Third Point Reinsurance and Sirius International Insurance Group, a global multi-line insurer and reinsurer, have agreed to merge in a cash and stock transaction worth $788 million.

The new company will be renamed SiriusPoint Ltd. and will be based in Bermuda.

Third Point Re will purchase Sirius from its parent company, China Minsheng Investment Group (CMIG), for $100 million in cash and approximately 58 million of Third Point Re shares. Both Third Point Re and Sirius are headquartered in Bermuda.

The transaction, which is expected to be completed in the first quarter of 2021, will create a global company with approximately $3.3 billion of tangible capital.

Sirius International launched a formal process in March to find a buyer after completing a strategic review.

Early last year, reports revealed that Shanghai-based CMIG, a private investment group, was facing liquidity issues related to a massive debt burden, which was approximately $34 billion in June 2018. Problems with the company’s liquidity were highlighted on Feb. 1, 2019 when it missed payments owed to bondholders. However, S&P Global Ratings issued a report at the time, which said the liquidity issues at parent company CMIG did not affect Sirius Group’s creditworthiness.

The new company’s executive team will consist of Siddhartha (Sid) Sankaran, who will become chairman and chief executive officer, post-closing. Sankaran is Third Point Re’s newly named non-executive chairman of the board. He has been a member of Third Point Re’s board since August 2019 and is currently the chief financial officer of Oscar Health. He previously served as CFO and chief risk officer of American International Group.

Third Point Re’s current CEO, Dan Malloy, will remain a senior underwriting executive of SiriusPoint following the closing. Kip Oberting, Sirius Group’s president and CEO, will be stepping down from his role at the transaction close.

Third Point Re will finance the transaction through a combination of cash; Third Point Re equity issued to Sirius Group shareholders, and Third Point Re equity issued to Daniel S. Loeb, who is co-founder, CEO and chief investment officer of Third Point Re’s parent company, Third Point LLC. (Loeb is currently Third Point Re’s largest individual shareholder). Loeb has agreed to purchase approximately $50 million worth of SiriusPoint shares at closing. If necessary, other debt or equity financing will be used to finance the transaction.

The transaction is expected to be accretive to earnings per share and return on equity in year one following the close.

The merger joins “two highly complementary businesses with a shared strategic vision to create a leading global company providing insurance and reinsurance solutions to clients and brokers located in almost 150 countries,” said a statement issued by the two companies.

“This transaction further strengthens our reinsurance operations and positions us to enter lines of business with higher risk-adjusted returns to achieve underwriting profitability. Combining with Sirius Group accelerates our continuing objective to deliver consistently strong book value per share growth over the long-term,” Sankaran said.

The companies cited key strategic benefits from the transaction:

• Strong global presence and longstanding relationships with clients and brokers, with expanded distribution through Lloyd’s, Bermuda, and the United States
• Refocused underwriting strategies in key U.S. and European re/insurance markets
• Superior product capabilities and relationshipsin accident and health (A&H), property, liability, and specialty lines
• Key partnerships with managing general underwriters (MGUs) for health and travel
• Experienced management team and a company with a long history and deep roots, focused onshared entrepreneurial culture.

“This transaction fulfills our vision to move Third Point Re up the quality curve by adding diversified insurance lines to our existing business, thus improving returns on capital and reducing insurance volatility, expanding our investment strategy from a single manager model to reduce investment volatility, and creating critical mass to support both internal growth and future acquisitions,” Loeb said in prepared remarks.

The SiriusPoint board of directors will comprise the current Third Point Re Board at the time of closing, with the addition of two new board members: Rachelle Keller from Sirius Group and Peter W. H. Tan from CM Bermuda Ltd. (Sirius Group’s current majority shareholder and subsidiary of CMIG).

In addition, Third Point Re’s former lead independent director, Steven Fass, will join the company as vice chairman. Fass is also a former chief executive officer of Sirius Group. He will work closely with Sankaran and senior members of the Sirius Group team in the integration of the businesses.

Third Point Re shareholders will be protected from up to $100 million of net incremental COVID-19 related losses at Sirius Group incurred in certain circumstances for three years following the closing.

Approvals from Boards of Directors

The agreement has been unanimously approved by both companies’ boards of directors. It is subject to approval by shareholders of both companies and customary regulatory approvals. Sirius Group’s majority shareholder, CM Bermuda Ltd., and its parent company, CMIG International Holding, have entered into a binding agreement to vote in favor of the merger transaction, as has Loeb, as Third Point Re’s largest individual shareholder.

J.P. Morgan Securities LLC is serving as sole financial advisor to Third Point Re; EA Markets LLC is serving as financing advisor. Debevoise & Plimpton LLP is Third Point Re’s legal counsel. Barclays Capital Inc. is acting as sole financial advisor to Sirius Group. Sidley Austin LLP and Conyers Dill & Pearman Limited are legal advisers to Sirius Group, with Jenner & Block LLP separately representing the Strategic Review Committee of Sirius Group.

Goldman Sachs is acting as exclusive financial advisor to CMIG International Holding Pte. Ltd., and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor to CMIG International Holding Pte. Ltd.

Source: Third Point Re

*A version of this story ran previously in our sister publication Insurance Journal.