Bermuda-based reinsurer, Third Point Reinsurance Ltd, has entered into a definitive agreement to combine in a cash and stock transaction with international multi-line re/insurer, Sirius Group.
The deal is valued at around $788 million and will see the establishment of a global company with $3.3 billion of tangible capital, to be renamed SiriusPoint Ltd.
In light of current market conditions, the new company will be well positioned to take advantage of significant opportunities in the insurance and reinsurance market.
SiriusPoint will be a diversified entity with an attractive business profile and a strong balance sheet, with pro forma LTM gross written premiums of $2.5 billion as of June 30th, 2020.
An announcement on the transaction reveals that Third Point Re will finance the deal through a combination of cash-on-hand; equity issued to Sirius Group shareholders; equity issued to Daniel Loeb, Chief Executive Officer (CEO) and Chief Investment Officer (CIO) of Third Point LLC and currently Third Point Re’s largest individual shareholder, pursuant to an agreement to purchase approximately $50 million worth of SiriusPoint shares at closing; and if necessary, other debt or equity financing.
Siddhartha (Sid) Sankaran, who was recently named non-executive Chairman of the Board of Third Point Re, will lead SiriusPoint as Chairman and CEO once the deal completes. Dan Malloy, current CEO of Third Point Re, will remain a senior underwriting executive officer of the new firm following the deal.
Sankaran commented: “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.”
Sirius Group’s President and CEO, Kip Oberting, will be stepping down from his position once the deal closes.
The Board of Directors of SiriusPoint will include the current Third Point Re Board at the time of closing, with the additions of Rachelle Keller from Sirius Group and Peter Tan from CM Bermuda Limited, Sirius Group’s current majority shareholder.
Furthermore, Steven Fass, Third Point Re’s former lead Independent Director, is set to join the new company as Vice Chairman. He will work closely with Sankaran and senior members of the Sirius Group team in the integration of the businesses.
“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,” said Loeb.
Once the deal completes, SiriusPoint will have a restored strategic partnership with Third Point LLC, under which the new entity will access a range of solutions managed by Third Point LLC, including the firm’s flagship fund strategy. Additionally, Third Point LLC will help with the oversight of SiriusPoint’s investment portfolio allocation and a diversified range of third-party traditional asset managers to drive enhanced investment returns.
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.”
Tan, Chairman of CMIG International Holding Pte. Ltd., said: “We think this is a terrific outcome that leaves a better, stronger competitor in the market. We are proud to continue as investors.”
The transaction is expected to close in the first-quarter of 2021 and has been unanimously approved by both companies’ Boards of Directors.