SiriusPoint Ltd

Good morning, ladies and gentlemen, and welcome to the Serious Point Limited fourth quarter and full year 2022 earnings conference call. During today's presentation, all parties will be in a listen-only mode. As a reminder, this conference call is being recorded. I would now like to turn the call over to Mr. Dhruv Galod, Head of Investor Relations and Chief Strategy Officer of Serious Point. Please go ahead.

Thank you, operator, and good morning, good afternoon to everyone listening. I welcome you to the Serious Point earnings call for the 2022 full year and fourth quarter results. Last night, we issued a press release and financial supplement, which are available on our website, www.seriouspt.com. Additionally, a webcast presentation will coincide with today's discussion and is available on our website. With me here today are Scott Egan, our Chief Executive Officer, and Steve Yandel, our Chief Financial Officer. Before we start, I would like to remind you that today's remarks contain forward-looking statements based on management's current expectations. Actual results may differ. Please refer to page two of our investor presentation for additional information and the company's latest public filings. At this time, I will turn the call over to Scott.

Thank you Dhruv and good morning, good afternoon everyone. Thank you for joining our fourth quarter and full year results call. I have now completed a very busy and productive five months with Serious Point. I remain confident about the opportunities ahead of us. We have a healthy balance sheet, excellent people and resources, strong client and broker relationships, and a diversified business model that has potential to deliver higher returns. I'm excited to be here, and I'm determined to help the company improve its performance and realize its potential. We have the ingredients to be an outstanding organization, but we recognize we're not there now. Since I joined Sirius Point as CEO, we have made significant progress on our strategic priorities of reducing volatility, improving profitability and business simplification. We believe we have a robust plan in place for 2023 against each of these areas, helping deliver against our underwriting first ethos. The vision for Sirius Point is to be a high performing underwriter and I am confident that we have the right elements in our business required to execute against that strategy and deliver. However, I recognise we are in the early stages. That said, we are already seeing positive changes in the company's performance and culture. We will be disciplined and consistent in our approach as we aim to re-establish our credentials and build confidence with our stakeholders as good stewards of capital. We expect to see meaningful improvement in profitability during 2023 as we benefit from already implemented underwriting and cost saving actions, locked in investment yields and stable MGA fee income. We expect to realise full run rate benefits of all our strategic actions taken during 22 and 23 in 2024, when we expect to deliver a double digit return on equity. Our business model is diversified and differentiated compared to a traditional P&C insurer. We have three uncorrelated sources of earnings. Underwriting income, capital life fee income from our five consolidated MGA partnerships, and investment income. Recognizing that past results do not reflect the full power of some of these value drivers, which were impacted by volatility and challenging performance, we believe that the actions we have taken and continue to implement have better positioned our franchise for success. We aim to improve performance, deliver more stable earnings, and ultimately deliver attractive returns. This morning I will outline further details of our strategic agenda and provide clarity on our plans. The key points of this overview can be found on slide five of our full year 2022 results presentation, which we are sharing during today's webcast and can also be found on the investor pages of our website. My intention is to provide transparent updates on our journey and progress as we navigate through 23 and beyond. I would now like to walk you through the six key focus areas, starting with point one, our fully integrated model with uncompromised emphasis on underwriting. The core of our strategy is quality underwriting, as we look to simplify the organisation, improve culture, and create a one serious point approach. We want the organization to be globally connected, collaborative, disciplined, and a profitable franchise working towards the same targets. The organization is still in transition and working towards full and effective integration following the merger in 2021. We are focused on establishing an efficient operating model and a culture that drives performance and delivery. We are making good progress on creating a one team approach where we look to improve employee engagement and have made changes to the remuneration structure for 2023 to better align performance and pay. Our underwriting approach must translate to a sustainable and higher level of profitability. and we will prioritise underwriting improvement over top line growth in the medium term. Moving to point two, the reduction in volatility and refinement of the portfolio. Property cat exposure has been the main source of underwriting volatility and addressing this level of uncertainty in our results has been an ongoing priority for the company. I would like to emphasise that we have already done a lot and have exited around $300 million of property premiums. Our PMLs based on 1 in 100 year events on a per occurrence basis have reduced substantially by around 50% in the last 18 months and we expect further refinements during this year. now only accounts for around 18% of the group gross premiums versus 31% last year. The reduction in property cap portfolio benefited us at our 1-1 renewals as it significantly lowered our reliance on the retro market. Despite a significant reduction in exposure, we have been cautious in our approach for 2023 and have bought reinsurance protection with lower attachment points to further protect our balance sheet. Pleasingly, our reinsurance protection costs have remained at similar levels to the previous years. We now believe that the majority of the rebalancing associated with the property portfolio is largely complete, but we will continue to review and refine our portfolio mix based on market conditions and our strategic priorities. In the medium term, we would like to increase the proportion of business of specialty and A&H lines, develop London as a hub leveraging our Lloyds platform and continue to develop our North American Specialty Programme business. Our actions are starting to pay off and we are seeing the positive impact of the work carried out in underwriting. Our CAT losses within our core results were significantly lower at $138 million in 22 versus $326 million in 21, despite 2022 being a heavy CAT year for the global insurance industry. Our loss estimate for Hurricane Ian remained unchanged at $81 million, or four points of our book value. During the second half of 22, we saw year on year improvement in accident year loss ratios in both discrete Q3 and Q4, while our accident year combined ratio improved by around nine points during 2022. Our underwriting ratios are not where we would want them to be, but we now have a better platform with momentum into 2023. Our book ex-Property Cat was profitable in 22, but we still see significant room for improvement. 1-1 renewals went well. We remained very disciplined with our approach, took advantage of market conditions, and focused on our target returns. We experienced positive rate increases, with the majority of lines seeing rates above lost cost trends, which will support our margins going forward. As a reminder, 35 to 40% of our reinsurance portfolio renews at 1.1, including more than 50% of the overall property portfolio. Turning now to point three, which focuses on the actions we've taken to de-risk our investment strategy. Our investment portfolio has been a source of earnings volatility during 2021 and two, and a heavy consumer of capital. Given our focus on becoming a higher performing underwriter, we have de-risked our investment portfolio to be much more in line with other insurers. We aim to optimize our returns rather than maximize them and have taken actions to make investment income more predictable. In 2023, we expect to deliver between 220 to $240 million of net investment income with a reduced capital charge. Today, our portfolio is primarily fixed income focused, short duration and high quality. We have limited exposure to BBB and below investment grade bonds, while the average credit rating of our fixed income portfolio is AA. Third Point Enhanced Fund, which was mainly a hedge fund focused strategy, accounted for around 18% of our overall portfolio at Q2 2021 and changes in fair value created volatility in our P&L. We have substantially reduced this position, which is now down to around 100 million or 2% of the total investment portfolio, thereby lowering the capital intensity of the portfolio. Also, 63% of our fixed income investments are now held as available for sale versus none at the end of 2021, which we believe will help reduce volatility within our P&L going forward, albeit still contributing to capital. The designation of new assets to available for sale also ties in with our investment philosophy to hold fixed income assets to maturity as we aim to match our liabilities. Investment yields have risen significantly last year and we have proactively invested to take advantage of this trend. We have reduced holdings of cash and short term investments and have invested into longer dated fixed income instruments, helping us to eliminate the duration gap with regards to our loss reserves. we'll turn to attractive distribution capabilities as a contributor of fee income. MGAs are an important part of our strategy and our partnerships generate around 35% of the group premiums. We value our partnerships and aim to further develop these relationships as we leverage our underwriting expertise. Premium growth via our MGA partnerships has been strong at more than 50% during the last year, predominantly through organic growth in existing partnerships, whilst we also developed some new ones. Within this segment, we have five MGAs which we consolidate in our accounts and believe they have significant value and are underappreciated. These businesses namely Arcadian, Armada, Altisigna, Banyan and IMG generated $662 million of premiums for Sirius Point in 2022 and had more than 25% premium growth last year. These MGAs also generated $36 million of capital light net services fee income during 22. Their book value at the end of 22 was only $85 million, well below market valuations. In total, we had 36 equity stakes in MGAs, insured techs, and other investments at the end of last year. I believe this is too high to manage for the size of our group, and we are reviewing our options to optimize the number of equity stakes we have with the aim of having fewer and deeper. We will be happy owners or investors in MGAs where it complements our underwriting, and we do not expect to be active acquirers in this space in the near term. Moving to point five, cost and capital optimisation. Improvement in underwriting income will be supported not only by loss ratio reductions, but also by our cost actions. The loss ratio should benefit from the actions we have already discussed. But we believe our cost base is high and we have set a target to lower our costs by more than $50 million by 2024. This is significant and should support around two points of combined ratio improvement. The majority of the actions needed to deliver cost savings are already advanced and we are in the process of streamlining our operations to function more efficiently. We announced the rationalisation of our geographic footprint last quarter and are now looking closely at other opportunities to improve our overall operating framework. As I outlined earlier, the group is still going through an integration and we believe there is room to improve coordination and create a globally connected organisation which will further support cost savings as well as improve connectivity, collaboration and company culture. This year we expect further restructuring charges of $25 million as we deliver on our cost saving goal. Overall, our goal to deliver a double digit return on equity by 2024 will need to be supported by higher earnings across all the three sources of earnings, underwriting, fee income from the consolidated MGAs, and investment income. We aim to improve capital generation meaningfully as we achieve higher levels of profitability and will remain disciplined with regards to capital deployment, whilst ensuring returns are adequate and within our risk appetite. Finally, we will look at our healthy balance sheet. Overall, our balance sheet is healthy and we continue to operate the company against the AA rating requirement under the S&P model. Our Bermuda Solvency Capital Ratio was 194% as at Q3 2022 and based on preliminary calculations, we expect to see an improvement at the end of 2022. we have a prudent approach to reserving, which will help mitigate inflationary impacts. Our reserving philosophy considers the uncertainty inherent in our business, and we remain conservative with our approach when setting initial loss ratios, reserving for cat events, and recognizing the benefit of favorable loss trends. In conclusion, I'd like to summarize by saying we have a strong and diversified business model at Sirius Point. We want to be a high performing insurer and we are executing at pace to make things better. We have left no stone unturned and are reviewing everything from our loss ratios, to our costs, to our premium mix, to our investment portfolio and our capital. Our target is to achieve double digit return on equity by 2024. We will look to grow in areas where we can leverage our knowledge and expertise and the specialisms where we operate. I am feeling positive as we go into 2023, having done much already and I expect to again see significant improvement in our results. There will be no complacency as we drive hard to deliver for our customers and shareholders and I look forward to sharing updates on our meaningful progress as we go through the year. With these remarks, I will pass over to Steve, who will take you through the full year financials.