Enstar Group Limited (Nasdaq: ESGR) filed its quarterly report on
Form 10-Q with the SEC earlier today. An audio presentation
reviewing the second quarter 2023 results with expanded commentary
is available on Enstar's investor relations website at
investor.enstargroup.com.
Second Quarter 2023
Highlights:
-
Net earnings of $21 million, or $1.34 per diluted ordinary share,
compared to net loss of $434 million, or $25.20 per diluted
ordinary share, for the three months ended June 30, 2022.
-
Return on equity ("ROE") of 0.5% and Adjusted ROE* of 2.1% for the
quarter compared to (8.2)% and (1.6)%, respectively, in the second
quarter of 2022. ROE performance was driven by investment returns
of $159 million. Adjusted ROE* excludes $89 million of net realized
and unrealized losses on our fixed maturities.
-
Run-off liability earnings ("RLE") of $10 million, driven by
favorable development on our workers' compensation line of
business. In comparison, RLE of $159 million in the prior-year
period benefited from favorable development on our professional
indemnity/directors and officers and workers’ compensation lines of
business and reductions in the value of certain portfolio
liabilities that are held at fair value due to increases in
interest rates.
-
Annualized total investment return (“TIR”) of 3.0% and Annualized
Adjusted TIR* of 5.1%, compared to (15.2)% and (2.2)%,
respectively, for the three months ended June 30, 2022. Recognized
investment results benefited from net realized and unrealized gains
on our other investments, including equities, of $62 million and
net investment income of $172 million, partially offset by net
realized and unrealized losses on our fixed maturities, including
other comprehensive income (“OCI”) of $111 million.
-
Completed $1.9 billion LPT agreement with certain subsidiaries of
QBE Insurance Group Limited (“QBE”) and AUD $360 million (USD $245
million) LPT with RACQ Insurance Limited (“RACQ”). At closing, we
assumed net loss reserves of $2.0 billion from QBE and $179 million
from RACQ, respectively.
-
Amended and restated our existing revolving credit agreement,
increasing commitments from $600 million to $800 million and
increasing the term by five years.
* Non-GAAP measure; refer to "Non-GAAP Financial
Measures" further below for explanatory notes and a reconciliation
to the most directly comparable GAAP measure.
Dominic Silvester, Enstar CEO,
said:
“Our momentum from the beginning of the year
continued into the second quarter, as we delivered solid net
earnings through improved year-over-year performance in our
investment portfolio and positive RLE. Operationally, we completed
both our $2.0 billion LPT transaction with QBE, and our $179
million LPT transaction with RACQ. The strength of our balance
sheet and continued performance was recognized by S&P who
recently upgraded our long-term credit rating to BBB+. We continue
to maintain a robust pipeline of opportunities and will remain
selective in adding only those that can offer compelling
risk-adjusted returns. With our scale, differentiated expertise,
claims management function and strong balance sheet, we remain
well-positioned to provide long-term value to our
shareholders.”
Six Months Ended June 30, 2023
Highlights:
-
Net earnings of $445 million, or $27.19 per diluted ordinary share,
compared to net loss of $701 million, or $40.29 per diluted
ordinary share, for the six months ended June 30, 2022.
-
ROE of 10.0% and Adjusted ROE* of 8.6%, compared to (12.1)% and
(2.7)%, respectively, for the six months ended June 30, 2022. ROE
performance was driven by investment returns of $514 million and a
net gain recognized on the completion of the novation of the
Enhanzed Re reinsurance of a closed block of life annuity policies
of $194 million. Adjusted ROE* excludes $48 million of net
realized and unrealized losses on our fixed maturities.
-
RLE of $20 million, driven by favorable development on our workers'
compensation line of business and partially offset by increases in
the value of certain portfolios that are held at fair value. In
comparison, RLE of $335 million in the prior-year period benefited
from favorable loss activity in our professional
indemnity/directors and officers and workers’ compensation lines of
business, reductions in the value of certain portfolio liabilities
that are held at fair value due to increases in interest rates and
favorable results on our inactive catastrophe programs held by
Enhanzed Re.
-
Annualized TIR of 6.1% and Annualized Adjusted TIR* of 5.6%,
compared to (12.8)% and (0.8)%, respectively, for the six months
ended June 30, 2022. Recognized investment results benefited from
net realized and unrealized gains on our fixed maturities,
including OCI, and other investments, including equities, of $226
million and net investment income of $328 million.
-
Repurchased remaining $341 million of non-voting convertible
ordinary shares, at a price that represented a 13% discount to
year-end book value at the time the repurchase was negotiated as
reported in our Annual Report on Form 10-K for the year ended
December 31, 2022, simplifying Enstar’s capital structure.
Following the adoption of ASU 2018-12 on a retrospective basis, the
price paid in the repurchase transaction represented a 23% discount
to year-end book value as reported in and further described in our
Quarterly Report on Form 10-Q for the period ended June 30,
2023.
* Non-GAAP measure; refer to "Non-GAAP Financial
Measures" further below for explanatory notes and a reconciliation
to the most directly comparable GAAP measure.
Key Financial and Operating
Metrics
We use the following GAAP and Non-GAAP measures
to monitor the performance of and manage the company:
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
2023 |
|
2022 |
|
$ / pp / bp Change |
|
2023 |
|
2022 |
|
$ / pp / bp Change |
|
(in millions of U.S. dollars, except per share
data) |
Key Earnings Metrics |
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) attributable to Enstar ordinary
shareholders |
$ |
21 |
|
|
$ |
(434 |
) |
|
$ |
455 |
|
|
$ |
445 |
|
|
$ |
(701 |
) |
|
$ |
1,146 |
|
Adjusted operating income (loss) attributable to Enstar ordinary
shareholders* |
$ |
105 |
|
|
$ |
(89 |
) |
|
$ |
194 |
|
|
$ |
506 |
|
|
$ |
(149 |
) |
|
$ |
655 |
|
ROE |
|
0.5 |
% |
|
(8.2 |
)% |
|
8.7 |
pp |
|
|
10.0 |
% |
|
(12.1 |
)% |
|
22.1 |
pp |
Annualized ROE |
|
|
|
|
|
|
|
19.9 |
% |
|
(24.1 |
)% |
|
44.0 |
pp |
Adjusted ROE* |
|
2.1 |
% |
|
(1.6 |
)% |
|
3.7 |
pp |
|
|
8.6 |
% |
|
(2.7 |
)% |
|
11.3 |
pp |
Annualized Adjusted ROE* |
|
|
|
|
|
|
|
17.2 |
% |
|
(5.4 |
)% |
|
22.6 |
pp |
|
|
|
|
|
|
|
|
|
|
|
|
Key Run-off Metrics |
|
|
|
|
|
|
|
|
|
|
|
Prior period development |
$ |
10 |
|
|
$ |
159 |
|
|
$ |
(149 |
) |
|
$ |
20 |
|
|
$ |
335 |
|
|
$ |
(315 |
) |
Adjusted prior period development* |
$ |
8 |
|
|
$ |
123 |
|
|
$ |
(115 |
) |
|
$ |
44 |
|
|
$ |
176 |
|
|
$ |
(132 |
) |
RLE |
|
0.1 |
% |
|
|
1.3 |
% |
|
(1.2 |
) pp |
|
|
0.2 |
% |
|
|
2.7 |
% |
|
(2.5 |
) pp |
Adjusted RLE* |
|
0.1 |
% |
|
|
1.0 |
% |
|
(0.9 |
) pp |
|
|
0.3 |
% |
|
|
1.4 |
% |
|
(1.1 |
) pp |
|
|
|
|
|
|
|
|
|
|
|
|
Key Investment Return Metrics |
|
|
|
|
|
|
|
|
|
|
|
Total investable assets |
$ |
19,219 |
|
|
$ |
20,869 |
|
|
$ |
(1,650 |
) |
|
$ |
19,219 |
|
|
$ |
20,869 |
|
|
$ |
(1,650 |
) |
Adjusted total investable assets* |
$ |
20,272 |
|
|
$ |
22,115 |
|
|
$ |
(1,843 |
) |
|
$ |
20,272 |
|
|
$ |
22,115 |
|
|
$ |
(1,843 |
) |
Investment book yield |
|
4.47 |
% |
|
|
2.32 |
% |
|
215 |
bp |
|
|
3.78 |
% |
|
|
2.03 |
% |
|
175 |
bp |
Annualized TIR |
|
3.0 |
% |
|
(15.2 |
)% |
|
18.2 |
pp |
|
|
6.1 |
% |
|
(12.8 |
)% |
|
18.9 |
pp |
Annualized Adjusted TIR* |
|
5.1 |
% |
|
(2.2 |
)% |
|
7.3 |
pp |
|
|
5.6 |
% |
|
(0.8 |
)% |
|
6.4 |
pp |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
Key Shareholder Metrics |
|
|
|
|
|
|
June 30, 2023 |
|
December 31, 2022 |
|
|
Book value per ordinary share |
|
|
|
|
|
|
$ |
284.76 |
|
|
$ |
262.24 |
|
|
$ |
22.52 |
|
Adjusted book value per ordinary share* |
|
|
|
|
|
|
$ |
279.37 |
|
|
$ |
258.92 |
|
|
$ |
20.45 |
|
pp - Percentage point(s)bp - Basis
point(s)*Non-GAAP measure; refer to "Non-GAAP Financial Measures"
further below for explanatory notes and a reconciliation to the
most directly comparable GAAP measure.
Results of Operations By Segment - For
the Three and Six Months Ended June 30, 2023, and 2022
Run-off Segment
The following is a discussion and analysis of
the results of operations for our Run-off segment.
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
$ |
|
June 30, |
|
$ |
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
INCOME |
(in millions of U.S. dollars) |
Net premiums earned |
$ |
7 |
|
|
$ |
9 |
|
|
$ |
(2 |
) |
|
$ |
15 |
|
|
$ |
26 |
|
|
$ |
(11 |
) |
Other income: |
|
|
|
|
|
|
|
|
|
|
|
Reduction in estimates of net ultimate defendant A&E
liabilities - prior periods |
|
— |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
2 |
|
|
|
4 |
|
|
|
(2 |
) |
Reduction in estimated future defendant A&E expenses |
|
— |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
All other income |
|
5 |
|
|
|
5 |
|
|
|
— |
|
|
|
7 |
|
|
|
12 |
|
|
|
(5 |
) |
Total other income |
|
5 |
|
|
|
7 |
|
|
|
(2 |
) |
|
|
10 |
|
|
|
17 |
|
|
|
(7 |
) |
Total income |
|
12 |
|
|
|
16 |
|
|
|
(4 |
) |
|
|
25 |
|
|
|
43 |
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
Net incurred losses and LAE: |
|
|
|
|
|
|
|
|
|
|
|
Current period |
|
3 |
|
|
|
14 |
|
|
|
(11 |
) |
|
|
13 |
|
|
|
25 |
|
|
|
(12 |
) |
Prior periods: |
|
|
|
|
|
|
|
|
|
|
|
Reduction in estimates of net ultimate losses |
|
(8 |
) |
|
|
(108 |
) |
|
|
100 |
|
|
|
(23 |
) |
|
|
(137 |
) |
|
|
114 |
|
Reduction in provisions for ULAE |
|
— |
|
|
|
(13 |
) |
|
|
13 |
|
|
|
(18 |
) |
|
|
(34 |
) |
|
|
16 |
|
Total prior periods |
|
(8 |
) |
|
|
(121 |
) |
|
|
113 |
|
|
|
(41 |
) |
|
|
(171 |
) |
|
|
130 |
|
Total net incurred losses and LAE |
|
(5 |
) |
|
|
(107 |
) |
|
|
102 |
|
|
|
(28 |
) |
|
|
(146 |
) |
|
|
118 |
|
Acquisition costs |
|
4 |
|
|
|
9 |
|
|
|
(5 |
) |
|
|
6 |
|
|
|
17 |
|
|
|
(11 |
) |
General and administrative expenses |
|
47 |
|
|
|
36 |
|
|
|
11 |
|
|
|
86 |
|
|
|
75 |
|
|
|
11 |
|
Total expenses |
|
46 |
|
|
|
(62 |
) |
|
|
108 |
|
|
|
64 |
|
|
|
(54 |
) |
|
|
118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT NET (LOSS) EARNINGS |
$ |
(34 |
) |
|
$ |
78 |
|
|
$ |
(112 |
) |
|
$ |
(39 |
) |
|
$ |
97 |
|
|
$ |
(136 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall Results
Three Months Ended June 30, 2023 versus
2022: Net loss from our Run-off segment was $34 million
compared to net earnings of $78 million in the comparative quarter,
primarily due to:
-
A $113 million decrease in favorable PPD in the current quarter,
mainly driven by a $100 million decrease in the reduction in
estimates of net ultimate losses in comparison to the comparative
quarter.
-
During the second quarter of 2023, we recognized favorable
development of $9 million on our workers’ compensation line of
business as a result of continued favorable claims experience, most
notably in the 2021 acquisition year.
-
We also increased our ULAE provision by $21 million as a result of
assuming active claims control on our 2022 LPT agreement with Argo,
which offset other ULAE reserve adjustments from our run-off
operations.
-
In comparison, during the second quarter of 2022 we recognized
favorable development of $78 million and $16 million on our
professional indemnity/directors and officers and workers’
compensation lines of business, respectively, as a result of
favorable loss activity, most notably in the 2021 acquisition year;
partially offset by
- Reductions in
current quarter net incurred losses and LAE and acquisition costs
that were greater than the reductions in net premiums earned,
following our exit of our StarStone International business
beginning in 2020.
Six Months Ended June 30, 2023 versus
2022: Net loss from our Run-off segment was $39 million
compared to net earnings of $97 million in the comparative period,
primarily due to:
-
A $130 million decrease in favorable PPD, mainly driven by a $114
million decrease in the reduction in estimates of net ultimate
losses in comparison to the comparative period.
-
We recognized favorable development of $20 million on our workers’
compensation line of business during the first half of 2023 as a
result of continued favorable claims experience, most notably in
the 2021 acquisition year.
-
We also increased our ULAE provision by $21 million as a result of
assuming active claims control on our 2022 LPT agreement with Argo,
which offset other ULAE reserve adjustments from our run-off
operations.
-
In comparison, during the first half of 2022, we recognized
favorable development of $81 million and $50 million on our
professional indemnity/directors and officers and workers’
compensation lines of business, respectively, as a result of
favorable loss activity, most notably in the 2021 acquisition year;
partially offset by
-
Reductions in current period net incurred losses and LAE and
acquisition costs that were greater than the reductions in net
premiums earned, following our exit of our StarStone International
business beginning in 2020.
Investments Segment
The following is a discussion and analysis of
the results of operations for our Investments segment.
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
$ |
|
June 30, |
|
$ |
|
2023 |
|
2022 |
|
Change |
|
2023 |
|
2022 |
|
Change |
|
(in millions of U.S. dollars) |
INCOME |
|
|
|
|
|
|
|
|
|
|
|
Net investment income: |
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities |
$ |
145 |
|
|
$ |
85 |
|
|
$ |
60 |
|
|
$ |
276 |
|
|
$ |
153 |
|
|
$ |
123 |
|
Cash and restricted cash |
|
8 |
|
|
|
1 |
|
|
|
7 |
|
|
|
13 |
|
|
|
1 |
|
|
|
12 |
|
Other investments, including equities |
|
23 |
|
|
|
22 |
|
|
|
1 |
|
|
|
47 |
|
|
|
41 |
|
|
|
6 |
|
Less: Investment expenses |
|
(4 |
) |
|
|
(4 |
) |
|
|
— |
|
|
|
(8 |
) |
|
|
(15 |
) |
|
|
7 |
|
Total net investment income |
|
172 |
|
|
|
104 |
|
|
|
68 |
|
|
|
328 |
|
|
|
180 |
|
|
|
148 |
|
Net realized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities |
|
(25 |
) |
|
|
(30 |
) |
|
|
5 |
|
|
|
(50 |
) |
|
|
(65 |
) |
|
|
15 |
|
Other investments, including equities |
|
42 |
|
|
|
(8 |
) |
|
|
50 |
|
|
|
31 |
|
|
|
(10 |
) |
|
|
41 |
|
Net realized gains (losses): |
|
17 |
|
|
|
(38 |
) |
|
|
55 |
|
|
|
(19 |
) |
|
|
(75 |
) |
|
|
56 |
|
Net unrealized gains (losses): |
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities, trading |
|
(64 |
) |
|
|
(377 |
) |
|
|
313 |
|
|
|
2 |
|
|
|
(670 |
) |
|
|
672 |
|
Other investments, including equities |
|
20 |
|
|
|
(212 |
) |
|
|
232 |
|
|
|
178 |
|
|
|
(294 |
) |
|
|
472 |
|
Total net unrealized (losses) gains: |
|
(44 |
) |
|
|
(589 |
) |
|
|
545 |
|
|
|
180 |
|
|
|
(964 |
) |
|
|
1,144 |
|
Total income (loss) |
|
145 |
|
|
|
(523 |
) |
|
|
668 |
|
|
|
489 |
|
|
|
(859 |
) |
|
|
1,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
10 |
|
|
|
10 |
|
|
|
— |
|
|
|
21 |
|
|
|
19 |
|
|
|
2 |
|
Total expenses |
|
10 |
|
|
|
10 |
|
|
|
— |
|
|
|
21 |
|
|
|
19 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from equity method investments |
|
14 |
|
|
|
1 |
|
|
|
13 |
|
|
|
25 |
|
|
|
32 |
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT NET EARNINGS (LOSS) |
$ |
149 |
|
|
$ |
(532 |
) |
|
$ |
681 |
|
|
$ |
493 |
|
|
$ |
(846 |
) |
|
$ |
1,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overall Results
Three Months Ended June 30, 2023 versus
2022: Net earnings from our Investments segment were
$149 million for the three months ended June 30, 2023 compared
to net losses of $532 million for the three months ended June 30,
2022. The favorable movement of $681 million was primarily due
to:
-
a decrease in net realized and unrealized losses on fixed
maturities of $318 million, primarily as a result of a less
significant increase in interest rates across U.S., U.K. and
European markets and tightening of credit spreads relative to the
comparable quarter;
-
net realized and unrealized gains on other investments, including
equities, of $62 million, compared to net realized and unrealized
losses of $220 million in the comparative period. The favorable
variance of $282 million was primarily driven by:
-
Net gains for the three months ended June 30, 2023, primarily
driven by our public equities, private equity funds, fixed income
funds and private credit funds, largely as a result of global
equity market performance and tightening high yield credit spreads;
in comparison to
-
Net losses for the three months ended June 30, 2022, primarily
driven by our fixed income funds, public equities and CLO equities,
largely as a result of global equity market declines and the
widening of high yield credit spreads. This was partially offset by
gains on our private equity funds, private credit funds and real
estate funds for the three months ended June 30, 2022, which are
typically recorded on a one quarter lag; and
- an increase in our net investment
income of $68 million, which is primarily due to the reinvestment
of fixed maturities at higher yields, deployment of consideration
received from deals closed in the second half of 2022 and the first
half of 2023 and the impact of rising interest rates on the
$3.1 billion of our fixed maturities that are subject to
floating interest rates. Our floating rate investments generated
increased net investment income of $28 million, which equates
to an increase of 326 basis points on those investments in
comparison to the prior quarter.
Six Months Ended June 30, 2023 versus
2022: Net earnings from our Investments segment was $493
million for the six months ended June 30, 2023 compared to net
losses of $846 million for the six months ended June 30, 2022. The
favorable movement of $1.3 billion was primarily due to:
-
a decrease in net realized and unrealized losses on fixed
maturities of $687 million, primarily driven by a net decline in
interest rates and tightening of credit spreads in the current
period, in comparison to an increase in interest rates across U.S.,
U.K. and European markets and widening of credit spreads in the
prior period;
-
net realized and unrealized gains on other investments, including
equities, of $209 million, compared to net realized and unrealized
losses of $304 million in the comparative period. The favorable
variance of $513 million was primarily driven by:
-
Net gains for the six months ended June 30, 2023, primarily from
our public equities, private equity funds, private credit funds and
fixed income funds, largely as a result of strong global equity
market performance and tightening of high yield credit spreads; in
comparison to
-
Net losses for the six months ended June 30, 2022, driven by our
fixed income funds, public equities, hedge funds and CLO equities,
largely as a result of global equity market declines and the
widening of high yield credit spreads. This was partially offset by
gains on our private equity funds, private credit funds and real
estate funds, which are typically recorded on a one quarter lag;
and
- an increase in
our net investment income of $148 million, which is primarily due
to the reinvestment of fixed maturities at higher yields,
deployment of consideration received from deals closed in the
second half of 2022 and the first six months of 2023 and the impact
of rising interest rates on the $3.1 billion of our fixed
maturities that are subject to floating interest rates. Our
floating rate investments generated increased net investment income
of $56 million, which equates to an increase of 346 basis
points on those investments in comparison to the prior period.
Income and (Loss) Earnings by Segment -
For the Three and Six Months Ended June 30, 2023 and
2022
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
June 30, |
|
|
|
2023 |
|
2022 |
|
$ Change |
|
2023 |
|
2022 |
|
$ Change |
|
(in millions of U.S. dollars) |
INCOME |
|
|
|
|
|
|
|
|
|
|
|
Run-off |
$ |
12 |
|
|
$ |
16 |
|
|
$ |
(4 |
) |
|
$ |
25 |
|
|
$ |
43 |
|
|
$ |
(18 |
) |
Assumed Life |
|
— |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
275 |
|
|
|
15 |
|
|
|
260 |
|
Investments |
|
145 |
|
|
|
(523 |
) |
|
|
668 |
|
|
|
489 |
|
|
|
(859 |
) |
|
|
1,348 |
|
Legacy Underwriting |
|
— |
|
|
|
6 |
|
|
|
(6 |
) |
|
|
— |
|
|
|
8 |
|
|
|
(8 |
) |
Subtotal |
|
157 |
|
|
|
(500 |
) |
|
|
657 |
|
|
|
789 |
|
|
|
(793 |
) |
|
|
1,582 |
|
Corporate and other |
|
(3 |
) |
|
|
14 |
|
|
|
(17 |
) |
|
|
(3 |
) |
|
|
17 |
|
|
|
(20 |
) |
Total income (loss) |
$ |
154 |
|
|
$ |
(486 |
) |
|
$ |
640 |
|
|
$ |
786 |
|
|
$ |
(776 |
) |
|
$ |
1,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SEGMENT NET EARNINGS (LOSS) |
|
|
|
|
|
|
|
|
|
|
|
Run-off |
$ |
(34 |
) |
|
$ |
78 |
|
|
$ |
(112 |
) |
|
$ |
(39 |
) |
|
$ |
97 |
|
|
$ |
(136 |
) |
Assumed Life |
|
— |
|
|
|
(7 |
) |
|
|
7 |
|
|
|
275 |
|
|
|
22 |
|
|
|
253 |
|
Investments |
|
149 |
|
|
|
(532 |
) |
|
|
681 |
|
|
|
493 |
|
|
|
(846 |
) |
|
|
1,339 |
|
Legacy Underwriting |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total segment net earnings (loss) |
|
115 |
|
|
|
(461 |
) |
|
|
576 |
|
|
|
729 |
|
|
|
(727 |
) |
|
|
1,456 |
|
Corporate and other |
|
(94 |
) |
|
|
27 |
|
|
|
(121 |
) |
|
|
(284 |
) |
|
|
26 |
|
|
|
(310 |
) |
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR ORDINARY
SHAREHOLDERS |
$ |
21 |
|
|
$ |
(434 |
) |
|
$ |
455 |
|
|
$ |
445 |
|
|
$ |
(701 |
) |
|
$ |
1,146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
For additional detail on the Assumed Life
segment, the Legacy Underwriting segment and Corporate and other
activities, please refer to our Quarterly Report on Form 10-Q for
the period ended June 30, 2023.
Cautionary Statement
This press release contains certain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements include
statements regarding the intent, belief or current expectations of
Enstar and its management team. Investors can identify these
statements by the fact that they do not relate strictly to
historical or current facts. They use words such as ‘aim’,
‘anticipate’, ‘estimate’, ‘expect’, ‘intend’, ‘will’, ‘project’,
‘plan’, ‘believe’, ‘target’ and other words and terms of similar
meaning in connection with any discussion of future events or
performance. Investors are cautioned that any such forward-looking
statements speak only as of the date they are made, are not
guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of
various factors. Important risk factors regarding Enstar can be
found under the heading "Risk Factors" in our Form 10-K for the
year ended December 31, 2022 and are incorporated herein by
reference. Furthermore, Enstar undertakes no obligation to update
any written or oral forward-looking statements or publicly announce
any updates or revisions to any of the forward-looking statements
contained herein, to reflect any change in its expectations with
regard thereto or any change in events, conditions, circumstances
or assumptions underlying such statements, except as required by
law.
About Enstar
Enstar is a NASDAQ-listed leading global
(re)insurance group that offers capital release solutions through
its network of group companies in Bermuda, the United States, the
United Kingdom, Continental Europe and Australia. A market leader
in completing legacy acquisitions, Enstar has acquired over 115
companies and portfolios since its formation. For further
information about Enstar, see www.enstargroup.com.
Contacts
For Investors: Matthew Kirk
(investor.relations@enstargroup.com)For Media:
Jenna Kerr (communications@enstargroup.com)
ENSTAR GROUP
LIMITEDCONDENSED CONSOLIDATED STATEMENTS OF
EARNINGSFor the Three and Six Months Ended June
30, 2023 and 2022
|
Three Months EndedJune 30, |
|
Six Months EndedJune 30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
(expressed in millions of U.S. dollars, except share and
per share data) |
INCOME |
|
|
|
|
|
|
|
Net premiums earned |
$ |
7 |
|
|
$ |
14 |
|
|
$ |
15 |
|
|
$ |
48 |
|
Net investment income |
|
172 |
|
|
|
106 |
|
|
|
328 |
|
|
|
186 |
|
Net realized gains (losses) |
|
17 |
|
|
|
(38 |
) |
|
|
(19 |
) |
|
|
(75 |
) |
Net unrealized (losses) gains |
|
(44 |
) |
|
|
(591 |
) |
|
|
180 |
|
|
|
(972 |
) |
Other income |
|
2 |
|
|
|
23 |
|
|
|
282 |
|
|
|
37 |
|
Total income (loss) |
|
154 |
|
|
|
(486 |
) |
|
|
786 |
|
|
|
(776 |
) |
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
Net incurred losses and loss adjustment expenses |
|
|
|
|
|
|
|
Current period |
|
3 |
|
|
|
13 |
|
|
|
13 |
|
|
|
26 |
|
Prior periods |
|
(10 |
) |
|
|
(159 |
) |
|
|
(20 |
) |
|
|
(335 |
) |
Total net incurred losses and loss adjustment expenses |
|
(7 |
) |
|
|
(146 |
) |
|
|
(7 |
) |
|
|
(309 |
) |
Policyholder benefit expenses |
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
18 |
|
Amortization of net deferred charge assets |
|
24 |
|
|
|
21 |
|
|
|
41 |
|
|
|
39 |
|
Acquisition costs |
|
4 |
|
|
|
12 |
|
|
|
6 |
|
|
|
20 |
|
General and administrative expenses |
|
85 |
|
|
|
83 |
|
|
|
174 |
|
|
|
168 |
|
Interest expense |
|
22 |
|
|
|
23 |
|
|
|
45 |
|
|
|
48 |
|
Net foreign exchange losses (gains) |
|
5 |
|
|
|
(13 |
) |
|
|
(1 |
) |
|
|
(10 |
) |
Total expenses |
|
133 |
|
|
|
(14 |
) |
|
|
258 |
|
|
|
(26 |
) |
|
|
|
|
|
|
|
|
EARNINGS (LOSS) BEFORE INCOME TAXES |
|
21 |
|
|
|
(472 |
) |
|
|
528 |
|
|
|
(750 |
) |
Income tax benefit |
|
4 |
|
|
|
4 |
|
|
|
5 |
|
|
|
4 |
|
Earnings from equity method investments |
|
14 |
|
|
|
1 |
|
|
|
25 |
|
|
|
32 |
|
NET EARNINGS (LOSS) |
|
39 |
|
|
|
(467 |
) |
|
|
558 |
|
|
|
(714 |
) |
Net (earnings) loss attributable to noncontrolling interests |
|
(9 |
) |
|
|
42 |
|
|
|
(95 |
) |
|
|
31 |
|
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR |
|
30 |
|
|
|
(425 |
) |
|
|
463 |
|
|
|
(683 |
) |
Dividends on preferred shares |
|
(9 |
) |
|
|
(9 |
) |
|
|
(18 |
) |
|
|
(18 |
) |
NET EARNINGS (LOSS) ATTRIBUTABLE TO ENSTAR ORDINARY
SHAREHOLDERS |
$ |
21 |
|
|
$ |
(434 |
) |
|
$ |
445 |
|
|
$ |
(701 |
) |
|
|
|
|
|
|
|
|
Earnings (loss) per ordinary share attributable to Enstar: |
|
|
|
|
Basic |
$ |
1.36 |
|
|
$ |
(25.20 |
) |
|
$ |
27.44 |
|
|
$ |
(40.29 |
) |
Diluted |
$ |
1.34 |
|
|
$ |
(25.20 |
) |
|
$ |
27.19 |
|
|
$ |
(40.29 |
) |
Weighted average ordinary shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
15,460,318 |
|
|
|
17,224,449 |
|
|
|
16,216,080 |
|
|
|
17,400,257 |
|
Diluted |
|
15,660,981 |
|
|
|
17,470,691 |
|
|
|
16,366,517 |
|
|
|
17,634,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENSTAR GROUP
LIMITEDCONDENSED CONSOLIDATED BALANCE
SHEETSAs of June 30, 2023 and December 31,
2022
|
June 30, 2023 |
|
December 31, 2022 |
|
(in millions of U.S. dollars, except share
data) |
ASSETS |
|
|
|
Short-term investments, trading, at fair value |
$ |
6 |
|
|
$ |
14 |
|
Short-term investments, available-for-sale, at fair value
(amortized cost: 2023 — $59; 2022 — $37) |
|
59 |
|
|
|
38 |
|
Fixed maturities, trading, at fair value |
|
2,038 |
|
|
|
2,370 |
|
Fixed maturities, available-for-sale, at fair value (amortized
cost: 2023 — $5,901; 2022 — $5,871; net of allowance:
2023 — $24; 2022 — $33) |
|
5,351 |
|
|
|
5,223 |
|
Funds held - directly managed, at fair value |
|
2,669 |
|
|
|
2,040 |
|
Equities, at fair value (cost: 2023 — $953; 2022 — $1,357) |
|
965 |
|
|
|
1,250 |
|
Other investments, at fair value (includes consolidated variable
interest entity: 2023 - $32; 2022 - $3) |
|
3,416 |
|
|
|
3,296 |
|
Equity method investments |
|
424 |
|
|
|
397 |
|
Total investments |
|
14,928 |
|
|
|
14,628 |
|
Cash and cash equivalents |
|
768 |
|
|
|
822 |
|
Restricted cash and cash equivalents |
|
418 |
|
|
|
508 |
|
Reinsurance balances recoverable on paid and unpaid losses (net of
allowance: 2023 — $135; 2022 — $131) |
|
846 |
|
|
|
856 |
|
Reinsurance balances recoverable on paid and unpaid losses, at fair
value |
|
247 |
|
|
|
275 |
|
Insurance balances recoverable (net of allowance: 2023 and 2022 —
$5) |
|
175 |
|
|
|
177 |
|
Funds held by reinsured companies |
|
3,105 |
|
|
|
3,582 |
|
Net deferred charge assets |
|
797 |
|
|
|
658 |
|
Other assets |
|
577 |
|
|
|
648 |
|
TOTAL ASSETS |
$ |
21,861 |
|
|
$ |
22,154 |
|
LIABILITIES |
|
|
|
Losses and loss adjustment expenses |
$ |
12,664 |
|
|
$ |
11,721 |
|
Losses and loss adjustment expenses, at fair value |
|
1,170 |
|
|
|
1,286 |
|
Future policyholder benefits |
|
— |
|
|
|
821 |
|
Defendant asbestos and environmental liabilities |
|
587 |
|
|
|
607 |
|
Insurance and reinsurance balances payable |
|
96 |
|
|
|
100 |
|
Debt obligations |
|
1,830 |
|
|
|
1,829 |
|
Other liabilities |
|
412 |
|
|
|
462 |
|
TOTAL LIABILITIES |
|
16,759 |
|
|
|
16,826 |
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
REDEEMABLE NONCONTROLLING INTERESTS |
|
178 |
|
|
|
168 |
|
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
Ordinary Shares (par value $1 each, issued and outstanding 2023:
16,027,816; 2022: 17,588,050): |
|
|
|
Voting Ordinary Shares (issued and outstanding 2023: 16,027,816;
2022: 15,990,338) |
|
16 |
|
|
|
16 |
|
Non-voting convertible ordinary Series C Shares (issued and
outstanding 2023: 0; 2022: 1,192,941) |
|
— |
|
|
|
1 |
|
Non-voting convertible ordinary Series E Shares (issued and
outstanding 2023: 0; 2022: 404,771) |
|
— |
|
|
|
— |
|
Preferred Shares: |
|
|
|
Series C Preferred Shares (issued and held in treasury 2023 and
2022: 388,571) |
|
— |
|
|
|
— |
|
Series D Preferred Shares (issued and outstanding 2023 and 2022:
16,000; liquidation preference $400) |
|
400 |
|
|
|
400 |
|
Series E Preferred Shares (issued and outstanding 2023 and 2022:
4,400; liquidation preference $110) |
|
110 |
|
|
|
110 |
|
Treasury shares, at cost (Series C Preferred Shares 2023 and 2022:
388,571) |
|
(422 |
) |
|
|
(422 |
) |
Joint Share Ownership Plan (voting ordinary shares, held in trust
2023 and 2022: 565,630) |
|
(1 |
) |
|
|
(1 |
) |
Additional paid-in capital |
|
447 |
|
|
|
766 |
|
Accumulated other comprehensive loss |
|
(488 |
) |
|
|
(302 |
) |
Retained earnings |
|
4,851 |
|
|
|
4,406 |
|
Total Enstar Shareholders’ Equity |
|
4,913 |
|
|
|
4,974 |
|
Noncontrolling interests |
|
11 |
|
|
|
186 |
|
TOTAL SHAREHOLDERS’ EQUITY |
|
4,924 |
|
|
|
5,160 |
|
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND
SHAREHOLDERS’ EQUITY |
$ |
21,861 |
|
|
$ |
22,154 |
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
In addition to our key financial measures
presented in accordance with GAAP, we present other non-GAAP
financial measures that we use to manage our business, compare our
performance against prior periods and against our peers, and as
performance measures in our incentive compensation program.
These non-GAAP financial measures provide an
additional view of our operational performance over the long-term
and provide the opportunity to analyze our results in a way that is
more aligned with the manner in which our management measures our
underlying performance.
The presentation of these non-GAAP financial
measures, which may be defined and calculated differently by other
companies, is used to enhance the understanding of certain aspects
of our financial performance. It is not meant to be considered in
isolation, superior to, or as a substitute for the directly
comparable financial measures prepared in accordance with GAAP.
Some of the adjustments reflected in our
non-GAAP measures are recurring items, such as the exclusion of
adjustments to net realized and unrealized (gains)/losses on fixed
maturity investments recognized in our income statement, the fair
value of certain of our loss reserve liabilities for which we have
elected the fair value option, and the amortization of fair value
adjustments.
Management makes these adjustments in assessing
our performance so that the changes in fair value due to interest
rate movements, which are applied to some but not all of our assets
and liabilities as a result of preexisting accounting elections, do
not impair comparability across reporting periods.
It is important for the readers of our periodic
filings to understand that these items will recur from period to
period.
However, we exclude these items for the purpose
of presenting a comparable view across reporting periods of the
impact of our underlying claims management and investments without
the effect of interest rate fluctuations on assets that we
anticipate to hold to maturity and non-cash changes to the fair
value of our reserves.
Similarly, our non-GAAP measures reflect the
exclusion of certain items that we deem to be nonrecurring, unusual
or infrequent when the nature of the charge or gain is such that it
is not reasonably likely that such item may recur within two years,
nor was there a similar charge or gain in the preceding two years.
This includes adjustments related to bargain purchase gains on
acquisitions of businesses, net gains or losses on sales of
subsidiaries, net assets of held for sale or disposed subsidiaries
classified as discontinued operations and other items that we
separately disclose.
The following table presents more information on
each non-GAAP measure. The results and GAAP reconciliations for
these measures are set forth further below.
Non-GAAP Measure |
|
Definition |
|
Purpose of Non-GAAP Measure over GAAP Measure |
Adjusted book value per ordinary share |
|
Total Enstar ordinary shareholders' equityDivided byNumber of
ordinary shares outstanding, adjusted for:-the ultimate effect of
any dilutive securities on the number of ordinary shares
outstanding |
|
Increases the number of ordinary shares to reflect the exercise of
equity awards granted but not yet vested as, over the long term,
this presents both management and investors with a more
economically accurate measure of the realizable value of
shareholder returns by factoring in the impact of share dilution.
We use this non-GAAP measure in our incentive compensation
program. |
Adjusted return on equity (%) |
|
Adjusted operating income (loss) attributable to Enstar ordinary
shareholders divided by adjusted opening Enstar ordinary
shareholder's equity |
|
Calculating the operating income (loss) as a percentage of our
adjusted opening Enstar ordinary shareholders' equity provides a
more consistent measure of the performance of our business by
enabling comparison between the financial periods presented. We
eliminate the impact of net realized and unrealized (gains) losses
on fixed maturities and funds-held directly managed and the change
in fair value of insurance contracts for which we have elected the
fair value option, as:
- we typically hold most of our fixed
maturities until the earlier of maturity or the time that they are
used to fund any settlement of related liabilities which are
generally recorded at cost; and
- removing the fair value option
improves comparability since there are limited acquisition years
for which we elected the fair value option.
Therefore, we believe that excluding their impact on our earnings
improves comparability of our core operational performance across
periods. We include fair value adjustments
as non-GAAP adjustments to the adjusted operating income (loss)
attributable to Enstar ordinary shareholders as they are non-cash
charges that are not reflective of the impact of our claims
management strategies on our loss portfolios. We eliminate the
net gain (loss) on the purchase and sales of subsidiaries and net
earnings from discontinued operations, as these items are not
indicative of our ongoing operations. We use this
non-GAAP measure in our incentive compensation program. |
Adjusted operating income (loss) attributable to Enstar
ordinary
shareholders(numerator) |
|
Net earnings (loss) attributable to Enstar ordinary shareholders,
adjusted for:-net realized and unrealized (gains) losses on fixed
maturities and funds held-directly managed,-change in fair value of
insurance contracts for which we have elected the fair value option
(1),-amortization of fair value adjustments,-net gain/loss on
purchase and sales of subsidiaries (if any),-net earnings from
discontinued operations (if any),-tax effects of adjustments,
and-adjustments attributable to noncontrolling interests |
|
Adjusted opening Enstar ordinary shareholders' equity
(denominator) |
|
Opening Enstar ordinary shareholders' equity, less:-net unrealized
gains (losses) on fixed maturities and funds held-directly
managed,-fair value of insurance contracts for which we have
elected the fair value option (1),-fair value adjustments, and-net
assets of held for sale or disposed subsidiaries classified as
discontinued operations (if any) |
|
Adjusted run-off liability earnings (%) |
|
Adjusted PPD divided by average adjusted net loss reserves. |
|
Calculating the RLE as a percentage of our adjusted average net
loss reserves provides a more meaningful and comparable measurement
of the impact of our claims management strategies on our loss
portfolios across acquisition years and also to our overall
financial periods. We use this measure to evaluate
the impact of our claims management strategies because it provides
visibility into our ability to settle our claims obligations for
amounts less than our initial estimate at the point of acquiring
the obligations. The following
components of periodic recurring net incurred losses and LAE and
net loss reserves are not considered key components of our claims
management performance for the following reasons:
- Prior to the settlement of the
contractual arrangements, the results of our Legacy Underwriting
segment were economically transferred to a third party primarily
through use of reinsurance and a Capacity Lease Agreement(2); as
such, the results were not a relevant contribution to Adjusted RLE,
which is designed to analyze the impact of our claims management
strategies;
- The results of our Assumed Life
segment relate only to our prior exposure to active property
catastrophe business; as this business was not in run-off, the
results were not a relevant contribution to Adjusted
RLE;
- The change in fair value of insurance
contracts for which we have elected the fair value option(1) has
been removed to support comparability between the two acquisition
years for which we elected the fair value option in reserves
assumed and the acquisition years for which we did not make this
election (specifically, this election was only made in the 2017 and
2018 acquisition years and the election of such option is
irrevocable); and
- The amortization of fair value
adjustments are non-cash charges that obscure our trends on a
consistent basis.
We include our performance in managing claims and estimated future
expenses on our defendant A&E liabilities because such
performance is relevant to assessing our claims management
strategies even though such liabilities are not included within the
loss reserves.We use this measure to assess the performance of our
claim strategies and part of the performance assessment of our past
acquisitions. |
Adjusted prior period
development(numerator) |
|
Prior period net incurred losses and LAE, adjusted to: Remove:
-Legacy Underwriting and Assumed Life operations-amortization of
fair value adjustments, -change in fair value of insurance
contracts for which we have elected the fair value option (1), and
Add: -the reduction/(increase) in estimates of net
ultimate liabilities and reduction in estimated future expenses of
our defendant A&E liabilities. |
|
Adjusted net loss reserves
(denominator) |
|
Net losses and LAE, adjusted to:Remove:-Legacy Underwriting and
Assumed Life net loss reserves-current period net loss reserves-net
fair value adjustments associated with the acquisition of
companies,-the fair value adjustments for contracts for which we
have elected the fair value option (1) andAdd:-net nominal
defendant A&E liability exposures and estimated future
expenses. |
|
Adjusted total investment return (%) |
|
Adjusted total investment return (dollars) recognized in earnings
for the applicable period divided by period average adjusted total
investable assets. |
|
Provides a key measure of the return generated on the capital held
in the business and is reflective of our investment strategy.
Provides a consistent measure of investment returns as a percentage
of all assets generating investment returns. We adjust our
investment returns to eliminate the impact of the change in fair
value of fixed maturities (both credit spreads and interest rates),
as we typically hold most of these investments until the earlier of
maturity or used to fund any settlement of related liabilities
which are generally recorded at cost. |
Adjusted total investment return ($)
(numerator) |
|
Total investment return (dollars), adjusted for:-net realized and
unrealized (gains) losses on fixed maturities and funds
held-directly managed; and-unrealized (gains) losses on fixed
maturities, AFS included within OCI, net of reclassification
adjustments and excluding foreign exchange. |
|
Adjusted average aggregate total investable assets
(denominator) |
|
Total average investable assets, adjusted for: -net unrealized
(gains) losses on fixed maturities, AFS included within AOCI-net
unrealized (gains) losses on fixed maturities, trading |
|
(1) Comprises the discount rate and risk margin
components.(2) The reinsurance contractual arrangements (including
the Capacity Lease Agreement) described in Note 5 to our
consolidated financial statements in our Annual Report on Form 10-K
for the year ended December 31, 2022 were settled during the second
quarter of 2023. As a result of the settlement, we do not expect to
record any transactions in the Legacy Underwriting segment in
2023.
Reconciliation of GAAP to Non-GAAP
Measures
The table below presents a reconciliation of
BVPS to Adjusted BVPS*:
|
|
June 30, 2023 |
|
December 31, 2022 |
|
|
Equity(1) |
|
Ordinary Shares |
|
Per Share Amount |
|
Equity(1) (2) |
|
Ordinary Shares |
|
Per Share Amount |
|
|
(in millions of U.S. dollars, except share and per share
data) |
Book value per ordinary share |
|
$ |
4,403 |
|
|
15,462,186 |
|
|
$ |
284.76 |
|
|
$ |
4,464 |
|
|
17,022,420 |
|
|
$ |
262.24 |
|
Non-GAAP adjustment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation plans |
|
|
|
298,129 |
|
|
|
|
|
|
218,171 |
|
|
|
Adjusted book value per ordinary share* |
|
$ |
4,403 |
|
|
15,760,315 |
|
|
$ |
279.37 |
|
|
$ |
4,464 |
|
|
17,240,591 |
|
|
$ |
258.92 |
|
(1) Equity comprises Enstar ordinary
shareholders' equity, which is calculated as Enstar shareholders'
equity less preferred shares ($510 million) prior to any non-GAAP
adjustments.(2) Enstar ordinary shareholders’ equity as of December
31, 2022 has been retrospectively adjusted for the impact of
adopting ASU 2018-12. Refer to Note 8 to our condensed consolidated
financial statements in our Quarterly Report on Form 10-Q for the
period ended June 30, 2023 for further information.
The table below presents a reconciliation of ROE
to Adjusted ROE* and Annualized ROE to Annualized Adjusted
ROE*:
|
Three Months Ended |
|
|
|
June 30, 2023 |
|
June 30, 2022 |
|
|
|
Net earnings (loss)(1) |
|
Opening equity(1) |
|
(Adj) ROE |
|
Annualized(Adj) ROE |
|
Net earnings (loss)(1) |
|
Opening equity(1) |
|
(Adj) ROE |
|
Annualized (Adj) ROE |
|
(in millions of U.S. dollars) |
|
|
Net earnings (loss)/Opening equity/ROE/Annualized
ROE(1) |
$ |
21 |
|
|
$ |
4,367 |
|
|
0.5 |
% |
|
1.9 |
% |
|
$ |
(434 |
) |
|
$ |
5,299 |
|
|
(8.2 |
)% |
|
(32.8 |
)% |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remove: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized losses on fixed maturities and funds
held - directly managed / Net unrealized losses on fixed maturities
and funds held - directly managed(2) |
|
89 |
|
|
|
994 |
|
|
|
|
|
|
|
409 |
|
|
|
458 |
|
|
|
|
|
|
|
Change in fair value of insurance contracts for which we have
elected the fair value option / Fair value of insurance contracts
for which we have elected the fair value option(3) |
|
(8 |
) |
|
|
(278 |
) |
|
|
|
|
|
|
(48 |
) |
|
|
(201 |
) |
|
|
|
|
|
|
Amortization of fair value adjustments / Fair value
adjustments |
|
6 |
|
|
|
(121 |
) |
|
|
|
|
|
|
5 |
|
|
|
(104 |
) |
|
|
|
|
|
|
Tax effects of adjustments(4) |
|
(3 |
) |
|
|
— |
|
|
|
|
|
|
|
22 |
|
|
|
— |
|
|
|
|
|
|
|
Adjustments attributable to noncontrolling interests(5) |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(43 |
) |
|
|
— |
|
|
|
|
|
|
|
Adjusted operating income (loss)/Adjusted opening
equity/Adjusted ROE/Annualized adjusted ROE* |
$ |
105 |
|
|
$ |
4,962 |
|
|
2.1 |
% |
|
8.5 |
% |
|
$ |
(89 |
) |
|
$ |
5,452 |
|
|
(1.6 |
)% |
|
(6.6 |
)% |
(1) Net earnings (loss) comprises net earnings
(loss) attributable to Enstar ordinary shareholders, prior to any
non-GAAP adjustments. Opening equity comprises Enstar ordinary
shareholders' equity, which is calculated as opening Enstar
shareholders' equity less preferred shares ($510 million), prior to
any non-GAAP adjustments.(2) Represents the net realized and
unrealized losses (gains) related to fixed maturities. Our fixed
maturities are held directly on our balance sheet and also within
the "Funds held - directly managed" balance.(3) Comprises the
discount rate and risk margin components.(4) Represents an
aggregation of the tax expense or benefit associated with the
specific country to which the pre-tax adjustment relates,
calculated at the applicable jurisdictional tax rate.(5) Represents
the impact of the adjustments on the net earnings (loss)
attributable to noncontrolling interests associated with the
specific subsidiaries to which the adjustments relate.*Non-GAAP
measure.
|
Six Months Ended |
|
|
|
June 30, 2023 |
|
June 30, 2022 |
|
|
|
Net earnings (loss)(1) |
|
Opening equity(1)(2) |
|
(Adj) ROE |
|
Annualized(Adj) ROE |
|
Net earnings (loss)(1) |
|
Opening equity(1) |
|
(Adj) ROE |
|
Annualized (Adj) ROE |
|
(in millions of U.S. dollars) |
|
|
Net earnings (loss)/Opening equity/ROE/Annualized
ROE(1) |
$ |
445 |
|
|
$ |
4,464 |
|
|
10.0 |
% |
|
19.9 |
% |
|
$ |
(701 |
) |
|
$ |
5,813 |
|
|
(12.1 |
)% |
|
(24.1 |
)% |
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized losses on fixed maturities and funds
held - directly managed / Net unrealized gains on fixed maturities
and funds held - directly managed(3) |
|
48 |
|
|
|
1,827 |
|
|
|
|
|
|
|
743 |
|
|
|
(89 |
) |
|
|
|
|
|
|
Change in fair value of insurance contracts for which we have
elected the fair value option / Fair value of insurance contracts
for which we have elected the fair value option(4) |
|
12 |
|
|
|
(294 |
) |
|
|
|
|
|
|
(146 |
) |
|
|
(107 |
) |
|
|
|
|
|
|
Amortization of fair value adjustments / Fair value
adjustments |
|
9 |
|
|
|
(124 |
) |
|
|
|
|
|
|
7 |
|
|
|
(106 |
) |
|
|
|
|
|
|
Net gain on purchase and sales of subsidiaries |
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
Tax effects of adjustments(5) |
|
(6 |
) |
|
|
— |
|
|
|
|
|
|
|
(4 |
) |
|
|
— |
|
|
|
|
|
|
|
Adjustments attributable to noncontrolling interests(6) |
|
(2 |
) |
|
|
— |
|
|
|
|
|
|
|
(48 |
) |
|
|
— |
|
|
|
|
|
|
|
Adjusted operating income (loss)/Adjusted opening
equity/Adjusted ROE/Annualized adjusted ROE* |
$ |
506 |
|
|
$ |
5,873 |
|
|
8.6 |
% |
|
17.2 |
% |
|
$ |
(149 |
) |
|
$ |
5,511 |
|
|
(2.7 |
)% |
|
(5.4 |
)% |
(1) Net earnings (loss) comprises net earnings
(loss) attributable to Enstar ordinary shareholders, prior to any
non-GAAP adjustments. Opening equity comprises Enstar ordinary
shareholders' equity, which is calculated as opening Enstar
shareholders' equity less preferred shares ($510 million), prior to
any non-GAAP adjustments.(2) Enstar ordinary shareholders’ equity
as of December 31, 2022 has been retrospectively adjusted for the
impact of adopting ASU 2018-12. Refer to Note 8 to our condensed
consolidated financial statements in our Quarterly Report on Form
10-Q for the period ended June 30, 2023 for further information.(3)
Represents the net realized and unrealized losses (gains) related
to fixed maturities. Our fixed maturities are held directly on our
balance sheet and also within the "Funds held - directly managed"
balance.(4) Comprises the discount rate and risk margin
components.(5) Represents an aggregation of the tax expense or
benefit associated with the specific country to which the pre-tax
adjustment relates, calculated at the applicable jurisdictional tax
rate.(6) Represents the impact of the adjustments on the net
earnings (loss) attributable to noncontrolling interests associated
with the specific subsidiaries to which the adjustments
relate.*Non-GAAP measure.
The tables below present a reconciliation of RLE
to Adjusted RLE* and Annualized RLE to Annualized Adjusted
RLE*:
|
|
Three Months Ended |
|
As of |
|
Three Months Ended |
|
|
June 30, 2023 |
|
June 30, 2023 |
|
March 31, 2023 |
|
June 30, 2023 |
|
June 30, 2023 |
|
|
RLE / PPD |
|
Net loss reserves |
|
Net loss reserves |
|
Average net loss reserves |
|
RLE % |
|
Annualized RLE % |
|
|
(in millions of U.S. dollars) |
PPD/net loss reserves/RLE/Annualized RLE |
|
$ |
10 |
|
|
$ |
12,939 |
|
|
$ |
11,226 |
|
|
$ |
12,082 |
|
|
0.1 |
% |
|
0.3 |
% |
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss reserves - current period |
|
|
— |
|
|
|
(11 |
) |
|
|
(9 |
) |
|
|
(10 |
) |
|
|
|
|
Amortization of fair value adjustments / Net fair value adjustments
associated with the acquisition of companies |
|
|
6 |
|
|
|
116 |
|
|
|
121 |
|
|
|
119 |
|
|
|
|
|
Changes in fair value - fair value option / Net fair value
adjustments for contracts for which we have elected the fair value
option(1) |
|
|
(8 |
) |
|
|
312 |
|
|
|
278 |
|
|
|
295 |
|
|
|
|
|
Change in estimate of net ultimate liabilities - defendant A&E
/ Net nominal defendant A&E liabilities |
|
|
— |
|
|
|
550 |
|
|
|
560 |
|
|
|
555 |
|
|
|
|
|
Reduction in estimated future expenses - defendant A&E /
Estimated future expenses - defendant A&E |
|
|
— |
|
|
|
34 |
|
|
|
34 |
|
|
|
34 |
|
|
|
|
|
Adjusted PPD/Adjusted net loss reserves/ Adjusted
RLE/Annualized Adjusted RLE* |
|
$ |
8 |
|
|
$ |
13,940 |
|
|
$ |
12,210 |
|
|
$ |
13,075 |
|
|
0.1 |
% |
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
As of |
|
Three Months Ended |
|
|
June 30, 2022 |
|
June 30, 2022 |
|
March 31, 2022 |
|
June 30, 2022 |
|
June 30, 2022 |
|
|
RLE / PPD |
|
Net loss reserves |
|
Net loss reserves |
|
Average net loss reserves |
|
RLE % |
|
Annualized RLE % |
|
|
(in millions of U.S. dollars) |
|
|
PPD/net loss reserves/RLE/Annualized RLE |
|
$ |
159 |
|
|
$ |
12,524 |
|
|
$ |
11,300 |
|
|
$ |
11,912 |
|
|
1.3 |
% |
|
5.3 |
% |
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss reserves - current period |
|
|
— |
|
|
|
(25 |
) |
|
|
(13 |
) |
|
|
(19 |
) |
|
|
|
|
Assumed Life |
|
|
— |
|
|
|
(149 |
) |
|
|
(152 |
) |
|
|
(151 |
) |
|
|
|
|
Legacy Underwriting |
|
|
5 |
|
|
|
(140 |
) |
|
|
(143 |
) |
|
|
(142 |
) |
|
|
|
|
Amortization of fair value adjustments / Net fair value adjustments
associated with the acquisition of companies |
|
|
5 |
|
|
|
99 |
|
|
|
104 |
|
|
|
102 |
|
|
|
|
|
Changes in fair value - fair value option / Net fair value
adjustments for contracts for which we have elected the fair value
option(1) |
|
|
(48 |
) |
|
|
239 |
|
|
|
201 |
|
|
|
220 |
|
|
|
|
|
Change in estimate of net ultimate liabilities - defendant A&E
/ Net nominal defendant A&E liabilities |
|
|
1 |
|
|
|
574 |
|
|
|
586 |
|
|
|
580 |
|
|
|
|
|
Reduction in estimated future expenses - defendant A&E /
Estimated future expenses - defendant A&E |
|
|
1 |
|
|
|
36 |
|
|
|
37 |
|
|
|
37 |
|
|
|
|
|
Adjusted PPD/Adjusted net loss reserves/Adjusted
RLE/Annualized Adjusted RLE* |
|
$ |
123 |
|
|
$ |
13,158 |
|
|
$ |
11,920 |
|
|
$ |
12,539 |
|
|
1.0 |
% |
|
3.9 |
% |
(1) Comprises the discount rate and risk margin
components.*Non-GAAP measure.
|
|
Six Months Ended |
|
As of |
|
Six Months Ended |
|
|
June 30, 2023 |
|
June 30, 2023 |
|
December 31, 2022 |
|
June 30, 2023 |
|
June 30, 2023 |
|
|
PPD |
|
Net loss reserves |
|
Net loss reserves |
|
Average net loss reserves |
|
RLE % |
|
Annualized RLE % |
|
|
(in millions of U.S. dollars) |
PPD/net loss reserves/RLE/Annualized RLE |
|
$ |
20 |
|
$ |
12,939 |
|
|
$ |
12,011 |
|
|
$ |
12,475 |
|
|
0.2 |
% |
|
0.3 |
% |
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss reserves - current period |
|
|
— |
|
|
(11 |
) |
|
|
— |
|
|
|
(6 |
) |
|
|
|
|
Legacy Underwriting |
|
|
— |
|
|
— |
|
|
|
(139 |
) |
|
|
(70 |
) |
|
|
|
|
Amortization of fair value adjustments / Net fair value adjustments
associated with the acquisition of companies |
|
|
9 |
|
|
116 |
|
|
|
124 |
|
|
|
120 |
|
|
|
|
|
Changes in fair value - fair value option / Net fair value
adjustments for contracts for which we have elected the fair value
option(1) |
|
|
12 |
|
|
312 |
|
|
|
294 |
|
|
|
303 |
|
|
|
|
|
Change in estimate of net ultimate liabilities - defendant A&E
/ Net nominal defendant A&E liabilities |
|
|
2 |
|
|
550 |
|
|
|
572 |
|
|
|
561 |
|
|
|
|
|
Reduction in estimated future expenses - defendant A&E /
Estimated future expenses - defendant A&E |
|
|
1 |
|
|
34 |
|
|
|
35 |
|
|
|
35 |
|
|
|
|
|
Adjusted PPD/Adjusted net loss reserves/Adjusted
RLE/Annualized Adjusted RLE* |
|
$ |
44 |
|
$ |
13,940 |
|
|
$ |
12,897 |
|
|
$ |
13,418 |
|
|
0.3 |
% |
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
As of |
|
Six Months Ended |
|
|
June 30, 2022 |
|
June 30, 2022 |
|
December 31, 2021 |
|
June 30, 2022 |
|
June 30, 2022 |
|
|
PPD |
|
Net loss reserves |
|
Net loss reserves |
|
Average net loss reserves |
|
RLE % |
|
Annualized RLE % |
|
|
(in millions of U.S. dollars) |
PPD/net loss reserves/RLE/Annualized RLE |
|
$ |
335 |
|
|
$ |
12,524 |
|
|
$ |
11,926 |
|
|
$ |
12,225 |
|
|
2.7 |
% |
|
5.5 |
% |
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Net loss reserves - current period |
|
|
— |
|
|
|
(25 |
) |
|
|
— |
|
|
|
(13 |
) |
|
|
|
|
Assumed Life |
|
|
(29 |
) |
|
|
(149 |
) |
|
|
(181 |
) |
|
|
(165 |
) |
|
|
|
|
Legacy Underwriting |
|
|
4 |
|
|
|
(140 |
) |
|
|
(153 |
) |
|
|
(147 |
) |
|
|
|
|
Amortization of fair value adjustments / Net fair value adjustments
associated with the acquisition of companies |
|
|
7 |
|
|
|
99 |
|
|
|
106 |
|
|
|
103 |
|
|
|
|
|
Changes in fair value - fair value option / Net fair value
adjustments for contracts for which we have elected the fair value
option(1) |
|
|
(146 |
) |
|
|
239 |
|
|
|
107 |
|
|
|
173 |
|
|
|
|
|
Change in estimate of net ultimate liabilities - defendant A&E
/ Net nominal defendant A&E liabilities |
|
|
4 |
|
|
|
574 |
|
|
|
573 |
|
|
|
574 |
|
|
|
|
|
Reduction in estimated future expenses - defendant A&E /
Estimated future expenses - defendant A&E |
|
$ |
1 |
|
|
$ |
36 |
|
|
$ |
37 |
|
|
$ |
37 |
|
|
|
|
|
Adjusted PPD/Adjusted net loss reserves/Adjusted
RLE/Annualized Adjusted RLE* |
|
$ |
176 |
|
|
$ |
13,158 |
|
|
$ |
12,415 |
|
|
$ |
12,787 |
|
|
1.4 |
% |
|
2.8 |
% |
(1) Comprises the discount rate and risk margin
components.*Non-GAAP measure.
The tables below present a reconciliation of our
Annualized TIR to our Annualized Adjusted TIR*:
|
Three Months Ended |
|
Six months ended |
|
June 30, 2023 |
|
June 30, 2022 |
|
June 30, 2023 |
|
June 30, 2022 |
|
(in millions of U.S. dollars) |
Net investment income |
$ |
172 |
|
|
$ |
106 |
|
|
$ |
328 |
|
|
$ |
186 |
|
Net realized gains (losses) |
|
17 |
|
|
|
(38 |
) |
|
|
(19 |
) |
|
|
(75 |
) |
Net unrealized (losses) gains |
|
(44 |
) |
|
|
(591 |
) |
|
|
180 |
|
|
|
(972 |
) |
Earnings from equity method investments |
|
14 |
|
|
|
1 |
|
|
|
25 |
|
|
|
32 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
Unrealized (losses) gains on fixed maturities, AFS, net of
reclassification adjustments excluding foreign exchange |
|
(22 |
) |
|
|
(230 |
) |
|
|
65 |
|
|
|
(482 |
) |
TIR ($) |
$ |
137 |
|
|
$ |
(752 |
) |
|
$ |
579 |
|
|
$ |
(1,311 |
) |
|
|
|
|
|
|
|
|
Non-GAAP adjustment: |
|
|
|
|
|
|
|
Net realized and unrealized losses on fixed maturities and funds
held-directly managed |
|
90 |
|
|
|
409 |
|
|
|
49 |
|
|
|
743 |
|
Unrealized losses (gains) on fixed maturities, AFS, net of
reclassification adjustments excluding foreign exchange |
|
22 |
|
|
|
230 |
|
|
$ |
(65 |
) |
|
$ |
482 |
|
Adjusted TIR ($)* |
$ |
249 |
|
|
$ |
(113 |
) |
|
$ |
563 |
|
|
$ |
(86 |
) |
|
|
|
|
|
|
|
|
Total investments |
$ |
14,928 |
|
|
$ |
15,827 |
|
|
$ |
14,928 |
|
|
$ |
15,827 |
|
Cash and cash equivalents, including restricted cash and cash
equivalents |
|
1,186 |
|
|
|
1,086 |
|
|
|
1,186 |
|
|
|
1,086 |
|
Funds held by reinsured companies |
|
3,105 |
|
|
|
3,956 |
|
|
|
3,105 |
|
|
|
3,956 |
|
Total investable assets |
$ |
19,219 |
|
|
$ |
20,869 |
|
|
$ |
19,219 |
|
|
$ |
20,869 |
|
|
|
|
|
|
|
|
|
Average aggregate invested assets, at fair value(1) |
|
18,548 |
|
|
|
19,826 |
|
|
|
18,830 |
|
|
|
20,464 |
|
Annualized TIR %(2) |
|
3.0 |
% |
|
(15.2 |
)% |
|
|
6.1 |
% |
|
(12.8 |
)% |
Non-GAAP adjustment: |
|
|
|
|
|
|
|
Net unrealized losses on fixed maturities, AFS included within AOCI
and net unrealized losses on fixed maturities, trading
instruments |
|
1,053 |
|
|
|
1,246 |
|
|
|
1,053 |
|
|
|
1,246 |
|
Adjusted investable assets* |
$ |
20,272 |
|
|
$ |
22,115 |
|
|
$ |
20,272 |
|
|
$ |
22,115 |
|
|
|
|
|
|
|
|
|
Adjusted average aggregate invested assets, at fair value*(3) |
$ |
19,572 |
|
|
$ |
20,711 |
|
|
$ |
20,218 |
|
|
$ |
21,024 |
|
Annualized adjusted TIR
%*(4) |
|
5.1 |
% |
|
(2.2 |
)% |
|
|
5.6 |
% |
|
(0.8 |
)% |
(1) This amount is a two and three period
average of the total investable assets for the three and six months
ended June 30, 2023 and 2022, respectively, as presented above, and
is comprised of amounts disclosed in our quarterly and annual U.S.
GAAP consolidated financial statements.(2) Annualized TIR % is
calculated by dividing the annualized TIR ($) by average aggregate
invested assets, at fair value.(3) This amount is a two and three
period average of the adjusted investable assets* for the three and
six months ended June 30, 2023 and 2022, respectively, as presented
above.(4) Annualized adjusted TIR %* is calculated by dividing the
annualized adjusted TIR* ($) by adjusted average aggregate invested
assets, at fair value*.*Non-GAAP
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