SiriusPoint Ltd. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Underwriting Performance: Second quarter core combined ratio was 89.5%, a 3.8 point improvement year-over-year. 1.8 point improvement from attritional loss ratio, sixth consecutive quarter of year-over-year attritional loss ratio improvement. No catastrophe losses in the quarter vs 1 point last year. Favorable prior-year development continued strong, 17th consecutive quarter of favorable releases.
• MGA Partnerships: Entered 4 new MGA partnerships in the quarter, 3 of which were expansions with existing long-term partners. Reject over 80% of opportunities in MGA distribution channel. Won Program Insurer of the Year at Program Manager awards.
• Investments: Net investment income for the quarter was $68 million, tracking in line with full year guidance of $265 million to $275 million. Net service fee income from consolidated MGAs increased 16% in the quarter, year-to-date up 13%. Half year service margin was 23.6%, generating net service fee income of $28 million.
• Capital: Second quarter BSCR ratio was 223%, within target range, capital remains strong.
• People: Annual engagement survey showed significant improvements, Net Promoter Score increased 16 points year-over-year, staff turnover at 13%. Attracted top talent, including 2 new members of executive leadership team.

Segment Performance

• Insurance & Services: Gross written premiums increased $70 million or 14% to $560 million in the quarter, driven by strong growth in A&H, other specialties, and property lines. For the half year, gross written premiums increased $181 million or 18% to $1.2 billion. The segment achieved a combined ratio of 89.3% in the quarter, a 6.7 point improvement from the prior-year quarter. Half year combined ratio was 91.6%, improved by 5.5 points. Net premium growth in the quarter was 15% within Insurance & Services.
• Reinsurance: Gross written premiums increased $17 million or 5% to $370 million in the quarter, with double-digit growth in other specialties partially offset by reductions in property reinsurance premiums. Half year gross premium written increased by 2%, net premiums written decreased by 1% in the quarter and 4% in the first half. Combined ratio for the quarter improved to 89.8%, half year combined ratio was 93.5%.

Guidance

• Net investment income: Tracking in line with full year guidance of $265 million to $275 million.
• Return on equity: Underlying return on equity for the quarter was 17%, year-to-date 15.4% at upper end of target range (12% to 15%).
• Combined ratio: Second quarter core combined ratio 89.5%, year-to-date core combined ratio 92.4%.

Risks

• Reinsurance Market Pressures: Competitive pressures persisting across reinsurance markets, particularly on catastrophe excess of loss placements with double-digit decreases in non-loss impacted placements. Margins tightening in proportional business.
• Casualty Allocation: Cautious on certain segments of casualty, such as commercial auto, leading to trimming at the edges if necessary.
• Market Volatility: Potential impact of market events like the Air India incident on aviation reinsurance pricing not yet reflected, and ongoing monitoring of rate adequacy in property reinsurance.

Question and Answer

Q: Impact of new programs on top line and net premiums over next 18 months A: Scott Egan mentioned they take programs on a case-by-case basis, choose carefully, reject 80% of opportunities, and lean into net as they feel comfortable. Jim McKinney added it's a tailwind to growth depending on partnership seasoning.

Q: Net investment income trending ahead of full year guide A: James J. McKinney said they're largely on track with the year's plan, expecting potential interest rate cuts in the back half, and new money yields over 4.5%.

Q: Casualty within insurance, decision to write less business A: Scott Egan said they're cautious on casualty, particularly commercial auto, and trim at the edges where they feel cautious. James J. McKinney emphasized disciplined capital allocation to profitable areas.

Q: Net growth outpacing gross in Insurance & Services, performance needed for retaining more A: Scott Egan stated they only lean in if it hits ROE targets, need confidence in data flows and relationships, and no pressure to be aggressive. Highlighted surety as an example of a successful partnership.

Q: Impact of MGA consolidation trend on partnerships A: Scott Egan said no material impact on SiriusPoint's model of partnering with MGAs.