Siriuspoint Ltd (SPNT) 2025 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Siriuspoint's Third quarter 2025 earnings conference call. (Operator Instructions)

With that, I'd like to turn the call over to Liam Blackledge, Investor Relations, and Strategy Manager. Please go ahead.

Thank you, operator, and good morning or good afternoon to everyone listening. I welcome you to the Serious Point earning call for the 2025, third quarter and 9 months result. Last night, we issued our earnings press release, thank you, and financial supplement, which are available on our website www.siriuspt.com. Additionally, a webcast presentation will coincide with today's discussion and is available on our website.

Joining me on the call today are Scott Egan, Our Chief Executive Officer, and Jim McKinney, 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 certain non-GAAP financial measures will also be discussed. Management uses the non-GAAP financial measures in its internal analysis of our results of operations and believes that they may be informative to investors engaging the quality of our financial performance and identifying trends in our results.

However, these measures should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. Please refer to page 2 of our investor presentation and the company's latest public filings with the Securities and Exchange Commission for additional information.

I will now turn the call over to Scott.

Thanks, Liam, and good morning, good afternoon, everyone. Thank you for joining our third quarter and 9 months 2025 results call.

The third quarter was another successful quarter of delivery for Siriuspoint. A strong underwriting performance. Deliberately targeted growth the announcement of MGAs disposals. Insurer reinsurer of the year at the Insurance inside the US and an upgrade to positive outlook from S&P means there is a lot to be pleased about the ambition remains the same.

Keep building on the progress and momentum whilst targeting sustained levels of best-in-class performance. The third quarter was another step along the road on that journey. And we remain completely focused with no room for complacency. In terms of specifics, our core combined ratio of 89.1% delivered an 11% increase in underwriting income versus last year, aided in part by no catastrophe losses in the quarter.

We achieved a strong operating return on equity of 17.9%, significantly ahead of our across the cycle 12% to 15% target range. More importantly, our year today operating return on equity of 16.1% is still outperforming a range despite the heightened first half losses from the California wildfires and aviation. Therefore, we would not describe the first 9 months as being quiet, as in fact our catastrophe losses are over $50 million higher than prior year.

This puts our 16.1% operating return on equity into context and is an important proof point of the improvement in the quality of our earnings. In addition to a strong financial delivery, the third quarter also saw significant execution on the rationalization of our MGA investments.

We announced agreements for the sale of our 100% stake in Armada and our 49% stake in Arcadian for combined total proceeds of $389 million valuing them together at around 15 times EBITDA. Upon closure of these deals, over $200 million off-balance sheet value will be recognized in our book value, representing a per share increase of approximately $1.75.

Finally, the quarter also saw our third outlook upgrade of the year, with S&P upgrading our outlook to positive, joining the previous upgrades from AM Best and Fitch. We have added a new slide this quarter linked to delivery against our ambition to become a disciplined underwriter with a low volatility portfolio.

Slide 10 shows our combined ratio volatility against our peers over the past two years. This demonstrates the significant progress we have made in managing the volatility of our underwriting both at an individual risk level and across the portfolio.

We talk often about our disciplined approach to portfolio management of risk, and as you can see, since our turnaround and reshaping, we now rank amongst the top performers over the past couple of years. Our aim is to continue to build this track record.

We have now delivered 12 consecutive quarters of underwriting profits and 18 consecutive quarters of favorable prior year development. I also want to spend a few moments talking about the strong top-line momentum we have within the company. Gross premiums written grew double-digit again in the quarter at 26% year over year.

This is now our 6th consecutive quarter with a double-digit growth profile. This was driven in large part by strong growth within our insurance and services business and particularly from our accident and health, surety, and attritional property books of business.

In particular, I want to highlight our accident and health division. This business acts as a volatility shock absorber within the wider underwriting portfolio given its short tail and low volatility characteristics. It also boasts a long track record of high capital returns. In the health division allows us to take disciplined risk in other areas that still remain within our guide rails to achieve a low volatility portfolio overall. It also has the added advantage of being less correlated to wider P&C pricing cycles.

This division accounts for almost $1 billion of gross premiums written on an annualized basis and forms a significant part of our company. Elsewhere within our insurance and services business we are seeing strong growth from surety which like accident and health is less correlated to wider P&C pricing cycles.

Premiums here are derived via the MGA distribution channel. Something specifically to look at the premium we write via the MGA distribution channel, again, we have included an additional slide in the quarter to share more details on our approach.

Slide 13 focuses on the length of the relationship linked to the derived premium. In short, we are more careful with newer partners. Whilst they make up approximately 1/3 by number, they only make up 9% of our overall MGA premiums. We tend to have higher premium volumes with more mature partners where we have gained greater historical experience.

Around 90% of our overall portfolio comes from partners who we have had a relationship with for three years or more. We think this seasoning is an important part of our approach to risk taking. Our selection process, which declined around 80% of opportunities presented, seeks out partners who want to form deep long-term relationships.

Looking at our existing relationships in the last year, we have continued writing business with 97% of the partners we have previously onboarded over a year ago. This demonstrates our ability to seek out those partners who we will work with on a long-term basis and those who share our underwriting and risk philosophies.

In addition to our cautious approach to risk taking in the early days of a relationship, we also apply the same logic to our reserving. Under a risk-based approach to reserving, newer relationships are generally reserved above pricing projections to account for uncertainty from limited performance experience.

Lastly, we have profit sharing features in place for around 87% of our MGA partners driving alignment of interest linked to underwriting performance. Coming back briefly to the sale of our MGA investments, as I mentioned earlier, this quarter saw us reach agreements to sell two MGA investments, Armada and Arcadian.

Importantly, we also signed long-term capacity deals with them both until 2030 and 2031 respectively on existing economic terms. Armada, the most material to our book value, remains on track to close in the 4th quarter, and Arcadian remains on track to close in the first quarter of next year.

We reaffirm our commitment to a long-term ROE across the cycle target of 12% to 15% post these disposals. ING is now our only 100% owned MGA, generating roughly $50 million of net service fee income on an annual basis. As a reminder that carrying value on our balance sheet is $70 million.

ING is a key part of our wider accident and health ecosystem, generating around 25% of the accident and health underwriting division's premium as well as a healthy MGA margin in its own right. We are excited about the future of ING and announced last week the appointment of a new CEO, Will Nihan, who joins us from Travel.

Finally, our capital remains strong, and our third quarter BSCR ratio improved to 226%, which is within our target range as we continue to deploy capital to support the organic growth opportunities of the business. Of course, we expect this to increase post the closing of the MGA transactions I have mentioned.

As we think ahead on capital given these sales, we are taking a look at our capital stack and more specifically our hybrid instruments. When we conducted the buybacks related to the CMIG shareholder agreement, we increased our leverage.

Jim will cover this in more detail, but with the Series B preference shares having a rate reset coming up in February 206, we have an opportunity to reduce leverage to pre-CMIG agreement levels whilst reducing our financing costs meaningfully.

Before I pass across to Jim, I also wanted to highlight that last month saw the company earn another award. This time insurer re-insurer of the year at the US Insurance Insider Honors Awards. This follows a program insurer of the Year award which we received in May at the Program Manager awards. Whilst they don't mean anything in and of themselves, I think we can take them as further proof points of our progress.

So, I will finish what I always do. I'm incredibly proud of the team and the commitment, desire, and determination they have shown again so far this year. As I reflect back on my third anniversary as CEO, our progress is strong, but it could not be done without our biggest asset of people. I am grateful to all of them for what they have done.

And what they do every day, and I am excited about our future. Our collective aim is to continue our upward trajectory to become a best in class specialty underwriter.

With that, I'll pass across to Jim who will take you through the financials in more detail.

Thank you, Scott.

Turning to our third quarter results on slide 16, in the third quarter and for the first 9 months of the year, we delivered excellent financial results on a consolidated basis and in each of our segments. Our diverse portfolio continues to showcase profitable premium growth with low volatility and highly attractive lines of business.

At 89.1%, the core combined ratio is strong and broadly in line with the previous year. The combination of higher premiums, a strong core attritional loss ratio, lower expense ratio, and no catastrophe losses produce core underwriting income of $70 million. This is an 11% increase from the third quarter of 2024 and our 12th consecutive quarter of positive income.

These items are a testament to the team's strong execution, disciplined underwriting, and focused capital management. Moving to net service fee income, we benefited from a 22% increase in year after year service revenues, as well as net service fee income increasing 47% to $10 million.

The investment result is $73 million. It includes the full impact of the actions taken during the first quarter to support our repurchase activities. Net investment income continues to benefit from a supportive yield environment and remain on track with our full year guidance of net interest income between $265 million and $275 million.

Operating net income is $85 million. This excludes non-recurring items such as foreign exchange losses on a per-share basis. This increased by 41% to $0.72. We previously referred to this metric as underlying net income but have renamed it this quarter to better reflect the nature of this metric as the business moves past its repositioning history.

Net income for the quarter is $87 million a strong year over year improvement from $5 million last year. In summary, our third quarter results demonstrate our ability to profitably grow a low volatility portfolio and create meaningful value for all of our stakeholders.

Moving to our 9-month results on slide 17. These are consistent with the third quarter. Strong execution, disciplined underwriting, and focused capital management is producing profitable growth. Gross written premium, net written premium, and net earned premium grew 16%, 19%, and 18%, respectively.

Growth was particularly strong in the third quarter. We expect fourth quarter premiums to be more in line with the growth produced on a year-to-date basis. Common shareholders' equity increased $273 million to $2 billion resulting in diluted book value per share ex AOCI growing 13% or $1.83 to $16.47.

Moving to slide 18 and double clicking into our underlying earnings quality. Our underwriting first focus continues to deliver strong underlying margin improvement. The attritional combined ratio chart on the left-hand side of the page strips out the impact from catastrophe losses and prior year development, as these inherently vary over time. We believe this metric is useful to examine the quality of our underwriting income.

Our 90.9% core attritional combined ratio in the first nine months of the year represents a 1.8% improvement versus the prior year period of 92.7%. All facets of the ratio improved. The attritional loss ratio improved 0.9 points, the acquisition cost improved 0.2 points, and the OUE improved 0.7 points.

Important to note, we continue to benefit from scale from our earned premium growth. For the full year, we remain comfortable with our previously stated expense ratio expectation of 6.5% to 7%. The right-hand side provides a bridge from our underlying earnings quality to our core combined ratio. This displays 3 points of favorable prior year development in the first nine months, partially offsetting 3.5 points of catastrophe losses that relate entirely to the first quarter of California wildfires.

Turning to our insurance and services segment results on slide 19, gross written premium increased $186 million, or 49% to $562 million in the quarter, driven by strong growth within all of our specialties. Year-to-date, gross written premium increased $367 million or 26% to 1.8 billion.

The insurance and services segment achieved a combined ratio of 90.1%. This is a 2.3% improvement from the prior year quarter. This was driven by a 2.3% decrease in the loss ratio and a 2-point decrease in other underwriting expenses partially offset by a 2-point increase in the acquisition cost ratio. The improvement is due to improving risk selection and a shift in business mix.

Double clicking on our accident and health book of business. A&H provides us with a stable source of underwriting profit and a strong double-digit return on capital. During the first 9 months of the year, Premiums for this specialty grew 24%. It now accounts for 45% of the segment gross written premium. For the areas we focus on, the pricing environment continues to meet our risk return requirements. We continue to see growth opportunities within this specialism.

Turning to casualty, year-to-date premiums have increased by 4%, driven by strong rate offset by decreased volumes. In the first half of the year, we allocated capital towards other opportunities that have more attractive underlying margins. Subsequently, in the third quarter, we saw growth. Means within select general liability subclasses.

Overall, there are many classes we remain cautious on due to pricing challenges, notably public DNO and commercial auto, whereas previously indicated, we have substantially reduced premium and exposure. In terms of casualty pricing, we continue to benefit from rate and excess of trend, particularly in excess casualty that has seen mid double-digit rate increases.

Our priority is the bottom line over top-line. If conditions change, we will not be afraid to take decisive action to ensure appropriate underwriting margins. Other specialties continue to see strong growth highlighted by surety and environmental. Both of these lines have seen strong year over year and quarter over quarter increases in premiums.

Within marine and energy, rate trends are similar to those described in the second quarter. Cargo and haul generally saw single-digit rate decreases. Rates for marine liability are firmer, ranging from flat to low single-digit rises. Energy liability rates remain positive and average 5%.

Last, premiums for our property specialty are strong on both a third quarter and year-to-date basis. This is driven by growth from our international business where we are writing select opportunities mostly in the UK. This business has a controlled volatility profile with a focus on lower limit residential and SME properties protected by Excel reinsurance for larger events.

Moving to our reinsurance segment results on slide 20. This quarter, gross written premium decreased by $5 million or 2% to $310 million. We saw growth in casualty offset by a decrease in aviation premium, with property premium broadly flat. Trends were similar on a net written premium basis. On a 9-months basis, gross written premium increased by 1%, while on a net basis, premiums written decreased by 3%.

The combined ratio for the quarter increased by 3.3 points to 87.9%. The result was driven by a 1.2% improvement in the acquisition cost ratio, offset by a 4.4% increase in the loss ratio, largely the result of decreased favorable prior year development.

Double clicking into casualty reinsurance. Gross written premium increased 7% in the quarter. It is down 2% for the nine months. Casualty reinsurance continued to benefit from positive rates that exceeded trend. Aligned with our fourth quarter 2024 guidance, we reduced exposures on structured deals and certain casualty classes at 11. This is a result of underwriting discipline and our ability to allocate capital to the best opportunities.

Other specialties saw gross written premium decrease by 10% this quarter. Year-to-date we are up 6%. The reduction is the result of reduced aviation premium. We remain cautious on this specialty as we seek further rate increases to achieve rate adequacy, particularly with major airlines. A majority of major airline renewals occur in the fourth quarter. Our capital allocation to this area will depend on rate achieved and price adequacy.

Elsewhere and other specialties, credit and bond pricing continues to be pressured, stemming from favorable historical results and ample market capacity. Within property reinsurance, premiums were flat in the quarter, with softening and excess of loss largely offset by an increase in demand for surplus relief via quota share.

Here, carriers are driving additional demand, specifically for secondary perils coverage following market expansion resulting from the improved market conditions and regulatory environment. For the first 9 months, premiums are roughly flat with reinstatement premiums from the California wildfires offsetting premium reductions. We will continue to monitor rate adequacy and property reinsurance and be disciplined capital allocators.

Slide 21 shows our catastrophe losses versus peers and the reduction in the volatility of our portfolio. Following portfolio actions taken in 2022, we have materially decreased our capacity exposure in order to deliver more consistent returns to our shareholders. The charts show how we reduced our catastrophe losses in 2023 and 2024 and have continued on this path in 2025.

Care losses in the first nine months represent 3.5 points of our combined ratio, and we're largely driven by the first quarter California wildfires. We have a comparatively low loss ratio demonstrating the benefits of our diversified portfolio.

I would like to take a moment on behalf of all of Siriuspoint to send our thoughts to all those who have been affected by Hurricane Melissa earlier this week. At present, we expect this to be a manageable loss with our net exposure in the affected regions around $10 million.

Moving to reserving. Our strong history of prudence is shown on slide 22. Favorable prior year development in the quarter stood at $9 million for the core business versus $30 million in the prior year quarter. It is important to consider our consolidated result here, as this includes the business we have put in runoff. We had favorable prior year development on a consolidated basis of $9 million, marking the 18th consecutive quarter of favorable prior year development.

Our track record of consecutive favorable releases well exceeds the average duration of our insurance liabilities of 2.8 years, highlighting our prudent approach to reserving. Additionally, we show here the strong level of protection we have on each of these lost portfolio transfers that were completed in 2021, 2023, and 2024.

Turning to our strong investment result on slide 23. Net investment income for the first 9 months of the year was $206 million down slightly from the prior year period as a result of a lower asset base following the settlement of the CM Bermuda transaction in the first quarter. We reinvested over $900 million this quarter with new money yields continuing to be in excess of 4.5%.

The portfolio continues to perform well, and there were no defaults across our fixed income portfolio. We remain committed to our investment strategy which focuses on high-quality fixed income securities. 83% of our investment portfolio is fixed income, of which 99% is investment grade with an average credit rating of minus. Our overall portfolio duration remained at 3.1 years while assets backing lost reserves remained fully at matched and are at 2.8 years.

Moving on to slide 24, looking at our strong and diversified capital base. Our third quarter estimated BSCR ratio increased 3 points to 226%. Our capital position remains strong and contains sufficient prudence as shown by the stress test scenario of a 1 in 250-year PML event.

Moving on to our balance sheet on slide 25, we continue to have a strong balance sheet with ample capital and liquidity. During the quarter, the debt to capital ratio fell to 23.6%, driven by an increase in shareholders' equity from net income offset by weakening of the US dollar Swedish corona exchange rate, increasing the value of our debt issued in Corona. Our debt to capital levels remains within our targets.

We continue to have strong liquidity levels, including $662 million of liquidity available to the Holdco following the final payment of $483 million to see in Bermuda in the first quarter. As a reminder, in the first half of the year, both AM Best and Fitch revised our Outlook to positive from stable, whilst Moody's and S&P affirmed our ratings. During the third quarter, S&P also revised our Outlook to positive from stable.

We believe our balance sheet continues to be undervalued in relation to the consolidated MGAs which we own. During the quarter, we announced the sale of Armada, which will increase book value by roughly $180 million upon clothes. We also announced the sale of our 49% stake in Arcadian. This will increase book value by roughly $25million to $30 million upon close.

Following the sale of these MGAs, we reaffirm our commitment to producing 12% to 15% ROE across the cycle. We expect to use the proceeds to redeem the $200 million of preference shares that we have outstanding at their upcoming rate reset on a pro forma basis, using the proceeds from the sale to redeem the preference shares would reduce our leverage ratio, including preference shares from 31% to 24%. This will enhance our credit profile and reduce our cost of debt.

With this, we conclude the financial section of our presentation. This quarter saw a continuation of strong double-digit growth in our top-line while delivering a core combined ratio in the high 80s that contains continued attritional loss ratio improvement. This is our seventh consecutive quarter of attritional loss ratio improvement.

Operating return on equity for the quarter of 17.9% contributes to a 9-month operating return on equity of 16.1%. We are on track to deliver another year with a strong return on equity at or above our 12% to 15% across the cycle target. We have built a strong track record of delivery, and this quarter's result further validates the significant progress we have made on our journey to becoming a best-in-class specialty underwriter.

With that, I hand the call back over to the operator. We can now open the lines for questions.

Michael Phillips, Oppenheimer & Co.

Thank you. Good morning, everybody. Good afternoon. First off, congrats on the quarter, and I appreciate the slide, the new slide 13 is nice to see. I'm so glad you guys added that. Question on, I guess, insurance and kind of to Jim's last couple of comments on the nutritional loss ratio improvements. You've taken it nicely down from mid 60s to, now teasing 60s, low 60s, and I assume part of that, a good part of that is because of the mixed shift in in the company in that segment.

I guess as soon as we think about continued probably mixed shift A&H and charity and different things that you're really growing in and think about that line item for the traditional act your loss ratio. It seems like, are we teasing to get below 60 as we look forward the question.

Michael, thank you very much for the question, and thanks for your comments at the beginning as well. Jim, you can jump in a second as well. Look, I think, Michael, the way I think about it is obviously we've done a lot of the hard work, over the past few years, which was really reshaping the portfolio.

Obviously. Because of the profile of our distribution, sometimes when we win a new MGA relationship, that can see things sort of move, but I wouldn't expect any material movements if I'm honest with you, as we sort of, look out and over our ambition is always to is always to reduce it obviously all of our ratios, but obviously we have to take into account the environment as well.

So, I would say, look, it's more sort of speeds off now, Michael, to be honest, rather than sort of incremental moves. But obviously if that mix shift change changes because we're making decisions or because we win sort of new relationships, then obviously we'll be very clear in our guidance. But Jim, do you want to add anything beyond what I've.Said?

I think that's well said. I think at this stage we're likely it's a makeshift element. What would be clear is our targets from an ROE perspective and our commitment that we're earning appropriate returns on the deployment of capital. And so I would think about us continuing to optimize and to grow that as the real focus point.

And Michael, I'll just come back on that as well because one of the things, for example, in something like reinsurance, as we look into some of the more structured products, if that makeshift changes, obviously you can be quite a shift in terms of sort of, loss ratio acquisition cost, etc.

But look for us, we'll go after. I think there's the most value. If we pull back in certain areas, we'll be very clear on what and why, but always with good first principle, which is number one on the principle, and I think Jim captured it perfectly for me, which is, look, we think of it holistically and arrow and don't just sort of pull one particular lever, and we can sometimes see value.

In different areas which obviously would shift between acquisition cost and loss ratio and obviously OUE much smaller number, but ultimately we've made great progress in that over the last few years. So, look, we'll be as transparent as we possibly can be and look hopefully the slides helped a bit as well and thank you for your comments in that regard.

Yeah, no, thanks. I guess, given the pretty significant jump in insurance growth this quarter, I know last year you is when you, I think you took out the $90 million so I know we're apples to apples from this year to last year, but just help us think about how we can, I guess, model the premium growth going forward, was there any anomalies in this quarter in either A&H or sure that kind of led to the pretty significant growth this quarter? They're not anomalies.

I definitely wouldn't describe them as that, Michael. I mean, what can happen obviously is we can win new relationships and obviously that can impact it. Obviously we've tried to be clear over the last few quarters, I hope, where we can say we've been sort of leaning into them so I think you can see the difference between growth and our net written growth and obviously there's a linkage there to earned premium which is still to come, which I think is the point that Jim often that Jim often makes.

So, look, I think what you could expect subject to market conditions, profitability, and a few other assumptions is, our ambition is to make sure. That we seize the relationships that we bought in in the 1-to-2-year segment on the pie chart, but obviously that will be subject to, us being satisfied with the sort of underwriting performance and obviously market conditions, but I think that's effectively what we would be looking into.

There's not really any anomalies per se, but Jim, do you want to add anything?

Yeah, I would just say, Michael, maybe just thinking a little bit about trends, as Scott indicated, no anomalies from a quarter perspective or in a year over year that you'd take a look at. It's been a pipeline that has been growing, and the strength of our relationships have been growing that have enabled what, we've seen from a quarter growth perspective.

I would highlight and we tried to call this out when I think about what, growth might be, for example, in the fourth quarter, we're thinking that it would be much closer to what we experienced maybe year-to-date, recognizing that the fourth quarter tends to be or sometimes is a little bit slower than maybe kind of what your first quarter or some of the other quarters might be from just an overall kind of seasonality perspective and just where we see policies being written.

Yeah, thanks, Jim, and that comment was more on insurance, correct, just to be clear.

Yes, it was yeah.

Okay, cool. All right, cool, thanks, that's all for now. I'll circle back. Thank you very much.

Thank you.

Thank you, ladies, and gentlemen, as a reminder, if you'd like to join the question queue, please press star one on your telephone keypad. We'll pause a moment to allow for any other questions.

Mr. Blackledge, there are no other questions at this time. I'll turn the floor back to you for final comments.

Thank you everyone for joining us today. If you have any follow-up questions, we will be around to take your call, or you can email us on investor.relations@siriuspt.com.

Thank you for your ongoing support, and I hope you enjoy the remainder of your day. I'll now turn it back over to the operator to wrap up the call.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time.

Thank you for your participation.