SiriusPoint Ltd

Good morning, ladies and gentlemen, and welcome to the Serious Point Limited Second Quarter 2021 earnings conference call. For today's presentation, all parties will be in listen-only mode. As a reminder, this conference call is being recorded, and I would like to turn the call over to Ms. Claire Carrington, Head of Investor Relations for Serious Point. Please go ahead, ma'am.

Thank you, Operator. Welcome to the Sirius Point Limited earnings call for the second quarter of 2021. Last night, we issued our second quarter Form 10Q, an earnings press release and financial supplement, and an announcement on a lost portfolio transfer transaction with Compre, all of which are available on our website, www.siriuspt.com. With me here today are Sid Sankaran, our Chairman and Chief Executive Officer, and David Junius, our Chief Financial Officer. Before we begin, I would like to remind you that many of the remarks today will contain forward-looking statements based on current expectations. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These refer to the earnings press release and the company's other public filings, including the recent Form 10Q and the Form 10Q for the period ended March 31, 2021, where you will find risk factors that could cause actual results to differ materially from those forward-looking statements. In addition, management will refer to certain non-GAAP financial measures, which management believe allow for a more complete understanding of the company's financial results, A reconciliation of these non-GAAP measures to the most comparable GAAP measure is presented in the company's earnings press release that is available on our website. At this time, I will turn the call over to Sid.

Thank you, Claire, and good morning, everyone. On today's call, I'll provide a high-level overview of our second quarter financial results and provide an update on our progress executing on our three-pillar strategy as we work to establish sustained underwriting profitability. David will then review our second quarter results in more detail. We were also pleased to announce yesterday a loss portfolio transfer transaction with Compre, a legacy runoff specialist, which eliminates our highest risk long tail reserves. The deal between Sirius America and Sirius Bermuda with Palus Re, a subsidiary of Compre, covers $417 million of loss reserves subject to or associated with the transaction. including much of the legacy serious group runoff business, including asbestos and environmental, for a premium of $430 million. The transfer, which is subject to regulatory approval and other closing conditions, covers the bulk of the economic risk of the reserves in the runoff segment, including most of Serious Point's legacy A&E exposure to a runoff specialist better able to focus on these blocks. Assuming we receive timely regulatory approvals, this transaction will be reflected in our third quarter results. Importantly, it will free up approximately $100 million of rating agency capital to deploy into higher growth and more profitable lines of business, allowing us to optimize capital allocation and focus on rebalancing towards insurance and higher margin and growth levels, while providing further clarity on Serious Points reserve positions. Turning to our results, I'm very pleased with our team's execution and strong delivery in our first full quarter. We achieved a combined ratio of 92.8% in the second quarter of 2021, which keeps us well on track to deliver an underwriting profit in 2021 after multiple years of underwriting losses at our predecessor companies. On a reported basis, Catastrophe losses were $12.7 million, or 2.7 percentage points on the company's combined ratio, which were primarily from late June European wind storms. In addition, the team has been actively monitoring the impact of the devastating European floods in July, a third quarter event. Even though our office in Liège, Belgium was not impacted, our paramount concern is the safety and well-being of our local team members, as well as ensuring our ability to serve the needs of our clients in the region. Our thoughts are with our European colleagues and clients as they navigate this disaster and work to repair and rebuild. That said, the actions taken to reduce our catastrophe exposure on January 1st, 2021 have proven out. Through the reduction of PMLs, boosting participation rates on our existing quota shares, and additional reinsurance purchases, Based on the information we have today, we estimate our losses in third quarter from this event to be capped at approximately $30 million, absent a dramatic increase in the initial industry loss estimates. For the second quarter of 2021, we delivered net income of $65 million, or $0.37 per diluted common share, and grew tangible diluted book value per share $0.33, or 2.4%, to $14.30 since March 31st. We will continue to measure our execution through our KPIs of underwriting profitability, tangible book value growth, and the ability to generate double-digit returns on equity, all of which we delivered this quarter. Turning to investment income, we earned $77 million in the second quarter of 2021, which compares to prior year second quarter net investment income of $137 million. Our investment in the Third Point Enhanced Fund earned a 3.7 percent return for the quarter and contributed $45 million of investment income. Underwriting this quarter continued its focus on remediation, along with re-underwriting and growth in our target insurance and reinsurance classes. We have made progress on exiting risks that do not meet our return hurdles. as well as rebalancing the portfolio to expand more into specialized lines as we continue to diversify beyond property. We expect that growth will be in line with our revised underwriting targets and appetite. We've conducted a policy-level review across our entire portfolio, applied changes, and expect our updated appetite and focus on high-quality business, which is partially reflected in our 2021 year-to-date underwriting results. to be fully executed with Q1 and Q2 renewals. This will continue to emerge in the 2022 financial results. We have cumulatively remediated 13% of the portfolio in the last two quarters and expect to remediate or non-renew an additional 11%. As we execute our strategy to stabilize our core insurance and reinsurance portfolios, we've been aggressively reshaping our reinsurance book, which is a legacy Third Point Re portfolio, in particular, had a small number of large transactions that are no longer within our risk appetite. This has proved to be a headwind to premium growth, where net premiums earned over $466 million for the second quarter of 2021. Counterbalancing this, there remain attractive areas to grow in both reinsurance and insurance, with strong margins that we are accessing through our existing distribution channels, as well as our growing array of partnerships, including our announced transactions with Arcadian, Banyan, Hestia, Join, Rhino, and Outdoorsy, among others. Many of these partnerships are focused on growing our contribution to the portfolio from insurance. While the premium volume for 2021 year-to-date is modest for these activities, we expect these ventures to be strong contributors to growth in 2022 and beyond, which I'll refer to in more detail later. In our reinsurance portfolio, market conditions remain positive with adequate pricing across global casualty, specialty, and property, albeit with decelerating rate increases. Across the majority of the reinsurance lines, absent a few, we believe we have passed the pricing peak. As we allocate capital and focus on all three pillars of our strategy, we take advantage of positive market conditions, but we're not reliant on the recent hardening market. We intend to capitalize on market dislocation and believe we are well-placed to move quickly and navigate changes in conditions as they evolve. We believe we have strong services assets in our portfolio where we see good growth opportunities. Our wholly-owned managing general underwriters and agents, MGUs or MGAs, IMG and OMADA, participate in areas of the market with strong macroeconomic tailwinds, including travel and healthcare. Serious Point already has a distinct advantage in our services business, and with an infusion of talent and capital, we see significant opportunities for us to grow here as well. We remain bullish on the travel sector overall, particularly coming out of COVID lockdown, even though continued international travel restrictions, including restrictions on inbound travelers to the United States, have negatively impacted our top line versus expectations at IMG this quarter. MGAs provide access to unique specialty primary insurance business, allowing us to grow premiums in the primary space with the flexibility to adjust the volume of business based on market cycles. They generate commission-based, non-risk-bearing fee income, which provides a source of income to Serious Point. We're seeing MGA valuations rise to 12 to 16 times EBITDA, up from 10 times EBITDA five years ago. The increase is driven by huge amount of deployable capital on the buy side, reduced opportunities elsewhere in the insurance space, and increased faith in the MGA model. The market is seeing an increase in new MGA startups. both traditional MGAs led by experienced underwriters leading large incumbent insurers, and innovative MGA startups founded by tech-native entrepreneurs. We're establishing SeriousPoint as a partner of choice for these MGAs. We offer a global platform consisting of admitted and E&S licenses in the U.S., Lloyd Syndicate 1945, Bermuda Class 4 entities, a European branch network, and Asian outposts. We have an ability to be nimble, paired with a multi-year investment outlook that is not based on short-term performance. Our approach involves taking investment stakes where appropriate and offering the use of paper, balance sheet capacity, product expertise, actuarial support, and MGA operations support. In some cases, we're truly incubating new businesses by working with founders from day one and setting up a new business. Our senior leaders' relationships are driving significant deal flow. We evaluated more than 100 deals, both tech-driven and traditional MGAs, in our first 100 days. We believe that potential partners come to us because they like our paper and platform and the speed with which we can respond. We see these deals as an opportunity to leverage into equity investments, and we see the bulk of our new premium growth coming from this area in the years ahead. While we're seeing terrific deal flow, we'll continue to employ a disciplined process and utilize a strong screen as we evaluate investments. which is focused on a credentialed founding team with a defensible competitive advantage, which is within underwriting appetite and risk management limits. The potential investment must also have strategic alignment with serious point with trusted co-investors where we have an opportunity to play an active role. We've made strong progress on this pillar through the second quarter, building momentum with the pipeline of attractive deals and working with experienced and innovative partners to launch a number of new businesses. We've co-founded JOIN and InsurTech MGA with Sarainam Massey and her team, with extensive collective experience in the InsurTech and small commercial space. JOIN underwrites commercial insurance in the small and middle markets, driving positive disruption in current market offerings through digital technology, data analytics, and automation. We launched Banyan Risk, and MGA co-founded with Tim Usher Jones, offering custom D&O insurance risk solutions in complex risk areas, including life sciences, global initial public offerings, and the technology sector. We've also partnered with Outdoorsy, an RV rental marketplace platform, which through Romley, through MGA, provides innovative technology-driven insurance solutions globally to their 37 million followers. We invested in Outdoorsy and provide risk capital to Romley, Our longer-standing investments in innovative technology-driven businesses, such as Pi and InsurTech Nobler, which was bought by USA this quarter, have also continued to add value, as does our partnership with John Boylan, who is successfully building up the team at Arcadian Risk, attracting the best talent from across the industry. We aim to play a role in accelerating the growth of the companies we are partnering with and investing in to create value. We have multiple avenues to drive profitable growth over time, which will deliver value to our shareholders, including appropriate exits to realize gains. Now let me turn the call over to David to review our financial results in more detail.