SiriusPoint faces final year of transition on path to profit targets

SiriusPoint is facing another year of transformative work with gains needed across its earnings pillars – underwriting, MGA fee income and investment earnings - if it is to reliably hit its goal of double-digit ROE in 2024, top officials have said.

“We're not there now,” CEO Scott Egan (pictured) told his company’s Q4 earnings call. He cites “significant progress on reducing volatility, increasing profitability and business simplification” to “better position our franchise for success,” but that success will find its measure in 2024.

“Double digit ROE by 2024 will need to be supported by higher earnings by all three sources,” Egan said. While he is “feeling confident going into 2023, having done much already,” he brands mantras of “no stones unturned “ and “no complacency.” The cost side will deliver an added $50 million in savings in 2023, officials said.

“2024 should be the year when we realise the full run rate ... of all of our actions,” CFO Steven Yendall concurred of the march to a double digit return on equity in 2024.

Some changes remain at a very fundamental level. It’s been two years since the merger of Sirius and Third Point and integration and “one-team” mantras rank tops on the priority list. As of today, the CEO cites “good progress … towards a one team approach.”

Re/insurance pulled to an underwriting profit in the fourth quarter and nearly dragged its combined ratio down to the 100-line for the full-year reading, but remains well short of targets. “We will prioritise underwriting improvement over top line growth in the medium term,” Egan said.

Much of the work to date in underwriting has been on volatility from property cat. SiriusPoint has “done a lot,” including existing around $300 million in property premium and hacking some 50% from its PMLs since Q2’21, Egan said. Property is down to some 18% of group premium from ca 31% a year prior.

That includes some $100 million which the reinsurance wing dropped entirely at the 1/1 reinsurance renewals. SiriusPoint preferred to leverage a “strong market” to better “facilitate our efforts to rebalance and re-underwrite,” Yendall said. Beyond prices, terms and conditions were said to have improved across the book.

Egan expects “further refinements  this year,” but may replace the shears with a scalpel. “The majority of the rebalancing of the property portfolio is largely complete,” he said. Mid-term, specialty and accident & health lines could take a higher allocation.

The SiriusPoint stable of MGA’s may be leaned on for fresh growth in fee income, albeit with increasing focus on the core group. The units offer “significant value” and may be broadly “underappreciated,” Egan said. But their contribution won’t lead the 2023 recovery: expect “stable” MGA fee earnings.

The move to stronger investment returns, following heavy losses in FY2022, should be delivered by new, higher, fixed income reinvestment yields which SiriusPoint is compounding with a move to longer durations. The 2022 shedding of a hedge fund investment structure has likely already removed the bulk of earnings volatility, officials said.

“We intend to provide predictable and stable returns,” Yendall said, citing an investment structure “more in line with market average.”

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.