SiriusPoint is halfway to its goal: Egan

SiriusPoint’s second-quarter results are a cause for celebration, but they are no excuse for complacency, the re/insurer’s chief executive insists.

A net profit of $66m contrasted with a $61m loss in same period of last year. The difference is a new chief executive.

In an interview with Insurance Day, Scott Egan says that, in the months before he took the job last September, SiriusPoint was in the news “for predominantly the wrong reasons”.

So why did the former Royal Sun Alliance senior executive and FTSE 100 board director join the Bermuda- based carrier?

“What shone really brightly was how customers view SiriusPoint’s people and products. There was a dichotomy – negative headlines, mostly of the corporate dimension, and strongly positive feedback from clients,” Egan says.

“And so, when I joined, I said openly to staff that this company deserves to perform at a better level than it was.”

This required not merely a clear strategy but “demonstrably executing against it”, Egan says, and the financial results are evidence there is “momentum building” at SiriusPoint. The destination for that progress is to be “best in class” in the markets where it operates, which is “more than just about financial performance”, he stresses.

Strong financial results “don’t happen by accident” and are the result of “blood, sweat and tears”. That challenging journey has seen the exit of several of its executives. It has also seen the entrance of an industry veteran as its new chairman – Bronek Masojada, who served at Hiscox for nearly 30 years and retired as group chief executive in 2021.

No distractions

Egan’s focus on building momentum has also meant dealing quickly with distractions. SiriusPoint ended discussions regarding a potential takeover by US hedge fund Third Point, and then drew a line under the matter through a standstill agreement with that company’s founder, Dan Loeb.

“SiriusPoint’s strategy is not a ‘for sale’ strategy,” Egan says. “It is a long-term, standalone programme to deliver sustainable performance for our shareholders.”

Shares in SiriusPoint leapt 12.9% in the week to August 9, on news of the standstill deal with Loeb. It means SiriusPoint has delivered a 78.1% gain for investors so far in 2023, and 130% in the past 12 months.

Loeb’s interest in SiriusPoint may have provided a boost to its stock in May and again this month, but that is not the “real test”, Egan says. The company’s share price has moved far from where it was a year ago, “well below the valuation of our peers”, and provides “external validation”, but Egan says he is not “obsessed” with it.

“If we’re to achieve our goal of operating among the best in class in terms of service, engagement and financial performance – across all the metrics – then it will take several years and not several quarters,” he says.

MGA focus

Tangible “evidence points” of progress, he says, include the “pipeline of opportunities” with external partners, such as managing general agents (MGAs) Air Centurion and Applied Surety Underwriters, in the US, and Eaton Gate, in the UK.

These new partnerships are “building blocks” in SiriusPoint’s international business and follow its creation of an MGA Centre of Excellence in Stockholm.

Another important building block is Lloyd’s, Egan says. Although he is keen to stress the talks he inherited with Bermudian insurer Mosaic ended because the two sides were unable to reach an agreement, it is clear his loyalty to Lloyd’s was a factor. The plan had been for Sirius­Point to sell its Lloyd’s MGA, which supports its syndicate 1945.

“Both sides decided we would call a halt to the discussions and go on our way but, from my perspective, this really underlines and cements our commitment to the Lloyd’s market,” he says.

SiriusPoint has reduced its equity investment in MGAs from 36 to 32, with the logic that “fewer but deeper” relationships will improve its performance.

Egan explains: “The MGA programme space will play a key role in our strategy going forward, but we don’t have to own distribution for us to be able to provide underwriting capital to our partners. That’s the strategic clarity we have delivered to the market.”

Forming effective partnerships is a “core part of our DNA”, Egan says, “and one people are beginning to recognise”.

Another “evidence point” of the company’s progress, is the completion of its loss portfolio transfer deal with Compre.

“That will release $150m-plus of capital on an S&P basis and will improve our Bermuda solvency ratio by greater than 15 points,” Egan says.

“What that means is we’re able to realign our balance sheet and capital away from the past and towards the future. This gives us great flexibility on how we might deploy that capital.”

SiriusPoint is “happy to look at” opportunities for structuring its business but has no “strategic intent or ambition” to enter the insurance-linked securities or industry loss warranty markets, he adds.

Quiet in property cat

SiriusPoint has “effectively exited” international property catastrophe and its remaining exposure is US business from Bermuda.

“That’s not to say we don’t want to rate property,” Egan stresses. “We just don’t want to rate what I would term exposed property cat.”

SiriusPoint has cut its property catastrophe exposure by as much as 60% from its level in the second quarter of 2021.

“What you should read into that, is our volatility has decreased as a consequence,” Egan says. “We’ll be tested on that as we come through hurricane season in Q3, but I don’t think that’s the only reference point.”

The company had a “pretty quiet” first half in terms of property catastrophe losses and none in the second quarter. Its loss for Hurricane Ian was “at the bottom end of the market in terms of percentage of book value”, Egan says.

Egan points out that SiriusPoint has also “significantly” reduced volatility in its investments. As a result, he continues, its performance is “much more aligned to our peers and the market”.

“You can never remove volatility in investments, that’s impossible, but now it’s where we want to be.”

A game of two halves

Without naming the club he supports, Egan uses soccer to illustrate progress at SiriusPoint.

“If you joined my employee calls, then you’d know I keep saying, ‘it’s half-time’. And as a supporter of my football team in the UK, we’ve been ahead at half-time, and I’ve regretted celebrating too early.”

The company has been “very explicit” that it aims to deliver a double-digit return-on-equity this year. “So far, we’re on track with that and also with our cost targets, but there’s still the second half of the year to go,” Egan says.

“There was a fear our top line would shrink on the basis we were taking portfolio action and driving the underwriting performance hard. I think we demonstrated at half-year that our top line is actually growing,” he adds.

SiriusPoint will not give explicit guidance, however, on its planned split of insurance and reinsurance premiums.

“We will likely grow insurance over reinsurance over the next two to three years, but reinsurance is a really important part of this organisation and allows us to deliver innovative and creative solutions for our customers. That’s the guidance I’ve given the market.”

On the market more broadly, Egan says “there is a danger sometimes of only talking about reinsurance”.

“Around a third of our business is accident and health, which is a very different rate environment to the one in property cat reinsurance which, in turn, is very different to casualty, and so on and so forth.”

Property catastrophe rates are “strong”, but the market must remain disciplined because that business has “needed to self-correct”, he adds.

Every market in which SiriusPoint operates – accident and health, aviation, credit, energy, marine and property and casualty – has a “steady” rate environment, he says.

“We’re carrying rate where we believe we need to and are being disciplined about staying on top of inflationary trends,” he adds.

Underwriting-first company

Egan’s aim over the next few years is to “restore” Sirius­Point’s underwriting track record.

“We are an ‘underwriting first’ company and we must make sure our performance matches that strapline if we’re going to achieve our goal of being best in class for customers who need to risk-protect in the areas where we operate,” he says.

Broadening its reach into other lines of business is “not necessarily on the agenda”, he adds, because the focus is on “improving performance before we go wider”.

Change is the only constant, however, and the exit of several SiriusPoint executives during the past year is down to “people making decisions for themselves that I can’t control, and I take decisions, too”.

He continues: “We’ve seen people leave, and they’ve gone with huge thanks for their work, and we’ve seen people join, who have hit the ground running.”

Real success, he says, doesn’t lie in the financial numbers or share price, but in the scores of the company’s employee engagement and customer satisfaction surveys, and in the quality of the partnerships it attracts.

Is there anything he would have done differently?

“If you ever get to a point where you don’t think you can do things better, then that’s when your ego is getting ahead of your capability. It’s a cliché but challenging ourselves always to be better makes for a learning organisation,” Egan says.

“And the thing that we are all trying to do is to create ‘one SiriusPoint’. We’re nearly there, but there’s more to do.”