SiriusPoint(US:SPNT)2023-02-24 21:32Investment Strategy and Portfolio - The company has repositioned its investment portfolio to align better with its underwriting strategy, aiming for lower volatility and improved risk-adjusted returns across asset classes [97]. - As of December 31, 2022, alternative investments managed by Third Point LLC comprised 2% of the company's investment portfolio [98]. - The investment objective is to maximize long-term after-tax total return while maintaining adequate liquidity and complying with regulatory requirements [99]. - The company is required to hold cash, short-term investments, and fixed income investments amounting to no less than 100% of policyholder liabilities [100]. - SiriusPoint's investment/finance units continually monitor portfolio composition to ensure compliance with investment rules applicable to each (re)insurance subsidiary [167]. Regulatory Compliance and Capital Requirements - The company competes in the global insurance and reinsurance markets, facing competition from both traditional and non-traditional sources of capital [104][106]. - The financial strength ratings for the company's subsidiaries are "A-" (Excellent) from AM Best and "A–" (Strong) from both Fitch and S&P, with a stable outlook from AM Best and a negative outlook from Fitch and S&P [107][108]. - The minimum solvency margin for a Class 4 insurer is the greater of $100 million or 50% of net premium written, among other criteria [125]. - The Bermuda Monetary Authority requires insurers to maintain a minimum liquidity ratio of at least 75% of relevant liabilities [124]. - The company has received approval to file a consolidated group financial condition report, which includes measures governing business operations and financial performance [123]. - The BSCR model is used to determine the capital requirements for Class 3A and Class 4 insurers, taking into account the risk characteristics of their business [127]. - Class 3A and Class 4 insurers must disclose their capital structure under a '3-tiered capital system' to enhance the BMA's assessment of capital quality [130]. - Insurers are prohibited from declaring dividends if it breaches their Minimum Solvency Margin (MSM) or minimum liquidity ratio, and any failure to meet these requirements restricts dividend payments until rectified [132]. - Dividends cannot exceed 25% of total statutory capital and surplus from the previous financial year without BMA approval, ensuring ongoing solvency [133]. - The BMA requires insurers to maintain available statutory economic capital and surplus at least equal to their group Enhanced Capital Requirement (ECR), with a target capital level set at 120% of group ECR [145]. - The Group Solvency Self-Assessment (GSSA) must evaluate the quality and quantity of capital to cover risks, including stress testing and risk appetite considerations [144]. - The BMA acts as the group supervisor for SiriusPoint, coordinating compliance with solvency and supervision rules across the Regulatory Group [142]. - Insurers must notify the BMA of any material changes and cannot proceed without BMA's non-objection within 30 days [139]. Cybersecurity and Data Protection - The Cyber Code mandates insurers to manage operational cyber risks and report significant cyber events that could impact their operations or clients [149]. - The Economic Substance Act requires Bermuda-registered entities to maintain a substantial economic presence in Bermuda, with penalties for non-compliance [148]. - The NAIC's Insurance Data Security Model Law requires insurers to comply with certain data security requirements, impacting SiriusPoint's operations [175]. - The California Consumer Privacy Act of 2018 requires SiriusPoint to comply with obligations to secure personal data [177]. Financial Performance and Results - For the year ended December 31, 2022, other revenues amounted to $82.1 million from service fee revenue and $27.4 million from changes in the fair value of liability-classified capital instruments [470]. - The company recorded a net corporate and other expenses increase for the year ended December 31, 2022, primarily driven by increased services expenses and approximately $30 million in costs related to the Restructuring Plan [474]. - The company recognized a CECL of $12.7 million for the year ended December 31, 2022, down from $21.0 million in 2021, primarily due to credit exposure from Russian (re)insurers [475]. - Interest expense for the year ended December 31, 2022, was $38.6 million, an increase from $34.0 million in 2021, driven by partial quarter expenses from the legacy Sirius Group companies [477]. - Foreign exchange gains for the year ended December 31, 2022, were $66.0 million, primarily due to $36.0 million from international operations and $38.0 million from the 2017 SEK Subordinated Notes [479]. - The income tax benefit for the year ended December 31, 2022, was $36.7 million, compared to $10.7 million in 2021, attributed to increased losses in taxable jurisdictions [482]. - The company’s reportable segments are classified into Reinsurance and Insurance & Services, collectively referred to as "Core" results [483]. - The company changed its accounting policy for assumed written premiums effective January 1, 2021, to recognize premiums written ratably over the term of the related policy or reinsurance treaty [484]. - Gross premiums written increased by $1,157.3 million, or 51.5%, for the year ended December 31, 2022 compared to 2021 [490]. - Net premiums written increased by $767.9 million, or 43.2%, for the year ended December 31, 2022 compared to 2021 [490]. - Net premiums earned increased by $566.2 million, or 32.7%, for the year ended December 31, 2022 compared to 2021 [490]. - The underwriting loss improved to $34.8 million with a combined ratio of 101.6% for 2022, compared to a loss of $163.4 million and a combined ratio of 109.5% for 2021 [491]. - Catastrophe losses for 2022 were $137.9 million, or 6.0 percentage points on the combined ratio, significantly lower than $326.0 million, or 18.8 percentage points in 2021 [493]. - Services revenue increased to $215.5 million for the year ended December 31, 2022, compared to $133.7 million in 2021 [495]. - Net services income rose to $31.3 million for the year ended December 31, 2022, compared to $11.0 million in 2021 [496]. - The Reinsurance segment's gross premiums written increased by $171.0 million from 2021 to 2022 [499]. - The loss ratio improved to 70.6% in 2022 from 81.7% in 2021 [499]. - The combined ratio for the Reinsurance segment decreased to 105.6% in 2022 from 115.4% in 2021 [499]. - Gross premiums written in the Reinsurance segment increased by $171.0 million, or 12.7%, for the year ended December 31, 2022, compared to 2021 [500]. - Underwriting results improved by $119.8 million for the year ended December 31, 2022, primarily due to lower catastrophe losses, partially offset by $12.2 million in losses from the Russia/Ukraine conflict [501]. - Catastrophe losses for 2022 were $136.3 million, significantly lower than $324.5 million in 2021, with major losses from Hurricane Ian and other events [502]. - The Insurance & Services segment saw gross premiums written increase by $986.3 million, or 109.8%, for the year ended December 31, 2022, driven by growth in strategic partnerships [506]. - Underwriting income increased by $8.8 million for the year ended December 31, 2022, primarily due to premium growth [507]. - Services revenue increased by $82.0 million, driven by higher demand for travel products and services [509]. - The underwriting loss in the Corporate segment was $5.7 million for 2022, significantly improved from a loss of $62.9 million in 2021 [510]. Employee and Workforce Information - As of December 31, 2022, the company had 1,185 employees across 11 countries, with 41% (486 employees) located outside North America [212]. - The gender mix of the workforce includes 58% females (688 employees) and 42% males (497 employees) [212]. Liquidity and Capital Management - Liquidity management is maintained through a high-quality fixed income portfolio to meet regulatory requirements and operational cash flow needs [521]. - For the year ended December 31, 2022, SiriusPoint received $125.0 million in distributions from its subsidiary, SiriusPoint Bermuda, compared to $74.0 million in 2021, indicating a 68.9% increase [523]. - As of December 31, 2022, the dividend/distribution capacity of SiriusPoint's subsidiaries was approximately $713.5 million, providing sufficient liquidity for the foreseeable future [523]. - SiriusPoint did not pay any dividends to its common shareholders for the year ended December 31, 2022 [525]. - The company has a 3-year, $300.0 million senior unsecured revolving credit facility with JPMorgan Chase Bank, with no outstanding borrowings as of December 31, 2022 [527]. - SiriusPoint's liquidity sources include net premiums written, reinsurance recoveries, investment income, and proceeds from sales or distributions from investments [526]. Debt and Financial Obligations - The carrying value of the 2017 SEK Subordinated Notes was $258.6 million as of December 31, 2022, down from $296.3 million in 2021 [531]. - The carrying value of the 2016 Senior Notes was $404.8 million as of December 31, 2022, slightly down from $406.0 million in 2021 [534]. - The carrying value of the 2015 Senior Notes was $114.6 million as of December 31, 2022, compared to $114.4 million in 2021 [535]. - SiriusPoint was in compliance with all covenants under its debt instruments as of December 31, 2022 [537]. - The company's ability to pay dividends is limited by regulatory constraints and the need to maintain capital levels to support insurance operations [524].