Share-based compensation and employee benefit plans

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Share-based compensation and employee benefit plans

19. Share-based compensation and employee benefit plans

Share-based compensation

As of December 31, 2021, the Company’s share-based awards consisted of Restricted Share Units (“RSUs”), Performance Share Units (“PSUs”), restricted share awards with service condition and options.

As part of the 2021-2023 annual long-term incentive award cycle, the Company granted to its employees a number of RSUs and PSUs pursuant to the terms and conditions of the SiriusPoint Ltd. 2013 Omnibus Incentive Plan. The RSUs vest over three years in equal, one-third installments on each anniversary of the award grant date subject to continued provision of services through the applicable vesting date. The PSUs are subject to a service condition as well as a performance condition. As of December 31, 2021, 18,532,406 (December 31, 2020 - 7,617,210) of the Company’s common shares were available for future issuance under the equity incentive compensation plans.

The total share-based compensation expense recognized during the years ended December 31, 2021, 2020 and 2019 was $22.6 million, $6.6 million and $7.0 million, respectively.

As of December 31, 2021, the Company had $37.0 million (December 31, 2020 - $14.2 million) of unamortized share compensation expense, which is expected to be amortized over a weighted average period of 2.4 years (December 31, 2020 - 1.9 years).

Restricted shares awards with service condition

Restricted share award activity for the year ended December 31, 2021 was as follows:

	Number of non- vested restricted shares	Weighted average grant date fair value
Balance as of January 1, 2021	1,171,058	$	8.80
Granted	2,123,811	10.32
Forfeited	(88,553)	10.31
Vested	(616,122)	9.84
Balance as of December 31, 2021	2,590,194	$	10.13

In 2021, the Company modified its 2019 and 2020 restricted share awards with service and performance conditions to convert them at the most recent forecasted performance percentage to restricted shares with a service condition only. Further, the Company supplemented these awards with additional restricted shares with extended vesting periods.

Restricted share awards with service condition vest either ratably or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment or service and transferability.

Restricted Share Units

RSU activity for the year ended December 31, 2021 was as follows:

	Number of non- vested restricted shares	Weighted average grant date fair value
Balance as of January 1, 2021	—	$	—
Granted	6,246,111	10.18
Forfeited	(458,841)	10.24
Vested	(2,358,382)	10.21
Balance as of December 31, 2021	3,428,888	$	10.14

As a result and at the time of the acquisition of Sirius Group, Sirius Group's outstanding restricted share units were converted to Company RSUs.

RSUs with service condition vest either ratably or at the end of the required service period and contain certain restrictions during the vesting period, relating to, among other things, forfeiture in the event of termination of employment or service and transferability.

Performance Share Units

PSU activity for the year ended December 31, 2021 was as follows:

	Number of non- vested PSUs	Number of non- vested PSUs probable of vesting	Weighted average grant date fair value of PSUs probable of vesting
Balance as of January 1, 2021	—	—	$	—
Granted	1,169,604	1,169,604	10.31
Forfeited	(79,657)	(79,657)	10.36
Vested	(4,653)	(4,653)	10.36
Balance as of December 31, 2021	1,085,294	1,085,294	$	10.30

PSUs vest over four distinct performance periods subject to participant’s continued provision of services to the Company until the vesting date.

Options

The options activity for the years ended December 31, 2021 were as follows:

	Number of options	Weighted average exercise price
Balance as of January 1, 2021	8,255,810	$	13.45
Granted	2,772,215	10.69
Forfeited	(3,720,930)	13.20
Exercised	(220,000)	10.00
Balance as of December 31, 2021	7,087,095	$	12.61

The share options issued to management under the Share Incentive Plan are subject to a service condition. The fair value of share options issued were estimated on the grant date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model used the following assumptions for options granted during the year ended December 31, 2021 (there were no options granted for the years ended December 31, 2020 and 2019):

	2021
Dividend yield	—	%
Risk free interest rate	1.55	%
Expected volatility(1)	34.17	%
Expected life (in years)	6.5
Weighted average grant date fair value	$3.28

(1) The volatility assumption used was based on the average estimated volatility of a reinsurance peer group.

As of December 31, 2021 the weighted average remaining contractual term for options outstanding and exercisable was 2.0 years and 2.1 years, respectively (2020 - 1.2 years and 1.2 years, respectively).

The following table summarizes information about the Company’s management and director share options outstanding as of December 31, 2021:

	Options outstanding				Options exercisable
Range of exercise prices	Number of options	Weighted average exercise price		Remaining contractual life	Number of options	Weighted average exercise price
$9.83 - $10.89	4,663,843	$	10.02	2.1 years	4,075,481	$	9.97
$15.00 - $16.89	1,446,510	$	15.63	2.9 years	1,046,510	$	15.87
$20.00 - $25.05	976,742	$	20.50	0.4 years	976,742	$	20.50
	7,087,095	$	12.61	2.0 years	6,098,733	$	12.67

As the Company’s closing share price on December 31, 2021 and December 31, 2020 was below $9.83, there was no aggregate intrinsic value of options outstanding and options exercisable. For the year ended December 31, 2021, the Company received proceeds of $2.2 million (2020 - $nil) from the exercise of options.

Employee Benefit Plans

As a result of the acquisition of Sirius Group, the Company operates several retirement plans in accordance with the local regulations and practices. These plans cover substantially all of the Company’s employees and provide benefits to employees in event of death, disability, or retirement.

Defined benefit plans

Swedish and German employees of SiriusPoint International can participate in defined benefit plans which are based on the employees' pension entitlements and length of employment. In Sweden, where a defined benefit pension plan is mandated by the government, SiriusPoint International's employees participate in collective agreements funded by SiriusPoint International. These collective agreements are managed by third party trustees who calculate the pension obligation, invoice SiriusPoint International for additional funding and invest the funds. All employees in Germany are covered by defined benefit pension plans sponsored by SiriusPoint International called SiriusPoint Re GmbH Pension Plan. Paid pension premiums are invested with Skandia Liv for employees in Sweden and with Allianz for employees in Germany. Skanda Liv held 94% of total plan assets in 2021. Allianz held 6% of total plan assets in 2021. Skandia manages the portfolio to be able to pay a guaranteed amount and a favorable return over time with the goal of getting the highest possible return along with well-balanced risk. The average return for 2021 is 18.0%. The investment directive is decided by the Skandia Liv board of directors. To achieve the goals the portfolio is diversified with the asset allocation shown below.

The breakdown of the investment of plan assets for the year ended December 31, 2021 are as follows:

	2021
International equities	15.0	%
Swedish equities	12.7	%
Swedish nominal bonds	33.9	%
Real estate	8.9	%
Private equity	14.6	%
Other	14.9	%

The assumptions used to determine Swedish benefit obligations for the year ended December 31, 2021 are as follows:

	2021
Discount rate	0.9	%
Increase in compensation levels rate	3.0	%
Turnover rate	3.0	%

The Swedish actuaries follow the Swedish industry DUS21 mortality rate. The discount rate used to calculate the Swedish benefit obligation was derived from the expected return of an investment in Swedish covered mortgage bonds with a duration in accordance with the duration of the pension obligation. The duration of the Swedish pension liability is approximately 19 years.

The assumptions used to determine German benefit obligations for the year ended December 31, 2021 are as follows:

	2021
Discount rate	0.4	%
Increase in compensation levels rate	2.0	%

The German actuaries follow the Germany industry Richttafeln 2018 G mortality rates and standard turnover values for the year ended December 31, 2021. The discount rate used to calculate the German benefit obligation was derived from markets yields on high quality corporate bonds with durations consistent with plan obligations. The duration of the German pension liability is approximately 16 years.

The following tables present a reconciliation of the beginning and ending funded status and the net amounts recognized for the defined benefit plans for the year ended December 31, 2021:

	2021
Change in benefit obligation
Projected benefit obligation, beginning of year	$	22.8
Service cost	1.0
Interest cost	0.2
Actuarial losses	(0.8)
Benefit payments	(0.5)
Tax payments	(0.1)
Currency revaluation effect	(2.2)
Projected benefit obligation, end of year	20.4
Change in plan assets
Fair value of plan assets, beginning of year	21.5
Employer contributions	0.5
Benefit payments	(0.3)
Interest income	3.3
Currency revaluation effect	(2.3)
Fair value of plan assets, end of year	22.7
Funded status at end of year(1)	$	2.3

(1)At December 31, 2021, the Swedish plan had a funding status of $6.0 million and the German plan had a funding status of $(3.7) million.

Under the Swedish plan, a 100 basis point discount rate decrease would increase the 2021 defined benefit obligation by $2.8 million, with all other items remaining the same. Under the German plan, a 50 basis point decrease in the discount rate

would increase the benefit obligation by $0.5 million, with all other items remaining the same. Conversely, a 50 basis point increase in the discount rate would decrease the benefit obligation by $0.6 million.

The accumulated benefit obligation for the year ended December 31, 2021 was $20.4 million.

The components of net periodic pension expense for the year ended December 31, 2021 are as follows:

	2021
Service cost	$	(1.0)
Interest cost	—
Actuarial (loss)	4.0
Net periodic pension expense	$	3.0

The employer benefit payments/settlements for the year ended December 31, 2021 were $0.5 million. As of December 31, 2021, the projected benefit payments required for the defined pension benefits plans are as follows:

	December 31, 2021
2022	$	0.4
2023	0.3
2024	0.4
2025	0.5
2026	0.5
2027-2031	3.1
Total benefit payments required	$	5.2

Defined contribution plans

Non-U.S.

In the United Kingdom, SiriusPoint International contributes 12% of the employee's salary. Contributed funds are invested into an annuity of the employee's choice. In Belgium, SiriusPoint International contributes 6.5% - 8.5% of the employee's salary. Employees in Switzerland are eligible to participate in the industry-sponsored Swisscanto pension plan ("Swisscanto plan"). The Swisscanto plan is a combination of a defined contribution and a defined benefit plan. For the Swisscanto plan, SiriusPoint International incurs 60% - 70% of the total premium charges and the employees incur the remaining 30% - 40%. As of December 31, 2021, the projected benefit obligation of SiriusPoint International's various benefit plans was $20.4 million and the funded status was $(2.3) million. SiriusPoint International recognized expenses related to these various plans of $3.0 million in 2021.

In Bermuda, SiriusPoint Bermuda's employees are eligible for retirement benefits through defined contribution retirement plans. SiriusPoint Bermuda and employees contribute an amount equal to a specified percentage of each employee's salary. Expenses related to the defined contribution plans was $1.2 million for the year ended December 31, 2021 (2020 - $0.7 million and 2019 - $0.7 million).

U.S.

The Company’s U.S. subsidiaries’ employees are eligible for retirement benefits through 401(k) retirement savings plans. These plans provide qualifying employees with matching contributions from the Company based on the amount of employee contribution. Total expense for matching contributions was $2.7 million for the year ended December 31, 2021 (2020 - $0.2 million and 2019 - $0.2 million).