Executing the game plan

SiriusPoint chief executive officer Scott Egan is a proud supporter of English Premier League football team Tottenham Hotspur, so it is perhaps unsurprising that he uses a sports analogy when describing the progress his company has made this year. 

“We’re very pleased about the half-year results, while recognising it is half-time and you don’t win a match at half-time,” Egan said in an interview with Bermuda:Re+ILS after the results were released.

As a fan of Tottenham, he will know from bitter experience that no half-time lead is safe. 

If Egan were the Spurs manager, you could see him in the dressing room telling his players that they need to keep executing the game plan, but more importantly, to keep getting the basics right: making the tackles, closing down opponents, protecting the ball and completing passes. 

That’s the sporting equivalent of what Egan calls chasing the one percents in business—the incremental gains that taken together, deliver continuously improving results.

“It’s clear that we have a strong determination in the organisation and a very clear ambition to operate at best-in-class levels, and we are not there yet,” he said. “Our results show that chasing the one percents and marginal gains are what will drive the improvement from this point on.” 

Egan, a veteran insurance CEO who was brought in when the company’s struggles following the merger of Third Point Re and Sirius International collided with the annus horribilis of 2022 to send it into a spiral, bridles when asked, slightly tongue in cheek, what his next trick will be following the turnaround he executed over the last two years. 

“There are no tricks,” he replies firmly. Instead, Egan is focused on getting the details right and building the company to meet his vision of an underwriting business that can compete with the best in the business.

Positive results 

So far, it seems to be working. SiriusPoint had net income of $114 million in the second quarter of 2024, up from $60 million in the same period in 2023, while first half income rose to $210 million from $200 million in 2023.

But Egan is quick to point out that much of the second quarter income was boosted by recognition of the increase in value of some of the managing general agents (MGAs) in which SiriusPoint has an equity stake and were one-off gains. 

If such gains, and those from the business in which SiriusPoint last year agreed a loss portfolio transfer (LPT) are excluded, the company still recorded its seventh consecutive quarter of positive underwriting results—in stark contrast to the period before—and saw growth in its continuing business for the first time since the new management team came in. 

In addition, the company’s combined ratio excluding the LPT improved by one percentage point to 92.8 percent. 

“The fact that this is our seventh consecutive quarter of underwriting profit is beginning to give us a credibility that’s meaningful,” Egan commented. “Are we doing better than at this point last year? If you remove the noise, the headline is ‘yes, we are’. 

“That’s a very important message, because we’re an underwriting company, and our combined ratio is the most important measure of performance and improvement. 

“The second headline under our underwriting results is that for the first time in a quarter, our continuing lines have shown year-on-year growth of 22 percent. That’s the first time in a quarter we’ve shown growth year over year since I’ve been here. 

“It’s another proof point that the seeds we’ve been planting in new MGAs and expanding existing MGAs, and all the work we’ve been doing, are beginning to bear some fruit, so it’s a very important inflection point for the organisation. 

“Our ambition is to have a business that is best in class from a profit perspective, and also a growing business, because that reflects that we’re doing the right thing for customers.” 

Working on the MGAs 

Egan noted that the company is making tangible progress on rationalising its approach to MGAs. 

When he joined SiriusPoint, he wanted to reduce the number of MGAs in which the company had equity investments, but to expand the number of relationships overall. 

“We started with 36 equity relationships with MGAs; that’s now down to 22 and our ambition is that it will reduce further, so we’re making good progress. The other thing we’ve focused on is unrealised value of what I would call our consolidated MGAs,” he explained. 

“In quarter two, we were able to recognise a just under $50 million gain as an update to the market value of our consolidated MGAs, and that’s a very important proof point that demonstrates that the value we carry on our balance sheet is less than their market value. That’s an important message to the marketplace, so we’re pleased about that.” 

Egan noted that the company had raised its investment income guidance for the year to $275 to $285 million from $250 to $265 million, while raising its Bermuda solvency capital ratio to a record 284 percent. It was less than 200 percent two years ago. 

Egan says that the stronger capital position means the company can return some capital to investors—it has authorised a $300 million share repurchase programme. 

It has also been able to settle the sale of shares by its largest single shareholder, CM Bermuda, which is owned by CMIH, a Singapore-based investment company which went into receivership last December and was the owner of Sirius International before its merger. 

SiriusPoint will buy back $125 million of its shares and will also redeem convertible preference shares held by the company for cash. In all, the $261 million agreement reduces CM Bermuda’s shareholding from 33 percent to 28 percent. 

A happy team 

Egan is proud that SiriusPoint, which struggled to develop a single corporate culture after the merger, has a high level of employee engagement, as shown in a survey which showed an average engagement score of 80, when anything over 70 is considered to be positive. All segments of the survey, from leadership ratings to wellbeing, showed improvement from 2023. 

“I have a very simple philosophy, which is that we cannot drive these levels of performance without the team and the people. I am hugely grateful to them for everything they do, and everything they give to SiriusPoint and to our customers,” he explained. 

“The engagement scores show they are absolutely with us, rowing in the same direction. There’s a sense of pride in SiriusPoint, and that’s something we should celebrate.” 

Employees matter, but so do investors, and the stock market also seems to like what SiriusPoint is doing. Its shares, which plumbed the depths in July 2022 priced at $4.38, valuing the company at $700 million, have now risen to $14.15 as of August 7, valuing the company at almost $2.5 billion. “We’re outperforming the market today, and that’s evidence that these results and the structural actions we’re taking have been perceived really well,” he said. “I would say we’re developing a strong reputation for execution. When we say we’ll do something, we do it.” 

Future outlook 

SiriusPoint will continue to focus on its profitable lines of business, Egan says. Accident and health (A&H) has been a stellar performer for the company—the proportion of gross written premium has risen to 29 percent of the book, from 25 percent in 2022, and seems likely to grow more. 

“It’s a core part of our business and has a long track record of profitability,” he commented, noting that SiriusPoint’s two MGAs in that space, IMG and Armada, have proved their worth. 

“They are great providers of business to our underwriting business. In A&H, we have plans to be bigger and better and I know the CEO who runs that business shares that ambition, which is great.” 

The other areas of strategic focus are in North American property casualty insurance and in its London and international business. 

“We will predominantly, but not solely, do that with relationships through programme administrators and MGAs,” he said. “We see that as a very important distribution channel to market. If we can get it right then we can attract good partners. 

“We’re beginning to develop a market reputation for our MGA Centre of Excellence, which is all about working with MGAs and programme administrators going forward. It’s no coincidence that we keep announcing new partnerships or expansions to existing partnerships. 

“People are coming to us because they respect what we do in our areas of specialism and they respect us as a partner.” 

Egan agrees that SiriusPoint has lowered its exposure to casualty, where the industry has been rocked with prior year adverse developments, largely driven by social inflation, but is adamant that it is not leaving the segment. 

While the proportion of gross written premium has dropped from 37 percent to 34 percent, he says this is largely due to the company ceasing to write one workers’ compensation programme. 

“We’re definitely not allergic to casualty. It forms a big part of our book. We’re just being careful and thoughtful, and where we think we can make money, we will deploy capital. There is a lot of noise in the marketplace around casualty, and it’s right to be careful. Our focus on casualty is to ensure that we make an underwriting profit,” Egan said. 

“We don’t see high interest rates and therefore investment income as a cross-subsidy to underwriting. Our philosophy is that we write to make an underwriting profit.” 

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