Strongly back from the brink

CEO Scott Egan has SiriusPoint going in the right direction after a period of upheaval, but he says there is still work to do.

Scott Egan knows a thing or two about turning around struggling businesses. The insurance veteran was chief executive officer (CEO) of RSA’s UK and international business having joined as chief financial officer (CFO) after the giant UK primary insurer had run into difficulties.

Previously he was CFO and interim CEO of broker Towergate Insurance which sold itself to its creditors in 2015 and is now part of the Ardonagh Group.

So it was no surprise that the board of directors of SiriusPoint turned to the affable Scotsman after the company, formed through a merger of Third Point Re and Sirius International, seemed to be coming unstuck and took a $402 million annual loss after two previous years of declining earnings.

The bigger question might be why Egan, who had never worked in Bermuda, and had only recently stepped down from RSA after it was sold, would take what might have looked like a thankless job.

“For me, it was very much the dialogue I had with staff before I joined,” he recalls during an interview with Bermuda:Re+ILS. “The more I looked at SiriusPoint, I felt the disconnect between performance and the potential of the business was stark.

“Yet when I spoke to customers they talked very fondly about the business. They talked about our staff and our specialisms, so there was a disconnect between the way people spoke about the company, and its scale—it’s not a small company with in excess of $3.5 billion premium—yet the performance was nowhere near good enough,” Egan says.

“I saw that as a real opportunity and challenge to come in and work with my colleagues to make this business what it could and should be.”

He adds that is the same message he tries to get across to staff. “It’s not about me, right?” he says. “It’s about us all working together and pulling in the same direction.”

It’s one thing to call on employees to pull together for the sake of the company, and another to have a clear vision of the direction of travel so people inside and outside are going to buy into it. Egan set down three strategic points early on.

“The first was re-establishing our credentials, and our focus as an underwriter. Over the past 12 to 18 months, the strategy around managing general agents (MGAs) and acquisitions was causing confusion outside as to the strategic direction of the company,” he explains.

“I wanted to make sure from minute one that we re-established the underwriting DNA and the strategic direction that underwriting performance was at the core of everything we did, and improving it.”

Egan says the second point was to sharpen the company’s focus, especially on execution.

“We were trying to be too many things to too many people and my management philosophy is that companies who focus tend to perform better as long as they execute well,” he says.

“As we’ve trimmed things, we are becoming a lot more focused. That coupled with an execution intensity, which is what differentiates companies in our sector, has been an important part of recalibration of the business.”

The third point was to calm the company’s volatile earnings, which had been rocked in underwriting and investing.

“We’ve done a lot of work to rectify that sort of volatility because it was disproportionate to the size of the balance sheet. That had a fundamental effect on performance—and on the share price.”

“We’ve made some progress in our financial performance over the past six months or so and that’s now manifested itself in the share price.”

E pluribus unum

Egan says he has a fourth goal: to create a single culture for SiriusPoint which, he says, did not happen after the merger.

“The banner headline is One SiriusPoint, which is to bring us all together to work in a much more collaborative and joined-up way,” he says.

“Of course, that takes longer than a few months. A proper cultural journey is three to five years, but I would say I’m hugely pleased with the way that staff have reacted. Everyone wants to be part of a much more successful company and everyone is leaning in to be part of that.”

In May, SiriusPoint announced first quarter results which were a massive improvement on the previous year’s.

“We’ve made some progress in our financial performance over the past six months or so and that’s now manifested itself in the share price,” he says.

“Momentum is building and people are beginning to notice that things are different. But there is no complacency here. If you ever listen to one of my results calls, you’ll hear me eat humble pie on many occasions. There is zero complacency and I’m sure there’ll be bumps in the road, but I’m extremely proud and grateful to my colleagues for the way they’ve jumped on the train and gone with it.”

Egan maintains his recovery timeline looks beyond the next quarter or year, but concedes that delivering shareholder value comes with the job.

“All of our horizons are beyond financial performance in one calendar year, because we know often the fruits of your labour aren’t usually born within a 12-month period so it’s important that we keep up that level of energy and intensity, although delivering financial performance for our shareholders is why we’re here and therefore it is important that we had a good start to the year.”

SiriusPoint turned in strong second quarter results as well, with net income of $66 million compared to a loss of $60 million in the previous year and a half-year profit of $205 million compared to a loss of $277 million in 2022—a near-half billion-dollar turnaround.

Egan does not deny that the timing of his arrival as CEO was good—the overall insurance sector improved in 2023, with many lines of re/insurance enjoying rate increases and the investment markets bouncing back from the turmoil of the first half of 2022.

But, he notes, this is not the whole story. If SiriusPoint was simply chasing rates, it would not have exited international property-catastrophe reinsurance as it did. Nor does he think SiriusPoint should simply ride the ups and downs of the insurance and investment cycle. He wants to beat the market.

“There have been some tailwinds,” he admits. “But we took a strategic decision to exit property-cat international, despite the tailwinds of market conditions. I was challenged on that several times but it was the right decision strategically.

“Of course, a tailwind is helpful—but everyone gets it. I’m interested in relative performance and while we will be nowhere near it this year, I don’t want us to be an average company. In the markets where we operate in specialist areas, I want us to be among the best in class.

“We’re a long way from that and the starting point is a poor one, but the ambition for this organisation is not to rest on our laurels and be an average performer. We might not be able to do it, but if hard work, determination, and teamwork are core ingredients, then we’re in good shape and I always work under the premise that the harder the work, the luckier you get.”

“The day you think you’re getting help from the market and you can step back is the day you go backwards.” Scott Egan, SiriusPoint

Tough surgery

Egan says the same is true on the investment side of the business, where the portfolio had to take “some tough surgery” after it lost $323 million in 2022, contributing to an overall $403 million annual loss.

“We’ve done a lot of work and the portfolio is in good shape, but not perfect, and there’s still work to do every single day. That speaks to the psyche and the culture as well, which is one of the things I try to do personally and also through the organisation—not resting on our laurels,” he says.

“The day you think you’re getting help from the market and you can step back is the day you go backwards. This means that at times I’m a pain, but I hope over time, a good pain. I hope that over time people will see that, if we’re able to achieve our best-in-class ambitions.”

Getting there requires work in all areas of the business, Egan says, noting that SiriusPoint has worked hard to reduce expenses, including making some staff reductions, although he points out it has been hiring as well.

“I’ve been very honest in the marketplace and said that whether we liked it or not, relative to our peers, we were too expensive. If your ambition is to be among the best in class, you have to pull every single lever—culture, cost-efficiency, customer service, product—you can.”

That includes investing in technology, including improved databases, a new general ledger for accounting and generally weaving together different systems from the two companies.

Egan has also been rationalising the company’s investments in 36 different MGAs, as much because of the message it sends to the company and the market as anything else.

“We don’t have the bandwidth or capability to manage 36 investments,” he says. “That doesn’t mean we can’t have underwriting relationships. But having investment relationships requires you to have a different skillset, and we are not venture capitalists.

“We’re an underwriting company and that’s our DNA. That’s why people buy our product and why our staff choose to work here and therefore, if you have that as your North Star, I want to rationalise that energy footprint.”

One other step that SiriusPoint has taken to focus on underwriting is a $1.3 billion loss portfolio transfer to Compre that closed in early July.

“There wasn’t a one-off balance sheet concern,” he says of the transaction. “But it allowed us to align our balance sheet with the go-forward strategy. When you’re in a turnaround situation where you’re trying to significantly improve performance, that realignment gives investors confidence that the past is boxed off, even though we started that with no concerns on the reserves.”

As to where the company will deploy the capital that has been freed up, Egan says it is unlikely it will go into completely new lines of business. Instead SiriusPoint plans to build a bigger presence in the London Market and in credit risk, while continuing to expand its commanding presence in accident and health in the US and around the world.

When SiriusPoint reported its first half results at the beginning of August, Egan was clearly pleased as the company reported improvements across the board.

But Egan is quick to issue a cautionary note. “I’m very pleased with the progress we’re making. This isn’t the destination, but I think we’ve made demonstrable progress in the last three quarters.

“The great news is we feel that we can keep the momentum going. We feel we can do better and that in itself is as important as the results because these things don’t happen by accident,” he concludes.

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