CEO Egan: $1.3bn LPT gives SiriusPoint flexibility to allocate capital to opportunities

SiriusPoint CEO Scott Egan has said the $1.3bn loss portfolio transfer (LPT) announced with Compre this morning validates his firm’s reserving strategy and crucially brings “finality” to its international cat exposure, with the deal including recognition of $100mn in reserve redundancy on the portfolio.

  • Egan: “This isn’t us getting rid of a problem” as SiriusPoint’s legacy deal with Compre features a $100mn reserve redundancy / release
  • CEO says $1.3bn LPT announced this morning should give investors even more confidence in balance sheet strength after exiting int’l property cat
  • SiriusPoint could look to grow NA property cat as conditions strengthen, but will not return to int’l
  • Latest legacy deal gives SPNT flexibility to focus on new strategic priorities: NA programs, London market business

The executive said the transaction also gives the company flexibility to allocate capital more quickly to where it wants to grow going forward.

Egan made those comments to The Insurer in an interview shortly after SiriusPoint and legacy specialist Compre announced they had struck their second LPT in the last two years, this time walling off international and London-based property cat exposure.

“This isn’t us getting rid of a problem. This is reinforcing that we have a prudent and healthy balance sheet. It’s a proof point. We are absolutely focused on execution,” Egan told The Insurer.

The deal is the latest major strategic action taken under Egan since the former RSA executive joined the company last September.

It comes after the CEO took the call in November to consolidate five of SiriusPoint’s 10 offices globally, a move that involved centralising the writing of cat risk out of Bermuda and Stockholm.

“From our perspective, and I hope following hard on the earnings call and laying out our strategy, that people understand ‘stuff’ is happening here, and this is another big piece of the jigsaw,” Egan said.

“I think this really aligns this company going forward, it closes things off from the past. It's a brilliant deal,” he added.

As part of the transaction, the carrier is recognising a $100mn reserve redundancy on the portfolio being transferred – in contrast to other legacy transactions where cedants have paid premiums to address reserving uncertainty – which Egan said confirmed SiriusPoint’s existing reserve strength.

“This gives us the flexibility to allocate capital more quickly to our go-forward strategy,” Egan said.

“When people look at the areas where we want to grow – North America program business and London – I think we’ve got more flexibility after this deal than we did prior to this deal.”

Certainty for investors over int’l cat run-off

Egan also pointed out that the LPT is as much about boosting investor confidence following the (re)insurer’s exit from writing international property cat and eliminating the potential for “surprises” as that portfolio runs off.

“I think there has to be an honesty, given the recent performance of the organisation. I'm sure that when we exited the property cat international portfolio, people may have been worried that that could lead to negative reserve run off,” the chief executive explained.

“What this does is a) dispel it, because of the $100mn [reserve redundancy], but b) regardless of that, it gives finality to those reserves. And I think in terms of clearing the decks going forward, that’s one part.”

Egan was asked whether – despite its pullback from international cat – strengthening property catastrophe market conditions could entice the company to grow its writings.

“We're not anti-property,” Egan explained, noting that his company “write[s] a lot” of property business.

“I think it's highly likely that we’ll write more property as part of our London strategy,” he continued.

“What we won’t write is property cat international – so lots of cat property in the UK, Europe and international – having exited those markets.”

The CEO pointed out that SiriusPoint continues to have a meaningful presence writing cat business in North America.

“We are happy with that book, we are happy with the rate that we saw. I'm glad the market is correcting after five tough years in that space. We also saw improvements in terms and conditions. So I think for us, we’re happy with our position and exposure, and if the market conditions prevail, we’ll take advantage of that.

“But we are unlikely, despite the market conditions, to go back in any significant way into property cat international.”

Egan credited his team for their hard work on SiriusPoint’s latest legacy transaction, while also indicating that with the latest milestone behind it, management can turn its attention to other strategic priorities.

“I am delighted, pleased, but more than anything, myself and the organisation are energised, because our eyes are fixed on the horizon,” Egan explained.

The major moves made under Egan since he joined the company in September have helped boost the firm’s stock by nearly 55 percent in that span, trading at $7.14 per share early in the Thursday session.

“In terms of our current investors or future investors, and our current valuation level, I think [the LPT] makes us more attractive, not less, albeit ‘no complacency’, and with a humility that we have to deliver proof points.

“We never get over-excited on [our] stock price, but we've seen it improve. This [LPT] should give further confidence to that stock price,” he said.

The Insurer broke the news in November that SiriusPoint was among a pair of companies approached last summer by White Mountains over a possible takeover deal, but that approach was rebuffed.

Egan was asked Thursday whether the improvements being made to the company could make it more attractive to a prospective buyer, and whether SiriusPoint would entertain a sale sometime in the next year.

The CEO declined to comment, but elaborated further: “My job is to run this company for the benefit of shareholders and that's what I do, I don't get drawn into stuff like that.”