SiriusPoint Ltd. (SPNT) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the SiriusPoint Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded, and a replay is available through 11:59 p.m. Eastern Time on August 13, 2025. With that, I'd like to turn the call over to Liam Blackledge, Investor Relations and Strategy Manager. Thank you. Please go ahead.

Good morning, and thank you for joining us for SiriusPoint's Second Quarter and Half Year 2026 Earnings Call. Last night, we released our earnings press release, Form 10-Q and financial supplement, all available on our website at investors.siriuspt.com, along with the slides that will accompany today's discussion. Joining me on the call are Scott Egan, our Chief Executive Officer; and Jim McKinney, our Chief Financial Officer. Before we begin, I'd like to remind you that today's remarks contain forward-looking statements based on current expectations, and actual results may differ materially. We will also reference certain non-GAAP financial measures, which we believe are useful in evaluating the performance of the business. Reconciliations can be found in the presentation and our SEC filings. Please refer to our earnings release and accompanying material for a more complete discussion of forward-looking statements and non-GAAP measures. With that, I'll turn the call over to Scott.

Thanks, Liam, and welcome, everyone, to our second quarter and half year results call. SiriusPoint delivered another quarter of consistent and strong underwriting profitability. We continue to demonstrate the durability of our performance, which is especially important as more markets become tougher. We firmly believe delivering a strong return on equity year in, year out is key to creating long-term shareholder value. And this is why over the last three years, we've deliberately taken actions to diversify the book and reduce our volatility. We are well positioned for cycle resilience and to deliver on our across the cycle 12% to 15% return on equity target, and our half year results for 2026 are another proof point that our strategy is delivering against that aim. Our headlines at the half year are clear. The business continues to perform strongly. We are growing where we create the most value and where we see attractive returns for the risk we take. Our approach and growing reputation means our growth pipeline remains strong. And finally, our balance sheet and agile capital management serve as the bedrock to maximizing business opportunities. Jim will take you through the details of the second quarter shortly, but we delivered a core combined ratio of 91.4% and an operating return on equity of 13.8%. This means that at half year, our net income is up 44% over the prior year and our operating ROE of 14.7% is at the upper end of our 12% to 15% target range. Our core result, which excludes our runoff business, continues to outperform and delivered a 16.2% return on equity, which is above our target range. Our book value continues to grow. Book value per diluted common share, excluding AOCI, increased 3% in the quarter and 8% year-to-date. And we've repurchased $95 million of common shares year-to-date, bringing total capital return to shareholders in 2026 of $295 million, including the preference share redemption in February. Our value creation continues to be driven by our earnings growth, reflecting the quality, discipline and durability of our operating model. We are driving the company to be a focused specialty underwriter underpinned by a diversified and lower volatility portfolio, which is meaningfully more balanced than it was several years ago. A key example of this is the growth of our Accident & Health business to around $1 billion, given its strategic importance as a consistently profitable and low volatility business with a low correlation to wider P&C pricing cycles. The combination of our insurance and services and reinsurance businesses, coupled with our 10 different specialty lines and our multiple distribution channels act as good diversification, supporting more stable earnings and a resilient capital profile. Turning to Slide 8. The quarter once again demonstrated both our underwriting discipline with a low 90s combined ratio and our ability to grow. Our Insurance and Services gross written premium grew 15%, while our reinsurance premium declined 9%. We will be disciplined in areas where pricing or risk-adjusted returns do not meet our thresholds. We have the ability to redirect our capital quickly to other more attractive lines, segments and geographies. Slide 11 shows the scale and breadth of our growing specialty platform and our active management of the various pricing cycles. We have meaningful positions across many lines. To reiterate, underwriting discipline is key to how we manage the business. We will not pursue growth at any cost. And this quarter, we have added some additional detail to the slide on trailing growth trends. As you can see, we are growing strongly in areas where we have previously said pricing is more attractive, such as accident and health and surety and pulling back in areas where pricing is more competitive like aviation, property cat and certain segments of casualty. Jim will cover each of our specialties in more detail, but this slide shows how we are building in specialty lines where we have underwriting expertise, relevant distribution and the ability to generate attractive returns. As the portfolio evolves driven by our underwriting focus, the shift in our business mix has affected the timing of our earned premium recognition, meaning premiums are earning through more slowly. You can see that in some of the numbers this quarter, and Jim will unpack this later in the call. Turning to underwriting performance briefly on Slide 12. This shows exactly the type of business portfolio we are building. This is now consistently delivering strong combined ratios and lower volatility, and our volatility profile continues to be favorable against our U.S. specialty peers and of course, is very different to that of the largely reinsurance-focused Bermuda domiciled peers. This is obviously very different to our past. Slide 13 shows our disciplined approach to partnering with specialist MGAs. We've reinforced this many times during these calls before. But given their importance to us and our strong performance, it is worth reiterating. The headlines are we are highly selective in choosing partners declining more than 90% of opportunities. We take our time getting to know potential partners before onboarding. Once we enter a relationship, we deliberately start conservatively in our net positions, growth and reserving. Importantly, incentives are aligned with underwriting profitability and not premium growth. You can see this in our acquisition ratio as profitability improves. This is a dynamic we are very happy with. The result is a portfolio built around long-term relationships with strong renewal rates and with a significant portion of premiums coming from partners we have worked with for many years. We believe our differentiated approach to this distribution channel is the key to our success and earnings power. Turning to our people. As you know, at SiriusPoint, we put a lot of emphasis on our culture. Once a year, we run an employee engagement survey, which gives us a real benchmark on how we are doing with the most important asset in our business, our staff. Our approach to everything we do is that it starts with having the right people, the right culture and the right mindset. And I believe this has been the most important ingredient of our success over the past three years. The highlights of this year's survey are seen on Slide 14. Our overall employee engagement score is now at 83, increasing for the third consecutive year. Our scores across leadership, organizational alignment, collaboration, development, recognition and pride our top quartile scores. And finally, our NPS score of plus 40 is well above industry benchmarks and once again increased double digit year-on-year. I see a direct link between these scores and the business performance we are driving. It is the cornerstone of long-term sustainable performance. I'm incredibly proud of and grateful to all of my colleagues and what they do every single day. They are our secret sauce. Before I pass across to Jim, I'll end with some key takeaways as we head into the second half of 2026. Our business has delivered another strong half year of performance, operating at the upper end of our return on equity guidance. Our track record shows the consistency and predictability of what we are saying and doing. This matters. The continued growth of our insurance business is creating real shareholder value and our pipeline is strong. Our capital and balance sheet are very strong as demonstrated by the ratings upgrades to A by S&P, Fitch and A.M. Best earlier this year. And our aim is to continue to improve. So to end with the World Cup theme of the past few months for all new soccer lovers, it's half time in the SiriusPoint 2026 Match, a strong performance in the first half by the team, all to play for in the second half, and the team is ready, able and hungry for success, and I look forward to providing you with our next update at the third quarter hydration date. So with that, I'll turn it over to Jim to walk you through the match stats for the first half. Jim?

Scott, I expected you to call it football, but glad to see you are coming around and calling in soccer. Anyway, good morning or good afternoon, everyone. I'll provide a bit of additional detail to our second quarter and half year results, then cover underwriting, investments, capital and the balance sheet. Turning to our financial results. The strength and consistency of the portfolio Scott just described translated into another quarter of solid operating performance. Core gross written premium increased 6% to $982 million, reflecting continued growth in our insurance and services business, while net written premium grew 1% as we maintained our disciplined underwriting approach. Underwriting performance remained strong with a combined ratio of 91.4% and underwriting income of $55 million. While this compares to an exceptionally strong prior year quarter, it remains fully consistent with our across-the-cycle profitability objectives. As Scott noted earlier, changes in our portfolio mix during the first half of the year extended the earning pattern of our unearned premium, reducing earned premium recognized in the quarter by approximately 10% or $31 million. This shift reflects growth in longer duration lines such as surety, combined with reduced exposure to shorter-tail property catastrophe business. Importantly, this is a timing impact rather than an economic one, creating a favorable earned premium tailwind that will benefit future periods. The earnings profile continues to benefit from diversification across underwriting, fee income and investment. Net service fee income increased 15% year-over-year to $10 million or 41% adjusting for go-forward MGAs and total investment income remained strong at $73 million, including $66 million of net investment income. These results produced operating net income of $79 million or $0.67 per diluted share, unchanged from the prior year despite a more competitive market environment. Importantly, we continue to grow intrinsic value during the quarter with diluted book value per share, excluding AOCI, increasing $0.50 to $19.48. Overall, the quarter reflects the quality of our underwriting portfolio, the growing contribution from fee-based earnings and the resilience of our balance sheet and investment portfolio. The key takeaway is that we continue to deliver consistent operating earnings and book value growth while maintaining underwriting discipline and a strong capital position. The strength of our portfolio is translating into consistent financial performance. For the first half of the year, core gross written premium grew 3% to nearly $2 billion, while actions to improve portfolio quality and reduce volatility contributed to a 2.3 point improvement in the combined ratio to 90.1%. That drove a 31% increase in underwriting income to $126 million, while strong investment performance and growth in fee income further diversified earnings. As a result, operating earnings per share increased 17% year-over-year to $1.37 and diluted book value per share, excluding AOCI, increased $1.38 to $19.48. Overall, the first half demonstrates that our strategy is delivering the outcomes we set out to achieve, strong underwriting profitability, growing earnings diversification and continued growth in intrinsic value per share. The combination of strong earnings generation, book value growth and a resilient balance sheet continues to provide significant flexibility in how we deploy capital for shareholders. Turning to segment performance. The results reinforce the themes Scott and I have discussed today, disciplined growth in Insurance and Services and continued portfolio optimization in reinsurance. In Insurance and Services, gross written premium grew 15% in the quarter and 11% year-to-date, driven by areas where we see attractive risk-adjusted returns. Despite that growth, the combined ratio remained strong at 90.7% for the quarter and 91.4% year-to-date, reflecting disciplined underwriting and favorable prior year development. In reinsurance, we continue to prioritize profitability over volume. Gross written premium declined as a result of intentional portfolio actions, while the combined ratio improved 5.2 points year-to-date to 88.3%, driven largely by lower catastrophe losses and an improved portfolio quality. Expense ratios remain disciplined across both segments. The modest increase in acquisition ratio reflects higher profit commissions on the prior year business, consistent with favorable reserve development. The OUE ratio was impacted by the timing shift in earned premium recognition discussed earlier. Despite this, we remain on track to deliver a full year OUE ratio of approximately 7% at the upper end of our guidance range. Overall, these results demonstrate the benefits of our strategy, growing where returns are attractive, reducing exposures where they are not and consistently improving the quality of earnings across the portfolio. Circling back and double-clicking into our core specialty lines shown on Page 11. Accident & Health, our largest line at 27% of premium, remains highly attractive business, combining strong profitability with low capital intensity. Employer stop loss continues to show signs of firming, and we remain well positioned to capitalize on improving market conditions. General liability pricing remains broadly aligned with loss trends, although rate momentum has moderated. We continue to focus on segments where underwriting discipline supports attractive returns. Other property conditions remain mixed. We have reduced participation where reinsurance pricing has softened, while continuing to grow selectively in property insurance niches offering attractive economics. Financial and professional lines remain competitive, particularly in D&O and professional liability. While market conditions are stabilizing, we remain cautious and highly selective, prioritizing margin over growth. Within other casualty, we continue to reduce auto exposure given unfavorable loss cost trends while benefiting from strong growth and performance in environmental. Surety remains an attractive diversifying line. While we are monitoring emerging loss trends across the market, our portfolio remains differentiated with a focus on commercial surety and limited exposure to larger project-related risks. Aviation remains disciplined with expectations for continued rate improvement in major airline business later this year. Credit remains well priced and delivered strong growth in the quarter, supported by favorable market conditions. Marine and Energy presents a mixed environment with attractive opportunities in selected energy and specialty niches, offset by continued competitive pressure in cargo, haul and upstream energy. Finally, property catastrophe reinsurance, now approximately 4% of the portfolio, experienced further rate pressure at midyear renewals. Consistent with our strategy, we reduced participation and allowed premium volumes to decline, prioritizing profitability and capital efficiency over top line growth. Overall, market conditions continue to vary by class, but our approach remains unchanged, deploy capital where risk-adjusted returns are strongest, maintain underwriting discipline and continue improving the quality and resilience of earnings. Turning to Slide 20. Another important indicator of portfolio quality is our reserve performance and consistency of prior year development. We recorded our 21st consecutive quarter of favorable prior year development, supported by disciplined reserving process, prudent reserve setting on new business and meaningful protection from our LPT structures. This consistent track record is another example of the underwriting and risk management discipline that underpins our earnings and book value growth. Turning to Slide 21. Our investment portfolio continues to provide a stable and predictable earnings stream that complements our underwriting results. In the first half, net investment income was $132 million and total investment income was $151 million. The portfolio remains conservatively positioned with a AA- average credit quality, approximately 99% investment-grade exposure, limited private credit exposure and no fixed income defaults during the period. Combined with strong liquidity and a short duration profile, the investment portfolio remains well positioned to support earnings consistency and balance sheet strength. Turning to financial strength and capital position on Slides 22 and 23. Our capital position, leverage profile and liquidity continue to provide significant flexibility to execute our strategy and create shareholder value. Our estimated DSCR ratio remains strong at 239%, reflecting a well-capitalized balance sheet while maintaining resilience in severe stress scenarios. At current trading levels, we continue to view share repurchases as an attractive capital allocation opportunity, offering compelling returns and payback economics. We've repurchased $95 million of common shares year-to-date and have $79 million remaining under our authorization. We continue to manage the business within a capital framework aligned with S&P's AAA capital model assumptions, underscoring our commitment to balance sheet strength. Our debt to capital of 22.9% is near the lowest level in several years, providing additional financial flexibility. Liquidity remains robust at $1.1 billion, giving us ample capacity to support the business, pursue strategic opportunities and navigate market volatility. Importantly, we continue to believe our current valuation does not fully reflect the value of our MGA platform, particularly IMG, nor the quality and earnings power of the broader franchise. In conclusion, we are proud of our results for the second quarter and half year. Our strategy predicated on underwriting excellence, volatility reduction and balanced capital management continues to yield strong results. The quarter saw us deliver strong underwriting profits, continued attritional loss ratio improvement, net investment income well supported by portfolio yields, returns comfortably within our across-the-cycle targets and continued capital strength and balance sheet flexibility. We have made exceptional progress in becoming a best-in-class specialty underwriter, though there is still room to improve, and that is what the second half of the year is for. With that, I'll turn the call back to the operator, and we'll open the line for questions.

[Operator Instructions] Our first question today is coming from Michael Phillips of Oppenheimer.

I want to -- I guess, first off, just all about timing, right? Tough data to report given the broader market and what's happening in insurance today, but we'll get past that. I guess I want to start with your comments on the insurance growth in one piece, the other property segment, it's one of your top three lines. And Jim, you said it's mix, right? So can you just maybe help define specifically or give some examples of your book in other property and pieces of that, that you think are more attractive than others so we can kind of frame what that could look like over the next year?

Yes. Mike, it's Scott. As always, thank you for your questions. Thanks for dialing in. Look, for us, obviously, we always talk about the property cat market when we -- in general terms, when we talk about the unattractiveness. But actually, we have some quite strong property programs in our program MGA space. These tend to be more niche in a sense. So we have programs both in U.K., Europe and in North America. Examples might be landlords, examples might be SME businesses in the U.K. So they tend to be more niche products. And actually, we're happy Mike, with the environment that we're seeing in them, both in terms of performance of the actual schemes and also the rate that we're carrying. Of course, we never fall asleep and we're always alert. But the dynamics that we're seeing in those type of markets is actually quite different to what I would call the kind of broader general property markets and property cat markets, if that helps answer your question.

Yes, it does. It does. And thanks for addressing that because it's simply people think of property right now, and it's under a lot of pressure. But clearly, there's some spaces in your...

Yes. And Mike, maybe I can make a general point here. And sorry, I know I interrupted you there. I should have said it when I answered your question, which is, look, I think one of the things that our MGA program distribution focus allows us is often to partner with sort of specialists in niche spaces. It's one of the things that we really like. And therefore, we get access to niche markets, but we also partner with really specialist underwriters who understand that space. And so it's a really sort of two-pronged answer in a sense, which is it also talks to our focus and strategic focus in MGA and programs as well and why we find that attractive.

Yes. And I would just add one element to clarification or enhancement. I think when the market is referencing property in total, many times, Mike, I think they're referencing the property cat market as they go versus the attritional property market. And those at times can have very different trends, as you know and as others know.

Scott, I appreciate that. Let me turn to IMG for a second. You've done some deals recently there. And I guess just more broadly, longer term, does that MGA book currently have as diversified of a book as you wanted to have? Or should we think there could be more to come from what you've done recently with, say, Assist America and World Nomads?

Yes. Look, I think the IMG business is an interesting one. Mike, I would say we've definitely improved the diversification over the last three years. We've introduced some new products. And actually, we're introducing subproducts as we speak underneath those tiered products, et cetera. We've also diversified our distribution to market. So our direct-to-consumer in IMG now makes up roughly about 1/3 of our distribution, whereas a few years ago when I arrived, it was heavy, heavy and predominantly via aggregators and brokers, et cetera. So we are diversifying the business. We are diversifying the product set. We are diversifying routes to market. There's nothing imminent on the horizon. And I do -- I'll never rule it out if there's something that fitted well with our skill set, with our underwriting skill set and our platform, then we'd look at it. But I think something like Assist America and World Nomads, we're really building on products that we had and customers that we had, albeit in slightly different geographies. But look, ultimately, World Nomads is a great example where it's a sort of subspecialism within the product. And I sometimes think, Mike, that's a really smart way of sticking to what you know, but getting access to different segments within the marketplaces. So look, we're quite excited with where IMG is going. We're quite excited by the products that it has, and we're quite excited by the bolt-on acquisitions that we've done, if that answers your question.

It does. I guess maybe a follow-up there, Scott, would be we've seen in the last couple of quarters, the margin on that business kind of tick up a bit, and you called out this quarter Assist America. I wonder, is there more to come? It should -- or are we hitting that mid-teens margin is kind of the ceiling for a margin in the business -- given the recent deals that you've done?

Yes. I mean, just to be clear, World Nomads is not yet in our numbers, Mike. So that's still got to come through. And I think the strategic focus in IMG is to continue to grow our direct-to-consumer business. That's not always easy. But obviously, inorganic and organic are tools that we can deploy. I think what is true is that if we grow our direct-to-consumer business, the margin on that product or on that distribution channel, should I say, is higher than via other routes. But obviously, there is an offsetting expense where ultimately, we have to market the brand. And so one of the questions we're asking ourselves perhaps for the plans next year and beyond is should we be doing more to perhaps invest in the brands that we have with a view of growing that distribution channel. But ultimately, the economics of that are attractive.

The next question is coming from Timothy D'Agostino of B. Riley Securities.

Just one from my end. And within the past month or so, you launched the Fine Art and the Crisis Solutions offerings. I guess, can you just provide some color on why now is the time to do that? What you're seeing there and how it fits the SiriusPoint model?

Yes. No, good question, Tim, and thanks again for joining. So maybe if I go back a step, Tim. So I think we've always been very clear that the London market fits very well with our strategy of specialisms. For the first few years that I was here, certainly, we were investing in some of our sort of processes, underlying infrastructure, capabilities, et cetera. Earlier on this year, we sort of broke it out as one of our sort of stand-alone P&Ls and David Govrin within our business took over the leadership of that. And for us, what we're looking to do is develop teams and develop products within that business. And these are two areas, PVT, which we've actually labeled Crisis Solutions. That's the brand we've given that. I think it's actually a better -- quite frankly, it's a better badge than PVT, sounds like medicine. And Fine Art and Specie is areas that we think are attractive in the market and where we can make money. And we've actually gone out and attracted some of the best talent in the London market. And honestly, Tim, been very humble about it three years ago, we would not have been able to do that. And so we're really excited that the platform we've created, the leadership that we put there and our sort of growing reputation means that we're able to attract people with really good, strong underwriting skills in niche markets in London that we find attractive.

The next question is coming from Andrew Anderson of Jefferies.

This is Charlie on for Andrew. The first question I have is just on the casualty side. When you guys are kind of looking at reserve adequacy, where are you more focused today? Is it on social inflation, claims emergence, severity trends, litigation funding? I guess, where are you seeing the most cause for concern and scrutiny?