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| 8-K - 8-K INVESTOR PRESENTATION - SiriusPoint Ltd | form8-kinvestorpresentatio.htm |
For Information Purposes Only
Investor Presentation
MARCH 2017
For Information Purposes Only
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
2
Certain statements and information in this presentation may constitute forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. The words “believe,” “anticipate,” “plan,” “intend,” “foresee,” “guidance,” “potential,” “expect,” “should,” “will” “continue,” “could,”
“estimate,” “forecast,” “goal,” “may,” “objective,” “predict,” “projection,” or similar expressions are intended to identify forward-looking statements
(including those contained in certain visual depictions) in this presentation. These forward-looking statements reflect the Company’s current
expectations and/or beliefs concerning future events. The Company has made every reasonable effort to ensure that the information, estimates,
forecasts and assumptions on which these statements are based are current, reasonable and complete. However, these forward-looking statements
are subject to a number of risks and uncertainties that may cause the Company’s actual performance to differ materially from that projected in such
statements. Although it is not possible to identify all of these risks and factors, they include, among others, the following: (i) fluctuation in results of
operations; (ii) more established competitors; (iii) losses exceeding reserves; (iv) downgrades or withdrawal of ratings by rating agencies; (v)
dependence on key executives; (vi) dependence on letter of credit facilities that may not be available on commercially acceptable terms; (vii) potential
inability to pay dividends; (viii) inability to service the Company’s indebtedness; (ix) limited cash flow and liquidity due to indebtedness; (x) unavailability
of capital in the future; (xi) fluctuations in market price of the Company’s common shares; (xii) dependence on clients’ evaluations of risks associated
with such clients’ insurance underwriting; (xiv) suspension or revocation of reinsurance licenses; (xiii) potentially being deemed an investment company
under United States federal securities law; (xv) potential characterization of Third Point Re and/or Third Point Reinsurance Company Ltd. as a passive
foreign investment company; (xvii) future strategic transactions such as acquisitions, dispositions, merger or joint ventures; (xvii) dependence on Third
Point LLC to implement the Company’s investment strategy; (xviii) termination by Third Point LLC of the investment management agreements; (xx) risks
associated with the Company’s investment strategy being greater than those faced by competitors; (xix) increased regulation or scrutiny of alternative
investment advisers affecting the Company’s reputation; (xxi) the Company potentially becoming subject to United States federal income taxation; (xxii)
the Company potentially becoming subject to United States withholding and information reporting requirements under the Foreign Account Tax
Compliance Act provisions; (xxiii) changes in Bermuda or other law regulation that may have an adverse impact on the Company's operations; and
(xxiv) other risks and factors listed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016
and other periodic and current disclosures filed with the U.S. Securities and Exchange Commission. All forward-looking statements speak only as of the
date made and the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
This presentation may also contain non-GAAP financial information. The Company’s management uses this information in its internal analysis of
results and believes that this information may be informative to investors in gauging the quality of the Company’s financial performance, identifying
trends in our results and providing meaningful period-to-period comparisons. For additional information regarding these non-GAAP financial measures,
including any required reconciliations to the most directly comparable financial measure calculated according to GAAP, see the Appendix section of this
presentation.
For Information Purposes Only
OUR COMPANY
• Specialty property & casualty reinsurer based in Bermuda
• A- (Excellent) financial strength rating from A.M. Best Company
• Began operations in January 2012 and completed IPO in August 2013
• Investment portfolio managed by Third Point LLC
• Total return focused
– Flexible and opportunistic reinsurance underwriting
– Superior investment management
3
For Information Purposes Only
Year ended Year ended Year ended Year ended
December 31, 2016 December 31, 2015 December 31, 2014 December 31, 2013
Shareholders’ Equity $ 1.41 billion $ 1.38 billion $ 1.45 billion $ 1.39 billion
Diluted Book Value Per Share* $ 13.16 $ 12.85 $ 13.55 $ 13.12
Return on Beginning Shareholders’ Equity* 2.0 % (6.0 %) 3.6 % 23.4 %
Increase (Decrease) in Diluted Book Value Per
Share* 2.4 % (5.2 %) 3.3 % 20.5 %
Cumulative Growth in Diluted Book Value Per
Share from December 31, 2011*1 35.3 % 32.1 % 39.2 % 34.8 %
1 Diluted Book Value Per Share as of December 31, 2011 = $9.73
* Non-GAAP financial measure. There are no comparable GAAP measures.
Please see descriptions and reconciliations on slides 32 and 33
KEY METRICS
4
For Information Purposes Only
TOTAL RETURN BUSINESS MODEL DESIGNED TO DELIVER
SUPERIOR RETURNS
5
Opportunity for
Attractive Equity
Returns to
Shareholders
Over Time
Experienced
Underwriting
Team
Superior
Investment
Management
Stable Capital
Base
Underwriting
Profit
Investment
Return on Float1
Investment Return
on Capital
Exceptional Resources Optimal Deployment Outstanding Results + =
1 Float = holding premium until claims must be paid
For Information Purposes Only
EXPERIENCED SENIOR MANAGEMENT TEAM
6
Robert Bredahl
President & CEO
Dan Malloy
Chief Underwriting
Officer (Bermuda)
• EVP, Co-Head of Specialty Lines, Aon Benfield
• President & CEO, Stockton Reinsurance Ltd.
• President, Center Re Bermuda
John Berger
Chairman & CEO (U.S.)
• CEO, Reinsurance, Vice Chairman of the Board,
Alterra Capital Holdings Limited
• CEO & President, Harbor Point Limited
• CEO & President, Chubb Re, Inc.
• Strong business
relationships
• Expertise in writing all lines
of property, casualty &
specialty reinsurance
• Track record of capitalizing
on market opportunities
and producing strong
underwriting results
• Significant business-
building experience
Thomas Wafer
President (U.S.)
• Chairman Reinsurance, Alterra Capital
• CEO Reinsurance, Alterra Capital & President,
Alterra Re USA
• President, Harbor Point Re U.S.
• CEO, Aon Benfield Securities
• President, Aon Benfield Americas
• CEO, Benfield U.S. Inc. & CEO, Benfield Advisory
Christopher Coleman
Chief Financial Officer
• Portfolio Manager, Goldman Sachs
• SVP, Benfield Advisory
• Consultant, McKinsey & Co
Manoj Gupta
EVP Underwriting (U.S.)
• Chief Accounting Officer, Third Point Re
• CFO, Alterra Bermuda Limited
• Chief Accounting Officer, Harbor Point Limited
For Information Purposes Only
ORGANIZATIONAL STRUCTURE – KEY ENTITIES
7
Third Point Reinsurance Ltd.
(Holding Company)
Third Point Reinsurance
Company Ltd.
(Class 4 Insurer)
Third Point Re
Marketing (UK) Ltd.
(Marketing Company )
100% 100%
Third Point Re (UK)
Holdings Ltd.
(Intermediate Holding Company)
100%
Third Point Re (USA)
Holdings Inc.
(Intermediate Holding Company)
Third Point Reinsurance
(USA) Ltd.
(Class 4 Insurer)
100%
100%
For Information Purposes Only
FLEXIBLE & OPPORTUNISTIC UNDERWRITING STRATEGY
8
• Our total return model provides
crucial flexibility in today’s
market environment
• We leverage strong relationships
to access attractive opportunities
• We are the lead underwriter on
many of our transactions
• Limited property cat exposure
Target Best
Opportunities
For Information Purposes Only
TRADITIONAL QUOTA SHARES
9
• Non-standard auto
• Ex-wind homeowners
• General liability
Target Best
Opportunities
• We focus on lines of business
with volatility we believe is
typically lower than that of
most other reinsurance
companies
• We provide reinsurance
support to small and medium
size insurers seeking surplus
relief
• These transactions are
typically relationship-driven,
since reinsurance plays a key
role in the client’s capital
structure
For Information Purposes Only
OPPORTUNISTIC DEALS
10
• Our relationships allow us to
often be the first call for
many special situations
• We look for dislocated
markets and distressed
situations where higher risk-
adjusted returns may be
available
• We manage our downside
exposure with structural
features and contract terms
and conditions
• Mortgage
• Distressed situations
• Multi-line quota shares
Target Best
Opportunities
For Information Purposes Only
RESERVE COVERS
11
• Reserve covers provide clients
with reinsurance protection,
capital relief and potentially
enhanced investment returns
• Relationships are key –
decision-maker is typically the
client’s CEO or CFO
• Our team has a reputation for
sophisticated structuring to meet
each client’s specific needs
• Bermuda reinsurers
• Lloyds Syndicates
• U.S. Insurers
• Captives
Target Best
Opportunities
For Information Purposes Only
EVOLUTION OF OUR PORTFOLIO
• Portfolio of primarily Florida
carriers built from past
relationships. The portfolio now
also includes a Northeast carrier
• Identified Assignment of Benefits
(AOB) issue in Florida early, but
did not fully price for it
• Attempted to adjust ceding
commission on renewals, but the
market did not follow us
• Portfolio has decreased to $66
million from three clients, and is
likely to decrease further in 2017
12
Property (Homeowners) Premium
($ Millions)
0
50
100
150
200
2012 2013 2014 2015 2016
Calendar Year GPW
Underwriting Year GPW
Earned Premium
For Information Purposes Only
0
25
50
75
100
125
2012 2013 2014 2015 2016
EVOLUTION OF OUR PORTFOLIO
• Portfolio includes mostly
California specialty writers and
MGAs
• Market conditions vary widely by
state, segment and carrier
• The portfolio has performed
reasonably well, though not as
well as originally expected (due
to underperformance of one
large contract)
• We will reduce this portfolio in
2017 if we cannot achieve
adequate pricing improvement
on renewals
13
Workers’ Compensation Premium
($ Millions)
Calendar Year GPW
Underwriting Year GPW
Earned Premium
For Information Purposes Only
EVOLUTION OF OUR PORTFOLIO
• Portfolio of MGA-driven
nonstandard auto business built
from past relationships
• Underlying rate increases not
enough to counter increasing loss
severity (due to more expensive
car parts) and frequency (due to
distracted driving and increased
miles driven)
• Re-oriented our approach to
focus on best-in-class
carriers/MGAs with the size and
differentiation to navigate difficult
market conditions
14
0
50
100
150
200
250
2012 2013 2014 2015 2016
Nonstandard Auto Premium
($ Millions)
Calendar Year GPW
Underwriting Year GPW
Earned Premium
For Information Purposes Only
0
25
50
75
100
125
150
2012 2013 2014 2015 2016
EVOLUTION OF OUR PORTFOLIO
• Portfolio is dominated by a single
broad casualty retrocession deal.
We also write a few transaction
liability and professional lines
reinsurance treaties
• Pricing on recent general liability
renewals has been flat
• D&O has had a very benign run.
Reinsurance terms have leveled
off, but there is still some pressure
on terms and conditions
• We have been very careful about
transaction liability aggregates,
and we are only backing teams
that write predominantly primary
layers and have extensive
expertise
15
General & Professional Liability Premium
($ Millions)
Calendar Year GPW
Underwriting Year GPW
Earned Premium
For Information Purposes Only
0
25
50
75
100
125
150
175
200
225
250
2012 2013 2014 2015 2016
EVOLUTION OF OUR PORTFOLIO
• Portfolio is primarily quota
share contracts of Lloyds
entities
• Portfolio is dominated by a
large, global auto warranty and
physical damage deal that has
been non-renewed
• This contract has performed
below expectations due to poor
results on several underlying
programs
16
Multi-Line Premium
($ Millions)
Calendar Year GPW
Underwriting Year GPW
Earned Premium
For Information Purposes Only
EVOLUTION OF OUR PORTFOLIO
• Portfolio includes political risk, trade
credit, structured credit, surety, title,
residual value and mortgage.
• Mortgage reinsurance is the majority
of the portfolio. Exposure is written
as reinsurance of the private
mortgage insurers, and one
retrocession deal (which includes
GSE exposure)
• We believe pricing and terms &
conditions of mortgage risk have
held up well due to rapidly increasing
demand
• Traditional credit and political risk
insurance is highly competitive. We
favor market leads with the capacity
and expertise to transact in less
commoditized areas
17
0
25
50
75
100
125
2012 2013 2014 2015 2016
Credit & Financial Lines Premium
($ Millions)
Calendar Year GPW
Underwriting Year GPW
Earned Premium
For Information Purposes Only
DIVERSIFIED PREMIUM BASE
Gross Premium Written Since
Inception1 by Type of Transaction
Gross Premium Written Since
Inception1 by Line of Business
1As of 12/31/2016
Note: All figures are for P&C Segment only
18
For Information Purposes Only
REINSURANCE RISK MANAGEMENT
19
• Reinsurance business plan complements our investment management
strategy: no property catastrophe excess treaties on rated balance sheet and
premium and asset leverage (see slide 20) lower than peer group
• Company-wide focus on risk management
• Robust underwriting and operational controls
Risk
Management
Culture
Holistic Risk
Control
Framework
• Measure use of risk capital using internally-developed capital model, A.M. Best
BCAR model and Bermuda Monetary Authority BSCR model
• Developed a comprehensive Risk Register that we believe is appropriate for
our business model
• Instituted a Risk Appetite Statement that governs overall sensitivities in
underwriting, investment, and enterprise portfolio
Ongoing
Risk
Oversight
• Own Risk Self Assessment (ORSA) report produced quarterly and provided to
management / Board of Directors
• Provides management with meaningful statistics on our current capital
requirement and comparisons to our risk appetite statement
• Growing in scope
For Information Purposes Only
100
150
200
250
300
20 40 60 80 100
REINSURANCE RISK MANAGEMENT (CONT’D)
20
• Low premium leverage and
asset leverage compared to
peer group
• Limited legacy reserves
• Limited catastrophe risk
Bermuda Reinsurer Leverage Metrics
(Percent)
Premium to Equity
In
ve
st
ed
A
ss
et
s
to
E
qu
ity
TPRE
Source: Dowling & Co; As of 12/31/2016; “Premium to Equity” = Trailing 12 months’ net premium written divided by
shareholders’ equity; “Invested Assets to Equity” = Invested assets and cash divided by shareholders’ equity; Peer
group = ACGL, AGII, AWH, AXS, RE, XL, AHL, ENH, GLRE, LRE, PRE, RNR, VR
For Information Purposes Only
MARKET-LEADING INVESTMENT MANAGEMENT
BY THIRD POINT LLC
21
• Third Point LLC owned and
led by Daniel S. Loeb
• 18.9% net annualized returns
for Third Point Partners LP
since inception in 19951
• 10.1% net annualized return
on TPRE managed account
since inception (Jan. 1, 2012)
• Risk-adjusted returns driven
by security selection and
lower volatility
Notes: For Third Point Partners L.P. after fees, expenses and incentive allocation; Past performance is not necessarily indicative of future results; all investments involve risk including the loss of principal; The historical performance of Third Point Partners L.P. (i) for the years 2001 through December 31, 2015 reflects the total return after incentive
allocation for each such year as included in the audited statement of financial condition of Third Point Partners L.P. for those years and (ii) for the years 1995 through 2000 reflects the total return after incentive allocation for each such year as reported by Third Point Partners L.P. Total return after incentive allocation for the years 2001 through June
30, 2016 is based on the net asset value for all limited partners of Third Point Partners L.P. taken as a whole, some of whom pay no incentive allocation or management fees, whereas total return after incentive allocation for the years 1995 through 2000 is based on the net asset value for only those limited partners of Third Point Partners L.P. that
paid incentive allocation and management fees. In each case, results are presented net of management fees, brokerage commissions, administrative expenses, and accrued performance allocation, if any, and include the reinvestment of all dividends, interest, and capital gains; The illustrative return is calculated as a theoretical investment of
$1,000 in Third Point Partners, L.P. at inception relative to the same theoretical investment in two hedge fund indices designed to track performance of certain “event-driven” hedge funds over the same period of time. All references to the Dow Jones Credit Suisse HFI Event Driven Index (“DJ-CS HFI”) and HFRI Event-Driven Total Index (“HFRI”)
reflect performance calculated through June 30, 2016. The DJ-CS HFI is an asset-weighted index and includes only funds, as opposed to separate accounts. The DJ-CS HFI uses the Dow Jones Credit Suisse database and consists only of event driven funds deemed to be “event-driven” by the index and that have a minimum of $50 million in
assets under management, a minimum of a 12-month track record, and audited financial statements. The HFRI consists only of event driven funds with a minimum of $50 million in assets under management or a minimum of a 12-month track record. Both indices state that returns are reported net of all fees and expenses. While Third Point Partners
L.P. has been compared here with the performance of well-known and widely recognized indices, the indices have not been selected to represent an appropriate benchmark for Third Point Partners L.P., whose holdings, performance and volatility may differ significantly from the securities that comprise the indices.
1From formation of Third Point Partners L.P. in June 1995 through February 2017.
Illustrative Net Return Since Inception
(June 1995 = $1,000)
For Information Purposes Only
RELATIONSHIP WITH THIRD POINT LLC
22
• Exclusive relationship through 2021, followed by successive 3-year terms on
renewal
• Investments are managed on substantially the same basis as the main Third
Point LLC hedge funds
• We pay a 1.5% management fee and 20% performance allocation. The
performance allocation is subject to a standard high water mark
Investment
Management
Agreement
Risk
Management
• Restrictions on leverage, position concentrations and illiquid, private
investments
• Key man and performance termination provisions
• Allowed to diversify portfolio to address concerns of A.M. Best or regulator
Liquidity • Investments are held in a separate account – Third Point Re has full ownership
of investment portfolio to provide liquidity for claims and expenses
• More than 95% of investments are within FAS 157 Levels 1 & 21
• Separate account may be used at any time to pay claims and expenses
1 As of December 31, 2016
For Information Purposes Only
THIRD POINT LLC PORTFOLIO RISK MANAGEMENT
23
• Portfolio diversification across industries,
geographies, asset classes and strategies
• Highly liquid portfolio – investment manager
can dynamically shift exposures depending
on macro/market developments
• Security selection with extensive diligence
process
• Approach includes index and macro
hedging and tail risk protection
• Institutional platform with robust investment
and operational risk management
procedures
For Information Purposes Only
GROSS PREMIUM WRITTEN
Total Gross Written Premium
• Robust growth since inception
• Broad range of lines of
business and distribution
sources (brokers)
• We may reduce premium in
2017 given challenging
market conditions
24
($ Millions)
190
402
613
702
617
2012 2013 2014 2015 2016
For Information Purposes Only
DIFFICULT REINSURANCE MARKET CONDITIONS
P&C Segment Combined Ratio
• Our potential to produce a
sub-100% combined ratio
will be limited until market
conditions improve
• We do not write property
catastrophe business,
which many reinsurers
have benefited from
*Inception to Date (“ITD“) - P&C segment combined ratio from 1/1/2012 to 12/31/2016
25
(Percent)
129.7
107.5
102.2 104.7
108.5 106.8
2012 2013 2014 2015 2016 ITD*
For Information Purposes Only
1.07 1.12
1.24
1.50 1.55
2012 2013 2014 2015 2016
OPTIMAL ASSET LEVERAGE
Asset Leverage1
• If the underlying reinsurance risk
is attractive, generating float
allows a reinsurer to access
investment “leverage” at low or
no cost
• Certain lines of business provide
reinsurers with float for several
years
• We are currently operating at
what we believe is our optimal
level of investment leverage
1Asset leverage is total net investments managed by Third Point LLC as a percentage of Total
Shareholders’ Equity Attributable to Shareholders
26
For Information Purposes Only
RETURNS SINCE INCEPTION
Return on Beginning Shareholders’ Equity1
• We believe we have reached
scale in our underwriting
operation
• We believe that we are well-
positioned to out-perform in
a challenging underwriting
environment
1Non-GAAP financial measure. There is no comparable GAAP measure.
Please see description and reconciliation on slides 32 and 33.
27
(Percent)
13.0
23.4
3.6
-6.0
2.0
2012 2013 2014 2015 2016
For Information Purposes Only
TOTAL RETURN BUSINESS MODEL DESIGNED TO DELIVER
SUPERIOR RETURNS
28
Opportunity for
Attractive Equity
Returns to
Shareholders
Over Time
Experienced
Underwriting
Team
Superior
Investment
Management
Stable Capital
Base
Underwriting
Profit
Investment
Return on Float1
Investment Return
on Capital
Exceptional Resources Optimal Deployment Outstanding Results + =
1 Float = holding premium until claims must be paid
For Information Purposes Only
29
APPENDIX
For Information Purposes Only
Condensed Consolidated Income Statement ($000s)
Years Ended
12/31/2016 12/31/2015 12/31/2014 12/31/2013
Net premiums earned $ 590,190 $ 602,824 $ 444,532 $ 220,667
Net investment income (loss)(1) 98,825 (28,074 ) 85,582 258,125
Total revenues 689,015 574,750 530,114 478,792
Loss and loss adjustment expenses incurred, net 395,932 415,191 283,147 139,812
Acquisition costs, net 222,150 191,216 137,206 67,944
General and administrative expenses 39,367 46,033 40,008 33,036
Other expenses(1) 8,387 8,614 7,395 4,922
Interest expense 8,231 7,236 — —
Foreign exchange gains (19,521 ) (3,196 ) — —
Total expenses 654,546 665,094 467,756 245,714
Income (loss) before income tax (expense) benefit 34,469 (90,344 ) 62,358 233,078
Income tax (expense) benefit (5,593 ) 2,905 (5,648 ) —
Income (loss) including non-controlling interests 28,876 (87,439 ) 56,710 233,078
(Income) loss attributable to non-controlling interests (1,241 ) 49 (6,315 ) (5,767 )
Net income (loss) $ 27,635 $ (87,390 ) $ 50,395 $ 227,311
Selected Income Statement Ratios(2)
Loss ratio 67.1 % 68.9 % 65.5 % 65.7 %
Acquisition cost ratio 37.6 % 31.7 % 31.5 % 31.5 %
Composite ratio 104.7 % 100.6 % 97.0 % 97.2 %
General and administrative expense ratio 3.8 % 4.1 % 5.2 % 10.3 %
Combined ratio 108.5 % 104.7 % 102.2 % 107.5 %
Net investment return(3) 4.2 % (1.6 )% 5.1 % 23.9 %
Highlights
• Generated $2.525 billion of
gross premiums written from
inception to date.
• Interest expense relates to
2015 debt issuance.
• Income tax (expense)
benefit relates to U.S.
operations and withholding
taxes on investment
portfolio.
• FX primarily due to the
revaluation of GBP loss
reserves.
(1) Prior to 2014, changes in estimated fair value of embedded derivatives were recorded in net investment income. As these embedded derivatives have become more prominent, the presentation has been modified and changes
in the estimated fair value of embedded derivatives are now recorded in other expenses in the consolidated statements of income. In addition, fixed interest crediting features on these contracts that were recorded in net investment
income are now classified in other expenses in the condensed consolidated statements of income.
(2) Underwriting ratios are for the property and casualty reinsurance segment only; Underwriting ratios are calculated by dividing the related expense by net premiums earned.
(3) Net investment return represents the return on our investments managed by Third Point LLC, net of fees.
KEY FINANCIAL HIGHLIGHTS
30
For Information Purposes Only
Selected Balance Sheet Data ($000s)
As of
12/31/2016 12/31/2015 12/31/2014 12/31/2013
Total assets $ 3,895,644 $ 3,545,108 $ 2,582,580 $ 2,159,890
Total liabilities 2,445,919 2,149,225 1,300,532 649,494
Total shareholders’ equity 1,449,725 1,395,883 1,552,048 1,510,396
Non-controlling interests (35,674 ) (16,157 ) (100,135 ) (118,735 )
Shareholders' equity attributable to shareholders $ 1,414,051 $ 1,379,726 $ 1,451,913 $ 1,391,661
Investments ($000s)
As of
12/31/2016 12/31/2015 12/31/2014 12/31/2013
Total net investments managed by Third Point LLC $ 2,191,559 $ 2,062,823 $ 1,802,184 $ 1,559,442
Selected Balance Sheet Metrics
Years Ended
12/31/2016 12/31/2015 12/31/2014 12/31/2013
Diluted book value per share*
$ 13.16 $ 12.85 $ 13.55 $ 13.12
Growth in diluted book value per share*
2.4 % (5.2 )% 3.3 % 20.5 %
Return on beginning shareholders’ equity*
2.0 % (6.0 )% 3.6 % 23.4 %
Highlights
• $286.0 million of capital
raised with 2013 IPO.
• $115.0 million of debt issued
in 2015.
• $596 million of float* as of
12/31/16.
• 56.9% cumulative net
investment return through
December 31, 20161.
* Non-GAAP financial measure. There is no comparable GAAP measure. Please see descriptions and reconciliations on slides 32 and 33.
1Cumulative net investment return represents the cumulative return on our investments managed by Third Point LLC, net of fees. The cumulative net investment return on investments managed by
Third Point LLC is the percentage change in value of a dollar invested from January 1, 2012 to December 31, 2016 on our investment managed by Third Point LLC, net of non-controlling interests.
The stated return is net of withholding taxes, which are presented as a component of income tax (expense) benefit in our consolidated statements of income (loss). Net investment return is the key
indicator by which we measure the performance of Third Point LLC, our investment manager.
KEY FINANCIAL HIGHLIGHTS (con't)
31
For Information Purposes Only
NON-GAAP MEASURES & OTHER FINANCIAL METRICS
($000s, Except Share and per Share Amounts)
As of
12/31/2016 12/31/2015 12/31/2014 12/31/2013
Basic diluted book value per share numerator:
Total shareholders' equity $ 1,449,725 $ 1,395,883 $ 1,552,048 $ 1,510,396
Less: non-controlling interests (35,674 ) (16,157 ) (100,135 ) (118,735 )
Shareholders' equity attributable to shareholders 1,414,051 1,379,726 1,451,913 1,391,661
Effect of dilutive warrants issued to founders and an advisor 46,512 46,512 46,512 46,512
Effect of dilutive stock options issued to directors and employees 52,930 58,070 61,705 101,274
Diluted book value per share numerator: $ 1,513,493 $ 1,484,308 $ 1,560,130 $ 1,539,447
Basic and fully diluted book value per share denominator:
Issued and outstanding shares, net of treasury shares 104,173,748 104,256,745 103,397,542 103,264,616
Effect of dilutive warrants issued to founders and an advisor 4,651,163 4,651,163 4,651,163 4,651,163
Effect of dilutive stock options issued to directors and employees 5,274,333 5,788,391 6,151,903 8,784,961
Effect of dilutive restricted shares issued to employees 878,529 837,277 922,610 657,156
Diluted book value per share denominator: 114,977,773 115,533,576 115,123,218 117,357,896
Basic book value per share $ 13.57 $ 13.23 $ 14.04 $ 13.48
Diluted book value per share $ 13.16 $ 12.85 $ 13.55 $ 13.12
Book value per share and diluted book value per share
Book value per share and diluted book value per share are non-GAAP financial measures and there are no comparable GAAP measures. Book value per
share is calculated by dividing shareholders’ equity attributable to shareholders by the number of issued and outstanding shares at period end, net of
treasury shares. Diluted book value per share represents book value per share combined with the impact from dilution of all in-the-money share options
issued, warrants and unvested restricted shares outstanding as of any period end. For unvested restricted shares with a performance condition, we
include the unvested restricted shares for which we consider vesting to be probable. Change in book value per share is calculated by taking the change
in book value per share divided by the beginning of period book value per share. Change in diluted book value per share is calculated by taking the
change in diluted book value per share divided by the beginning of period diluted book value per share. We believe that long-term growth in diluted book
value per share is the most important measure of our financial performance because it allows our management and investors to track over time the value
created by the retention of earnings. In addition, we believe this metric is used by investors because it provides a basis for comparison with other
companies in our industry that also report a similar measure. The following table sets forth the computation of basic and diluted book value per share as
of December 31, 2016, 2015, 2014 and 2013:
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For Information Purposes Only
NON-GAAP MEASURES & OTHER FINANCIAL METRICS
($000s)
Years ended
12/31/2016 12/31/2015 12/31/2014 12/31/2013
Net income (loss) $ 27,635 $ (87,390 ) $ 50,395 $ 227,311
Shareholders' equity attributable to shareholders -beginning of year 1,379,726 1,451,913 1,391,661 868,544
Impact of weighting related to shareholders’ equity from shares repurchased (4,363 ) — — —
Impact of weighting related to shareholders' equity from IPO — — — 104,502
Adjusted shareholders' equity attributable to shareholders - beginning of year $ 1,375,363 $ 1,451,913 $ 1,391,661 $ 973,046
Return on beginning shareholders' equity 2.0 % (6.0 )% 3.6 % 23.4 %
Return on beginning shareholders’ equity
Return on beginning shareholders’ equity as presented is a non-GAAP financial measure. Return on beginning shareholders’ equity is calculated by
dividing net income by the beginning shareholders’ equity attributable to shareholders. We believe that return on beginning shareholders’ equity is an
important measure because it assists our management and investors in evaluating the Company’s profitability. For the years ended December 31, 2013
and December 31, 2014, we have adjusted the beginning shareholders’ equity for the impact of the issuance of shares in our IPO on a weighted average
basis. This adjustment lowers the stated return on beginning shareholders’ equity attributable to shareholders. For the year ended December 31, 2016,
we have also adjusted the beginning shareholders’ equity for the impact of the shares repurchased on a weighted average basis. This adjustment
increased the stated returns on beginning shareholders’ equity.
Insurance float
In an insurance or reinsurance operation, float arises because premiums and proceeds associated with deposit accounted reinsurance contracts are
collected before losses are paid. In some instances, the interval between premium receipts and loss payments can extend over many years. During this
time interval, insurance and reinsurance companies invest the premiums received and seek to generate investment returns. Float is not a concept
defined by U.S. GAAP and therefore, there are no comparable U.S. GAAP measures. Float, as a result, is considered to be a non-GAAP measure. We
believe that net investment income generated on float is an important consideration in evaluating the overall contribution of our property and casualty
reinsurance operation to our consolidated results. It is also explicitly considered as part of the evaluation of management’s performance for the purposes
of incentive compensation.
Net investment return on investments managed by Third Point LLC
Net investment return represents the return on our investments managed by Third Point LLC, net of fees. The net investment return on investments
managed by Third Point LLC is the percentage change in value of a dollar invested over the reporting period on our investment assets managed by Third
Point LLC, net of non-controlling interests. The stated return is net of withholding taxes, which are presented as a component of income tax (expense)
benefit in our consolidated statements of income (loss). Net investment return is the key indicator by which we measure the performance of Third Point
LLC, our investment manager.
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