Sirius swings to loss in Q2 and H1 2020 ahead of merger with Third Point Re

Bermuda-based Sirius International Insurance Group saw its business shrink and swung to loss in the the second quarter and first half of 2020, but its reinsurance unit performed favourably despite the challenges of the COVID-19.

The company revealed its results on the same day it entered into a definitive merger agreement with Third Point Re in a cash and stock deal valuing at approximately $788 million.

Sirius Group made a net loss of $14 million in the second quarter and a net loss of $112 million for the first half 2020. This compares with a profit of $6.6 million in the second quarter of 2019 and a profit of $102 million in the first half of last year.

The company's combined ratio was 96 percent for Q2 2020, compared to 105 percent for Q2 2019. The improvement was mainly driven by lower net unfavorable prior year loss reserve development, partially offset by COVID-19 pandemic losses (4 points), net of reinsurance.

Gross written premiums for the second quarter of 2020 were $323 million, down 34 percent compared to the second quarter of 2019. Absent the effect of a single fronting arrangement within the Global Reinsurance segment, gross written premiums decreased 19 percent compared to the prior year period primarily due to decreases in Global A&H and Global Reinsurance.

Global reinsurance produced $13 million of underwriting income and a 95 percent combined ratio. The results included $4 million of losses from the COVID-19 pandemic. Current year catastrophe losses, net of reinsurance and reinstatement premiums, were $10 million.

“We produced a solid financial return during the quarter with a 3.1 percent growth in BVPS,” said Kip Oberting, president and CEO of Sirius Group. “Investment results were strong and incremental COVID losses were modest following our Q1 reserving actions.

“During the quarter we dedicated substantial resources to the firm’s strategic review process and these efforts bore fruit as we announced earlier today. This is a positive outcome for our shareholders, clients and employees as Sirius celebrates its 75th anniversary.”

Sirius Group CFO Ralph Salamone added: “Comprehensive income was $50 million for the quarter, a strong improvement from the first quarter and a significant increase over the second quarter of last year. The total return on investments of 3.0 percent also helped our quarterly financial performance. Having taken a prudent approach to reserving for COVID in the first quarter, we recorded a modest amount of additional losses in the second quarter. Together with a relatively quiet catastrophe loss quarter, we produced an underwriting profit with a 96 percent combined ratio. As a result, Book value per common share grew 3.1 percent during the three months ended June 30, 2020.”