SiriusPoint: A Reinsurance Underdog Set For A Breakout (NYSE:SPNT) | Seeking Alpha =============== * Create Free Account Investing Groups Portfolios Find &amp; Compare Subscriptions Search field Entering text into the input field will update the search result below Entering text into the input field will update the search result below Create free account Log in SiriusPoint: A Reinsurance Underdog Set For A Breakout ====================================================== Jul. 29, 2025 2:53 PM ET 953 Followers Follow Play(11min) Summary * SiriusPoint has successfully executed a strategic turnaround, improving underwriting discipline and restoring profitability since 2023 despite catastrophe losses. * The company’s book value per share has grown 31% since Q4 2022, supporting a potential re-rating to 1.3–1.4x P/B and 30% upside. * Forward P/E of 9.3 is below the industry average, indicating undervaluation if underwriting margins and net income remain stable or improve. * Key risks include catastrophe losses, rating downgrades, and interest rate changes, but SiriusPoint is now seen as a steady, reliable partner. Poca Wander Stock Some weeks ago, the "Best Contrarian Idea" contest was launched. While I already participated in some other contests, this one was pretty challenging in terms of stock picking (or rather, "company name picking"). Most of the insurers are seen as steady and well-managed insurers, even though there are some exceptions like Mercury General (), a former Dividend Aristocrat, which had suffered from the inflationary pressures, regulatory challenges, and rise in catastrophe losses. Nonetheless, writing an article on MCY to defend the company would have been intellectually dishonest - or at the very least, the company wouldn’t have met all the criteria set by the competition. That’s why I decided to change course and look for another insurance company. As I said, it wasn’t an easy task. I thought about Kestrel Group (), which was formed from the prior operations of Maiden Holdings (), but there was not enough available information to provide a steady, accurate, and intellectually honest analysis. Later, I started to analyze Lemonade (), but I was unable to value the company correctly, as the insurer (spoiler alert: yes, it is an insurer, not an AI company) was loss-making. Based on the loss trends, the underwriting losses, I could not see a short-term or a medium-term catalyst - even though I wish all LMND's shareholders to become millionaires (or even better, billionaires). Therefore, I decided to cover Lemonade in another article, which was not eligible for the competition. That’s when I remembered a reinsurer I once invested in: SiriusPoint (NYSE:), born from the combination of Third Point Re and Sirius Group. To be more accurate, I invested in Sirius Group before the merger and sold my shares before the merger announcement. Since then, I’ve kept only a distant eye on the company’s news and earnings. Back to The Past: A Brief Introduction to SiriusPoint In August 2020, Third Point Reinsurance, a Bermuda-based reinsurer backed by Dan Loeb’s hedge fund, announced a merger with Sirius Group, a global reinsurer previously owned by China Minsheng Investment Group. The transaction, valued at approximately $788 million, combined Sirius’s underwriting footprint with Third Point Re’s capital markets expertise. The deal closed in February 2021, forming a new public company: SiriusPoint Ltd. Initially led by former AIG executive Sid Sankaran, the company faced integration challenges, underwriting volatility (or to be more accurate, underwriting losses), and investor skepticism. To improve market confidence, it has been decided to change the executive team. , Scott Egan (ex-CEO of Beazley - a British insurer) took over as CEO, launching a strategic turnaround focused on core profitability, de-risking, and restoring credibility. During 2023, Dan Loeb tried actively to buy SiriusPoint out for delisting the company and taking it private. Nonetheless, he failed, and he agreed with the (re)insurance carrier to stop its attempts to control the company. Since 2023, SiriusPoint has shown signs of operational improvement and regained market confidence. Underwriting Margin Improvement: Back To Underwriting Discipline The reinsurance market is a challenging and tough market, where size matters. The largest property and casualty (P&C) reinsurers, like Swiss Re, Munich Re, Scor, or Hannover Re, used to be the most resilient reinsurance carriers. As noted in , the smaller P&C reinsurers used to struggle to generate superior underwriting gains over the cycle. Is it the case for SiriusPoint? It is a tricky question because SiriusPoint is both a reinsurer and an insurer. Even though the company is a hybrid insurance carrier, providing both reinsurance and insurance coverages, its underwriting performance might still be analyzed. Annual Reports - SiriusPoint Over the last six years, the company generated underwriting losses from 2019 to 2022. The company started to be profitable from an underwriting perspective in 2023, when it decided to remediate its portfolio by transferring loss-making portfolios to other insurance and reinsurance carriers. Since then, the company has delivered a decent underwriting performance, with a combined ratio around 90%. In Q1 2025, SiriusPoint posted a combined ratio of 95.4%, or 4 points higher than last year in the same period. The combined ratio worsening was mostly driven by the California wildfires, while the attritional combined ratio has shown a year-over-year improvement. Q1 2025 Presentation - SiriusPoint Although SiriusPoint suffered from the losses incurred from the wildfires that occurred in California, the insurance and reinsurance divisions remained profitable in Q1 2025, and I do believe that the rest of the year will follow the same trend, even though there is still a risk that the catastrophe events might deteriorate the overall underwriting performance. Valuation The book value is a good metric for valuing an insurance company, even though picky investors might argue that the tangible book value is a better proxy. Other investors would counter-argue that the P/E metric is even superior. I will try not to disappoint anyone, and I will look at P/E and P/B metrics. Since Q4 2022, the book value per share has grown by 31% to $15.15 in Q1 2025. Q1 2025 Presentation - SiriusPoint Over a longer period, the book value did not grow, as in the first period (2019 to 2022), the company was loss-making from an underwriting perspective, resulting in value destruction. Annual Reports - SiriusPoint In Q1 2025, the book value per share amounted to $15.37 (on a diluted basis), or a 5.3% growth from December 2024. Valuation-wise, P&C insurers and reinsurers are valued at around 1.2 to 1.5 times the book value, depending on their RoE level. Mechanically (and logically), (re)insurance carriers with a superior underwriting performance would be valued at a higher premium on the book value. In the 1.2 to 1.5x corridor, the current valuation of the Bermuda-based insurance provider ranges from $18.88 to $23.59. Analyst's Assumptions At the current price (circa $19.5), the market considers SiriusPoint's valuation to be slightly above 1.2 times its book value. I strongly believe that a 1.3 to 1.4x P/B valuation is highly possible, as the underwriting margin has been around 90% over the last two years. If the company succeeds in stabilizing margins and delivering a 90% combined ratio over the cycle (and on a short-term view for FY2025), the company's valuation could be re-evaluated positively by the market, and the stock price could jump to $22-$23, or a 12% to 17% upside, without any change in the book value. But the book value will certainly grow during 2025, fueled by the earnings generated by both the underwriting portfolio and the investment revenues. Therefore, a 30% upside is more probable if the company remains disciplined regarding underwriting processes. The TTM P/E is currently above 20, which may indicate an overvaluation. Nonetheless, like most insurers, SiriusPoint's Q1 2025 earnings have been affected by the California wildfires. Seeking Alpha However, it might be slightly misleading to base the company's valuation on the TTM earnings. Potentially, the forward P/E could be a better indicator. As of now, the forward P/E is circa 9.3, while the industry average is around 11.9. Therefore, the potential upside (if the underwriting margins and the net income improve) could be about 27.9%. Underlying Risks Like any insurer or reinsurer, SiriusPoint faces several well-known risks: 1. **The change in loss trends** is either driven by a change in severity, an increase in frequency, or an increased adverse effect from natural disasters. Those events could be combined with mispricing, aggressive underwriting, or underreserving. 2. **A rating downgrade:** It will mostly affect the reinsurance operations, for which the credit quality is important for any insurer ceding business to reinsurers. As of now, SiriusPoint and its subsidiaries are rated A- with a positive or stable outlook. The entity is seen as a steady and reliable business partner. 3. **Interest Rate Change:** Usually, insurers prefer to be involved in a high-interest rate environment so that they can invest the earned premiums into high fixed-income securities and generate higher investment income. Therefore, a drop in the investment yield might affect the investment revenues, which are generally either an offsetting effect when the insurance portfolio is loss-making or an income boost when the insurance portfolio performs well. Conclusion In Q1 2025, SiriusPoint has demonstrated that the underwriting discipline launched two years ago has borne fruit. Despite the high level of catastrophe losses fueled by the California wildfires, the company has succeeded in generating underwriting gains. The market perception about the company is changing over successive quarters, as the decisions and the efforts made by the company's teams have created additional value for shareholders. Nonetheless, the company is still viewed as a regional (re)insurance carrier (and SiriusPoint is undoubtedly a regional or second-tier player as it remains a small player in the insurance and reinsurance markets); this partially biased perception offers investors an opportunity regarding the company's valuation and potential upside (from 25% to 30% on a medium-term).

SiriusPoint: A Reinsurance Underdog Set For A Breakout (NYSE:SPNT)

SiriusPoint, a reinsurance company, has executed a strategic turnaround since 2023, improving underwriting discipline and restoring profitability despite catastrophe losses. Its book value per share has grown 31% since Q4 2022, supporting a potential re-rating to 1.3–1.4x P/B with 30% upside. The company faces risks like catastrophe losses and interest rate changes but is viewed as a reliable partner. Its underwriting performance improved to a combined ratio of 95.4% in Q1 2025, driven by operational discipline and a 90% underwriting margin.