SiriusPoint volatility reduction pays off

SiriusPoint’s strategy of reducing underwriting volatility paid off in the third quarter when the specialty re/insurer emerged relatively unscathed from a string of natural catastrophes, according to chief executive officer Scott Egan. 

Egan, who has just marked two years in charge of the Bermuda-based re/insurer, said in an interview with Bermuda:Re+ILS this month that he believed the company had now completed a series of “structural interventions” connected to its restructuring. 

Egan was speaking after SiriusPoint released its third quarter earnings, which dropped to $4.5 million as a result of a previously announced settlement with shareholder CM Bermuda (CMIG) with a net impact of $60 million.  

However the company recorded an underlying profit of $89.1 million for the quarter and recorded its eighth consecutive quarterly underwriting profit. 

Egan noted that the company expected losses from Hurricane Milton, which hit Florida in the fourth quarter, to be in the range of $30 million to $40 million. 

Noting that the year was not yet over, he said even with Hurricanes Milton and Helene, the re/insurer large losses should be within its catastrophe budget.   

Egan noted that while US hurricanes garnered most of the headlines, SiriusPoint’s volatility reduction was spread around the world. 

“We are in a really positive position, given that we've had Milton and Helene, but we've also made choices beyond hurricanes, because there's been horrifically bad weather in Canada and horrifically bad weather in Europe, and that was before the Spanish floods that we're watching at the moment. 

“We have got to be careful that we don't just talk about the US because we've deliberately not taken on Canadian risk and we've deliberately exited European volatility, and that was obviously a big strategic decision when I first came in here. 

“If you stand back, this company could have been exposed to the European events, it could have been exposed to the Canadian events, it could have been exposed to much higher volatility in the hurricanes. The evidence points would suggest that we really have got our arms around the volatility and are managing it well.” 

Egan said that while the company was still working to rebuild, he felt the major restructuring actions had been taken, narrowing the gap between its underlying performance and full earnings results. 

The shareholder settlement with CM Bermuda, the subsidiary of its Singapore based single largest shareholder, was now completed and would not be further reflected in fourth quarter earnings, he said. 

Similarly, costs associated with the company’s loss portfolio transfer with legacy insurer Compre will also begin to work their way off the earnings statement. 

“With a turnaround, by its very nature, there were many structural interventions that we had to implement,” he said. “However you can point to those structural interventions and the one-off nature of them, and link that to eight consecutive quarters of underwriting profit and a share price which has progressed incredibly strongly and a book value which has increased incredibly strongly over that same time period. 

“We mustn't forget that not only have we closed the discount to book value, we’ve also been growing book value every quarter as well, which points to building a track record.”

He added: “I will never say there'll be no more one-offs, but I think the size  of them and the frequency of them will diminish.”

Looking to the future, Egan said accident and health would continue to be a profit engine for the company, but it was unlikely that there would be strong premium growth in a mature market. 

Egan said the company was “cautious on casualty, but not frightened of casualty”, where some segments have suffered from heavy losses and adverse claims in prior years. 

“What I mean by that is that I think casualty is a pretty meaningless title,” he said. “I actually think it's the segments that are that are really important and there are certain segments in casualty that we will not go into. We will not grow public D&O as an example.

“But there are other segments that we're very happy to go into with the right partner or the right opportunity.” 

Similarly, Egan said the company was not “fighting” to grow its property account but was ready to deploy capital where there were opportunities. 

However, he said there were opportunities for the company in specialty lines, including segments like aviation, marine and energy, and credit. 

“That's where we're seeing good growth, and we think that fits very well with our overarching strategy to be a specialist because it talks to our expertise.”

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