Global insurance and reinsurance group SiriusPoint will be formed after Third Point Re and Sirius Group reached agreement to combine in a cash and stock transaction.
The transaction is valued at $788 million and is set to create a new global company with approximately $3.3 billion of tangible capital and around $2.5 billion of pro-forma gross written premium, to be renamed SiriusPoint Ltd.
The timing means it will be positioned to grow into the current firming global insurance and reinsurance market, with experienced teams, worldwide reach and investment capabilities led by Dan Loeb’s Third Point LLC hedge fund.
Both Third Point Re and Sirius have been considering options for some time, with conversations with private equity investors, potential buyers and other options, all looked at and widely discussed in the market, we understand.
In the current market environment scale is as important as ever to achieving the greatest relevance and client reach, making combinations of aligned insurance and reinsurance companies one way forwards to achieving this.
The pair see their businesses as complementary and SiriusPoint will be a diversified global insurance and reinsurance company, offering its products and solutions to clients and brokers located in almost 150 countries.
Both of these companies have worked with third-party reinsurance capital in their time, Third Point Re with a dedicated catastrophe fund and Sirius with its Capital Market operations.
Third Point Re is set to finance the transaction using a combination of cash-on-hand; Third Point Re equity issued to Sirius Group shareholders; Third Point Re equity issued to the firms largest individual shareholder Daniel S. Loeb, the CEO and Chief Investment Officer of Third Point LLC, pursuant to an agreement to purchase approximately $50 million worth of SiriusPoint shares at closing; and if necessary, other debt or equity financing.
SiriusPoint expects the transaction and coming together of Third Point Re and Sirius Group to be accretive to earnings per share and return on equity in the first year following the close of the transaction.
The transaction means changes at the top, in terms of leadership, as Siddhartha (Sid) Sankaran will become SiriusPoint’s Chairman and Chief Executive Officer post-closing.
Already a member of Third Point Re’s Board since August 2019 and currently on-executive Chairman of the Board, Sankaran works as Chief Financial Officer of insurtech Oscar Health at the moment. He previously served as Chief Financial Officer and Chief Risk Officer of American International Group, Inc.
Kip Oberting, Sirius Group’s current President and CEO, will step down from his role at the transaction close.
Dan Malloy, the current CEO of Third Point Re, is set to remain with SiriusPoint as a senior underwriting executive following the closing.
Sankaran commented on the news, “We are excited to create a powerful new entity that focuses on underwriting first but strives for excellence in its investment results. This transaction further strengthens our reinsurance operations and positions us to enter lines of business with higher risk-adjusted returns to achieve underwriting profitability. Combining with Sirius Group accelerates our continuing objective to deliver consistently strong book value per share growth over the long- term. Our new scale and global platform, diverse franchise, and enhanced financial profile will enable us to provide tremendous value to clients, brokers, and shareholders. I look forward to working with Sirius Group’s terrific and dedicated team.”
SiriusPoint Board of Directors will consist of the current Third Point Re Board at the time of closing, with the addition of two new Board members, in Rachelle Keller from Sirius Group and Peter W. H. Tan from CM Bermuda Limited, Sirius Group’s current majority shareholder, and an affiliate of CMIG International Holding Pte. Ltd. (China Minsheng Investment Group).
Third Point Re’s former Lead Independent Director, Steven Fass, will also join SiriusPoint as Vice Chairman. He is also a former Chief Executive Officer of Sirius Group and will work closely with Sankaran and senior members of the Sirius Group team in the integration of the businesses.
Third Point LLC’s founder Daniel S. Loeb stated, “This transaction fulfills our vision to move Third Point Re up the quality curve by adding diversified insurance lines to our existing business, thus improving returns on capital and reducing insurance volatility, expanding our investment strategy from a single manager model to reduce investment volatility, and creating critical mass to support both internal growth and future acquisitions. I am confident that this transaction will benefit both customers and shareholders of Third Point Re and Sirius.”
Meyer (Sandy) Frucher, Non-Executive Chairman of the Board of Sirius Group, added, “This strategic business combination is the result of a lot of hard work and the collaborative efforts of the Sirius Group Board, management team and CMIH and is a win-win for both Sirius Group and Third Point Re. I would especially like to acknowledge and thank Kip Oberting and Gene Boxer for their dedication and tireless efforts to ensure the successful resolution and conclusion of the firm’s strategic review process.”
Mr. Tan, Chairman of CMIG International Holding Pte. Ltd., commented, “We think this is a terrific outcome that leaves a better, stronger competitor in the market. We are proud to continue as investors.”
Part of the deal terms lays out a new investment role for Dan Loeb’s Third Point LLC hedge fund, with more oversight than total investing control of the SiriusPoint asset portfolio.
SiriusPoint will access a range of investment products managed by Third Point LLC, including its flagship fund strategy, as well as new and existing fixed-income products.
But, Third Point LLC will also help to oversee SiriusPoint’s investment portfolio allocation into a diversified range of third-party traditional asset managers, seeking to drive enhanced investment returns, while remaining within traditional property/casualty reinsurance investment risk parameters.
China Minsheng Investment Group, Sirius Group’s majority shareholder, will remain a major stakeholder in SiriusPoint, as the deal will see it receive $100 million in cash, as well as around 58 million Third Point Re shares in addition to Series A Preference Shares, warrants, and other securities.
China Minsheng will also have a 9.9% voting cap and standstill limitations, to eliminate stakeholder concerns relating to governance and access to capital markets going forwards.
The transaction is expected to close in Q1 2021.