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Acquisition of Sirius Group
 12 Months Ended
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract]  
Acquisition of Sirius Group
3. Acquisition of Sirius Group
Overview
On February 26, 2021, the Company completed its acquisition of Sirius Group. Prior to the closing of the acquisition, Sirius Group was a publicly listed company and traded on the Nasdaq Global Select Market under the symbol “SG”. Sirius Group, through its wholly owned subsidiaries, provides multi-line insurance and reinsurance on a worldwide basis. The acquisition of Sirius Group is expected to benefit the Company through expanded underwriting capabilities, geographic footprint and product offerings.
Pursuant to the terms of the acquisition, each common share, par value $0.01 per share, of Sirius Group (each, a “Sirius Share”) that was issued and outstanding immediately prior to the closing date of the acquisition was canceled and converted into the right to receive one of the following three consideration options at the shareholder’s election:
•$9.50 in cash;
•a combination of common shares, par value $0.10 per share, of the Company (“Company shares”), and CVR consideration comprising (1) 0.743 of a Company share and (2) one contractual contingent value right (each, a “CVR”), which represents the right to receive a contingent cash payment, which, taken together with the fraction of
the Company share received, guarantee that on the second anniversary of the acquisition, the electing shareholder will have received equity and cash valued at least $13.73 per Sirius Share; should SiriusPoint shares trade at or above $18.50 over any 14 consecutive trading day period up to the second anniversary of the acquisition, the CVR component will be automatically extinguished (4.7 million CVRs were issued under this consideration option); or
•a combination of cash, Company shares, Series A preference shares, warrants and Upside Rights (a “Mixed Election”) comprising (1) $0.905 in cash, (2) 0.496 Company shares, (3) 0.106 Series A preference shares, par value $0.10 per share, of the Company (the “Series A preference shares”), (4) 0.190 of a warrant (each, a “Merger warrant”) and (5) $0.905 aggregate principal amount of an “upside right” issued by the Company (collectively, the “Upside Rights”). Pursuant to the Company Voting and Support Agreement, CM Bermuda Limited (“CM Bermuda”), whose parent company is CMIG International Holdings Pte. Ltd. (“CMIG International”), made the Mixed Election.
The aggregate consideration for the transaction included the issuance of 58,331,196 SiriusPoint common shares valued at $595.6 million and $100.4 million of cash. In addition to the SiriusPoint common shares and the cash, the aggregate consideration for the transaction also consisted of the issuance of preference shares, warrants, and other contingent value components, as discussed below. The cash consideration portion was funded from available cash resources and $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, pursuant to which Third Point Opportunities Master Fund Ltd. committed to purchase up to 9.5% of the Company’s shares in connection with closing of the acquisition of Sirius Group.
Series A Preference Shares
On February 26, 2021, certain holders of Sirius Group shares elected to receive Series A preference shares with respect to the consideration price of 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 shall vote together as a single class with respect to any and all matters.
During the year ended December 31, 2021, the Company did not declare or pay dividends to Series A preference shareholders.
Upon the third anniversary of the closing date of the Sirius Group acquisition, as described in the Series A Certificate of Designation and pursuant to the analysis of an independent actuarial team, the Company will calculate the total amount of Third Point Reinsurance Ltd.’s (“TPRE”) COVID-19 losses in excess of $51.1 million (the “TPRE Net COVID Loss”) and the total amount of Sirius Group’s COVID-19 losses in excess of $150.0 million (the “Sirius Net COVID Loss”). If TPRE’s COVID-19 losses are less than or equal to $51.1 million, the TPRE Net COVID Loss will equal $0, and if Sirius Group’s COVID-19 losses are less than or equal to $150.0 million, the Sirius Net COVID Loss will equal $0. Should the Sirius Net COVID Loss be greater than the TPRE Net COVID Loss, then a number of Series A preference shares will be forfeited equal to (x) the lesser of (i) the Sirius Net COVID Loss minus the TPRE Net COVID Loss and (ii) $100.0 million divided by (y) the volume weighted average price (“VWAP”) measured over the 30 business day (where normal trading occurs on U.S. national and regional exchanges) (“Trading Day”) period prior to the date five business days after the calculation of the TPRE Net COVID Loss and Sirius Net COVID Loss (the “Final Adjustment Determination Date”). Should the TPRE Net COVID Loss be greater than the Sirius Net COVID Loss, then a number of Series A preference shares will be issued equal to (x) the TPRE Net COVID Loss minus the Sirius Net COVID Loss divided by (y) the 30-Trading Day VWAP during the period prior to the Final Adjustment Determination Date. After either such adjustment occurs, the Series A preference shares will convert into common shares based on the conversion ratio of one Series A preference share to one common share, subject to the adjustment as set forth in the Series A Certificate of Designation.
Series A preference shares are recorded at fair value in the liability-classified capital instruments line of the consolidated balance sheets. During the year ended December 31, 2021, the Company recorded gains of $20.4 million from the change in fair value of the Series A preference shares. As of December 31, 2021, the estimated fair value of the Series A preference shares is $20.4 million.
Merger Warrants
On February 26, 2021, the Company entered into a warrant agreement (the “Warrant Agreement”) with respect to the consideration price of the Sirius Group acquisition. Pursuant to the Warrant Agreement, each warrant (“Merger warrant”)
permits the holder thereof to purchase one common share for $11.00, subject to adjustment as set forth in the Warrant Agreement. The warrants are exercisable at any time after February 26, 2021 through the fifth anniversary of the closing date of the acquisition of Sirius Group. If the warrants are not exercised prior to the fifth anniversary, the warrants will expire without value. As of December 31, 2021, the Company had reserved for issuance common shares underlying warrants to purchase, in the aggregate, up to 21,009,324 common shares, to previous Sirius Group common shareholders.
The Merger warrants are recorded at fair value in the liability-classified capital instruments line of the consolidated balance sheets. During the year ended December 31, 2021, the Company recorded gains of $20.9 million from the change in fair value of the Merger warrants. As of December 31, 2021, the estimated fair value of the Merger warrants is $32.5 million.
Sirius Group Private Warrants
On February 26, 2021, the Company entered into an assumption agreement (the “Assumption Agreement”) by and among (i) the Company, (ii) Bain Capital Special Situations Asia, L.P., a Cayman Islands limited partnership (“Bain”), (iii) CCOF Master, L.P., a Delaware limited partnership (“Carlyle”), (iv) Centerbridge Credit Partners Master, LP, a Delaware limited partnership, and Centerbridge Special Credit Partners III, LP, a Delaware limited partnership (collectively, “Centerbridge”), and (v) GPC Partners Investments (Canis) LP, a Delaware limited partnership (“Gallatin” and, together with Bain, Carlyle and Centerbridge, collectively, the “Sirius Warrant Holders”). Pursuant to the terms of the Assumption Agreement, the Company agreed to assume all of the warrants issued on November 5, 2018 and November 28, 2018 (the “Private warrants”) by Sirius Group to the Sirius Warrant Holders.
Prior to February 26, 2021, the Private warrants were exercisable for an aggregate of 5,418,434 Sirius Group shares. On February 26, 2021, each Private warrant ceased to represent the right to purchase Sirius Group shares and each Sirius Warrant Holder was instead granted the right to receive, upon exercise of a Private warrant, a contingent cash payment which, taken together with the fraction of the Company common share received, guarantees that on the second anniversary of February 26, 2021, the electing shareholder will have received equity and cash valued at least $13.73 per Private warrant. The exercise price was also adjusted in accordance with the terms of the merger and the Private warrants to $13.00.
The Private warrants are recorded at fair value in the liability-classified capital instruments line of the consolidated balance sheets. During the year ended December 31, 2021, the Company recorded gains of $4.1 million from the change in fair value of the Private warrants. As of December 31, 2021, the estimated fair value of the Private warrants is $3.2 million.
Sirius Group Public Warrants
Under the merger agreement between Sirius Group and Easterly Acquisition Corporation, each of Easterly’s existing issued and outstanding public warrants was converted into a warrant exercisable for Sirius Group common shares (“Sirius Group Public Warrants”). From February 26, 2021, holders of the Sirius Group Public Warrants have the right to receive the merger consideration that the holder of the Sirius Group Public Warrants would have received if such holder had exercised his, her or its warrants immediately prior to February 26, 2021. Because the exercise price of such Sirius Group Public Warrants of $18.89 was greater than the per share merger consideration, no such warrants were exercised prior to the completion of the merger and therefore no merger consideration was paid to holders of such warrants. The Sirius Group Public Warrants are not currently listed on any public exchange.
The Sirius Group Public Warrants are recorded at fair value in the liability-classified capital instruments line of the consolidated balance sheets. During the year ended December 31, 2021, the Company recorded gains of $1.5 million from the change in fair value of the Sirius Group Public Warrants. As of December 31, 2021, the estimated fair value of the Sirius Group Public Warrants is $1.1 million.
Upside Rights
On February 26, 2021, the Company issued Upside Rights with respect to the consideration price of the Sirius Group acquisition. Pursuant to the Upside Rights, if (i) the last reported sales price of the Company’s common shares for each of 30 consecutive trading days exceeds the target price of $20.00 (the “Target Price”), subject to adjustment, prior to the first anniversary of February 26, 2021, or (ii) the Company enters into a definitive agreement to consummate a change of control transaction and the per share consideration in such transaction exceeds the Target Price, the principal amount of the Upside Rights will become immediately due and payable. Settlement of the Upside Rights will be in a number of Company common shares equal to $100,070,726 divided by the Company’s average share price determined using a 30-day VWAP, or in the case of a change of control transaction, the lesser of the per share consideration being offered in such change of control transaction and the Company’s average share price determined using a 30-day VWAP.
The Upside Rights are recorded at fair value in the liability-classified capital instruments line of the consolidated balance sheets. During the year ended December 31, 2021, the Company recorded gains of $6.5 million from the change in fair value of the Upside Rights. As of December 31, 2021, the estimated fair value of the Upside Rights is $nil.
Contingent Value Rights
On February 26, 2021, the Company entered into a contingent value rights agreement (the “CVR Agreement”) with respect to the consideration price of the Sirius Group acquisition. Pursuant to the CVR Agreement, the Company issued CVRs representing the right to receive a contingent cash payment of (1) in the case of acceleration upon certain breaches of the CVR Agreement, $13.73 minus the VWAP of the Company shares measured over the 14 consecutive trading day period beginning on the date a breach is declared, multiplied by 0.743, (2) on the second anniversary (the “Maturity Date”) of the merger, $13.73 minus the VWAP of the Company’s common shares measured over the 14 consecutive trading day period prior to the Maturity Date multiplied by 0.743 and (3) in the case of redemption by the Company prior to the Maturity Date, the discounted present value of $13.73, discounted from the Maturity Date to the last day of the 14 consecutive trading day period beginning on the date of the redemption notice (“Redemption Valuation Period”), minus the VWAP of the Company shares measured over the Redemption Valuation Period multiplied by 0.743.
The CVRs are recorded at fair value in the liability-classified capital instruments line of the consolidated balance sheets. During the year ended December 31, 2021, the Company recorded losses of $3.6 million from the change in fair value of the CVRs. As of December 31, 2021, the fair value of the CVRs is $30.6 million. The CVRs became publicly traded on the OTCQX Best Market during the quarter ended June 30, 2021.
The following table summarizes the change in fair value of the liability-classified capital instruments from the date of acquisition to December 31, 2021:
Fair value as of February 26, 2021Change in fair valueFair value as of December 31, 2021
Series A preference shares$40.8 $(20.4)$20.4 
Merger warrants53.4 (20.9)32.5 
Private warrants7.3 (4.1)3.2 
Sirius Group Public Warrants2.6 (1.5)1.1 
Upside Rights6.5 (6.5)— 
CVRs27.0 3.6 30.6 
Total liability-classified capital instruments$137.6 $(49.8)$87.8 
Purchase Price
The components of the Company's total purchase price for Sirius Group at February 26, 2021 were as follows:
Cash consideration
Sirius Group shares acquired for cash $100.4 
Common Shares
Common Shares issued by SiriusPoint58,331,196 
SiriusPoint share price as of February 26, 2021$10.21 595.6 
Preference Shares
Series A Preference Shares issued, at fair value 40.8 
Series B Preference Shares issued, at fair value (1)
200.0 
Warrants
Merger warrants issued, at fair value 53.4 
Private warrants issued, at fair value 7.3 
Sirius Group Public Warrants, at fair value2.6 
Upside Rights
Upside Rights issued, at fair value 6.5 
Contingent value rights (CVRs)
CVRs issued, at fair value27.0 
CVR waiver restricted shares0.7 
Other
Fair value of the replaced Sirius Group equity awards attributable to pre-combination services37.5 
Transaction fee reimbursement8.0 
Total purchase price$1,079.8 
(1)See Note 18 for additional information.

Fair Value of Net Assets Acquired and Liabilities Assumed
The following table summarizes the estimated fair values of major classes of identifiable assets acquired and liabilities assumed of Sirius Group as of February 26, 2021, the date the transaction closed:
Identifiable net assets:
     Cash and investments$3,944.1 
     Insurance and reinsurance balances receivable, net1,201.0 
     Reinsurance assets649.7 
     Value of business acquired147.9 
     Deferred tax asset228.0 
     Intangible assets178.8 
     Other assets181.9 
     Loss and loss adjustment expense reserves(2,928.5)
     Unearned premium reserves(900.0)
     Deferred tax liability(186.8)
     Debt(728.2)
     Other liabilities(657.7)
Total identifiable net assets acquired1,130.2 
Total purchase price1,079.8 
Bargain purchase gain$50.4 
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 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.
An explanation of the significant fair value adjustments is as follows:
•Goodwill and intangibles - to eliminate the goodwill and intangible assets in Sirius Group net assets acquired as part of the purchase accounting;
•Loss and loss adjustment expense reserves - to record loss and loss adjustment expense reserves at fair value, reflecting an increase for a market based risk margin, which represents the cost of capital required by a market participant to assume the loss and loss adjustment expense reserves of Sirius Group, partially offset by a deduction which represents the discount due to the present value calculation of the loss and loss adjustment expense reserves based on the expected payout of the net unpaid loss and loss adjustment expense reserves. The fair value adjustment resulted in an additional liability of $80.6 million which is amortized over the expected settlement period of the underlying claims. In addition, management increased certain casualty loss reserves by $70.0 million in order to reflect a consistent reserving approach between the two companies. The increase was in response to accumulated loss experience and the broader industry trends of social inflation;
•Deferred acquisition costs - to eliminate Sirius Group’s deferred acquisition costs asset;
•Value of business acquired (“VOBA”) - the expected future losses and expenses associated with the policies and contracts that were in-force as of the closing date of the transaction were estimated and compared to the future premium remaining expected to be earned. The difference between the risk-adjusted future loss and expenses, discounted to present value and the unearned premium reserve, was estimated to be the VOBA. The Company recognized VOBA of $147.9 million as a result of the Sirius Group acquisition. 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;
•Finite-lived insurance intangible assets - to establish the fair value of identifiable finite-lived insurance intangible assets acquired, including customer and other relationships, trade names and technology. The fair values of the finite-lived intangible assets relating to customer and other relationships were determined using the multi-period excess earnings approach. This method reflects the present value of the projected cash flows that are expected to be generated by the asset, reduced by returns on contributory assets. The Company recognized identifiable finite-lived intangible assets of $130.0 million, which will be amortized over their estimated useful lives;
•Indefinite-lived insurance intangible assets - to establish the fair value of identifiable indefinite-lived insurance intangible assets acquired (Lloyd’s capacity and insurance licenses). The Company recognized identifiable indefinite lived intangible assets of $48.8 million; and
•Deferred tax - to reflect adjustments to net deferred tax assets and liabilities related to the fair value adjustments above.
Identifiable intangible assets at February 26, 2021 and at December 31, 2021, consisted of the following, and are included in intangible assets on the Company’s consolidated balance sheets:
Economic Useful LifeGross balance at February 26, 2021Accumulated amortizationNet balance at December 31, 2021
Distribution relationships17 years$75.0 $— $75.0 
MGA relationships13 years34.0 (4.9)29.1 
Lloyd’s Capacity - Syndicate 1945Indefinite41.8 — 41.8 
Insurance licensesIndefinite7.0 — 7.0 
Trade name16 years16.0 (0.2)15.8 
Internally developed computer software5 years5.0 (0.8)4.2 
Identifiable intangible assets$178.8 $(5.9)172.9 
Insurance licenses sold (1)
(1.0)
Net identifiable intangible assets at December 31, 2021 related to the acquisition of Sirius Group (2)
$171.9 
(1)See Note 4 for additional information.
(2)No impairments were recorded in the year ended December 31, 2021.

The estimated remaining amortization expense for the Company's intangible assets with finite lives is as follows:
2022$8.0 
202311.1
202412.0
202511.4
2026 and thereafter81.6
Total remaining amortization expense $124.1 
An explanation of the identifiable intangible assets is as follows:
•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;
•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;
•Lloyd’s Capacity - Syndicate 1945 - relates to relationships associated with the right to distribute and market policies underwritten through Lloyd’s Syndicate 1945;
•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;
•Trade name - represents the value of the Sirius Group brand acquired; and
•Internally developed computer software - represents the value of internally developed computer software utilized by the Company.
Financial results
The following table summarizes the results of Sirius Group since February 26, 2021 that have been included in the Company's consolidated statements of income:
For the period from
February 26, 2021 to December 31, 2021
Total revenues$1,224.3 
Net loss$(161.2)
Supplemental Pro Forma Information
Sirius Group’s results have been included in the Company's consolidated financial statements from February 26, 2021 to December 31, 2021. The following table presents unaudited pro forma consolidated financial information for the years ended December 31, 2021 and 2020 and assumes the acquisition of Sirius Group occurred on January 1, 2020. The unaudited pro forma consolidated financial information is provided for informational purposes only and is not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the transaction been completed as of January 1, 2020 or that may be achieved in the future. The unaudited pro forma consolidated financial information does not give consideration to the impact of possible revenue enhancements, expense efficiencies, synergies or asset dispositions that may result from the acquisition of Sirius Group. In addition, unaudited pro forma consolidated financial information does not include the effects of costs associated with any restructuring or integration activities resulting from the acquisition of Sirius Group, as such costs cannot be determined at this time.
20212020
Total revenues$2,343.9 $2,613.6 
Net income (loss)$60.7 $(268.4)
Among other adjustments, and in addition to the fair value adjustments and recognition of identifiable intangible assets noted above, other material nonrecurring pro forma adjustments directly attributable to the acquisition of Sirius Group principally included certain adjustments to recognize transaction related costs, align reserving approach, amortize fair value adjustments, amortize identifiable indefinite lived intangible assets and recognize related tax impacts.