Third Point Reinsurance, a speciality reinsurer, and Sirius International Insurance Group, a global multi-line insurer and reinsurer, have entered into a definitive agreement to combine in a cash and stock transaction.
The transaction, which will see the company named SiriusPoint, will create a global company with approximately $3.3 billion of tangible capital that is set to be positioned to pursue “a range of significant expansion opportunities in the insurance and reinsurance market”.
Third Point Re will finance the transaction through a combination of cash-on-hand; Third Point Re equity issued to Sirius Group shareholders; Third Point Re equity issued to Daniel Loeb, CEO and chief investment officer of Third Point, under an agreement to purchase approximately $50 million worth of SiriusPoint shares at closing; and if necessary, other debt or equity financing.
The transaction is expected to be accretive to earnings per share and return on equity in year one following the close.
Third Point Re's newly named non-executive chairman of the board, Siddhartha Sankaran will lead SiriusPoint as chairman and CEO post-closing.
Third Point Re's current CEO, Dan Malloy, will remain a senior underwriting executive of SiriusPoint following the closing.
The SiriusPoint board of directors will comprise the current Third Point Re board at the time of closing.
It will also welcome two new board members Rachelle Keller from Sirius Group and Peter Tan from CM Bermuda, Sirius Group's current majority shareholder, and an affiliate of CMIG International Holding.
In addition, Third Point Re's former lead independent director, Steven Fass, will join the company as vice-chairman. Fass is also a former CEO of Sirius Group.
He will work closely with Sankaran and senior members of the Sirius Group team in the integration of the businesses.
Commenting on the agreement Sankaran said: "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," he added.
Loeb noted: "This transaction fulfils 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 a 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."
The agreement has been unanimously approved by both companies' boards of directors. It is subject to approval by shareholders of both companies and customary regulatory approvals.
The transaction is expected to be completed during Q1 2021.