SiriusPoint records drop in net income
SiriusPoint recorded a drop in net income in the first quarter as loss and loss adjustment expenses rose by 18.8%, the company reported.
It also reported a $400 million loss portfolio transfer with legacy re/insurer Enstar related to workers compensation insurance exposures incurred between 2018 and 2023.
The specialty re/insurer noted that it recorded a sixth consecutive profitable quarter with net income of $95 million compared to $136 million. SiriusPoint had warned it would see some slowdown in growth following the restructuring which took place in 2022 and 2023.
The Bermuda-based company said net premiums earned edged down from $595.5 million to $593.8 million although net investment income improved from $61.7 million to $78.8 million.
Underwriting income fell from $156.6 million to $89.6 million, largely due to losses in the reinsurance book rising from $85.6 million to $124.6 million.
SiriusPoint chief executive officer Scott Egan said: “Building on the momentum from 2023, we report our sixth consecutive quarter of positive underwriting result. Combined ratio for the Core operations is 91.4%, a 5% improvement over prior year, while net income is $90.8 million for the quarter.
"We also saw improvement in our Investment and Fee results. Net investment income was strong at $78.8 million and tracking higher than our FY 2024 guidance. Net service fee income from our Consolidated MGAs increased by 8.2% with an improved service margin of 30.1%.
"We continued to rationalize our equity stakes in MGAs which are now down to 24 compared to 36 at the start of 2023. We have also added five new distribution partnerships since the start of 2024 providing further evidence of our intent to grow in our targeted areas during the year and into 2025."
Egan said the company made "significant progress" in reducing its debt: "We refinanced $400 million of legacy senior notes and redeemed $115 million of legacy senior notes. "Together these transactions will reduce our financial leverage by approximately 2.5 points and improve our Q4’23 BSCR estimate of 255% by a further c.20 points. This will make our balance sheet even stronger.
"Overall, we are seeing good progress as we continue to execute strongly against our strategic priorities. Our first quarter performance is on track to meet our improved ROE guidance of 12%-15%. Our focus is to maintain this momentum and continue to improve our performance throughout the year.”
The company said the decrease in consolidated underwriting income was driven by lower favourable prior year loss reserve development.
"Favorable prior year loss reserve development for the three months ended March 31, 2023 included $101.6 million driven by reserving analyses performed in connection with the 2023 loss portfolio transfer.
"Excluding the favourable development linked to the 2023 LPT, net underwriting income increased by $33.9 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.
"This increase was primarily driven by a lower other underwriting expense ratio resulting from our cost savings program and lower attritional losses, as well as no catastrophe losses for the three months ended March 31, 2024 compared to $12.9 million for the three months ended March 31, 2023."
SiriusPoint said the 2024 LPT with Enstar was agreed between SiriusPoint America Insurance Company and Clarendon National Insurance Company, which is affiliated with Enstar.
SiriusPoint said SiriusPoint America will cede and Clarendon National will assume 100% of the net liability with respect to certain workers’ compensation insurance exposures of SiriusPoint America on a funds withheld basis, subject to the terms and conditions of the LPT Agreement including an aggregate limit.
"Immediately prior to the effective date of the LPT Agreement, SiriusPoint will be commuting certain ceded workers’ compensation reinsurance contracts, and the liabilities related to those commuted contracts will be included in the Subject Business," SiriusPoint said. "This transaction covers approximately $400 million of SiriusPoint reserves, including liabilities to be commuted, valued as of December 31, 2023, and the reinsurance premium. The aggregate limit under the LPT Agreements is 150% of the premium paid less certain adjustments for paid losses in the interim period prior to the effective date of the contract."
Enstar said nder the reinsurance agreement, which will be entered into at closing, SiriusPoint will cede net reserves of approximately $400 million, and Enstar’s subsidiary will provide approximately $200 million of cover in excess of the ceded reserves, with claims management transferring to Enstar.
Dominic Silvester, Enstar’s chief executive officer, said: “Our partnership with SiriusPoint aligns with our expertise and track record of outperformance in US Workers’ Compensation and demonstrates our capabilities to structure and execute sophisticated risk solutions. For SiriusPoint, this bespoke transaction will help to support its long-term strategic, economic and operational goals.”
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