Q4 2024 SiriusPoint Ltd Earnings Call
and many more. Thank you. Thank you.
Speaker Change: Good morning ladies and gentlemen and welcome to Sirius Points fourth quarter 2024 earnings conference call.
Speaker Change: During today's presentation, all parties will be in a listen-only mode. As a reminder, this conference call is being recorded, and a replay is available through 11.59 p.m. Eastern Time on March 5, 2025.
Speaker Change: With that, I would like to turn the call over to Liam Blackledge, Senior Associate, Investor Relations and Strategy. Please go ahead.
Liam Blackledge: Thank you, Operator, and good morning or good afternoon to everybody listening. I welcome you to the Series Point earning call for the 2024 four-year and fourth quarter results.
Liam Blackledge: Last night we issued our earnings press release and financial supplement which are available on our website www.siriuspt.com
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Management uses the non-GAAP financial measures in its internal analysis of results and believes that they may be informative to investors engaging the quality of our financial performance and identifying trends in our results.
Speaker Change: However, these measures should not be considered as a substitute for, or superior to, the measures of financial performance preferred in accordance with GAAP. Please refer to page 2 of our investor presentation for additional information on the company's latest public filings. I will now turn the call over to Scott.
Sarah Singh: Thank you for watching. Please subscribe to my channel. I'm your host, Sarah Singh.
Scott Egan: Thanks Liam and good morning, good afternoon everyone. Thanks for joining our fourth quarter and full year 2024 results call.
Sarah Singh: The fourth quarter was a very busy one for SiriusPoint, not just due to business as usual and market events such as Hurricane Milton, but also because of the strong execution on many actions as part of reshaping the company for the future.
For more information, visit www.FEMA.gov
Sarah Singh: In the quarter, we completed the previously announced lost portfolio transfer on the workers' compensation business with Insta.
Sarah Singh: We agreed the transaction with CMIG to repurchase all of their outstanding shares and warrants And we further de-risked their balance sheet by reducing the carrying value of a legacy MGA investment
For more information, visit www.FEMA.gov
Sarah Singh: But I'm confident that all of the actions we have taken both last year as part of the performance turnaround and this year as part of our wider reshaping have really helped drive strong performance improvement as well as positioning us strongly for the future.
Sarah Singh: The improvement in performance across all of the business is stark versus 2022 and most importantly our underwriting performance has never been stronger.
Sarah Singh: Our aim, through both this call and our disclosures, is to transparently help you separate the one-off reshaping from the underlying performance.
Sarah Singh: That said, I'm pleased to say that 2024 marks the end of our major reshaping and that going forward, the entire focus of the company is on improving our business performance further.
Sarah Singh: During the second half of the year, we announced the repurchase of CMIG's entire common shareholding.
Sarah Singh: the repurchase and surrender of their merger warrants and the settlement of their series A preference shares all for cash and today we are pleased to announce that all of these common shares will be retired upon completion of the transaction.
Sarah Singh: The transaction is immediately accretive to book value by 4% and will be meaningfully accretive to our go forward return on equity and earnings per share going forward.
For more information visit www.FEMA.gov
Sarah Singh: As a reminder, earlier in the year we refinanced $400 million of senior debt to gain capital credit and we also retired $115 million of senior debt to improve leverage.
Sarah Singh: And we unlocked $96 million of MGA off-balance sheet capital through the deconsolidation of Arcadian, in which we had a 49% stake.
Sarah Singh: We have returned over $1 billion to investors this year, a remarkable number when considering the size of the company and where we started at the end of 2022.
Sarah Singh: Each of these items alone creates a significant impact but taken together means we have significantly improved our balance sheet and structure to be healthier, less complex and more able to support the business going forward.
Sarah Singh: I am delighted with the progress that we've made in this regard.
Sarah Singh: Thank you for watching. I'm Stephen Yendall. I'll see you next time.
Sarah Singh: This has led to a 14% improvement in our underlying net income versus prior year to approximately $300 million.
Sarah Singh: Underlying income reflects the adjustments for some of the one-off items I have already mentioned and for transparency there is a full breakdown of the bridge to this number in appendices two and three of the presentation.
Sarah Singh: Our core combined ratio for 2024 was 91%, a 2.4 point improvement versus prior year, excluding the impact of the LPT in 2023.
Sarah Singh: This was despite seeing an additional 1.9 points of catastrophe losses versus 2023.
Sarah Singh: We have done this while also growing our continuing lines business by 10% over the year.
Sarah Singh: This strong performance has driven an underlying return on equity for 2024 of 14.6%, which is at the upper end of the 12-15% across the cycle target we set only last year.
Sarah Singh: Thank you for watching. I'm Stephen Yendall. I'll see you next time.
Speaker Change: Let me comment briefly on our discreet fourth quarter underwriting performance.
Speaker Change: We delivered a combined ratio for a core business of 90.2%, marking the ninth consecutive quarter of underwriting profit.
Speaker Change: This includes 6.6 points of catastrophe losses relating primarily to Hurricane Milton which remained at a previously disclosed estimate of $40 million.
Speaker Change: This combined ratio is a 3.2 point improvement versus the fourth quarter of 2023 with the improvement coming from both the loss ratio and the operating expense ratio.
Speaker Change: Normalising for the catastrophe losses, the year-on-year improvement was 9.8 points, a very strong proof point of our underwriting focus and culture across the company.
Thank you. Thank you. Thank you.
Speaker Change: Growing the top line is our aim, but we will only do this where we believe it matches our capabilities and aspirations for underwriting discipline.
Speaker Change: In the fourth quarter, our continuing lines gross premiums written grew 21%.
Speaker Change: On a net basis, growth was even stronger, with net premiums written growing 28%, reflecting our strategy of taking more risks where we have maturing relationships and therefore historical experience.
Speaker Change: We achieved double-digit growth in the fourth quarter within our accident and health, property and specialty lines of business, while we remained roughly flat within casualty.
Speaker Change: Our growth is targeted and disciplined and we only grow in areas where we see opportunities meeting our profitability and risk targets.
Speaker Change: On a full year basis, our continuing lines growth stands at 10%, comprising of 14% growth within insurance and services and 5% growth within reinsurance.
Speaker Change: The impact of the previously taken underwriting decisions on the top line comparatives will have a greatly reduced impact going forward as these were taken in 2023.
Thank you. Thank you. Thank you.
Speaker Change: Looking now at the catastrophe losses for the fourth quarter, these were $39 million, which primarily relate to Hurricane Milton.
Speaker Change: This event contributed to our overall cap losses for the year, which amounted to 2.4% of our common shareholder's equity.
Speaker Change: As a reminder, we took decisive repositioning actions in relation to our property cap portfolio in 2022 and have reduced our volatility from cap losses significantly as a result.
Speaker Change: We are pleased that these actions have resulted in us going from having a cap loss ratio amongst the highest for our peer group in 2022 to being in the lowest quartile for the same peer group in 2023 and 2024 as shown on slide 18 of our investor deck.
A clear truth point to a lower volatility risk appetite.
Speaker Change: Further evidence is that our re-insurance segment delivered a strong stand-alone full-year performance, achieving a combined ratio of 88% despite worldwide cap activity in 2024.
Speaker Change: Unfortunately, and before 2025 had barely begun, we once again saw very visible and upsetting scenes of devastation, this time in California with the wildfires which occurred there last month.
Speaker Change: As we previously ensured for our customers in Florida following Hurricane Milton, we are totally committed to ensuring all welfare claims are paid as quickly as possible.
Speaker Change: One of the main reasons we exist is to help those impacted rebuild their lives after terrible events like this and we will be doing our best to ensure we fully support our customers throughout this process. On behalf of all at Sirius Point, our thoughts go out to those who have been affected.
Speaker Change: The California wildfires look set to be the most costly wildfires in history, with industry loss estimates ranging from 30 to 50 billion.
Speaker Change: At present, the estimate for our net pre-tax losses relating to wildfires is $60-$70 million.
Speaker Change: As we did for Helen and Milton, this estimate has been arrived at by doing a bottom-up evaluation of our exposure on an account-by-account basis and not relying on market share linked to industry estimates.
Speaker Change: The range, which is net of reinsurance and includes reinstatement premiums, will take us into a retrocession cover.
Speaker Change: This is there to prevent us from this type of earnings volatility.
Speaker Change: We are very comfortable in our retro and contract limits, providing protection against further downside on property claims in this range.
Speaker Change: The wildfires in California are a devastating reminder of why the re-rating occurred and was necessary within property catastrophe reinsurance during the 2023 renewals.
Speaker Change: This event once again serves as a strong reminder to reinsurance participants not to unwind from the rates and terms which were hard fought for in 2023.
Speaker Change: We expect that the high single-digit rate decreases seen at 1.1 will now moderate for the remainder of renewals in 2025.
For more information visit www.FEMA.gov
Speaker Change: Selectively, we have a duty as re-insurers to try and reduce the cyclical nature of the property catastrophe re-insurance industry for our investors and for our customers.
Speaker Change: During the quarter, we also completed our external reserve review, validating our lost reserves as prudent. This coincides with our 15th consecutive quarter of favourable prior year development, with our favourable development track record now longer than the duration of our insurance liabilities, which was three years at the end of 2024.
Speaker Change: During the quarter, we completed on the lost portfolio transfer with Enstart, relating to $400 million of workers' compensation reserves, as I mentioned earlier in the call.
Speaker Change: It is also important to note that for each of these three Lost Portfolio Transfers that we've completed since 2021, we continue to have over 95% of our limit remaining.
Speaker Change: Thank you for watching. I'm Stephen Yendall. I'll see you next time.
Funding now to MGEs.
For more information visit www.FEMA.gov
Speaker Change: Our MGA distribution strategy continues to strengthen, with 19 new or expanded distribution partnerships entered into during 2024 through our MGA Centre of Excellence, over double the amount from 2023 as we develop our platform and propositions.
Speaker Change: We believe our approach and the infrastructure and capabilities we are building in both underwriting and the MGA Centre of Excellence means we are making good progress towards our ambition to become the preferred partner for delegated business.
Speaker Change: Business being written under delegated authority continues to increase in its market share as MGA's become an increasingly important link in the insurance ecosystem.
Speaker Change: The capabilities we are developing aim to put us firmly front and centre to capitalise and benefit from this distribution channel in the underwriting areas where we have expertise.
Speaker Change: As I have said many times before, we continue to rationalise the number of equity stakes we have in MGEs.
Speaker Change: We do not need to own distribution to be a good underwriting partner.
Speaker Change: We have 20 equity stakes remaining in these investments, down from 36 at the start of 2023.
Speaker Change: We will continue to try and reduce the number further in 2025.
Speaker Change: Thank you for watching. Please subscribe to my channel. I'm your host, Sarah Singh.
Speaker Change: As at the year-end 2024, we consolidate the results for three of these MGAs, having deconsolidated Arcadian midway through the year.
and many more. Thank you. Thank you.
Speaker Change: There are two where we own 100% of the equity and these align to our accident and health division.
Speaker Change: These two MGA's generated $42 million of net service fee income in 2024.
Speaker Change: Their performance continues to improve, with Net Service Fee Income increasing 36% over the prior year.
Speaker Change: Thank you for watching. I'm Stephen Yendall. I'll see you next time.
Speaker Change: I continue to make the point every quarter that there is significant off-balance sheet value in these consolidated MGAs, as we saw when we deconsolidated Arcadian and generated almost $100 million of book value.
Speaker Change: Thank you for watching. Please subscribe to our channel. And as always, thanks for watching.
Speaker Change: The carrying value on our balance sheet of the three remaining MGAs is $90 million, with net service fee income of $42 million in 2024, equating to an earnings multiple of approximately two times the earnings.
Speaker Change: As a reminder, when I joined in September 22, the value of the non-consolidated MGA investments on our balance sheet was around $265 million.
Speaker Change: Whilst there is still work to be done in rationalising these equity stakes, the progress so far means that the value of these investments on our balance sheet is now down to $105 million.
Speaker Change: In the fourth quarter, we took a $35 million write-down on one particular MGA investment which impacted our net income.
Speaker Change: Thank you for watching. I'm Stephen Yendall. I'll see you next time.
Speaker Change: We had previously taken a write-down on this specific investment earlier in the year as well.
For more information visit www.FEMA.gov
Speaker Change: Appendix 4 of our fourth quarter investor deck shows more detailed analysis of our MGA stakes.
Speaker Change: We have taken this decisive action to further de-risk the balance sheet and ensure going forward the focus is on the future and not the past.
Speaker Change: These remaining stakes are all individually small in nature and are valued, as I said, at $105 million in total.
For more information visit www.FEMA.gov
Speaker Change: Looking now at the investment portfolio, we've reported another strong result for the fourth quarter.
Speaker Change: contributing to a fourth quarter investment result of £29 million, reflecting the strong fixed income rates we've been able to lock in.
Speaker Change: For full year 2024, our net investment income was $304 million, outperforming slightly against our net investment income guidance of $295 to $300 million, as rates continued to remain elevated in the fourth quarter.
Thank you. Thank you. Thank you.
Speaker Change: I want to briefly talk further on the transaction with CMIG that I mentioned at the start of the call.
Speaker Change: Thank you for watching. Please subscribe to my channel. I upload weekly. Please subscribe to my channel. I upload weekly.
Speaker Change: Upon close of the deal on or before February 28th, 2025, we are pleased to confirm today that we will permanently retire all 45.7 million of the common shares previously held by CMIG.
Speaker Change: As a result, our price-to-earnings ratio reduces significantly post-deal to well below the peer average.
Speaker Change: We believe there is strong upside potential in our share price for investors.
Thank you. Thank you. Thank you.
Speaker Change: As part of the deal, we also agreed the surrender and cancellation of the merger warrants held by CMIG.
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Speaker Change: The overall agreement is immediately accretive, with the looted book value per share increasing by 4%.
Speaker Change: Our earnings per share is expected to meaningfully increase by greater than 20% and our return on equity is anticipated to increase by over 200 basis points.
Speaker Change: We have utilised our excess capital in a beneficial way for remaining shareholders and our resulting position also leaves us with a simplified corporate governance structure with CMIG relinquishing their board seat and board observer upon close of the deal.
Speaker Change: Crucially, we've retained our financial strength following these transactions with a BSCR capital ratio at 214% and our debt-to-capital ratio at 24.8%, similar to its level a year ago following the $115 million debt retirement during 2024.
Speaker Change: Thank you for watching. Please subscribe to my channel. I upload weekly. Please like and share this video.
I will end where I started.
Speaker Change: This has been a busy quarter for Sirius Point, but more importantly, a very strong year.
Strong underwriting profits.
Premium Growth
Strong investment income.
Speaker Change: book value growth of 10% and underlying return on equity of 14.6% at the top end of our range.
Speaker Change: We are pleased to present these results and actions to the market.
Most importantly, I'm incredibly proud of my colleagues.
for their determination and commitment in delivering these results.
Speaker Change: They do not happen by accident and it takes everyone in the company pulling together to achieve them.
That is a One Cities Point culture in action.
Speaker Change: We do not see these results as a destination, and we are determined to push ourselves to be a best-in-class operator in our sector.
These results show we are closing the gap.
Speaker Change: With that, I will pass across to Jim who will take you through the financials in more detail.
and many more. Thank you. Thank you.
Thank you, Scott, and good morning, good afternoon, everyone.
Speaker Change: Before I begin going through the financials, I want to take a moment to echo Scott's comments and to say how proud I am of the Sears Point team for all that they have achieved this year. Our strong financial results, highlighted by year-on-year underwriting margin improvements,
Speaker Change: and the enhancements we have made to optimize and strengthen our balance sheet do not come easily, are hard-earned, and have positioned the company for long-term success.
starting with our fourth quarter results on slide 13.
For more information visit www.FEMA.gov
Speaker Change: Continuing Line's gross premiums written increased to $133 million, or 21%, leading to $44 million of underlying net income, or an increase of 19% versus the prior year. These results were driven by our enhancement initiatives and focused execution.
Speaker Change: The headline, net loss of $21 million, was the result of three items linked to our efforts to finalize the reshaping of the company. These include the CMIG transaction, closure of the previously announced LPT transaction with NSTAR, and the write-down of a legacy MGA investment.
Speaker Change: The CMIG transaction reflected a $26 million expense for the mark-to-market settlement of the merger warrants.
Speaker Change: The previously announced $20 million pre-tax loss associated with the completion of the LPT corresponds to the workers' compensation exit announced in 2023.
Speaker Change: The $34 million decrease in the estimated fair value of the investment was driven by a change in the growth and future earnings outlook at DMGA.
Speaker Change: Combined, these items significantly impacted income in the quarter. They represent the final items associated with the company's major reshaping. We now move into 2025, purely focused on the ongoing operations of the company.
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Speaker Change: Refocusing on underwriting, gross premiums written increased 6% quarter on quarter for our core business and by 21% on a continuance line basis.
Speaker Change: Net written premiums increased at a faster pace, growing 22% on a headline basis and 28% on a continuing lines basis, driven by a shift in business mix associated with retaining a higher portion of our lower volatility portfolio.
Speaker Change: Important to note, this is the last quarter in which we will have to present our gross premiums written figures on a continuing lines basis, as the impact from the business exited in 2023 will not affect our numbers starting in the first quarter of 2025.
Speaker Change: Our headline combined ratio of 90.2% for core business was a 3.5 point improvement versus prior year. This was due to a 6.6 point improvement in attritional losses.
Speaker Change: Favorable prior year development in the quarter stood at $58 million for core business versus $35 million in the prior year quarter, excluding the LPT.
Speaker Change: We had favorable prior year development on a consolidated basis of $37 million, marking the 15th consecutive quarter of favorable prior year development.
Speaker Change: It is important to consider our consolidated results, as this includes the business we have put into runoff.
Our results are not a coincidence.
Speaker Change: We have great confidence in our loss picks and are pleased that our external reserve review that was completed in the quarter indicated that our reserves are prudent. The duration of our insurance liabilities is three years. Our track record of favorable releases exceeds this.
Moving to Catastrophe Losses
Speaker Change: For the quarter, we reported 39 million of catastrophe losses compared to zero in the prior year. 40 million of these losses relate to Hurricane Milton, the slight favorable offset related to Hurricane Helene.
Speaker Change: Now, turning to net service fee income, core MGA revenues and net service fee income reduced quarter over quarter because of the deconsolidation of Arcadian. As a reminder, this occurred at the end of our second quarter.
Speaker Change: Given Arcadian's deconsolidation, it is helpful to look at 100% owned A&H consolidated MGA businesses.
to get a like-for-like comparison.
Speaker Change: This reveals a 25% increase in year-on-year service revenues, with the service margin increasing from 10.2% in the fourth quarter of 2023 to 20.8% in the fourth quarter of 2024, resulting in service fee income increasing to $11 million.
This is more than double the previous year's amount.
Speaker Change: Net investment income for the quarter was $69 million. This is down $10 million compared to the prior year quarter as we began selling down our investment portfolio in the fourth quarter in anticipation of the CMIG agreement.
Speaker Change: Unrealized and realized losses, including from related party investment funds, were $40 million due to the previously mentioned review of our strategic MGA investments. All in, the total investment result for the quarter stood at $29 million.
and Sarah Singh. For more information visit www.fema.gov
Speaker Change: Other items impacting income include $20 million of interest expense, of which $9 million relates to funds withheld on lost portfolio transfers.
Speaker Change: and 13 million of foreign exchange gains. Excluding AOCI, diluted book value per share grew by 3% in the quarter, as the accretion in book value from the CMIG deal was offset partially by this quarter's net loss.
Thank you very much.
Turning to our full year 2024 results on slide 14.
Speaker Change: We are pleased to report a combined ratio of 91% for our core business, net income of $184 million, and diluted book value per share growth excluding AOCI of 9.8%.
Speaker Change: Underlying net income increased 14% year-on-year to $304 million, demonstrating the improving quality of our underlying earnings.
Speaker Change: standing at 14.6% on an underlying basis and 9.1% on a headline basis, one including the net effect of the one-off items I previously mentioned.
Speaker Change: As I mentioned on the previous slide, core MGA revenues and net service fee income comparisons are impacted by the deconsolidation of Arcadian.
Speaker Change: As is no longer consolidated, fee income from Arcadium now comes through as other revenue.
Speaker Change: For a like-for-like comparison, we examine our two largest MGAs where we own 100% of the equity.
Speaker Change: to 21.1%. This was driven by a 7% increase in service revenues, while service expenses increased just 1%.
Speaker Change: Our effective tax rate in 2024 was 13%. In 2025, we expect this to increase to 19% as a result of the Bermuda Corporate Income Tax Act of 2023 that introduced a 15% tax rate for Bermuda domiciled companies.
Speaker Change: Despite the higher expected go-forward effective tax rate, the company's existing deferred tax assets, including tax-loss carry-fors combined with its earnings power, will translate into cash savings that, in turn, will be accretive to capital, liquidity, and investment flow.
Turning to premium trends as shown on slide 15.
Speaker Change: For 2024, continuing lines premium increased 10% compared to the prior year. While runoff remains a drag on headline business performance through year-end, we expect the impact to be insignificant in 2025.
Speaker Change: We expect headline premium in 2025 will grow at rates similar to continuing lines premium in 2024
Speaker Change: Growth in 2024 was strongest in our insurance and services segment. We saw double-digit growth rates within our specialty and property specialisms that were partially offset by reductions in casualty.
Speaker Change: This growth included significant contributions from programs launched in 2023. Momentum continues to build in our distribution strategy, and it is beginning to bear fruit.
Speaker Change: On the reinsurance side, premiums increased 5% this year. We continue to see reductions in U.S. casualty that were partially offset by growth in Bermuda property and specialty loans.
Speaker Change: In the fourth quarter, this segment grew 24%. The growth was driven by our international specialty and our Bermuda property lines.
Slide 16 shows a more detailed view.
Speaker Change: of where our portfolio is seeing growth. Our property book grew 25% this year as we took advantage of the current hard market within U.S. capacity reinsurance.
Speaker Change: and grew into lower catastrophe and select property program business outside of the U.S.
Speaker Change: After multi-year peaks, rates in the property space began to soften at 1.1, following flat rates in the fourth quarter. We expect the effects from the California wildfires to mitigate some of the downward pressure in the property reinsurance space.
Thank you very much.
Speaker Change: Our Action and Health book of business is unique and has been a stable source of underwriting profit through the cycle and an important part of our strategy to maintain a low volatility portfolio.
Speaker Change: Premiums in this specialism were down 4% in 2024 driven by the non-renewal of a specific quota share agreement with one of our partners.
Speaker Change: The business mix attributable to AccidentHealth remains over a quarter of our total portfolio premium, and it is a key offering where we have a best-in-class team with a great track record. Our AccidentHealth unit saw positive price movements across the book of business.
Speaker Change: with Employer Stop Loss notably seeing double-digit rate increases and single-digit rate increases generally across other lines.
Speaker Change: Looking now at our specialty segment, we are seeing strong growth with gross premium drentan.
Speaker Change: increasing by 38% in 2024. We've bolstered our marine and energy offerings with key hires, and this is beginning to show in the premium growth we are seeing.
Speaker Change: Energy rates were flat to low single-digit positive. Renewable and power pricing held firm while energy liability realized high single-digit rate increases.
Speaker Change: Marine pricing also generally held firm, with the Baltimore Bridge accident providing a tailwind for rates.
Speaker Change: We are seeing risk-adjusted rate change increases specifically in cargo, marine liability, and ports and terminals lines of business.
Speaker Change: Within aviation, our book experienced rate softening in direct and facultative and excess-of-loss business, while pricing was flat in the pro-rata market.
Speaker Change: Within the aviation book, space lines are achieving double-digit rate increases driven by reduced capacity following the significant losses which occurred in 2023.
Speaker Change: Within casualty, we have kept premiums written broadly stable on a gross basis and had a slight reduction in premiums written up 3% on a net basis.
Speaker Change: The rate increases seen in casualty are continuing to hold due to loss trends, and we are achieving rate change that exceeds loss costs, particularly in excess casualty, as many peers have had to report reserve strengthening.
Speaker Change: At 1-1, we reduced premiums written in casualty reinsurance for structured deals and certain casualty classes such as commercial auto. We reallocated some of this capital to lines where we see stronger margins as we maintain underwriting discipline.
Speaker Change: Turning now to slide 17, which shows our combined ratio walk on a like-for-like basis adjusted for the impact of the lost portfolio transfer entered into in 2023 and our underlining earnings quality.
Speaker Change: Our full year 2024 combined ratio, excluding the small deferred gain from the LPT, stands at 91.3%, a 2.4 point improvement versus the prior year of 93.7%.
Speaker Change: It is important to look at our combined ratio excluding the effect of the LPT from last year as it distorts our year-over-year performance. On this basis, our loss ratio decreased 3.9 points.
Speaker Change: favorable prior year development excluding development recognized with the lost portfolio transfer
Speaker Change: increase versus the prior year, reducing the combined ratio by 4.3 points compared to 2.7 points in the previous period.
Speaker Change: The full year catastrophe loss ratio within our core segment was higher than the prior year at 2.5 points versus 0.6 points, but remains at historically low levels following our portfolio repositioning.
Speaker Change: The underlying earnings quality chart on the right-hand side of the page strips out the impact from catastrophe losses and prior year development. These inherently vary over time. We believe this metric is useful in demonstrating the underlying quality of our underwriting portfolio.
Speaker Change: We are pleased to report a 2.7 point improvement in our core business quality of earnings this year compared to prior year.
Speaker Change: The improvement was driven by a reduction in the attritional loss ratio that improved by 4.2 points year over year, more than offsetting the 1.7 point increase in the acquisition cost ratio due to a shift in business mix.
Speaker Change: Thank you for watching. I'm Stephen Yendall. I'll see you next time.
Speaker Change: We expect the attritional loss ratios to continue to remain at these lower levels in 2025, with the potential for them to improve further as we continue with our Underwriting First focus.
Speaker Change: The underwriting expense ratio decreased year-over-year by 0.2 points, building on the significant cost reduction work which we completed ahead of schedule in 2023.
Speaker Change: Crucially, the underlying quality of earnings combined ratio improved year over year for both the insurance and services segment and the reinsurance segment as the underwriting actions taken are improving our entire book of business.
Speaker Change: Looking further into catastrophe losses on slide 18 shows our catastrophe loss ratio for financial years 2022, 2023, and 2024 versus our peers that have already reported their 2024 financials.
Speaker Change: In 2022, we drastically changed our portfolio and meaningfully reduced our exposure to property catastrophe losses.
Speaker Change: Since then, our messaging has consistently highlighted our PML reductions. We are pleased that we now have two full years of financials to demonstrate the effect of our portfolio actions.
Speaker Change: Out of the 11 peers that have reported their 2024 financials, we went from having the fourth highest catastrophe loss ratio in 2022 to having the second lowest in both 2023 and 2024.
and the rest of the team. Thank you. Thank you.
Slide 19 puts these catastrophe losses into context.
Speaker Change: On the left-hand side, we demonstrate the retrocession protection we have in place for U.S. risk, starting with 1-1 renewals in 2023. We have achieved decreases in our retention and increases in our limit for a similar cost.
Speaker Change: On the right-hand side, we show the three-year trend in losses segmented by quarter.
Speaker Change: As the chart highlights, timing of the catastrophe losses can be dynamic.
Speaker Change: Importantly, we have meaningfully reduced our catastrophe losses as a percent of shareholders' equity as compared to 2022. In addition, we believe our targeted business mix and the retrocession protection we put in place positions us well to continue to enable our low-volatility strategy.
Speaker Change: Thank you for watching. Please subscribe to my channel. I am also on Twitter, Instagram and Facebook. Please check out my blog at www.blogspot.com.
Turning to our strong investment result on slide 20.
Speaker Change: Net investment income for full year 2024 was $304 million, coming in slightly ahead of our updated guidance as interest rates continue to remain elevated.
Speaker Change: The portfolio continues to perform well. In the fourth quarter, we saw no defaults across our fixed income portfolio. Overall, our investment strategy remains unchanged as we continue to operate a high-quality, low-volatility fixed income portfolio.
Speaker Change: 80% of our investment portfolio is now fixed income, of which 99% is investment grade with an average credit rating of AA-.
Speaker Change: During the quarter, we continue to see reinvestment rates in excess of 4.5 percent.
Speaker Change: Our overall portfolio duration increased slightly to 3.1 years with assets backing loss reserves remaining fully matched at three years
Speaker Change: Moving on to slide 21. The balance sheet remains strong with an estimated 214% PSCR ratio and significant liquidity.
Speaker Change: We continue to have a diverse mix of capital following the CMIG repurchase agreement. Last month, S&P reaffirmed our financial strength rating and stable outlook following the CMIG repurchase.
Speaker Change: The repurchase increased our debt-to-capital ratio by one point year-over-year to 24.8%. The $115 million debt retirement in the first half of the year served as a partial offset to lower equity.
Speaker Change: This ratio remains within our target range. As a reminder, we continue to have an outstanding share repurchase authorization of $181 million.
Thank you. Thank you. Thank you.
Speaker Change: Finally, we come to slide 22, looking further at our capital stack and liquidity.
Speaker Change: It is important for us to step back and look at the vast progress we have made in optimizing our structure in 2024. We were able to retire $115 million of senior debt while refinancing $400 million of other senior debt to ensure it now has full capital credit.
Speaker Change: With this, we conclude the financial section of our presentation. This quarter saw us make considerable progress in our reshaping journey, with the removal of numerous headwinds for the company as we enter 2025.
Speaker Change: Our underlying fourth quarter and full year 2024 results were strong and demonstrate stable, consistent, and improving results, with underlying earnings profile of roughly $300 million in 2024.
Speaker Change: Our major strategic reshaping is complete. Our balance sheet has been cleaned up considerably and is primed for the future.
Speaker Change: We have a simplified corporate governance structure and we have increased the diversification of our investor base. Our team has a united focus on creating value through underwriting excellence. I'm excited to be on this journey to become best in class with a team I believe in.
Speaker Change: I would like to thank you again for your time this morning. For any questions, please contact our Investor Relations team at investor.relationsatseriouspt.com. I now turn the call back over to the operator.
and many more. Thank you. Thank you.
and many more. Thank you. Thank you.
Thank you.