Sirius Group reports 2019 loss; warns further downgrades would harm business

Bermuda-based re/insurer Sirius Group has reported a loss for 2019, with a significantly raised combined ratio. Its gross written premiums were roughly on a par with 2018.

Following news of AM Best’s rating downgrade of Sirius, the group said any further negative ratings actions would have a material adverse effect on Sirius Group's business. The downgrade reflected concerns over the influence of controlling shareholder CMIG, whose credit quality is significantly weaker than that of Sirius Group.

Sirius Group’s gross written premiums for 2019 were $1.9 billion, compared to $1.8 billion in 2018. Its combined ratio for 2019 was 111 percent, up from 103.1 percent in 2018. The company made a pre-tax loss of $33.7 million, compared with an income of $23.7 million in 2018.

Highlighting the risks related to Sirius Group's business and industry, the group acknowledged that “AM Best's ratings downgrade reflects the negative impact of Sirius Group's association with CMIG and AM Best's concern that CMIG, with a credit quality significantly weaker than Sirius Group, could exert control over Sirius Group despite the presence of a sufficiently strong governance structure and independent board.”

S&P has noted that it has placed Sirius Group on credit watch negative due to its concerns that there appeared to be a divergence of views between Sirius Group's management and CMIG over the group's future capital strategy.

It also noted that the worsening of the dispute between Sirius Group and CMIG could impact the assessment of the group's governance, possibly leading to the determination that the board was no longer Sirius Group's final decision-making authority. S&P also view CMIG's creditworthiness to be significantly weaker than that of Sirius Group.

“If the rating agencies were to perceive Sirius Group's safeguard mechanisms as insufficient, or should they determine that CMIG exercises control over Sirius Group's operations, further negative rating action will likely occur, which could include a downgrade or withdrawal of Sirius Group's ratings, and any such action taken by the ratings agencies would have a material adverse effect on Sirius Group's business (including, without limitation, loss of premium), prospects, financial condition and results from operations,” said Sirius Group.

Its annual report also highlighted the factors that give it competitive strength, namely its “prudent, disciplined” approach to risk management, its “efficient capital deployment and financial strength”, the management’s “extensive experience”, its history of long term customer relationships and the fact that it is a global multi line reinsurer with proven track record and a diversified book of business.

“Sirius Group’s corporate objective is to grow book value per share by maximizing underwriting profits through market cycles while preserving and achieving long term growth,” the group said. It added that it intends to pursue this objective by maintaining broad geographic coverage across multiple lines; managing capital prudently; continuing to identify opportunistic acquisitions; and maintaining a disciplined investment approach.