Q1 2025 SiriusPoint Ltd Earnings Call
Speaker Change: Good morning ladies and gentlemen and welcome to series points first quarter 2025 earnings conference call During today's presentation all parties will be in a listen only mode
Speaker Change: As a reminder, this conference call has been recorded, and a replay is available through 11.59 p.m. Eastern Time on May 20, 2025. With that, I would like to turn a call over to Liam Blackledge, Invest the Relations, and Strategy Manager. Please go ahead, sir.
Liam Blackledge: Last night we issued our earnings facilities, thank you and financial support which are available on our website www.seriuspt.com Additionally, a webcast presentation will coincide with today's discussion and is available on our website
Speaker Change: Joining me on the call today is Scott Egan, Chief Executive Officer, and Jim McKinney, Chief Financial Officer.
Speaker Change: Before we start, I would like to remind you that today's marks contain forward-looking statements based on management's current expectations.
Actual results may differ [inaudible]
Certain non-GAAP financial measures will also be discussed.
Speaker Change: Management uses the non-gapped 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 Gap. Please refer to page 2 about investor presentation, prediction information and the company's latest public filings. I will now turn the call over to Scott.
Scott Egan: Thank you, Liam, and good morning, good afternoon, everyone. Thanks for joining our first quarter of 2025 Results Code.
Scott Egan: We also saw double digit percentage growth in both our growth and net written premiums marking a fourth consecutive quarter.
Scott Egan: The quarter also saw us complete on our 753 million shareholder repotters agreement with CN Bengida and participated in the secondary offering from the LOB entities, repotusing and retiring a further half a million shares.
Both were the victims for a shareholder's
Scott Egan: A return and equity of 12.9% was well within of 12-15% across the cycle target. Benchmarking well against their ambition to deliver consistent and stable earnings that create long-term
Scott Egan: Arachions in the quarter followed the strong performance momentum from 2024 as we look to continue our ambition to become a besting class specialty underwriter.
Scott Egan: focusing now on some of the important aspects of the result for the quarter, starting with her strong underrating performance.
Scott Egan: We deliver the combined ratio for a core business of 95.4%
Scott Egan: This includes a loss of $59 million relating to the California Wildfires net of reinstatement premiums, which came in below a previously disosed estimate of $60 to $70 million.
This had a 10.9 point impact to a combined ratio.
Scott Egan: dissecting an underrate performance fodder at expansion ratio improved by 1.2 points.
Scott Egan: Our acquisition cost ratio improved by 1.4 points and our additional law ratio improved by 0.4 points, driving a year-over-year improvement of three points, excluding catastrophes and prior year development.
Scott Egan: In addition, a result also contains $34 million of favorable prior year development, marking the 16th consecutive quarter of favorable higher year development. Four-year consistent track record serves to underscore a prudent approach to reserving.
Transcription by ESO. Translation by —
Fanning now, Törstrång, premium sprouting horny.
Scott Egan: We achieved double-digit growth in accident and health, property and other specialty lines of business whilst premiums decrease slightly within casualty as we prioritise underwriting discipline in this area.
Scott Egan: This also marks the fourth consecutive quarter of double-digit growth across the business not exited in 2023 as part of our turnaround.
Growth was even stronger on a net basis, increasing 20%.
Scott Egan: This is a very deliberate strategy as we seek to retain a greater proportion of books where we have gained further experience and confidence in their profitability and track record.
Scott Egan: I'm directing margin is our number one priority but it's quartered again demonstrated that our targeted and disciplined approach is working on both fronts.
James McKinney,
Scott Egan: The role MDAs play in the insurance ecosystem is becoming increasingly important as market share from this distribution channel continues to increase.
Scott Egan: We strengthened our offering during the quarter, adding five new or expanding distribution partnerships through our dedicated MGA platform.
Scott Egan: We continue to see strong premium growth coming from the partnerships we entered in 2023 and 2024 as we work with select long-term partners with strong track records.
Scott Egan: Our MBA Centre of Excellence continues to be an important growth engine for Siriuspoint and a reputation within this space continues to improve as we become the preferred partner for delegating business.
Scott Egan: We currently reject over 80% of the delegated opportunities which are presented to us as our commitment to underwrite night zones is unwavering.
Scott Egan: In addition, we are investing in our data capabilities in the MGA space during 2025, which we believe will give us a lot of the age in this growing distribution channel.
James McKinney, Bronislaw Masojada,
Scott Egan: Turning briefly to our investment result. Jim will cover this in more detail shortly but our headline net investment income of 71 million dollars for the quarter is tracking in line with their full year guidance with nothing of significance to note in our investments
Scott Egan: This quarter also saw as complete on the steps taken in 2024 to simplify our shareholder structure, with the closing of the previously announced CNVMUDA transaction in February .
Scott Egan: Additionally, entities associated with Dan Loeb conducted a secondary offering of roughly 4 million shares.
Scott Egan: On completion of the offering, their I did get state as a percentage of shares outstanding remains broadly unchanged, comparing before and after the CM commuter transaction.
Scott Egan: As part of this offering, we took an opportunity to further deploy capital and report just and retired 500,000 of these shares at a price below both market and book value.
Scott Egan: Our efforts have been noticed by the Rating Agencies. Earlier this year, Fetch and very recently A&Best revised our outlook from stable to positive whilst affirming our ratings.
Scott Egan: These are important fifth points in our journey and are important signals to the market and to customers of our strong balance sheet and significant improvements.
Scott Egan: Before I conclude I just wanted to touch briefly on the global uncertainty caused by the tariff changes on my thoughts on the impact on our company.
Scott Egan: Uncertainty had increased and it feels like new details emerged most days.
Scott Egan: That said, we continue to proactively monitor the impact that paraffs may have as the situation evolves, and our cross-function working group continues to remain alert to any developments.
Scott Egan: There is a heightened focus on monitoring the data we have available in light of the situation and we stand ready to adjust our pricing, risk appetite or book positioning accordingly should it be required.
Scott Egan: Inflation remains a number one focus and we will react early and quickly if we have to.
Scott Egan: That said, we have a diverse portfolio both in terms of the risk type of products cover and in the geographies in which we underwrite.
Scott Egan: Whilst potential impacts from tariffs naturally will vary depending on the type and location of the exposure, there are a level of diversification serves to reduce any volatility or inflation that could emerge in a single line of business.
Scott Egan: That said, we must not forget that periods of uncertainty can also produce opportunity for us. We exist to help our customers manage risk and navigate uncertainty.
Scott Egan: We will keep you updated, there's more clarity emerges and our response becomes clearer as the situation continues to play out.
So, to end, our momentum continues from 2024 into 2025.
Scott Egan: We are completely focused on becoming a higher performing specialty underwriter that delivers stable and consistent returns for our shareholders. The first quarter is another proof point. Resilient underwriting profits, significant top-line premium growth.
Scott Egan: Consistent investment income, book value growth of 5%, and an annualised return on equity of 12.9%.
Scott Egan: I am pleased to be able to present new results to the market, and as always I want to go and record to thank our wonderful employees for another strong quarter. They work incredibly hard every day to achieve these outcomes and to take us closer to a aim to be a besting class underwriter.
Scott Egan: As you can see from slide 9 in a presentation, the catch up to the market has been notable.
Scott Egan: Rames to outperform and that is what we are relentlessly focused on.
Scott Egan: With that, I will pass across to Jim who will take you through the financials in more detail.
Jim Mckinney: Thank you, Scott, and good morning. Good afternoon, everyone. Starting with our first quarter results on slide 13.
Speaker Change: It was a solid quarter and a good start to the year. We delivered net income of 58 million. It returned on equity of 12.9% and 12 and 20% year over year increases in core growth and net premiums written respectively.
Speaker Change: Underwriting Income for the Quarter was $29 million, Incluses of Significant Losses from the California Wallparks.
Speaker Change: A higher level of catastrophe losses was partially offset by lower nutritional losses and a higher level of net favorable prior year reserve development.
Speaker Change: Catastrophe losses, net of re-instatement premiums were 59 million, all of which relate to the wildfires compared to no catastrophe losses in the prior year quarter.
Speaker Change: Excluding catastrophe losses, underwriting income increased by approximately a hundred percent or forty-three million, reflecting higher levels of earned premium and an nutritional combined ratio that improved three points to ninety percent.
Speaker Change: This is the 10th consecutive quarter where we have delivered an underwriting profit, demonstrating the diversification of the portfolio bill.
Speaker Change: The Underwriting and Service Capabilities we have built delivered strong year-over-year gross written premium, net written premium, and earned premium growth. Net written premiums increase at a faster pace than gross premiums, as we have increased retention of our profitable underwriting portfolio.
Speaker Change: This strong momentum is expected to continue and result in double digit net premium growth for fiscal year 2025.
Speaker Change: Moving to net service fee income as a result of the deconsolidation of Arcadian in the second quarter of 2024. Core MGA revenues and net service fee income reduced slightly year over year as our share of Arcadian's profits now flows directly into other revenues on that basis.
Speaker Change: Given this, we believe it is helpful to look at our 100% owned A&H Consolidated MGA Businesses.
Speaker Change: to get a light for light comparison. This revealed an 11% increase and year over year service revenues with their service margin increasing 1.5 points to 30.3% in the first quarter of 2025, resulting in service fee income increasing 16% to 18 million.
Speaker Change: Net investment income for the quarter was 71 million. This is down 8 million compared to the prior year driven by the lower invested asset base following the CNBermuda buybacks.
Speaker Change: Unrealized and realized losses, including related party investment funds were zero. All in, the total investment result for the quarter therefore stood at 71 million.
Speaker Change: Other items impacting income include 18 million of interest expense. This includes 8 million related to funds with help on lost portfolio transfers. Additionally, the company generated 2 million of foreign exchange gains.
Speaker Change: Last, Commentary Holders Equity, increased by 88 million, or 5% in the quarter. In summary, our first quarter results demonstrate our ability to leverage our competitive advantages to grow premiums across our well-diversified book of business while maintaining attractive margins.
Speaker Change: Turning now to Slide 14, which looks further into the core underwriting performance.
Speaker Change: Our underwriting first focus led to another quarter of strong underlying margin improvement.
Speaker Change: The nutritional 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 in demonstrating the underlying quality of our underwriting portfolio.
Speaker Change: Our first quarter combined ratio stands at 90%, representing a three point improvement versus the prior year of 93%.
Speaker Change: This is driven by a 1.2 point improvement in our other underwriting expense ratio to 6% as we begin the benefit from the growth in our net-earned premiums.
Speaker Change: Our continued focus on operating leverage enables us to maintain this level of expense ratio even as we invest to further strengthen our competitive advantages, positioning us for continued success well into the future.
Speaker Change: Improvement also came from the acquisition cost ratio by 1.4 points to 24.7%.
Speaker Change: Last, our traditional loss ratio improved 0.4 points to 59.3%. We expect the traditional loss ratios to continue to remain at these lower levels in 2025.
Speaker Change: On the right hand side, we provide the underlying earnings quality bridge to our core combined ratio, with 5.5 points of favorable prior year development in the quarter, partially offsetting 10.9 points of catastrophe losses. As mentioned previously, this relates entirely to the California wildfires.
Speaker Change: Turning to our insurance and services segment results on slide 15.
Speaker Change: Gross written premiums increase $111 million or 21% to $635 million driven by double digit growth rates within our A&H property and other specialty lines while casualty premiums decreased by less than 1%
This group included significant contributions from programs launched.
Speaker Change: in 2023 and 2024. We expect to see continued growth throughout 2025.
Speaker Change: The segment achieved a combined ratio of 94% representing a 4.4 point improvement from the prior year quarter.
Speaker Change: The 4.4 point decrease in the loss ratio and 1.3 point decrease in the other underwriting expense ratio was partially offset by a 1.3 point increase in the acquisition cost ratio largely related to profit commissions associated with the 4.2 point decrease in the nutritional loss ratio.
Speaker Change: Our accident and health book of business has provided us with a stable source of underwriting profit through the cycle and its key offering where we have a best in class team that produce consistent results.
Speaker Change: Premiums in this specialism were up 19% in the first quarter of the year and represent roughly half of the growth versus the prior year quarter. The business mix attributable to accent and health is over half of the insurance and services first quarter premium with first quarter premiums heavily weighted towards ANH. [inaudible]
Speaker Change: We saw a double digit rate hardening within U.S. medical, while U.S. non-medical pricing was largely flat where rates are adequate.
Speaker Change: Cat and non-cat personal accident line saw single-digit rates offending at the pockets of the life books such as in Latin America with the market moving back to pre-COVID pricing.
Speaker Change: Elsewhere, pricing in other markets continue to hold firm. Overall, the pricing environment with an A&H continues to meet our risk and return profile, and we continue to seek growth opportunities within this sector.
Speaker Change: Turning to casualty, premiums here were broadly flat year over year, down less than 8%. The book continues to benefit from positive rate change that exceeds loss costs, particularly in excess casualty. We continue to achieve double digit rate and primary access casualty.
Casual T-Rates remain elevated due to the current loss trends.
Speaker Change: with the Reserve Strengthening that has been reported by numerous peers related to the litigation financing and social inflation continue to drive rate. We remain hyper-visual of market dynamics and will continue to deploy our capital towards lines where we believe we can generate the most value in line with our underwriting first and low volatility principle.
Speaker Change: Other specialties saw strong growth in the quarter on both a gross and net basis with net written premium growth significantly outpacing gross written premium growth.
Speaker Change: Growth came from both our North American and international platforms and across multiple specialties as we continue to diversify our premium mix and allocate capital to areas we believe will generate the best returns.
Speaker Change: Within other specialties there were a few rate highlights. First in aviation we saw the first tangible signs of rate hardening following heightened frequency of losses in this line of business in recent quarters. Airline renewals and marks saw rate increases between 5 to 10%.
Speaker Change: Within energy, rate generally help firm in the quarter, or experience low single digit
Speaker Change: Pupsoon Energy is highly influenced by nature, with lost free accounts seeing a rate softening while those with lost experience achieving rate increases.
Speaker Change: Pricing in renewables and power, broadly held firm. Energy liability relies high single visit rate increases.
Speaker Change: Turning to Marine, rate generally softened, ports and terminals, marine liability, cargo and horse all rate decreases.
Speaker Change: Within Space, we saw a double digit rate increases as a result of the significant losses experienced in the markets in 2023, which led to multiple capacity exits.
Speaker Change: Property also experienced double digit premium growth in the first quarter with an increase in premiums largely coming from the international property platform.
We continue experience rate adequacy across our portfolio.
Speaker Change: which, as a reminder, has a non-catastrophe element as well as the catastrophe element. Catastrophe losses for the segment were 5 million, which equates to 1.4 points of the combined ratio.
Moving to our re-insurance segment results on slide 16.
Speaker Change: The segments of gross premiums written decreased 2 millionness quarter to 355 million.
Speaker Change: Casualty Premium's decreased double digit offset by high single digit growth and other specialties and property lines as we reallocated capital
Speaker Change: Our company structure and underwriting portfolio, oversight capabilities, enable us to act nimbly and proactively to ensure the business we write is in the best market and the right lines of business.
Speaker Change: On a net basis, premiums decreased by 7%, as we reduced our net exposure and casualty lines while purchasing additional retrocessions and protection on the property side, following the California wildfire loss.
Speaker Change: We will always act in the best interests of our shareholders, as we aim to deliver our target return on equity across the cycle. Our retro session retention for any second sizable catastrophe event in 2025 is lower, and we are well protected.
Speaker Change: The reinsurance segment achieved a combined ratio of 97.1% and remained profitable in the quarter despite the California wildfire losses.
Speaker Change: The loss ratio increased 18.3 points versus the prior year quarter, which was driven by the 21.8 points of catastrophe losses versus zero in the previous year.
Speaker Change: Excluding to task fee losses, the re-inference segments combined ratio improved by 8.9 points.
with 4.3 points of improvement in the Acquisition Cost Ratio.
and a 1.1 point improvement in other underwriting expansion ratio.
Speaker Change: Overall, the Combined Ratio represents an increase of 12.9 points when compared to the first quarter of last year.
Speaker Change: with the heightened catastrophe losses partially offset by larger favorable prior year development of which 11 million of the development relates to the recovery of an ILW contract related to hurricanes Milton and Helene following first quarter increases in the industry loss assessment by PCS.
Speaker Change: Property reinsurance premiums grew 8% this quarter, and following the wildfires a moderation of the rate decrease seen at 1-1 was anticipated. Loss-impacted programs have maintained strong rates while non-loss-impacted programs remain rate adequate.
Speaker Change: We continue to monitor rate adequacy and property reinsurance particularly following two successive quarters containing notable catastrophe losses. Important to note, we will only grow premiums where we believe the margins are within our risk and profitability profile.
Speaker Change: But as we guided in the fourth quarter of 2024, we reduced exposures on structured deals and certain casualty classes at 1-1, such as commercial auto, as underwriting discipline led us to reallocate capital to protect underwriting margins.
Speaker Change: As a result, casualty premiums decrease 12% versus the prior year quarter as we reallocate the capital towards other specialties.
Speaker Change: with Incredit and Bond, rates generally held firm across the book with pricing an international business fairing better than in the US, where there is a slight overcapacity on the mortgage book. We continue to see strong underlining performance with Incredit and Bond.
Speaker Change: Looking at space, as we saw with the primary book, there were double digit rate increases on the reinsurance side following the reduction in capacity being offered in the market.
Speaker Change: The chart shows how we reduced our catastrophe losses in 2023 and 2024 as a result of the actions we took on the portfolio in 2022.
Speaker Change: We have included first quarter performance results for those peers that have reported. It is more useful to view this on an annual basis given the difference.
Moving to Reserving
It is important to consider our consolidated result here.
Speaker Change: As this includes the business we have put into runoff. We have favorable prior year development on a solid basis of 34 million.
Speaker Change: Marking the 16th consecutive quarter of Favourill prior year development, our track record of Favourill releases well exceeds the average duration of our insurance liabilities of three years, highlighting our prudent approach to reserving.
Speaker Change: Last, we show the strong level of protection we have on each of our three loss portfolio transfers that were completed in 2021,
Turning to our strong investment result on slide 19.
Speaker Change: Post redeployment of funds to settle the CNBermuda transaction. Net investment income for the first quarter was 71 million. The portfolio continues to perform well. There were no defaults across our fixed income portfolio. Our investment strategy continues to focus on high-quality fixed income securities.
Speaker Change: 79% of our investment portfolio is fixed income of which 97% is investment grade with an average credit rating of double a minus
Speaker Change: During the quarter, we continue to see reinvestment rates and access of 4.5%. Our overall portfolio duration decreased slightly to three years, from 3.1 years at the end of 2024. Assets backing loss reserves were made fully matched and are also at 3 years.
Speaker Change: Moving on to our slide 20, looking at our strong and diversified capital base.
Speaker Change: In addition, we return 7 million of capital in the quarter through the buyback of common shares relating to the low entity secondary offering and 4 million of dividends paid to the Series B preference shareholders.
Speaker Change: Our capital position is robust and contains sufficient prudence as shown by the stress test scenario of a 1 in 250 year PML event.
Speaker Change: During the quarter, the debt to capital ratio fell slightly to 24.7%.
Speaker Change: Driven by an increase in shareholder's equity from the level of retained earnings partially offset by weakening of the US dollar, Swedish corona exchange rate, increasing the value of our debt issued in corona.
Speaker Change: Our debt to capital levels remain below our target level and we continue to project they will decrease further throughout 2025.
Speaker Change: We continue to have strong liquidity levels with $7.4 million of whole total liquidity available following the final payment of $483 million during the quarter-relating to the CNBermuda Repurchase Transaction.
Speaker Change: Recognizing the progress we have made and our strong financial position, we recently saw both A and Best and Fitch revise our outlook to positive from stable and affirmations of our ratings from Moody's and S&P.
Speaker Change: The Reckonism of our Positive Outlook from Ampest and Fitch is a testament to hard work and dedication of our employees across the business.
Speaker Change: with fits attributing the Outlook upgrade to the significant underwriting improvement in 2024 and 2023 and the completion of the CM Bermuda buyback and AMBEST calling out the strength of our balance sheet.
Speaker Change: We believe our balance sheet continues to be under value. There is significant off balance sheet value in the Consolid MGA's which we all as we saw when we decontolited our Katie and last year and generated almost a hundred million of book value.
Speaker Change: The carrying value on our balance sheet of the three remaining MGA's is 83 million, with net service fee income for the trailing 12 months of 44 million. This equates to an earnings multiple of under two times the earnings versus the double digit earnings multiple used by the market.
With this, we conclude the financial section of our presentation.
Speaker Change: This quarter saw a strong double-digit growth in our top line following the major completion of our reshaping journey in 2024. We delivered another three-point margin improvement in our traditional combined ratio as our relentless underwriting first focus continues to deliver improvements in our quality of earnings.
Speaker Change: Our strong start to the year means we are on track to deliver another year with return on equity within our 12 to 15 percent across the cycle target.
Speaker Change: We have built a strong track record of delivery and this quarter's results further validate the significant products we have made on our journey to becoming a best in class specialty
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.relations at Siriuspt.com. I now turn the call back over to the operator.
Speaker Change: Thank you. This thus concludes today's teleconference and webcast. You may disconnect your lines at this time. Thank you for your participation and have a great day.
Speaker Change: Director of Photography, Sarah Singh Production Design, S. P. K. Production Design, S. P. K. Production Design, S. P. K. Production Design, S. P. K.