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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Insurance News Net

TABLE OF CONTENTS
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Executive Overview
Business operations consist of four operating segments: Core Commercial,
Specialty, Personal Lines and Other.
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Specialty
Description of Operating Segments
Results of Operations – Consolidated
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Operating income before interest expense and income
taxes
85.1
76.6
61.4
37.5
92.8
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Results of Operations – Segments
781.3
240.3
137.9
1,159.5
Operating income before interest expense and income taxes $ 154.4 $ 85.1
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
Production and Underwriting Results
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The following table summarizes U.S. GAAP underwriting results for the Core
Commercial, Specialty, Personal Lines and Other segments and reconciles them to
operating income before interest expense and income taxes.
Core Commercial current accident year underwriting profit, excluding
catastrophes, was $45.5 million for the three months ended March 31, 2022,
compared to $40.4 million for the three months ended March 31, 2021. This $5.1
million increase was primarily driven by earned premium growth.
Specialty
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Personal Lines net premiums written were $482.9 million for the three months
ended March 31, 2022, compared to $438.7 million for the three months ended
March 31, 2021. The premium growth of $44.2 million was primarily driven by
increased new business and retention.
Other
Our Other segment had operating income of $0.6 million for the three months
ended March 31, 2022, compared to $1.1 million for the three months ended March
31, 2021, a decrease of $0.5 million.
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Reserve for Losses and Loss Adjustment Expenses
The table below provides a reconciliation of the gross beginning and ending
reserve for unpaid losses and loss adjustment expenses.
Gross reserve for losses and LAE, beginning of period $ 6,447.6 $
6,024.0
1,641.6
Net reserve for losses and LAE, beginning of period 4,753.8
4,382.4
789.5
781.3
4,550.2
1,673.5
Gross reserve for losses and LAE, end of period $ 6,512.2 $
6,223.7
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Catastrophe Loss Development
For the three months ended March 31, 2022 and 2021, there was no net catastrophe
loss development.
2022 Loss and LAE Development, excluding catastrophes
2021 Loss and LAE Development, excluding catastrophes
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Net investment income before income taxes was as follows:
The increase in net investment income for the three months ended March 31, 2022
was primarily due to the continued investment of operational cash flows,
partially offset by the impact of lower new money yields and lower mortgage
income.
Investment Portfolio
7,382.2 $ (262.6 ) $ (471.7 )
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The change in net unrealized gain (loss) on fixed maturities was primarily due
to higher prevailing interest rates and, to a lesser extent, wider credit
spreads.
Amortized cost and fair value by rating category were as follows:
The duration of our fixed maturity portfolio was as follows:
Equity securities primarily consist of U.S. income-oriented large capitalization
common stocks and developed market equity index exchange-traded funds.
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For the three months ended March 31, 2022, we recognized net impairments on
fixed maturities of $0.9 million, consisting of $0.6 million of credit-related
losses and $0.3 million categorized as intend-to-sell. For the three months
ended March 31, 2021, we did not recognize any impairments.
At March 31, 2022 and December 31, 2021, the allowance for credit losses on
mortgage loans was $7.1 million and the allowance for credit losses on
available-for-sale debt securities was $0.9 million and $0.3 million,
respectively.
Unrealized Losses
Gross unrealized losses on fixed maturities at March 31, 2022 were $312.2
million, an increase of $264.2 million compared to December 31, 2021, primarily
attributable to higher interest rates and, to a lesser extent, wider credit
spreads. At March 31, 2022, gross unrealized losses consisted primarily of
$123.1 million on corporate fixed maturities, $62.6 million on residential
mortgage-backed securities, $62.4 million on municipals, $29.6 million on
commercial mortgage-backed securities, and $24.4 million on U.S. government
securities. See Note 3 – “Investments” in the Notes to Interim Consolidated
Financial Statements.
Due after one year through five years $ 11.3 $ 0.7
Due after five years through ten years
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Other Items
Net income also included the following items:
Income Taxes
We file a consolidated U.S. federal income tax return that includes our holding
company and its domestic subsidiaries (including non-insurance operations).
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
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Critical Accounting Estimates
For a more detailed discussion of these critical accounting estimates, see our
2021 Annual Report on Form 10-K.
Statutory Surplus of Insurance Subsidiaries
The following table reflects statutory surplus for our insurance subsidiaries:
Total Statutory Capital and Surplus $ 2,809.6 $ 2,720.0
Liquidity and Capital Resources
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At March 31, 2022, we were in compliance with the covenants of our debt and
credit agreements.
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Contingencies and Regulatory Matters
REGULATORY AND INDUSTRY DEVELOPMENTS
Information regarding litigation, legal contingencies and regulatory matters
appears in Part I – Note 12 “Commitments and Contingencies” in the Notes to
Interim Consolidated Financial Statements.
Risks and Forward-Looking Statements
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Disclosure Controls and Procedures Evaluation
Limitations on the Effectiveness of Controls
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Internal Control Over Financial Reporting
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SiriusPoint Investor Presentation May 2022
Earnings Document
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