SiriusPoint Ltd (SPNT) FY 2021 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with our consolidated financial statements and the related notes contained elsewhere in this Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (“Annual Report”).

The statements in this discussion regarding business outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to our Introductory Note to this Annual Report and the risks and uncertainties described in Part I, Item 1A “Risk Factors.” Our actual results may differ materially from those contained in or implied by any forward-looking statements.

Our fiscal year ends December 31 and, unless otherwise noted, references to years are for fiscal years ended December 31.

For discussion of our results of operations and changes in financial condition for the year ended December 31, 2020 compared to the year ended December 31, 2019, prior to the change in reportable segments discussed herein, refer to Part II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Form 10-K which was filed with the SEC on February 23, 2021.

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Overview

We are a holding company domiciled in Bermuda. Through our subsidiaries, we provide multi-line insurance and reinsurance products and services on a worldwide basis. We aim to be a highly diversified business with a sustainable and scalable underwriting platform, and a portfolio of insurance-related businesses. We seek to leverage our underwriting talent and capabilities, proven management expertise and geographical footprint, to build on our existing portfolio and identify new opportunities to create value. We intend to allocate our capital to the best opportunities and react quickly to new risks.

We are focused on optimizing capital allocation and rebalancing towards insurance and higher margin and growth lines. We have embarked on a series of strategic partnerships which we see as a key differentiator and a means by which we can add value and drive disruptive change in the industry, responding to consumers’ insurance needs. Refer to Part I. Item 1. “Business” for additional information on our recent Strategic Investments and partnerships.

Products & Services

The acquisition of Sirius Group created a highly diversified portfolio with expanded underwriting capabilities, geographical footprint and product offerings. In 2021, we began classifying our business into two reportable segments - Reinsurance and Insurance & Services. Where applicable, all prior periods presented have been revised to conform to this new presentation. Each segment is described below.

Reinsurance Segment

We provide reinsurance products to insurance and reinsurance companies, government entities, and other risk bearing vehicles on a treaty or facultative basis. We participate in the broker market for reinsurance treaties written in the United States and Bermuda primarily on a proportional and excess of loss basis. Our international book of business consists of treaty, written on both a proportional and excess of loss basis, facultative, and primary business, primarily in Europe, Asia and Latin America.

The Reinsurance segment provides coverage in the following product lines: Aviation & Space, Casualty, Contingency, Credit & Bond, Marine & Energy, Mortgage, and Property.

Insurance & Services Segment

The Insurance & Services segment predominantly provides insurance coverage in addition to receiving fees for services provided within Insurance & Services and to third parties. Insurance & Services revenues allows us to diversify our traditional reinsurance portfolio and generally has lower capital requirements. In addition, service fees from MGAs and their insurance provided are generally not as prone to the volatile underwriting cycle that is common in reinsurance marketplace. The Insurance & Services segment provides coverage in the following product lines: A&H, Environmental, Workers’ Compensation, and other lines of business including a cross section of property and casualty lines.

Investment Management

As a result of the acquisition of Sirius Group, we repositioned and continue to reposition our investment portfolio to better align with our underwriting strategy, while leveraging our strategic partnership with Third Point LLC. We believe that this repositioning will result in lower volatility, while taking advantage of opportunities to improve risk-adjusted returns across asset classes.

Under our investment strategy, our fixed income investments, which comprise the majority of our portfolio, are outsourced to a diversified range of third-party asset managers. Third Point LLC continues to manage the majority of our alternative investments as well as working with us on tailored asset-liability management strategies that are tailored to our risk and capital considerations. We believe that this is a strategic differentiator on our returns, reduces risk and volatility, and creates a portfolio mix more in line with peer property/casualty reinsurers.

Our investment objective is to maximize long-term after-tax total return while (1) limiting the investment risk within prudent risk tolerance thresholds, (2) maintaining adequate liquidity, and (3) complying with the regulatory, rating agency, and internal risk and capital management requirements, all in support of the company goal of meeting policyholder obligations.

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Recent Developments & Business Outlook

Acquisition of Sirius International Insurance Group, Ltd.

On February 26, 2021, the Company completed the acquisition of Sirius Group. We accounted for the acquisition of Sirius Group under the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805 Business Combinations. The total transaction consideration was $1,079.8 million, which was comprised of stock, cash, and other contingent value components. The associated bargain purchase gain from the Sirius Group acquisition was $50.4 million, which represents the excess of the fair value of the underlying net assets acquired and liabilities assumed over the total deal consideration. The gain from bargain purchase is included in other revenues in the consolidated statements of income. The bargain purchase determination is consistent with the fact that Sirius Group’s shares traded at a discount to book value and the need for Sirius Group to quickly diversify its ownership base.

Our results of operations and financial condition for the year ended December 31, 2021 include Sirius Group for the period from February 26, 2021 through December 31, 2021. The following discussion and analysis of our results of operations for the year ended December 31, 2021, compared to the years ended December 31, 2020 and 2019, as well as our liquidity and capital resources as of December 31, 2021, should be read in that context. In addition, the results of operations for the year ended December 31, 2021 and financial condition as of December 31, 2021 may not be reflective of the ultimate ongoing business of the combined entities.

We believe that our operating subsidiaries, following the acquisition of Sirius Group, have adequate capital resources in the aggregate, and the ability to produce sufficient cash flows to meet expected claims payments and operational expenses, including but not limited to dividend and interest payments.

During the year ended December 31, 2021, the Company recorded $58.8 million of corporate expenses associated with the acquisition of Sirius Group, comprised of $29.7 million of professional and advisory fees and $29.1 million of compensation-related expenses.

See Note 3 “Acquisition of Sirius Group” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information on the Sirius Group acquisition.

Catastrophe Losses

Catastrophe losses, net of reinsurance and reinstatement premiums, for the year ended December 31, 2021 were $329.0 million. Excluding $3.0 million of catastrophe losses in Corporate results, catastrophe losses from the operating segments were 18.8 percentage points on the core combined ratio. This includes $133 million for the European floods and $100 million for Hurricane Ida, with a ground-up assessment of client exposed business to each event and a top-down estimate, based on industry loss for each event and an estimate of our market share, and also includes $41 million from June windstorms and winter storm Uri. Sirius Group’s Uri losses fell into the pre-acquisition period, and, if included in the Company’s results, total catastrophe losses would have been $365 million. In January 2022, we exited certain property business that no longer fit our risk profile or meet risk adjusted return criteria. Refer to Part I, Item 1. “Business – Operational Priorities” for additional information. Catastrophe losses, net of reinsurance and reinstatement premiums, for the year ended December 31, 2020 were $36.6 million, or 6.3 percentage points on the core combined ratio, related to Hurricane Laura and other 2020 catastrophe events.

Loss Portfolio Transfer

On October 29, 2021, we closed a LPT transaction with Pallas Reinsurance Company Ltd., a subsidiary of the Compre Group, an insurance and reinsurance legacy specialist. As a result of the LPT, we dissolved Sirius Point Global Solutions, Inc., which specialized in the acquisition and management of runoff liabilities for insurance and reinsurance companies, both in the United States and internationally, as well as asbestos and environmental risks and other long-tailed liability exposures.

The LPT covers $362 million of the Company’s loss reserves for the subject business, including much of the legacy Sirius Group runoff portfolio, including asbestos and environmental lines, for a premium of $381 million. We recognized a net Corporate charge of $23 million, including $4 million of federal excise tax expense, in the fourth quarter of 2021.

Our transaction with the Compre Group underscores the ongoing transformation of SiriusPoint, our focus on optimizing capital allocation and rebalancing towards insurance and higher margin and growth lines, and provides further certainty on SiriusPoint’s reserve position. Following the completion of the LPT, our net loss reserves from Runoff business were reduced

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by 48%, although the Company will have continuing exposures to risk from its legacy runoff liabilities. In addition, the LPT, as a reinsurance contract, does not relieve us of our obligation to our insureds.

COVID-19 Pandemic

The COVID-19 pandemic has had and is expected to continue to have a significant effect on the (re)insurance industry. The industry has been impacted by a number of factors including: uncertainties with respect to current and future COVID-19 losses across many classes of insurance business and the amount of insurance losses that may ultimately be ceded to the reinsurance market, supply chain issues, labor shortages and related increased costs, inflation, equity market volatility and ongoing business and financial market impacts of COVID-19 associated economic downturn. We continue to maintain a strong capital position despite the uncertainty associated with COVID-19. We will continue to prudently assess the investment opportunities presented to us, and believe that we are well positioned to continue to deploy our capital efficiently. The ultimate impact of COVID-19 on current business in force as well as risks and potential opportunities on future business remains highly uncertain.

For the year ended December 31, 2021, we recorded $8.7 million (2020 - $46.7 million) of COVID-19 losses, as a result of recognition of losses incurred related to unearned premium converting to earned premium, while our ultimate loss incurred estimates remained unchanged.

Business Outlook

Insurance & Services

The majority of insurance lines we underwrite continue to show significant rate improvement. Although some lines, such as directors & officers, are beginning to experience a slowing of rate momentum, we believe rate is still outpacing loss cost in most lines of business. In select lines, such as cyber, significant rate increases continue due to imbalances between supply and demand. We continue to see strong growth in the program business, with momentum for new MGAs, largely in casualty and specialty lines. Some of this momentum is due to the entrepreneurialism and technology disruption we are witnessing in the primary markets, which is also fueling growth for fronting companies.

The volume of invested capital in the private insurtech market in the first three quarters of 2021 surpassed $10 billion and eclipsed the $7 billion for the full year of 2020. Fundraising rounds of over $100 million continue to represent approximately 50% of total funds raised, generally with a significantly increased number of investors per raise. Prospects of higher interest rates, partially driven by recent high inflation rates, could move capital away from alternative investment categories toward more traditional fixed income asset classes. Publicly traded insurtechs experienced marked declines in valuation multiples in 2021. Some of the decline can be attributed to those companies supporting in-house insurance capital and transitioning away from revenue-based valuations toward valuations based on cash flow or book value. Additionally, the substantial number of cancelled IPO or de-SPAC transactions that took place in 2021 could indicate some limitations on avenues for exit or monetization. Currently, the combination of availability of capital and investors continues to support the valuation and activity in the private insurtech market.

Reinsurance

While the reinsurance markets are benefiting from the positive primary insurance environment, financial results have and continue to be materially affected by elevated levels of catastrophe losses in the property reinsurance market compared to historical averages. This has caused many reinsurers to re-evaluate their positions in property, reducing aggregates and moving away from ground up exposures.

Outside of property, in the casualty and specialty reinsurance markets, rate momentum and performance remain strong, although primary carriers continue to increase retentions, causing erosion in terms passed on to reinsurers. Thus, ceding commissions on pro rata business have increased, muting the benefit of increased rate being passed on to reinsurers. However, the increase in costs for reinsurers furthers the gap in performance between insurance and reinsurance. Conversely, the MGA driven program business that is fueling growth among an increasing universe of fronting carriers continues to rely heavily on reinsurers as a primary source of underwriting capital.

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Key Performance Indicators

We believe that the following key financial indicators are the most important in evaluating our performance:

(1)     Core underwriting loss, Core net services income, Core loss and Core combined ratio are non-GAAP financial measures. See definitions in “Non-GAAP Financial Measures” and reconciliations in “Segment Results” below and Note 5 “Segment reporting” in our audited consolidated financial statements included elsewhere in this Annual Report. Basic book value per share, tangible basic book value per share, diluted book value per share and tangible diluted book value per share are non-GAAP financial measures. See definitions and reconciliations in “Non-GAAP Financial Measures”.

(2)    In the year ended December 31, 2021, we changed the method for calculating the dilutive effect of restricted shares, restricted share units and options to calculate the dilutive impact in a manner similar to how dilution is calculated using the treasury stock method for earnings per share. Prior periods presented have been revised to conform to this new presentation. See “Non-GAAP Financial Measures” for additional information.

Core Results

See “Segment Results” below for additional information.

Return on Average Common Shareholders’ Equity Attributable to SiriusPoint Common Shareholders

Return on average common shareholders’ equity attributable to SiriusPoint common shareholders is calculated by dividing net income available to SiriusPoint common shareholders for the year by the average common shareholders’ equity determined using the common shareholders' equity balances at the beginning and end of the year.

Return on average common shareholders’ equity attributable to SiriusPoint common shareholders for the years ended December 31, 2021 and 2020 was calculated as follows:

The decrease in return on average common shareholders’ equity attributable to SiriusPoint common shareholders for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to higher underwriting losses due to third quarter catastrophe events, partially offset by improved investment results.

The average common shareholders’ equity attributable to SiriusPoint common shareholders for the year ended December 31, 2021 was impacted by the additional equity issued related to the Sirius Group acquisition.

Basic and Tangible Basic Book Value Per Share

Basic book value per share and tangible basic book value per share are non-GAAP financial measures and there are no comparable U.S. GAAP measures. See “Non-GAAP Financial Measures” for an explanation and calculation.

As of December 31, 2021, basic book value per share was $14.46, representing a decrease of $2.42 per share, or 14.3%, from $16.88 per share as of December 31, 2020. As of December 31, 2021, tangible basic book value per share was $13.38,

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representing a decrease of $3.50 per share, or 20.7%, from $16.88 per share as of December 31, 2020. The decreases were primarily due to the dilutive impact of shares and other securities issued in conjunction with the acquisition of Sirius Group, partially offset by net income during the year.

Diluted and Tangible Diluted Book Value Per Share

Diluted book value per share and tangible diluted book value per share are non-GAAP financial measures and there are no comparable U.S. GAAP measures. In the year ended December 31, 2021, we changed the method for calculating the dilutive effect of restricted shares, restricted share units and options to calculate the dilutive impact in a manner similar to how dilution is calculated using the treasury stock method for earnings per share. See “Non-GAAP Financial Measures” for an explanation and reconciliations.

As of December 31, 2021, diluted book value per share was $14.33, representing a decrease of $2.38 per share, or 14.2%, from $16.71 per share as of December 31, 2020. As of December 31, 2021, tangible diluted book value per share was $13.27, representing a decrease of $3.44 per share, or 20.6%, from $16.71 per share as of December 31, 2020. The decreases were primarily due to the dilutive impact of shares and other securities issued in conjunction with the acquisition of Sirius Group, including the acquisition of intangible assets, partially offset by net income during the year.

Consolidated Results of Operations — Years ended December 31, 2021 and 2020

The following table sets forth the key items discussed in the consolidated results of operations section, which includes the results from the Company’s reportable segments and Corporate, and the year over year changes, for the years ended December 31, 2021 and 2020:

The key changes in our consolidated results for the year ended December 31, 2021 compared to the prior year are discussed below.

Underwriting loss

The increase in total underwriting loss for the year ended December 31, 2021 was primarily driven by third quarter catastrophe losses from the European floods and Hurricane Ida and a net Corporate charge of $23 million in the fourth quarter of 2021 related to the Compre LPT. Refer to “Segment Results” for additional information.

Other Revenues

For the year ended December 31, 2021, other revenues consisted of $51.1 million of service fee revenue from MGAs, $49.7 million of changes in the fair value of liability-classified capital instruments issued as part of the aggregate consideration for the Sirius Group acquisition and a bargain purchase gain of $50.4 million. The increase in service fee revenue was primarily due to fee revenue from IMG and Armada from the legacy Sirius Group companies from the date of acquisition. The bargain purchase gain represents the excess of the fair value of the underlying net assets acquired and liabilities assumed over the purchase price. The bargain purchase determination is consistent with the fact that Sirius Group’s shares traded at a discount to book value.

See Note 3 “Acquisition of Sirius Group” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information on the bargain purchase gain recognized as a result of the Sirius Group acquisition and the components of the aggregate consideration.

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Investments

Investment Portfolio

The following is a summary of our total investments, cash and cash equivalents and restricted cash and cash equivalents as of December 31, 2021 and 2020:

(1)Consists of our investments in TP Enhanced Fund and TP Venture Fund.

(2)Primarily consists of cash and fixed income securities such as U.S. Treasuries, money markets funds, and sovereign debt, securing the Company’s contractual obligations under certain (re)insurance contracts that the Company will not be released from until the underlying risks have expired or have been settled.

The main driver for the increase in total investments was the acquisition of Sirius Group on February 26, 2021. In addition, the increase in total investments was driven by the performance of the TP Enhanced Fund. During the fourth quarter of 2021, we redeemed $450.0 million from the TP Enhanced Fund, of which $200.0 million was reallocated to cash and fixed income investments and the remaining $250.0 million was reflected as a redemption receivable as of December 31, 2021. This portfolio repositioning better aligns our investment and underwriting strategies.

Investment Results

The following is a summary of the results from investments and cash for the years ended December 31, 2021 and 2020:

The following is a summary of total realized and unrealized investment gains and net investment income by investment classification, for the years ended December 31, 2021 and 2020:

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Investment Returns

The following is a summary of the net investment returns for our net investments on a U.S. Dollar basis for the years ended December 31, 2021 and 2020:

(1)Fixed income investment returns in original currencies for investments acquired as part of the Sirius Group acquisition were 0.6% for the year ended December 31, 2021.

(2)Equity securities and other long-term investment returns in original currencies for investments acquired as part of the Sirius Group acquisition were 7.4% for the year ended December 31, 2021.

Total realized and unrealized investment gains and net investment income for the year ended December 31, 2021 was primarily attributable to investment income of $298.5 million from our investment in the TP Enhanced Fund, corresponding to a 27.9% return. The TP Enhanced Fund return was primarily attributable to long event/fundamental equities, in particular from private positions that executed well-received initial public offerings. In addition, the Company recognized $11.2 million in unrealized gains in private equity and hedge fund investments for the year ended December 31, 2021.

Total realized and unrealized investment gains and net investment income for the year ended December 31, 2020 was primarily attributable to investment income of $195.0 million from our investment in the TP Enhanced Fund, corresponding to a 22.7% return. The TP Enhanced Fund return was primarily attributable to long event/fundamental equities, in particular a renewed focus on growth and technology positions. In addition, investment income was attributable to investment income from our credit portfolio, with strong contributions from investments in investment grade corporate credit and residential mortgage backed securities.

Refer to Part II, Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” for a list of risks and factors that could adversely impact our investments results.

Net Corporate and Other Expenses

Net corporate and other expenses include services expenses as well as costs associated with operating as a publicly-traded company and non-underwriting activities. In addition, for the year ended December 31, 2021, net corporate and other expenses include costs related to the acquisition of Sirius Group, expected credit losses from the Company’s insurance and reinsurance balances receivable and loss and loss adjustment expenses recoverable, and a gain from the sale of Cedar Insurance Company (“Cedar”).

The increase in net corporate and other expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to an increase in services expenses, professional and advisory fees and compensation-related expenses associated with the acquisition of Sirius Group, expected credit losses from the Company’s insurance and reinsurance balances receivable and loss and loss adjustment expenses recoverable, and expenses from the legacy Sirius Group companies from the date of acquisition.

For the year ended December 31, 2021, we recorded $58.8 million (2020 - $16.7 million) of corporate expenses associated with the acquisition of Sirius Group, comprised of $29.7 million of professional and advisory fees and $29.1 million of compensation-related expenses.

For the year ended December 31, 2021, we recorded $120.5 million of services expenses (2020 - $1.0 million). The increase in the year ended December 31, 2021 was primarily due to services expenses from IMG and Armada from the legacy Sirius Group companies from the date of acquisition, and full year Arcadian expenses.

For the year ended December 31, 2021, we recorded current expected credit losses (“CECL”) of $21.0 million (2020 - $0.6 million). The increase in CECL for the year ended December 31, 2021 was primarily a result of the acquisition of Sirius Group. We recorded an expense to re-establish the acquired company’s current expected credit losses provision. See Note 15 “Allowance for expected credit losses” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information on the credit loss methodology.

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For the year ended December 31, 2021, we recognized a $5.8 million gain from the sale of Cedar to Grandview Risk Holdings Ltd. See Note 4 “Significant transactions” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information on the sale of Cedar.

Amortization of Intangible Assets

The amortization of intangible assets for the year ended December 31, 2021 was due to intangible assets recognized as a result of the Sirius Group acquisition. See Note 3 “Acquisition of Sirius Group” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information on the intangible assets recognized as a result of the Sirius Group acquisition.

Interest Expense

In February 2015, Third Point Re (USA) Holdings, Inc. issued $115.0 million of senior notes bearing 7.0% interest. In November 2016, Sirius Group issued $400.0 million of senior notes bearing 4.6% interest and in September 2017, Sirius Group issued SEK 2,750.0 million floating rate callable subordinated notes. As a result, our consolidated results of operations include interest expense related to the senior and subordinated notes.

The increase in interest expense for the year ended December 31, 2021 was due to $25.9 million of interest expense from the senior notes and the SEK subordinated notes, from the legacy Sirius Group companies from the date of acquisition.

Foreign Currency Translation

Except for the Canadian reinsurance operations of SiriusPoint America, the U.S. dollar is the functional currency for SiriusPoint’s business. Assets and liabilities are converted into the functional currency using current exchange rates; revenues and expenses are converted into the functional currency using the average exchange rate for the period. The conversion process results in foreign exchange gains (losses) in the consolidated results of operations.

The foreign exchange gains of $44.0 million for the year ended December 31, 2021 were primarily due to the Company’s international operations and from the foreign currency effects of the SEK subordinated notes.

The foreign exchange losses of $5.2 million for the year ended December 31, 2020 were primarily due to the revaluation of foreign currency loss and loss adjustment expense reserves denominated in British pounds to the United States dollar, which weakened in the current year period.

Income Tax (Expense) Benefit

The income tax benefit of $10.7 million for the year ended December 31, 2021 compared to the income tax expense of $8.1 million for the year ended December 31, 2020, was primarily driven by the release of the valuation allowance against Swedish foreign tax credits.

As a result of the acquisition of Sirius Group, the Company has subsidiaries and branches that operate in various other jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The jurisdictions in which the Company's subsidiaries and branches are subject to tax are Australia, Belgium, Canada, Germany, Hong Kong (China), Ireland, Luxembourg, Malaysia, Singapore, Sweden, Switzerland, the United Kingdom and the United States.

Segment Results — Years ended December 31, 2021, 2020 and 2019

The determination of our reportable segments is based on the manner in which management monitors the performance of our operations. In 2021, we began classifying our business into two reportable segments - Reinsurance and Insurance & Services. Collectively, the sum of these two segments constitute “Core” results.

In addition, the results of all runoff business, including those that have asbestos and environmental (A&E) exposures, certain reinsurance contracts that have interest crediting features and the Compre LPT are included in Corporate.

Effective January 1, 2021, the Company changed its accounting policy for assumed written premiums. Previously, the Company estimated ultimate premium written for the entire contract period and recorded this estimate at inception of the contract. The Company changed its accounting policy to recognize premiums written ratably over the term of the related policy or reinsurance treaty. The change in accounting policy had no impact on the previously reported net income (loss) or shareholders’ equity attributable to SiriusPoint common shareholders. See Note 2 “Significant accounting policies” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information.

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The following table sets forth the operating segment results, and the year over year changes, for the years ended December 31, 2021, 2020 and 2019:

(1)Underwriting ratios are calculated by dividing the related expense by net premiums earned.

(2)Insurance & Services MGAs recognize fees for service using revenue from contracts with customers accounting standards, whereas insurance companies recognize acquisition expenses using insurance contract accounting standards. While ultimate revenues and expenses recognized will match, there will be recognition timing differences based on the different accounting standards.

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(1)Underwriting ratios are calculated by dividing the related expense by net premiums earned.

(2)Insurance & Services MGAs recognize fees for service using revenue from contracts with customers accounting standards, whereas insurance companies recognize acquisition expenses using insurance contract accounting standards. While ultimate revenues and expenses recognized will match, there will be recognition timing differences based on the different accounting standards.

(1)Underwriting ratios are calculated by dividing the related expense by net premiums earned.

(2)There were no Insurance & Services MGAs during the year ended December 31, 2019.

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We measure segment performance as Core income, which is comprised of two components, underwriting income and net services income. Core segment income is the combined total for the Company’s two segments, Reinsurance and Insurance & Services.

Premium Volume

Gross premiums written

Core gross premiums written increased by $1,688.7 million, or 301.8%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by an increase in gross premiums written of $1,549.6 million as a result of new premiums from the legacy Sirius Group companies from the date of acquisition.

Core gross premiums written decreased by $21.2 million, or 3.6%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to certain contracts that we did not renew, including certain contracts which no longer fit our underwriting criteria as a result of our shift in underwriting strategy. This decrease was partially offset by new contracts bound in the current year.

Net premiums written

Core net premiums written increased by $1,264.4 million, or 246.3%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by an increase in net premiums written of $1,171.4 million as a result of new premiums from the legacy Sirius Group companies from the date of acquisition.

Core net premiums written decreased by $56.1 million, or 9.9%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to certain contracts that we did not renew, including certain contracts which no longer fit our underwriting criteria as a result of our shift in underwriting strategy. The decrease was also due to an increase in gross premiums ceded in the year ended December 31, 2020, primarily due to one fronted reinsurance treaty, a small number of property catastrophe retro purchases for the purposes of portfolio management and gross premiums ceded of $9.5 million relating to Arcadian.

Net premiums earned

Core net premiums earned increased by $1,151.0 million, or 197.5%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by an increase in net premiums earned of $1,207.3 million as a result of new premiums from the legacy Sirius Group companies from the date of acquisition.

Core net premiums earned decreased by $28.8 million, or 4.7%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to a lower in-force underwriting portfolio.

Underwriting results

Year ended December 31, 2021 and 2020

We generated a Core underwriting loss of $173.6 million and a Core combined ratio of 110.0% for the year ended December 31, 2021, compared to a Core underwriting loss of $68.7 million and a Core combined ratio of 111.9% for the year ended December 31, 2020. The change in underwriting results was primarily driven by the Reinsurance segment as a result of catastrophe losses from the European floods and Hurricane Ida and the increase in underwriting activity as a result of the acquisition of Sirius Group, partially offset by net favorable prior year loss reserve development.

Core catastrophe losses, net of reinsurance and reinstatement premiums, for the year ended December 31, 2021 were $326.0 million, or 18.8 percentage points on the Core combined ratio, including $133 million for the European floods and $97 million for Hurricane Ida, based on our ground-up assessment of client exposed business to each event and a top-down estimate, based on industry loss for each event and an estimate of our market share, and also includes $41 million from June windstorms and winter storm Uri. Core catastrophe losses, net of reinsurance and reinstatement premiums, for the year ended December 31, 2020 were $36.6 million, or 6.3 percentage points on the Core combined ratio, related to Hurricane Laura and other 2020 catastrophe events.

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Core net favorable prior year loss reserve development was $32.1 million for the year ended December 31, 2021. The change from the prior period was driven by:

•$18.6 million of net favorable prior year reserve development in the Reinsurance segment as a result of better than expected loss reserve emergence on historical property events relating to multiple accident years and better than expected attritional loss experience; and

•$13.5 million of net favorable prior year reserve development in the Insurance & Services segment as a result of better than expected loss experience in A&H for recent accident years.

The change in Core underwriting loss for the year ended December 31, 2020 for prior period loss reserve development and adjustments to premium earnings estimates, after the impact of any offsetting changes in acquisition costs, resulted in a $33.7 million increase in Core underwriting loss. The adverse underwriting loss development for the year ended December 31, 2020 was a result of accumulated loss experience and cedent reserving increases, indicating that underlying casualty loss trends were higher than initial pricing and reserving.

Core COVID-19 losses for the year ended December 31, 2021 were $9.6 million compared to $46.7 million for the year ended December 31, 2020, from the earn in of losses on unearned premium converting to earned premium in our Reinsurance segment, while our ultimate loss incurred estimates remained unchanged.

Year ended December 31, 2020 and 2019

We generated a Core underwriting loss of $68.7 million and a Core combined ratio of 111.9% for the year ended December 31, 2020, compared to a Core underwriting loss of $26.4 million and a Core combined ratio of 104.4% for the year ended December 31, 2019. The increase in Core underwriting loss was primarily due to the global outbreak of the COVID-19 pandemic, prior year adverse development and higher catastrophe losses.

For the year ended December 31, 2020, we incurred Core catastrophe losses of $36.6 million, net of reinstatement premiums and profit commission adjustments, or 6.3 percentage points on the Core combined ratio, primarily related to Hurricane Laura and other 2020 catastrophe events, compared to $29.0 million, net of reinstatement premiums and profit commission adjustments, in the year ended December 31, 2019, or 4.7 percentage points on the Core combined ratio, related to Hurricane Dorian, Typhoons Faxai and Hagibis and other 2019 catastrophe events.

The change in Core underwriting loss for the year ended December 31, 2020 for prior period loss reserve development and adjustments to premium earnings estimates, after the impact of any offsetting changes in acquisition costs, resulted in a $33.7 million increase in Core underwriting loss, compared to a minimal increase in the Core underwriting results for the year ended December 31, 2019.

Core COVID-19 losses for the year ended December 31, 2020 were $46.7 million, net of additional premiums, or 8.0 percentage points on the Core combined ratio. These losses were driven primarily by event cancellation, property business interruption, and certain casualty and multi-line quota share contracts.

Services Results

Year ended December 31, 2021 and 2020

Core services revenue was $133.7 million for the year ended December 31, 2021 compared to $1.7 million for the year ended December 31, 2020. The increase was primarily a result of services revenue from IMG and Armada from the date of acquisition of Sirius Group.

We generated Core net services income of $11.0 million for the year ended December 31, 2021 compared to $0.4 million for the year ended December 31, 2020 primarily due to net services income from IMG and Armada from the date of acquisition of Sirius Group.

Year ended December 31, 2020 and 2019

Core services revenue was $1.7 million for the year ended December 31, 2020 compared to $nil for the year ended December 31, 2019 as a result of services revenue from our Bermuda incorporated MGA, Arcadian, in which we invest capital and expertise. Arcadian commenced operations on October 1, 2020. There were no MGAs in the year ended December 31, 2019.

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We generated Core net services income of $0.4 million for the year ended December 31, 2020 compared to $nil for the year ended December 31, 2019 due to our newly formed MGA, Arcadian.

Reinsurance Segment

Reinsurance consists of our underwriting lines of business which offer Aviation & Space, Casualty, Contingency, Credit & Bond, Marine & Energy, Mortgage, and Property on a worldwide basis. The following table sets forth underwriting results and ratios, and the period over period changes for the Reinsurance segment:

(1)    Underwriting ratios are calculated by dividing the related expense by net premiums earned.

Premium Volume

Gross premiums written in the Reinsurance segment increased by $816.3 million, or 152.8%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by an increase in premiums of $928.7 million as a result of new premiums from the legacy Sirius Group companies from the date of acquisition. Excluding the premiums from the Sirius Group legacy companies, the decrease in gross premiums written was due to a reduction in property catastrophe excess reinsurance premiums to reduce catastrophic risk exposures in anticipation of the Sirius Group acquisition.

Gross premiums written in the Reinsurance segment decreased by $41.2 million, or 7.2%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to one multi-line contract for $96.3 million which no longer fit our underwriting criteria following our shift in underwriting strategy, which we did not renew in the year ended December 31, 2020, partially offset by new property business of $56.0 million.

Underwriting Results

Year ended December 31, 2021 and 2020

The Reinsurance segment generated an underwriting loss of $196.9 million and a combined ratio of 116.3% for the year ended December 31, 2021, compared to an underwriting loss of $68.3 million and a combined ratio of 111.9% for the year ended December 31, 2020. The change in underwriting results for the year ended December 31, 2021, compared to the year ended December 31, 2020, was primarily driven by increased catastrophe losses from the European floods and Hurricane Ida and the increase in underwriting activity as a result of the acquisition of Sirius Group, partially offset by net favorable prior year loss reserve development and lower COVID-19 losses.

Catastrophe losses, net of reinsurance and reinstatement premiums, for the year ended December 31, 2021 in the Reinsurance segment were $324.5 million, including $133 million for the European floods and $95 million for Hurricane Ida, based on our ground-up assessment of client exposed business to each event and a top-down estimate, based on industry loss for each event and an estimate of our market share, and also includes $41 million from June windstorms and winter storm Uri. Catastrophe losses, net of reinsurance and reinstatement premiums, for the year ended December 31, 2020 in the Reinsurance segment were $36.6 million related to Hurricane Laura and other 2020 catastrophe events.

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COVID-19 losses, net of reinsurance and reinstatement premiums, for the year ended December 31, 2021 in the Reinsurance segment were $1.1 million compared to $46.7 million for the year ended December 31, 2020, from the earn in of losses on unearned premium converting to earned premium.

Net favorable prior year loss reserve development was $18.6 million in the Reinsurance segment for the year ended December 31, 2021 as a result of better than expected loss reserve emergence on historical property events relating to multiple accident years and better than expected attritional loss experience.

Net adverse prior year loss reserve development was $37.7 million in the Reinsurance segment for the year ended December 31, 2020 for prior period loss reserve development and adjustments to premium earnings estimates, after the impact of any offsetting changes in acquisition costs. The adverse underwriting loss development for the year ended December 31, 2020 was a result of accumulated loss experience and cedent reserving increases, indicating that underlying casualty loss trends were higher than initial pricing and reserving.

Year ended December 31, 2020 and 2019

The Reinsurance segment generated an underwriting loss of $68.3 million and a combined ratio of 111.9% for the year ended December 31, 2020, compared to an underwriting loss of $26.6 million and a combined ratio of 104.4% for the year ended December 31, 2019. The increase in underwriting loss in the year ended December 31, 2020 was primarily due to $37.7 million of prior year net adverse underwriting loss development relating to certain casualty reserves in response to our accumulated loss experience and the broader industry trends of social inflation, in addition to COVID-19 losses of $46.7 million. COVID-19 losses were driven primarily by event cancellation, property business interruption, and certain casualty and multi-line quota share contracts.

Catastrophe losses, net of reinsurance and reinstatement premiums, for the year ended December 31, 2020 in the Reinsurance segment were $36.6 million primarily related to Hurricane Laura and other 2020 catastrophe events, compared to $29.0 million in the year ended December 31, 2019 related to Hurricane Dorian, Typhoons Faxai and Hagibis and other 2019 catastrophe events.

Insurance & Services Segment

Insurance & Services offers a comprehensive set of services for startup MGAs and insurance services companies including fronting services, risk capital and equity and debt financing. Furthermore, we offer expertise in underwriting, pricing and product development to businesses with whom we partner. The Insurance & Services segment predominantly provides insurance coverage in addition to receiving fees for services provided within Insurance & Services and to third parties. The Insurance & Services segment provides coverage in the following product lines: A&H, Environmental, Workers' Compensation, and other lines of business including a cross section of property and casualty lines.

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The following table sets forth underwriting results, net MGA results, and ratios for the segment results, and the year over year changes, for the years ended December 31, 2021, 2020 and 2019:

(1)    Underwriting ratios are calculated by dividing the related expense by net premiums earned.

Premium Volume

Gross premiums written in the Insurance & Services segment increased by $872.4 million for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by an increase in premiums of $620.8 million as a result of new premiums from the legacy Sirius Group companies from the date of acquisition, and due to an increase in premium written of $183.4 million from Arcadian.

Gross premiums written in the Insurance & Services segment increased by $20.0 million for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily due to new casualty premium written of $19.0 million in the period from Arcadian.

Underwriting Results

Year ended December 31, 2021 and 2020

The Insurance & Services segment generated underwriting income of $23.3 million and a combined ratio of 95.5% for the year ended December 31, 2021, compared to an underwriting loss of $0.4 million and a combined ratio of 105.6% for the year ended December 31, 2020. The change in underwriting results for the year ended December 31, 2021, compared to the year ended December 31, 2020, was primarily driven by underwriting income from the legacy Sirius Group companies from the date of acquisition. A&H continues to benefit from favorable loss ratio trends in its healthcare products due to the recognition of lower healthcare utilization rates that we attribute to the COVID-19 pandemic.

Net favorable prior year loss reserve development was $13.5 million for the year ended December 31, 2021, compared to minimal adverse prior year loss reserve development for the year ended December 31, 2020. The change from the prior period was a result of better than expected loss experience in A&H for recent accident years.

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Year ended December 31, 2020 and 2019

The Insurance & Services segment generated an underwriting loss of $0.4 million and a combined ratio of 105.6% for the year ended December 31, 2020, compared to underwriting income of $0.2 million and a combined ratio of 95.8% for the year ended December 31, 2019.

Services Results

Year ended December 31, 2021 and 2020

Services revenue was $133.7 million for the year ended December 31, 2021 compared to $1.7 million for the year ended December 31, 2020. The increase was primarily a result of services revenue from IMG and Armada from the date of acquisition of Sirius Group.

We generated net services income of $10.7 million for the year ended December 31, 2021 compared to $0.4 million for the year ended December 31, 2020 primarily due to net services income from IMG and Armada from the date of acquisition of Sirius Group.

Year ended December 31, 2020 and 2019

Services revenue was $1.7 million for the year ended December 31, 2020 compared to $nil for the year ended December 31, 2019 as a result of services revenue from Arcadian. Arcadian commenced operations on October 1, 2020. There were no MGAs in the year ended December 31, 2019.

We generated net services income of $0.4 million for the year ended December 31, 2020 compared to $nil for the year ended December 31, 2019 due to our newly formed MGA, Arcadian.

Corporate

Corporate includes the results of all runoff business, which represent certain classes of business that we no longer actively underwrite, including those that have A&E and other latent liability exposures and certain reinsurance contracts that have interest crediting features. Corporate also includes the results from the Compre LPT for the year ended December 31, 2021. The following table sets forth underwriting results and the year over year changes for the years ended December 31, 2021, 2020 and 2019:

Premium Volume

Gross premiums written in Corporate decreased by $40.7 million, or 140.8%, for the year ended December 31, 2021 compared to the year ended December 31, 2020, primarily driven by reduction of $30.0 million from the impact of restructuring one retroactive reinsurance contract that was previously written and fully earned. The decrease in net premiums earned from the reduction in retroactive exposures in this reinsurance contract was offset by a similar decrease in loss and loss adjustment expenses incurred and acquisition costs

Gross premiums written in Corporate decreased by $58.7 million, or 67.0%, for the year ended December 31, 2020 compared to the year ended December 31, 2019, primarily driven by retroactive exposures in reinsurance contracts that were written and fully earned of $28.9 million compared to $87.6 million for the year ended December 31, 2019.

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Underwriting Results

Year ended December 31, 2021 and 2020

Corporate generated an underwriting loss of $52.7 million for the year ended December 31, 2021, compared to an underwriting loss of $3.1 million for the year ended December 31, 2020. We recognized a net charge of $23 million, including $4 million of federal excise tax expense, in the fourth quarter of 2021 relating to the Compre LPT. In addition, for the year ended December 31, 2021, other underwriting expenses include expenses associated with the Compre LPT and $5.1 million of accelerated expenses related to interest crediting features in certain reinsurance contracts.

Net favorable prior year loss reserve development was $10.5 million for the year ended December 31, 2021, compared to $4.0 million net favorable prior year loss reserve development for the year ended December 31, 2020. The change from the prior period was a result of better than expected loss experience on property and contingency classes of business moved to runoff in 2021.

Year ended December 31, 2020 and 2019

Corporate generated an underwriting loss of $3.1 million for the year ended December 31, 2020, compared to an underwriting loss of $6.8 million for the year ended December 31, 2019.

Non-GAAP Financial Measures

We have included certain financial measures that are not calculated under standards or rules that comprise U.S. GAAP. Such measures, including core underwriting income, core net services income, core income, core combined ratio, basic book value per share, tangible basic book value per share, diluted book value per share and tangible diluted book value per share, are referred to as non-GAAP financial measures. These non-GAAP financial measures may be defined or calculated differently by other companies. We believe these measures allow for a more complete understanding of our underlying business. These measures are used by management to monitor our results and should not be viewed as a substitute for those determined in accordance with U.S. GAAP. Reconciliations of non-GAAP measures to the most comparable U.S. GAAP measures are included below.

Core Results

Collectively, the sum of the Company's two segments, Reinsurance and Insurance & Services, constitute "Core" results. Core underwriting income, Core net services income, Core income and Core combined ratio are non-GAAP financial measures. We believe it is important to review Core results as it better reflects how management views the business and reflects our decision to exit the runoff business. The sum of Core results and Corporate results are equal to the consolidated results of operations.

Core underwriting income - calculated by subtracting loss and loss adjustment expenses incurred, net, acquisition costs, net, and other underwriting expenses from net premiums earned.

Core net services income - consists of services revenues which include commissions, brokerage and fee income related to consolidated MGAs, and other revenues, services expenses which include direct expenses related to consolidated MGAs, services non-controlling income which represent minority ownership interests in consolidated MGAs, and net investment gains from Strategic Investments at fair value which are net investment gains/losses from investment in our strategic partners. Net services income is a key indicator of the profitability of the Company's services provided, including investment returns on non-consolidated investment positions held.

Core income - consists of two components, core underwriting income and core net services income. Core income is a key measure of our segment performance.

Core combined ratio - calculated by dividing the sum of Core loss and loss adjustment expenses incurred, net, acquisition costs, net and other underwriting expenses by Core net premiums earned. This ratio is a key indicator of our underwriting profitability.

See Note 5 “Segment reporting” to our audited consolidated financial statements for additional information and a calculation of Core income (loss).

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Basic Book Value Per Share, Tangible Basic Book Value Per Share, Diluted Book Value Per Share, Tangible Diluted Book Value Per Share

In the year ended December 31, 2021, we changed the method for calculating the dilutive effect of restricted shares, restricted share units and options to calculate the dilutive impact in a manner similar to how dilution is calculated using the treasury stock method for earnings per share. This change had no impact on previously presented basic book value per share. The following table shows the revised diluted book value per share compared to the diluted book value per share as previously presented:

Basic book value per share, as presented, is a non-GAAP financial measure and is calculated by dividing common shareholders’ equity attributable to SiriusPoint common shareholders by the number of common shares outstanding, excluding the total number of issued unvested restricted shares, at period end. While restricted shares are outstanding, they are excluded from Basic book value per share because they are unvested.

Tangible basic book value per share, as presented, is a non-GAAP financial measure and is calculated by dividing tangible common shareholders’ equity attributable to SiriusPoint common shareholders by the number of common shares outstanding, excluding the total number of unvested restricted shares, at period end. Management believes that effects of intangible assets are not indicative of underlying underwriting results or trends and make book value comparisons to less acquisitive peer companies less meaningful. The Company's management believes tangible book value per share is useful to investors because it provides a more accurate measure of the realizable value of shareholder returns, excluding the impact of intangible assets.

Diluted book value per share and tangible diluted book value per share, as presented, are non-GAAP financial measures and are calculated similar to the treasury stock method. Under the treasury stock method, we assume that proceeds received from in-the-money options and/or warrants exercised are used to repurchase common shares in the market. The dilutive effect of restricted shares, restricted share units and options are calculated in a manner consistent with how dilution is calculated using the treasury stock method for earnings per share. We have also followed a similar approach for calculating dilution for warrants, Series A preference shares, Upside Rights and other potentially dilutive securities issued as part of our acquisition of Sirius Group. Management believes these measures are useful to investors because they measure the realizable value of shareholder returns in a manner consistent with how dilution is calculated using the treasury stock method for earnings per share. Management believes that effects of intangible assets are not indicative of underlying underwriting results or trends and make book value comparisons to less acquisitive peer companies less meaningful. Also, the tangible diluted book value per share is useful because it provides a more accurate measure of the realizable value of shareholder returns, excluding intangible assets.

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The following table sets forth the computation of basic book value per share, tangible basic book value per share, diluted book value per share and tangible diluted book value per share as of December 31, 2021 and 2020:

(1)As of December 31, 2021 there was no dilution as the conversion would result in the forfeiture of all of the Series A preference shares.

(2)As of December 31, 2021 and 2020, there was no dilution as a result of the Company’s share price being under the lowest exercise price for warrants.

Liquidity and Capital Resources

Impact of Sirius Acquisition on Liquidity and Capital Resources

On February 26, 2021, we completed the acquisition of Sirius Group. We believe that our operating subsidiaries, following the acquisition of Sirius Group, have adequate capital resources in the aggregate, and the ability to produce sufficient cash flows to meet expected claims payments and operational expenses, including but not limited to interest payments, for the next twelve months from cash flows generated from operating activities and investment income. We may incur additional indebtedness in the future if we determine that it would be an efficient part of our capital structure.

Liquidity Requirements

Liquidity is a measure of a company’s ability to generate cash flows sufficient to meet short-term and long-term cash requirements of its business operations. SiriusPoint’s insurance and reinsurance operations are subject to regulation and supervision in each of the jurisdictions where they are domiciled and licensed to conduct business. Generally, regulatory authorities have broad supervisory and administrative powers over such matters as licenses, standards of solvency, premium rates, policy forms, investments, security deposits, methods of accounting, form and content of financial statements, reserves for unpaid loss and loss adjustment expenses, reinsurance, minimum capital and surplus requirements, dividends and other distributions to shareholders, periodic examinations and annual and other report filings. In general, such regulation is for the protection of policyholders rather than shareholders. SiriusPoint manages its liquidity needs primarily through the maintenance of a short duration and high quality fixed income portfolio.

SiriusPoint is a holding company and has no substantial operations of its own and its assets consist primarily of its investments in subsidiaries. Its cash needs primarily consist of the payment of corporate expenses, interest payments on senior and subordinated notes, strategic investment opportunities and dividends to preference shareholders. SiriusPoint may

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also require cash to fund share repurchases. Cash at the subsidiaries is used primarily to pay loss and loss adjustment expenses, reinsurance premiums, acquisition costs, interest expense, taxes, general and administrative expenses and to purchase investments. The insurance and reinsurance business of our operating subsidiaries inherently provide liquidity, as premiums are received in advance of the time losses are paid. However, the amount of cash required to fund loss payments can fluctuate significantly from period to period, due to the low frequency/high severity nature of certain types of business we write.

To date, the COVID-19 pandemic has not materially impacted our ability to meet liquidity, regulatory capital requirements or other contractual commitments.

Dividend Capacity

SiriusPoint’s ability to pay expenses or dividends or return capital to shareholders will depend upon the availability of dividends or other statutorily permissible distributions from its subsidiaries. The ability to pay such dividends and/or distributions is limited by the applicable laws and regulations of the various countries and states in which SiriusPoint’s subsidiaries operate, as well as the need to maintain capital levels to adequately support insurance and reinsurance operations, and to preserve financial strength ratings issued by independent rating agencies. See Note 23 “Statutory requirements” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information. For the year ended December 31, 2021, SiriusPoint received $74.0 million (2020 - $135.2 million) of distributions from SiriusPoint Bermuda Insurance Company Ltd. (“SiriusPoint Bermuda”), its immediate wholly-owned subsidiary. We believe the dividend/distribution capacity of SiriusPoint’s subsidiaries, which was approximately $844.4 million as of December 31, 2021, will provide SiriusPoint with sufficient liquidity for the foreseeable future.

In addition to the regulatory and other contractual constraints to paying dividends, we manage the capital of the group and each of our operating subsidiaries to support our current ratings from AM Best, Fitch and S&P’s. This could further reduce the ability and amount of dividends that could be paid from subsidiaries to SiriusPoint.

For the year ended December 31, 2021, SiriusPoint did not pay any dividends to its common shareholders.

Sources of Liquidity

Our operating subsidiaries sources of liquidity have primarily consisted of net premiums written, reinsurance recoveries, investment income and proceeds from sales of or dividends or distributions attributable to investments.

We believe the liquidity profile of the net investments underlying the TP Enhanced Fund, the Company’s rights under the Third Amended and Restated Exempted Limited Partnership Agreement among SiriusPoint and SiriusPoint Bermuda effective February 26, 2021 (the “2020 LPA”) to withdraw from the TP Enhanced Fund and the operating cash on hand will provide us with sufficient liquidity to manage our operations. TP Enhanced Fund’s investment portfolio is concentrated in tradable securities and is marked to market each day. Pursuant to the investment guidelines as specified in the 2020 LPA, at least 60% of our portfolio must be invested in securities of publicly traded companies and governments of Organization of Economic Co-operation and Development high income countries, asset-backed securities, cash, cash equivalents and gold and other precious metals. Under the 2020 LPA, the Company has the right to withdraw funds monthly from TP Enhanced Fund to meet capital adequacy requirements and to satisfy financing obligations. The Company may also withdraw its investment upon the occurrence of certain events specified in the 2020 LPA, including to meet capital adequacy requirements, to prevent a negative credit rating, for risk management purposes or to satisfy financing obligations, subject to certain limitations on such withdrawals as specified in the 2020 LPA, and may withdraw its investment in full on the first quarter end date after the 5-year anniversary of the closing date of the acquisition of Sirius Group (i.e. March 31, 2026) and each successive two-year anniversary of such date. The Company is also entitled to withdraw funds from the TP Enhanced Fund in order to satisfy its risk management guidelines, upon prior written notice to TP GP, in an amount not to exceed 20% of the sum of (x) the aggregate opening balances of our capital account and (y) the aggregate amount of capital contributions credited to our capital account.

Effective February 26, 2021, the Company entered into a 3-year, $300.0 million senior unsecured revolving credit facility (the “Facility”) with JPMorgan Chase Bank, N.A. as administrative agent. The Facility includes an option, subject to satisfaction of certain conditions including agreement of lenders representing greater than a majority of commitments, for the Company to request an extension by such lenders of the maturity date of the Facility by an additional 12 months. The Facility provides access to loans for working capital and general corporate purposes, and letters of credit to support obligations under insurance and reinsurance agreements, retrocessional agreements and for general corporate purposes. Loans and letters of credit under the Facility will become available, subject to customary conditions precedent. As of December 31, 2021, there

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were no outstanding borrowings under the Facility. In addition, as of December 31, 2021, SiriusPoint was in compliance with all of the covenants under the Facility.

Financing

We expect that our cash and cash equivalents on the balance sheet and cash flow from operations will provide us with the financial flexibility to execute our strategic objectives. Our ability to generate cash, however, is subject to our performance, general economic conditions, industry trends and other factors. To the extent cash and cash equivalents on the balance sheet, investment returns and cash flow from operations are insufficient to fund our future activities and requirements, we may need to raise additional funds through public or private equity or debt financing. If we issue equity securities in order to raise additional funds, substantial dilution to existing shareholders may occur. If we raise cash through the issuance of additional indebtedness, we may be subject to additional contractual restrictions on our business. There is no assurance that we would be able to raise the additional funds on favorable terms or at all.

Our debt and equity instruments as of December 31, 2021 and December 31, 2020 are summarized below.

2017 SEK Subordinated Notes

On September 22, 2017, Sirius Group, through Sirius International Group (“SIG”), issued floating rate callable subordinated notes denominated in SEK in the amount of SEK 2,750.0 million (or $346.1 million on date of issuance) at a 100% issue price ("2017 SEK Subordinated Notes"). The 2017 SEK Subordinated Notes were issued in an offering that was exempt from the registration requirements of the Securities Act of 1933 (the "Securities Act"). The 2017 SEK Subordinated Notes bear interest on their principal amount at a floating rate equal to the applicable Stockholm Interbank Offered Rate for the relevant interest period plus an applicable margin, payable quarterly in arrears on March 22, June 22, September 22, and December 22 in each year commencing on December 22, 2017, until maturity in September 2047. The 2017 SEK Subordinated Notes are listed on the Euronext Dublin exchange.

As a result of the Company’s merger with SIG, the Company acquired the existing and outstanding aggregate principal amount of the 2017 SEK Subordinated Notes pursuant to the First Supplemental Subordinated Indenture, dated May 27, 2021, among SIG, the Company and The Bank of New York Mellon, as trustee (the “Trustee”).

As of December 31, 2021, the carrying value of the 2017 SEK Subordinated Notes was $296.3 million and reflected as debt in the in the consolidated balance sheets.

See Note 16 “Debt and letter of credit facilities” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information.

2016 Senior Notes

On November 1, 2016, Sirius Group, through SIG, issued $400.0 million face value of senior unsecured notes ("2016 Senior Notes") at an issue price of 99.209% for net proceeds of $392.4 million after taking into effect both deferrable and non-deferrable issuance costs. The 2016 Senior Notes were issued in an offering that was exempt from the registration requirements of the Securities Act. The 2016 Senior Notes bear an annual interest rate of 4.6%, payable semi-annually in arrears on May 1, and November 1, in each year commencing on May 1, 2017, until maturity in November 2026. The 2016 Senior Notes are listed on the Bermuda Stock Exchange.

As a result of the Company’s merger with SIG, the Company acquired the existing and outstanding aggregate principal amount of the 2016 SIG Senior Notes pursuant to the Third Supplemental Senior Indenture, dated May 27, 2021, among SIG, the Company and the Trustee.

As of December 31, 2021, the carrying value of the 2016 Senior Notes was $406.0 million and reflected as debt in the consolidated balance sheets.

See Note 16 “Debt and letter of credit facilities” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information.

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2015 Senior Notes

On February 13, 2015, Third Point Re (USA) Holdings Inc., issued $115.0 million of senior unsecured notes (the “2015 Senior Notes”) due February 13, 2025. The 2015 Senior Notes bear interest at 7.0% and interest is payable semi-annually on February 13 and August 13 of each year.

As a result of the Company’s merger with Third Point Re (USA) Holdings Inc., the Company acquired the existing and outstanding aggregate principal amount of the 2015 Senior Notes pursuant to the Second Supplemental Indenture, dated December 31, 2021, among Third Point Re (USA) Holdings Inc., the Company and the Trustee.

As of December 31, 2021 and December 31, 2020, the carrying value of the 2015 Senior Notes was $114.4 million and $114.3 million, respectively, and reflected as debt in the in the consolidated balance sheets.

See Note 16 “Debt and letter of credit facilities” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information.

Series A Preference Shares

On February 26, 2021, certain holders of Sirius Group shares elected to receive Series A preference shares as consideration with respect to the Sirius Group acquisition. The Company issued 11,720,987 of designated Series A preference shares, with a par value of $0.10 per share. The Series A preference shares rank pari passu with the Company’s common shares with respect to the payment of dividends or distributions. Each Series A preference share has voting power equal to the number of Company shares into which it is convertible, and the Series A preference shares and Company shares vote together as a single class with respect to any and all matters.

As of December 31, 2021, the estimated fair value of the Series A preference shares was $20.4 million and is reflected in liability-classified capital instruments in the consolidated balance sheets. During the year ended December 31, 2021, the Company did not declare or pay dividends to Series A preference shareholders.

See Note 3 “Acquisition of Sirius Group” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information.

Series B Preference Shares

On February 26, 2021, the previous Sirius Group preference shareholders exchanged their existing Series B preference shares of Sirius Group in return for 8,000,000 new Series B preference shares, par value $0.10, of the Company. Dividends on the Series B preference shares will be cumulative and payable quarterly in arrears at an initial rate of 8.0%. The preference shareholders will have no voting rights with respect to the Series B preference shares unless dividends have not been paid for six dividend periods, whether or not consecutive, in which case the holders of the Series B preference shares will have the right to elect two directors.

On June 28, 2021 and August 12, 2021, the Company entered into Underwriting Agreements with the Series B preference shareholders (the “Selling Shareholders”) pursuant to which the Selling Shareholders sold to the public market an aggregate of 8,000,000 Series B preference shares. The Company did not receive any proceeds from the sale of the Series B preference shares by the Selling Shareholders. The transaction did not change the underlying conditions of the Series B preference shares. The Series B preference shares are listed on the New York Stock Exchange under the symbol “SPNT PB”.

As of December 31, 2021, the carrying value of the Series B preference shares was $200.0 million and reflected in shareholders’ equity attributable to SiriusPoint shareholders in the consolidated balance sheets. During the year ended December 31, 2021, the Company declared and paid dividends of $12.1 million to the Series B preference shareholders.

See Note 18 “Shareholders' equity” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information.

Debt Covenants

As of December 31, 2021, SiriusPoint was in compliance with all of the covenants under the 2017 SEK Subordinated Notes, the 2016 Senior Notes, and the 2015 Senior Notes.

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Letter of Credit Facilities

As of December 31, 2021, $1,117.0 million of letters of credit had been issued. Each of the facilities contain customary events of default and restrictive covenants, including but not limited to, limitations on liens on collateral, transactions with affiliates, mergers and sales of assets, as well as solvency and maintenance of certain minimum pledged equity requirements and a minimum rating from rating agencies. Each restricts issuance of any debt without the consent of the letter of credit provider. Additionally, if an event of default exists, in any of the letter of credit facilities, we could be prohibited from paying dividends. We were in compliance with all of the covenants under the aforementioned letters of credit facilities as of December 31, 2021.

See Note 16 “Debt and letter of credit facilities” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information.

Cash Secured Letter of Credit Agreements

Under the cash secured letter of credit facilities, we provide collateral that consists of cash and cash equivalents and debt securities. As of December 31, 2021, total cash and cash equivalents and debt securities with a fair value of $1,266.8 million were pledged as collateral against the letters of credit issued.

We believe that we have adequate capacity between our existing cash secured letter of credit agreements as well as available investments to post in reinsurance trusts to meet our collateral obligations under our existing and future reinsurance business.

For further details and discussion with respect to cash secured letter of credit agreements, see Note 16 “Debt and letter of credit facilities” in our audited consolidated financial statements included elsewhere in this Annual Report.

Cash, Restricted Cash and Cash Equivalents and Restricted Investments

Cash and cash equivalents consist of cash held in banks and other short-term, highly liquid investments with original maturity dates of ninety days or less. We invest a portion of the collateral securing certain reinsurance contracts in U.S. treasury securities and sovereign debt. This portion of the collateral is included in debt securities in the consolidated balance sheets and is disclosed as part of restricted investments. In addition, restricted investments also pertain to limited partnership interests in TP Enhanced Fund securing the Company’s contractual obligations under certain reinsurance contracts that the Company will not be released from until the underlying risks have expired or have been settled.

Restricted cash and cash equivalents and restricted investments increased by $781.3 million, or 61.3%, to $2,055.6 million as of December 31, 2021 from $1,274.3 million as of December 31, 2020. The increase was primarily due to an increase in the number of reinsurance contracts that required collateral as a result of the acquisition of Sirius Group.

For additional information on restricted cash, cash equivalents and investments, see Note 6 “Cash, cash equivalents, restricted cash and restricted investments” in our consolidated financial statements included elsewhere in this Annual Report.

Cash Flows

Our cash flows from operations generally represent the difference between: (l) premiums collected and investment income and (2) loss and loss expenses paid, reinsurance purchased, underwriting and other expenses paid. Cash flows from operations may differ substantially from net income (loss) and may be volatile from period to period depending on the underwriting opportunities available to us and other factors. Due to the nature of our underwriting portfolio, claim payments can be unpredictable and may need to be made within relatively short periods of time. Claim payments can also be required several months or years after premiums are collected. In addition, as discussed above, SiriusPoint has access to the $300.0 million Facility that provides access to loans for working capital and general corporate purposes, and letters of credit to support obligations under insurance and reinsurance agreements and retrocessional agreements.

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Operating, investing and financing cash flows for the years ended December 31, 2021 and 2020 were as follows:

Operating Activities

Cash flows provided by operating activities can fluctuate due to timing differences between the collection of premiums and reinsurance recoverables and the payment of losses and loss expenses, and the payment of premiums to reinsurers. The decrease in cash flows from operating activities in the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to payments of losses and loss expenses, partially offset by an increase in premiums received and due to transaction related payments for professional and advisory fees relating to the Sirius Group acquisition.

Investing Activities

Cash flows provided by investing activities for the year ended December 31, 2021 primarily relates to the acquisition of Sirius Group, which comprised of $740.3 million of cash and restricted cash acquired, partially offset by $108.4 million of cash consideration. Additionally, the Company redeemed $200.0 million of investments from its related party investment funds. Offsetting the cash provided by investments were purchases of fixed income investments which exceeded sales and maturities during the period. Cash flows provided by investing activities for the year ended December 31, 2020 primarily relates to investment activity from the opportunistic credit portfolio.

Financing Activities

Cash flows provided by financing activities for the year ended December 31, 2021 primarily consisted of cash receipts of $48.6 million from the issuance of SiriusPoint common shares pursuant to the equity commitment letter between the Company, Third Point Opportunities Master Fund Ltd. and Daniel S. Loeb in connection with closing of the acquisition of Sirius Group. Cash flows used in financing activities for the year ended December 31, 2020 primarily consisted of $20.2 million from payments on deposit liability contracts.

See Note 3 “Acquisition of Sirius Group” in our consolidated financial statements included in this Annual Report for a more detailed discussion on the Sirius Group acquisition.

Financial Condition

As of December 31, 2021, total shareholders’ equity was $2,503.3 million compared to $1,565.3 million as of December 31, 2020. The increase was primarily due to the acquisition of Sirius Group. See Note 3 “Acquisition of Sirius Group” in our audited consolidated financial statements included elsewhere in this Annual Report for a more detailed discussion on the Sirius Group acquisition.

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Contractual Obligations

Our contractual obligations requirements as of December 31, 2021 by estimated maturity are presented below:

(1)    See Note 16 to our audited consolidated financial statements included elsewhere in this Annual Report for detailed information on our debt obligations.

(2)    We have estimated the expected payout pattern of the loss and loss adjustment expense reserves by applying estimated payout patterns from actuarial analyses. The amount and timing of actual loss payments could differ materially from the estimated payouts in the table above. Refer to “Critical Policies and Accounting Estimates - Loss and Loss Adjustment Expense Reserves” for additional information. The timing of claim payments is subject to significant uncertainty. SiriusPoint maintains a portfolio of marketable investments with varying maturities and a substantial amount of short-term investments to provide adequate liquidity for the payment of claims. We have not taken into account corresponding reinsurance recoverable amounts that would be due to us.

(3)    See Note 19 to our audited consolidated financial statements included elsewhere in this Annual Report for further details describing the projected pension benefit obligation.

(4)    See Note 22 to our audited consolidated financial statements included elsewhere in this Annual Report for detailed information on our leases. The above table does not include future minimum rental commitments of one material lease that has not yet commenced as of December 31, 2021. The minimum rental commitment under this lease is approximately $11.4 million.

(5)    For purposes of this table, we have included estimates of future interest accruals and the amount we expect the deposit liability contracts would settle for at their probable settlement dates.

(6)    We have future binding commitments to fund certain other long-term investments. These commitments totaled $13.8 million as of December 31, 2021. These commitments do not have fixed funding dates. Therefore, these commitments are excluded from the table above.

(7)    The Series B preference shares contain both a mandatory conversion and optional redemption features, with the optional redemption features allowing for settlement in either common shares or cash. Obligations arising from these incentives are excluded from the table above.

Critical Accounting Policies and Estimates

See Note 2 “Significant accounting policies” in our audited consolidated financial statements included elsewhere in this Annual Report for a summary of our significant accounting and reporting policies.

Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions. We believe that the accounting policies that require the most significant judgments and estimations by management are: (1) premium revenue recognition, including evaluation of risk transfer, (2) loss and loss adjustment expense reserves, (3) fair value measurements related to our investments, (4) valuation of loss and adjustment expenses reserves and intangible assets relating to the Value of Business Acquired (“VOBA”) and other intangible assets as part of the Sirius Group acquisition, and (5) income taxes. If actual events differ significantly from the underlying judgments or estimates used by management in the application of these accounting policies, there could be a material adverse effect on our results of operations and financial condition.

Premium Revenue Recognition Including Evaluation of Risk Transfer

Premium Estimates

Effective January 1, 2021, the Company changed its accounting policy for assumed written premiums. Previously, the Company estimated ultimate premium written for the entire contract period and recorded this estimate at inception of the contract. For contracts where the full premium written was not estimable at inception, the Company recorded premium written for the portion of the contract period for which the amount was estimable.

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The Company changed its accounting policy to recognize premiums written ratably over the term of the related policy or reinsurance treaty consistent with the timing of when the ceding company has recognized the written premiums. Premiums written include amounts reported by brokers and ceding companies, supplemented by the Company's own estimates of premiums where reports have not been received. The determination of premium estimates requires a review of the Company's experience with the ceding companies, familiarity with each market, the timing of the reported information, an analysis and understanding of the characteristics of each class of business and management's judgment of the impact of various factors, including premium or loss trends, on the volume of business written and ceded to the Company. On an ongoing basis, the Company's underwriters review the amounts reported by these third parties for reasonableness based on their experience and knowledge of the subject class of business, taking into account the Company's historical experience with the brokers, ceding companies or MGAs. See Note 2 “Significant accounting policies” in our audited consolidated financial statements for additional information on premium revenue recognition and the retrospective impact from the change in accounting policy on the Company’s consolidated financial statements.

Changes in premium estimates are expected and may result in adjustments in any reporting period. These estimates change over time as additional information regarding the underlying business volume is obtained. Along with uncertainty regarding the underlying business volume, our contracts may also contain a number of contractual features that can significantly impact the amount of premium that we ultimately recognize including commutation provisions, multi-year contracts with cancellation provisions and provisions to return premium at the expiration of the contract in certain circumstances. In certain contracts, these provisions can be exercised by the client, in some cases provisions can be exercised by us and in other cases by mutual consent. We regularly monitor the premium estimates for each of our contracts considering the cash premiums received, reported premiums, discussions with our clients regarding their premium projections as well as evaluating the potential impact of contractual features. Any subsequent adjustments arising on such estimates are recorded in the period in which they are determined.

Changes in premium estimates may not result in a direct impact to net income or shareholders’ equity since changes in premium estimates do not necessarily impact the amount of net premiums earned at the time of the premium estimate change and would generally be offset by proportional changes in acquisition costs and net loss and loss adjustment expenses.

The following table summarize premium estimates and related commissions and expenses by segment as of December 31, 2021 and 2020:

Risk Transfer

Determining whether or not a reinsurance contract meets the condition for risk transfer requires judgment. The determination of risk transfer is critical to recognizing premiums written and is based, in part, on the use of actuarial pricing models and assumptions and evaluating contractual features that could impact the determination of whether a contract meets risk transfer. If we determine that a reinsurance contract does not transfer sufficient risk, we use deposit accounting.

Loss and Loss Adjustment Expense Reserves

Loss and Loss Adjustment Expense Reserves by Reportable Segment

The following table summarize net loss and loss adjustment expenses reserves separated between (i) case reserves for claims reported ("Case") and (ii) incurred but not reported ("IBNR") reserves for losses that have occurred but for which claims have not yet been reported and for expected future development on case reserves as of December 31, 2021 and 2020:

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(1)Excludes deferred charges on retroactive reinsurance contracts.

In order to reduce the potential uncertainty of loss reserve estimation, we obtain information from numerous sources to assist in the reserving process for both our reinsurance and primary business. Our underwriters and pricing actuaries devote considerable effort to understanding and analyzing a ceding company or MGA’s operations and loss history during the underwriting of the business, using a combination of client and industry statistics. Such statistics normally include historical premium and loss data by class of business, individual claim information for larger claims, distributions of insurance limits provided and the risk characteristics of the underlying insureds, loss reporting and payment patterns and rate change history. In cases where there is limited history or no history for a particular cedent, we rely on other available information based on industry data or other sources. Our analysis is used to project expected ultimate loss ratios for each contract or MGA during the upcoming contract period, which are considered in the loss reserving process.

We rely heavily on information reported by MGAs and ceding companies, as discussed above. In order to determine the accuracy and completeness of such information, our underwriters, actuaries, and claims personnel perform audits of certain MGAs and ceding companies, where customary. Generally, ceding company audits are not customary outside the United States. In such cases, we review information from ceding companies for unusual or unexpected results. Any material findings are discussed with the ceding companies. We sometimes encounter situations where it is determined that a claim presentation from a ceding company is not in accordance with contract terms. Most situations are resolved without the need for litigation or arbitration. However, in the infrequent situations where a resolution is not possible, SiriusPoint defends its position in such arbitration or litigation.

See Note 13 “Loss and loss adjustment expense reserves” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information regarding loss and loss adjustment expense reserves including reserving methodologies.

As part of our risk management process, we periodically engage external actuarial and claims consultants to independently evaluate the adequacy of the net carried loss and loss adjustment expense reserves. Management considers the results of the independent analysis as a supplement to internal recommendations when determining carried loss and loss adjustment expenses reserve amounts.

The following table details our prior year loss reserve development of liability for net unpaid claims and claim expenses for the years ended December 31, 2021 and 2020:

Loss and loss adjustment expense development - 2021

The $42.6 million net decrease in prior years’ reserves for the year ended December 31, 2021 was driven by:

•$18.6 million of net favorable prior year reserve development in the Reinsurance segment as a result of better than expected loss reserve emergence on historical property events relating to multiple accident years and better than expected attritional loss experience;

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•$13.5 million of net favorable prior year reserve development in the Insurance & Services segment as a result of better than expected loss experience in A&H for recent accident years; and

•$10.5 million of net favorable prior year reserve development in Corporate as a result of better than expected loss experience on property and contingency classes moved to runoff in 2021.

Loss and loss adjustment expense development - 2020

The $33.8 million net increase in prior years’ reserves for the year ended December 31, 2020 includes $18.8 million increase in loss reserves resulting from increases in premium earnings estimates on certain contracts and $15.0 million of net adverse reserve development related to increases in loss reserve estimates. In total, the change in net underwriting loss for prior periods due to loss reserve development and adjustments to premium earnings estimates, after the impact of any offsetting changes in acquisition costs as a result of sliding scale or profit commissions, resulted in a $30.5 million increase in the net underwriting loss for the year ended December 31, 2020. The adverse underwriting loss development was a result of accumulated loss experience and cedent reserving increases, indicating that underlying casualty loss trends were higher than initial pricing and reserving.

Sensitivity Analysis

Actual Results vs. Initial Estimates

Generally, initial actuarial estimates of IBNR reserves not related to a specific large event are based on the loss ratio method applied to each class of business. SiriusPoint regularly reviews the adequacy of its recorded reserves by using a variety of generally accepted actuarial methods, including historical incurred and paid loss development methods. Estimates of the initial expected ultimate losses involve management judgment and are based on historical information for that class of business, which includes loss ratios, market conditions, changes in pricing and conditions, underwriting changes, changes in claims emergence, and other factors that may influence expected ultimate losses. If actual loss activity differs substantially from expectations, an adjustment to recorded reserves may be warranted. As time passes, loss reserve estimates for a given year will rely more on actual loss activity and historical patterns than on initial assumptions.

For major events, particularly natural catastrophe, SiriusPoint develops assessments of the ultimate losses associated with each individual event. Estimates are based on information from ceding companies, third party and internal catastrophe models, and by applying overall estimates of insured industry losses to SiriusPoint's exposure information.

Changes in all estimates will be recorded in the period in which the changes occur. In accident years where the updated estimates are lower than our initial estimates, we experience favorable development. Conversely, in accident years where the revised estimates are higher than our original estimates, there is adverse development on prior accident year reserves.

Potential Variability in Loss Reserve Estimates

There are possible variations from current estimates of loss reserves due to changes in key assumptions. In order to quantify the potential volatility in the loss reserve estimates, SiriusPoint employs a stochastic simulation approach to produce a range of results around the central estimate and estimated probabilities of possible outcomes. Both the probabilities and the related modeling are subject to inherent uncertainties. The simulation relies on a significant number of assumptions, such as variation in historical loss development patterns and industry losses for major events, potential mis-estimation of the initial expected loss ratios during the pricing process, and unanticipated inflation.

Fair value measurements

Fair Value Hierarchy

Fair value measurements are categorized into a hierarchy that distinguishes between inputs based on market data from independent sources ("observable inputs") and a reporting entity's internal assumptions based upon the best information available when external market data is limited or unavailable ("unobservable inputs"). Quoted prices in active markets for identical assets or liabilities have the highest priority ("Level 1"), followed by observable inputs other than quoted prices, including prices for similar but not identical assets or liabilities ("Level 2"), and unobservable inputs, including the reporting entity's estimates of the assumptions that market participants would use, having the lowest priority ("Level 3").

The availability of observable inputs can vary from financial instrument to financial instrument and is affected by a wide variety factors including, for example, the type of financial instrument, whether the financial instrument is new and not yet

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established in the marketplace, and other characteristics particular to the instrument. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. See Note 7 “Fair value measurements” to our audited consolidated financial statements for additional information on the framework for measuring fair value established by U.S. GAAP disclosure requirements.

Strategic Investments

We value our Strategic Investments at fair value, except for those that are consolidated. The fair value of these Strategic Investments are valued quarterly based on a combination of observable and unobservable market data inputs and entity specific financial data.

As of December 31, 2021, the Company’s Strategic Investments totaled $215.3 million. See Note 7 “Fair value measurements” to our audited consolidated financial statements for additional information on the framework for measuring fair value established by U.S. GAAP disclosure requirements related to investments.

Investments measured using Net Asset Value

We value our investments in limited partnerships, including our investments in related party investment funds, at fair value. We have elected the practical expedient for fair value for these investments which is estimated based on our share of the NAV of the limited partnerships, as provided by the independent fund administrator, as we believe it represents the most meaningful measurement basis for the investment assets and liabilities. The NAV represents our proportionate interest in the members’ equity of the limited partnerships.

The fair value of our investments in certain hedge funds and certain private equity funds are also determined using NAV. The hedge fund's administrator provides quarterly updates of fair value in the form of our proportional interest in the underlying fund's NAV, which is deemed to approximate fair value, generally with a three month delay in valuation. The private equity funds provide quarterly or semi-annual partnership capital statements with a three month delay which are used as a basis for valuation. These private equity investments vary in investment strategies and are not actively traded in any open markets. Due to a lag in reporting, some of the fund managers, fund administrators, or both, are unable to provide final fund valuations as of the Company's reporting date. This includes utilizing preliminary estimates reported by its fund managers and using other information that is available with respect to the underlying investments, as necessary.

See Note 7 “Fair value measurements” to our audited consolidated financial statements for additional information on the framework for measuring fair value established by U.S. GAAP disclosure requirements related to investments measured using NAV.

Valuation of components of purchase consideration, loss and adjustment expenses reserves and intangible assets relating to VOBA and other intangible assets as part of the Sirius Group acquisition

Purchase consideration

As a part of the total consideration related to the acquisition of Sirius Group, the Company issued various financial instruments, including preference shares, warrants, and other contingent value components, as discussed further in Note 3 “Acquisition of Sirius Group”.

The majority of these instruments were valued utilizing model simulations that included assumptions around equity volatility and other market-based inputs. The Series B preference shares were valued by considering the results of three separate analyses: (i) a comparison to the observed market yields on similar publicly traded preferred shares of other insurance industry peers; (ii) a build-up method whereby an appropriate yield is based on a base level plus incremental amounts for relative risk and liquidity factors; and (iii) a comparison to the observed or implied yields of other securities in the SiriusPoint capital structure.

Loss and loss adjustment expense reserves

As a part of the acquisition of Sirius Group, we recognized an adjustment to the acquired loss and loss adjustment reserves of $80.6 million to reflect the fair value of the acquired reserves as of the acquisition date. The adjustment to loss reserves is included in loss and loss adjustment expense reserves in our consolidated balance sheets and is based on the present value of future payments plus a risk margin.

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Management applied judgment in estimating the fair value of loss reserves using historical loss payment patterns and risk margins. As of December 31, 2021, the unamortized fair value adjustment to loss reserves was $65.6 million. On an annual basis, or as other factors necessitate such as an assessment, we evaluate the fair value adjustment to loss reserves for impairment. As of December 31, 2021, there were no indicators of impairment.

VOBA

As part of the acquisition of Sirius Group, we recognized VOBA of $147.9 million. As of December 31, 2021, VOBA had a carrying value of $50.0 million and amortization of $97.9 million in the year ended December 31, 2021 was recorded in acquisition costs, net in the consolidated statements of net income. The VOBA related asset is included in deferred acquisition costs and value of business acquired, net on our consolidated balance sheet.

Management determined the fair value of the VOBA intangible asset by calculating the difference between the unearned premium reserve and estimated risk-adjusted future losses and expenses associated with the policies and contracts that were in-force as of the closing date of the acquisition, discounted to present value. Management applied judgment in estimating the VOBA intangible asset, which involved the use of significant assumptions related to the discount rate and expected profitability associated with the unearned premium reserve, which includes an associated risk margin.

VOBA is assessed for impairment on an annual basis or more frequently if events or changes in circumstances indicate that is more likely than not that an impairment exists. Such events or circumstances may include an economic downturn in a geographic market or a change in the assessment of future operations.

There was no evidence of potential impairment of the VOBA intangible asset as of December 31, 2021.

Intangible Assets

As part of the acquisition of Sirius Group, SiriusPoint recognized identifiable intangible assets. As of December 31, 2021, these identifiable intangible assets had a carrying value of $171.9 million and consisted of the following, and are included in intangible assets on the Company’s consolidated balance sheet:

•Distribution relationships - refers to the relationships Sirius Group has established with external independent distributors and brokers to facilitate the distribution of its products in the marketplace. As a result of owning the distribution relationships, management will not have to duplicate historical marketing, training, and start-up expenses to redevelop comparable relationships to support business operations. The fair value of the distribution relationships intangible asset was determined using a variation of the income approach. Management applied judgement in estimating the fair value of the distribution relationships intangible asset, which involved the use of assumptions related to the discount rate and customer attrition rate, as well as the expected revenue growth rates and profitability margins (which are used to determine the amount and timing of expected future cash flows);

•MGA relationships - refers to relationships with managing general agents on the direct insurance business. Through the MGA relationships, Sirius Group generates a predictable and recurring stream of service fee revenue. The fair value of the MGA relationships intangible asset was determined using a variation of the income approach, which involved the use of assumptions related to the discount rate and customer attrition rate, as well as the expected revenue growth rates and profitability margins;

•Lloyd’s Capacity - Syndicate 1945 - relates to relationships associated with the right to distribute and market policies underwritten through Lloyd’s Syndicate 1945. The Lloyd’s Capacity intangible asset was valued using the market comparable transaction method;

•Insurance licenses - Sirius Group, like other insurance providers, is required to maintain licenses to produce and service insurance contracts. Insurance licenses are estimated to have an indefinite life and are therefore not amortized, but are subject to periodic impairment testing. The insurance licenses were valued using the market comparable transaction method;

•Trade name - represents the value of the Sirius Group brand acquired. The trade names intangible asset was valued using the relief from royalty method; and

•Internally developed and used computer software - represents the value of internally developed and used computer software utilized by the Company.

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Intangible assets are assessed for impairment on an annual basis or more frequently if events or changes in circumstances indicate that is more likely than not that an impairment exists. Such events or circumstances may include an economic downturn in a geographic market or a change in the assessment of future operations.

There was no evidence of potential impairment of intangible assets as of December 31, 2021.

Income Taxes

Prior to the acquisition of Sirius Group on February 26, 2021, we had one operating subsidiary incorporated in Bermuda, Third Point Re USA, which made an election to pay tax in the United States of America under Section 953(d) of the U.S. Internal Revenue Code of 1986, as amended.

Subsequent to the acquisition of Sirius Group, we have subsidiaries and branches that operate in various other jurisdictions around the world that are subject to tax in the jurisdictions in which they operate. The jurisdictions in which our subsidiaries and branches are subject to tax are Australia, Belgium, Canada, Germany, Hong Kong (China), Ireland, Luxembourg, Malaysia, Singapore, Sweden, Switzerland, the United Kingdom, and the United States.

Recoverability of Net Deferred Tax Asset

We record a valuation allowance against deferred tax assets if it becomes more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in income tax expense in the period of change. In determining whether or not a valuation allowance, or change therein, is warranted, we consider factors such as prior earnings history, expected future earnings, carryback and carryforward periods and strategies that, if executed, would result in the realization of a deferred tax asset. It is possible that certain planning strategies or projected earnings in certain subsidiaries may not be feasible to utilize the entire deferred tax asset, which could result in material changes to the deferred tax assets and tax expense.

Uncertain Tax Positions

Recognition of the benefit of a given tax position is based upon whether a company determines that it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. In evaluating the more likely than not recognition threshold, we must presume that the tax position will be subject to examination by a taxing authority with full knowledge of all relevant information. If the recognition threshold is met, then the tax position is measured at the largest amount of benefit that is more than 50% likely of being realized upon ultimate settlement. As of December 31, 2021, the total reserve for unrecognized tax benefits of $10.7 million. With few exceptions, we are no longer subject to U.S. federal, state or non-U.S. income tax examinations by tax authorities for years before 2017.

Earnings of Certain Subsidiaries

SiriusPoint has capital and liquidity in many of its subsidiaries, some of which may reflect undistributed earnings. If such capital or liquidity were to be paid or distributed to us or our subsidiaries, as dividends or otherwise, they may be subject to income or withholding taxes. Sirius Group generally intends to operate, and manage its capital and liquidity, in a tax-efficient manner. However, the applicable tax laws in the relevant countries are subject to change, possibly with retroactive effect, including in response to Organisation for Economic Cooperation and Development ("OECD") guidance. Accordingly, such payments or earnings may be subject to income or withholding tax in jurisdictions where they are not currently taxed or at higher rates of tax than currently taxed, and the applicable tax authorities could also attempt to apply income or withholding tax to past earnings or payments.

See Note 17 “Income taxes” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information on income taxes.

Recent Accounting Pronouncements

See Note 2 “Significant accounting policies” in our audited consolidated financial statements included elsewhere in this Annual Report for additional information on recently issued accounting standards.

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