 9.1 |
| Net income (loss) available to common shareholders | (48.0) | 68.7 | 147.4 | 9.1 |
| Basic EPS | (0.30) | 0.74 | 0.94 | 0.10 |
| Net underwriting income (loss) | (265.8) | (29.7) | (223.8) | (27.3) |
| Combined ratio | 151.9% | 121.0% | 118.1% | 106.3% |
| Net cash from operating activities | — | 26.6 | 45.3 |
Q3 loss ratio was 113.6%; the elevated combined ratio reflects catastrophe losses, concentrated in Property. For the nine-month period, investment performance materially supported reported earnings: related-party fund investment income was $401.2 million, compared with $8.3 million in 2020. The TP Enhanced Fund generated a reported 38.3% nine-month return. Investment results are market-sensitive and may be volatile.
Financial position and liquidity
- At September 30, 2021, total assets were $10.72 billion, total shareholders’ equity $2.64 billion, and debt $827.0 million, compared with $3.54 billion, $1.57 billion, and $114.3 million, respectively, at December 31, 2020. The acquisition is a major driver of these increases.
- Investments totaled $5.07 billion; cash and cash equivalents were $701.2 million and restricted cash was $1.48 billion. Cash, cash equivalents and restricted cash totaled $2.18 billion. Restricted cash and investments support letters of credit and reinsurance obligations and are not freely available for general use.
- Loss and LAE reserves were $4.86 billion, with $843.5 million of related recoverables. Insurance and reinsurance balances receivable were $1.62 billion.
- Operating cash flow was $26.6 million for the nine months, versus $45.3 million in 2020. Investing cash flow was $410.0 million, including acquisition-related cash flows. The company had no borrowings under its $300 million revolving facility at quarter-end.
- Letters of credit issued totaled $1.054 billion; $1.174 billion of cash and debt securities were pledged as collateral. Management stated it expected operating cash flows and investment income to meet expected claims and operating needs for the next 12 months.
Material changes and unusual items
- Catastrophe losses: Q3 catastrophe losses, net of reinsurance and reinstatement premiums, were $286.5 million, including $132 million for European floods and $100 million for Hurricane Ida. Nine-month catastrophe losses were $304.9 million; this excludes $40 million associated with Winter Storm Uri and June windstorms as described in the filing’s period discussion, including Sirius Group Uri losses falling in the pre-acquisition period.
- Acquisition and integration: Sirius Group contributed $933.4 million of revenue and a $161.5 million net loss from acquisition through September 30. SiriusPoint recorded $49.5 million of acquisition-related corporate costs for the nine months ($29.7 million professional and advisory fees; $19.8 million compensation-related costs). A $12.9 million bargain-purchase gain was recognized.
- Segment underwriting: Q3 Property generated a $264.7 million underwriting loss and a 275.6% combined ratio. A&H produced $15.2 million of underwriting income and an 86.4% combined ratio; Specialty had a $6.4 million underwriting loss and a 102.6% combined ratio.
- Reserves: The company recorded $25.9 million of favorable prior-year reserve development for the nine months, primarily in legacy Sirius Group Property and A&H business. Favorable development is an estimate subject to revision as claims emerge.
- Other items: The sale of Cedar Insurance Company generated $20.5 million in proceeds and a $5.8 million gain. Q3 Runoff & Other included $7.1 million of accelerated expenses related to interest-crediting features in certain contracts.
Outlook, risks and contingencies
No quantified earnings or underwriting guidance is provided. Management described plans to expand underwriting capabilities and partnerships, reposition the investment portfolio to target lower volatility, and focus on underwriting profitability. The company cautioned that actual results may differ materially from forward-looking statements.
- On October 29, 2021, after quarter-end, SiriusPoint executed definitive agreements for a loss portfolio transfer covering $369 million of reserves for a $388 million premium. Management estimated a $23 million net charge in Q4 2021, including about $4 million of federal excise tax, subject to post-closing adjustments; the filing states the transaction would reduce net Runoff reserves by 46% after completion.
- Key risks include catastrophe and climate-related losses, COVID-19 claim uncertainty, reserve adequacy, investment and interest-rate volatility, credit and reinsurance counterparty risk, ratings changes, and integration of Sirius Group. The company also identifies concentration in, limited withdrawal rights from, and conflicts relating to the Third Point Enhanced Fund.
- Fair-value and liquidity considerations include $1.46 billion invested in related-party investment funds and investments subject to redemption restrictions or private-equity lockups. Q3 investment returns were a significant earnings contributor.
- Debt increased following the acquisition; the company reported compliance with debt and facility covenants. Series B preference shares carry an initial 8% cumulative dividend. Subsidiary dividend capacity is subject to regulatory, solvency, and other restrictions.
- Management concluded disclosure controls were effective, but Sirius Group was excluded from the company’s internal-control-over-financial-reporting evaluation while integration work continued. Sirius Group represented approximately 66% of assets, 64% of liabilities, and 53% of nine-month revenue.
- The filing reports no material legal proceedings and no material changes to risk factors previously reported.
Most important facts for investors to verify
- How catastrophe loss estimates—particularly European floods and Hurricane Ida—develop, and whether reserve assumptions remain adequate.
- Whether investment gains, especially returns from the related-party TP Enhanced Fund, persist and how portfolio concentration, valuation, fees, and withdrawal restrictions affect risk and liquidity.
- Completion terms and final accounting for the post-quarter loss portfolio transfer, including the estimated Q4 charge and reserve reduction.
- Integration progress and the timing and scope of internal-control testing for the acquired Sirius Group operations.
- Underlying underwriting profitability by segment, separated from acquisition effects, catastrophe losses, favorable reserve development, and investment results.