Good morning, ladies and gentlemen, and welcome to the SiriusPoint Limited Second Quarter 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Ms. Clare Kerrigan, Head of Investor Relations for SiriusPoint. Please go ahead..

Thank you, operator. Welcome to the SiriusPoint Limited earnings call for the second quarter of 2022. Last night, we issued our earnings press release and financial supplement, which are available on our website, www.siriuspt.com. With me here today are Dan Malloy, our Interim Chief Executive Officer; and David Junius, our Financial Officer.

Before we begin, I would like to remind you that many of the remarks today will contain forward-looking statements based on current expectations. Actual results may differ materially from those projected as a result of certain risks and uncertainties.

Please refer to the earnings press release and the company's other public filings, including the Form 10-K for the period ended December 31, 2021 and Form 10-Q for the period ended June 30, 2022, where you will find risk factors that could cause actual results to differ materially from these forward-looking statements.

In addition, management will refer to certain non-GAAP financial measures, which management believes allow for a more complete understanding of the company's financial results. A reconciliation of these non-GAAP measures to the most comparable GAAP measure is presented in the company's earnings press release that is available on our website.

At this time, I will turn the call over to Dan..

Continue to drive transformation and operational improvement as we accelerate the momentum across our global operations. I will now hand the call over to David to take us through our second quarter financial results..

Thanks, Dan. For the second quarter, we generated a net loss of $61 million or $0.38 per diluted share versus net income of $65 million or $0.37 per diluted share in the same quarter a year ago. Our annualized return on average common equity in the quarter was negative 11.8%.

We achieved consolidated underwriting income of $39 million with a combined ratio of 93.1%, reflecting a $5 million or 60 basis points improvement quarter-over-quarter, making it the fifth quarter with an underwriting profit out of the 6 quarters since we launched SiriusPoint.

Core income was $20 million for the second quarter of 2022, including underwriting income of $10 million and a combined ratio of 98.3%, which compares to $31 million and a combined ratio of 93.2% in the second quarter of 2021. Our second quarter results included $16 million of catastrophe losses or 2.9 points driven by South African floods.

Core income was driven by moderate natural cat activity and some favorable prior year loss development. For the Russia-Ukraine conflict and COVID, a reserving approach of recognizing bad news quickly is holding with no change to our original currency ultimate loss picks, and hence, very limited financial impact in the quarter.

We continue to take a cautious approach to the reserving for our growing Insurance and Services segment, holding most ratios at original [ aspects ] despite positive actual versus expected trends as we wait for this book to season. The quarterly results include net favorable prior year development of $2 million.

Specifically with respect to inflation, we have evaluated the expected impact of the elevated level of current and expected inflation to our pricing and reserving. We took action earlier this year to adjust trend assumptions in our pricing to allow for this elevated level of inflation.

We have concluded that the impact is within our established reserves, given the existing allowances for uncertainty that were already established.

This is a dynamic situation with a relatively high degree of uncertainty, and we will continue to monitor and analyze the inflationary environment and its impact on our portfolio in order to maintain adequate pricing and reserving estimates.

Core gross premiums written for the second quarter were $812 million compared to $574 million in the same quarter a year ago, which is a growth of $238 million or 42%.

The growth year-over-year is driven by our Insurance and Services segment and reflects our business strategy of shifting our business mix from Reinsurance to Insurance to reduce earnings volatility and improve underwriting profitability.

Turning to the individual segment builds in more detail, the Insurance and Services segment produced underwriting income in the quarter of $10 million with a combined ratio of 96.1%, while the Reinsurance segment booked even with a combined ratio of 100.1%.

Insurance and Services produced income of $20 million, consisting of $11 million net services income and an underwriting profit of $10 million with an associated combined ratio of 96.1%.

Net services income primarily benefited from IMG's stronger revenue which outpaced expenses contributing to margin expansion, along with the continued strong performance from Arcadian and Banyan, 2 of our incubated MGAs.

Net services income included $57 million of service revenue versus $34 million in the prior year, predominantly from growth in IMG's core travel medical products.

Insurance and Services underwriting profit included favorable prior year development across our Accident & Health portfolio, where we continue to benefit from prudent initial loss picks in prior years.

Insurance and Services gross premiums written in the segment were $434 million compared to $197 million in the prior year, with both our Accident and Health and Property and Casualty premiums more than doubling year-over-year.

We are seeing a positive impact from our investments made over the last 18 months into A&H combined with incubation and partnerships with P&C MGA.

Pie and Arcadian were strong contributors to growth year-on-year as well as Corvus, which had strong production following our partnership launch in the fourth quarter of 2021, and where we continue to see demand supply imbalances in the market for cyber insurance.

Two MGA partnerships which launched this year, Alta Signa and Mosaic, are gaining traction, contributing meaningful to year-over-year top line growth. Reinsurance results continue to progress, albeit unevenly.

The results continue to reflect the improvements of the dramatic reshaping of the portfolio undertaken over the last 18 months, although we continue to have more volatility in property than we want in the long term. Our casualty reinsurance focus remains on niche specialty lines versus our larger commodity accounts.

We are seeing a good flow of new business with a positive primary commercial line rating environment, partially offset by rising seating commissions. Core underwriting expenses were $45 million for the second quarter of 2022 or a 7.9% OUE ratio.

We continue to invest in our insurance and services business, yet the OUE ratio is slightly below our 5-quarter trend of 8.1% as efficiency gains are keeping track with the investments to improve operational capabilities.

Corporate expenses, excluding service expenses, were $27 million in the quarter, inclusive of management turnover related severance expense and professional fees. Excluding these items, corporate expenses were $16 million for the quarter, trending down from previous quarters due to continued expense discipline.

The net investment loss for the second quarter was $142 million, driven by our related party investment funds of $61 million and debt securities of $58 million, which includes FX-driven investment losses of $26 million and roughly $8 million of losses in the TPOT portfolio.

The loss on the related party investment funds was primarily due to the Third Point Enhanced Fund with a negative return of 12.5% in the quarter. The fund continued to reduce exposures to growth equities, although the valuation of the fund's debt positions were impacted by widening credit spreads and exposure to rates.

We further reduced our exposure to TPE in the quarter and our quarter end balance was $289 million, reflecting a $304 million withdrawal at the end of May. As Dan mentioned, this brings total redemptions from TPE to over $850 million over the last three quarters.

In the second quarter, we also took action to shift some fair market value accounting to available for sale for new fixed income investments. While this does not have an impact on book value, it will reduce net income volatility and headline risk.

As of June 30, the balance of fixed income securities held under [ AFS ] was $716 million, and the accumulated other comprehensive loss on this portfolio was $10 million. Our balance sheet remains strong, ending the quarter with $2.2 billion of shareholders' equity. Total capital, including debt, was $3.0 billion.

Issued debt was unchanged in the quarter, except for FX changes in our SEK sub debt, and our debt to total capital ratio was flat at 26%. We benefited $25 million in the quarter from a change in the value of liability classified capital instruments because of the decline of SiriusPoint stock price.

Tangible book value per diluted share fell 3.6% in the quarter. Now, let me turn the call back over to Dan for concluding remarks..

Thanks, David. Going into the second half of the year, I'm confident our business, balance sheet and prospects remain strong.

I and the executive leadership team are committed to ensuring that we remain focused on transforming our business as we grow insurance and services through MGA and other partnerships, reduce volatility across our Reinsurance and Investment portfolios, and always put underwriting first.

I am proud to oversee the progress we have made since inception, and I look forward to advancing our ongoing and successful transformation to hand over to a new CEO in due course. Thank you again for your time this morning, and I'll turn the call back over to the operator..

Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day..