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Press Release

 

 

Date:July 29, 2024

 

For Release: Immediately

 

Contact: Enstar Communications

 

Telephone: +1 (441) 292-3645

 

 

Enstar Group Limited Reports Second Quarter 2024 Results

 

•Enstar to be Acquired by Sixth Street-led Consortium for $5.1 Billion

 

•Net Income Attributable to Enstar Ordinary Shareholders of $126 Million; Return on Equity of 2.5% Primarily Driven by Positive Investment Results

 

•Year-to-Date Growth in Book Value per Ordinary Share of 4.5% to $358.74 (Fully Diluted* $350.74)

 

•Announced $400 Million Loss Portfolio Transfer with SiriusPoint

 

•Signed $350 Million Agreement to Provide Reinsurance Cover in Insurance-linked Securities (ILS) Market1

 

•Entered into $200 Million Adverse Development Cover Agreement with Insurance Australia Group

 

•Closed $297 Million Transaction To Reinsure Legacy Business with Accredited

 

1This transaction closed on July 25.

 

* Non-GAAP measure; refer to "Non-GAAP Financial Measures" further below for explanatory notes and a reconciliation to the most directly comparable GAAP measure.

 

HAMILTON, Bermuda - July 31, 2024 - Enstar Group Limited (Nasdaq: ESGR) today announced financial results for the second quarter 2024.

 

 

 

Merger and Financial Results Audio Update:

 

 

As previously announced, Enstar has entered into a definitive merger agreement to be acquired by a consortium of institutional investors led by Sixth Street for $5.1 billion or $338 per ordinary share. A copy of the press release can be found by visiting the Investor Relations section of the Enstar corporate website at EnstarGroup.com. In light of the announced transaction, Enstar will not be providing recorded commentary to accompany its June 30, 2024 financial results.

 

 

 

President’s Departure:

 

 

Enstar also announced today that President, Orla Gregory, will step down at the end of the year. Ms. Gregory has been a pivotal leader at Enstar, contributing significantly to the Company’s growth and success over her 21-year tenure, and serving in senior executive leadership roles since 2015. She will focus on leading the Company’s preparations for closing the merger and its transition to a privately held business, as well as continuing to serve as a director and executive leadership team member until December 31, 2024.

 

Mr. Silvester said: “Orla has spent her career in dedicated service to Enstar. She is a dynamic executive who has contributed massively to the strong leadership, culture, and brand built at Enstar. We are appreciative that she will be involved in transitioning us into our next chapter. We will miss Orla tremendously.”

 

Enstar Group Limited | 2024 Press Release1 

 

 

Ms. Gregory said: “I am very proud of the achievements by so many during my time at Enstar. With great leadership in place, and significant opportunities in the legacy space, I have no doubt that Enstar will continue to excel. Today’s transaction is an exciting evolution, and I look forward to working with the team in preparation for closing. I thank Dominic for the great opportunities I’ve had and all of my colleagues for their dedication and support.”

 

 

 

Transactions:

 

 

During the second quarter 2024, we:

 

•Announced $400 million Loss Portfolio Transfer (“LPT”) agreement with SiriusPoint to reinsure a portfolio of workers’ compensation business covering underwriting years 2018 to 2023.

 

•Signed an agreement to reinsure certain 2019 and 2020 business written by a third-party capital platform for which Enstar will receive a premium of $350m for the portfolio, which marks our first ever deal in ILS and the first solution of its type in this market. This deal closed on July 25, 2024.

 

•Entered into an adverse development cover (“ADC”) agreement with Insurance Australia Group, where Enstar will provide approximately $430 million of excess cover over approximately $1.7 billion of underlying reserves related to certain long-tail insurance business, including product & public liability, compulsory third-party motor, professional risks and workers’ compensation.

 

•Completed a $297 million transaction to reinsure legacy business with Accredited, in connection with Accredited’s acquisition by Onex Partners.

 

 

 

Three Months Ended June 30, 2024 Highlights:

 

 

•Net income attributable to Enstar ordinary shareholders of $126 million, or $8.49 per diluted ordinary share, compared to $21 million, or $1.34 per diluted ordinary share, for the three months ended June 30, 2023.

 

•Return on equity ("ROE") of 2.5% and Adjusted ROE* of 2.9% for the quarter compared to ROE and Adjusted ROE* of 0.5% and 2.1%, respectively, in the second quarter of 2023. Quarter-over-quarter ROE performance was positively impacted by an increase in the gain from fair value changes in trading securities, funds held and other investments and favorable prior period loss development (“PPD”). Second quarter 2024 Adjusted ROE* excludes $35 million of net realized losses on our fixed maturities and fair value changes in trading securities and funds held.

 

•Run-off liability earnings ("RLE") of $62 million for the quarter relative to the comparative quarter RLE of $10 million was driven by favorable loss development on our construction defect line of business after assuming active claims management, as well as our professional indemnity/directors and officers line of business.

 

•Annualized total investment return (“TIR”) of 5.2% and Annualized Adjusted TIR* of 5.6% for the quarter compared to Annualized TIR and Annualized Adjusted TIR* of 3.0% and 5.1%, respectively, for the three months ended June 30, 2023. TIR in the second quarter of 2024 benefited from the fact that interest rates increased by less during the period relative to the second quarter of 2023, resulting in reduced losses from fair value changes in fixed income securities and funds held. Quarter-over-quarter TIR performance was also positively impacted by increased gains from fair value changes in other investments, including equities, partially offset by a loss from equity method investments.

 

*Non-GAAP measure; refer to "Non-GAAP Financial Measures" further below for explanatory notes and a reconciliation to the most directly comparable GAAP measure.

 

 

 

Six Months Ended June 30, 2024 Highlights:

 

 

•Net income attributable to Enstar ordinary shareholders of $245 million, or $16.49 per diluted ordinary share. In comparison, net income attributable to Enstar ordinary shareholders of $445 million, or $27.19 per diluted ordinary share, for the six months ended June 30, 2023, which includes the one-time Enstar's share of gain on novation of $194 million of our closed block reinsurance of life annuity policies in Enhanzed Re.

 

Enstar Group Limited | 2024 Press Release2 

 

 

•ROE of 4.9% and Adjusted ROE* of 5.6%, compared to 10.0% and 8.6%, respectively, for the six months ended June 30, 2023. The prior-year period’s ROE and Adjusted ROE* included a $194 million net gain recognized on the novation of Enhanzed Re reinsurance closed block of life annuity policies. Period-over-period ROE performance was also impacted by a decline in the gain from fair value changes in trading securities, funds held and other investments and losses from equity method investments. This is partially offset by an increase in favorable prior period loss development. Year-to-date second quarter 2024 Adjusted ROE* also excludes $60 million of net realized losses on our fixed maturities and fair value changes in trading securities and funds held.

 

•RLE of $86 million was driven by favorable loss development on our construction defect line of business after assuming active claims management, as well as our asbestos and professional indemnity/directors and officers lines of business, partially offset by adverse loss development on our environmental and general casualty lines of business. For the six months ended June 30, 2023, RLE of $20 million was positively impacted by favorable loss development in our workers’ compensation and general casualty line of business. The favorable results in 2023 were partially offset by an increase in the fair value of liabilities for which we have elected the fair value option and an increase in the unallocated loss adjustment expenses (“ULAE”) provision as a result of assuming active claims management control.

 

•Annualized TIR of 5.0% and Adjusted Annualized TIR* of 5.6%, compared to 6.1% and 5.6%, respectively, for the six months ended June 30, 2023. TIR was negatively impacted by increased losses from fair value changes on trading securities and funds held as a result of comparatively more significant increases in interest rates in the U.S. in the first half of 2024 than in the prior period. Period-over-period TIR was also impacted by losses from equity method investments, partially offset by increases in the fair value of other investments.

 

•In March 2024, Enstar’s Bermuda-based wholly-owned subsidiary Cavello Bay Reinsurance Limited was assigned an Insurer Financial Strength Rating of ‘A’ with stable outlook by S&P Global Ratings.

 

* Non-GAAP measure; refer to "Non-GAAP Financial Measures" further below for explanatory notes and a reconciliation to the most directly comparable GAAP measure.

 

Enstar Group Limited | 2024 Press Release3 

 

 

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
June 30,		             Six Months Ended
June 30,		          
    2024     2023     $ / pp / bp
Change		     2024     2023     $ / pp / bp
Change		  
    (in millions of U.S. dollars, except per share data)  
Key Earnings Metrics
Net income attributable to Enstar ordinary shareholders  $126   $21   $105   $245   $445   $(200)
Adjusted operating income attributable to Enstar ordinary shareholders*  $160   $105   $55   $301   $506   $(205)
ROE   2.5%   0.5%   2.0  pp   4.9%   10.0%   (5.1) pp
Adjusted ROE*   2.9%   2.1%   0.8  pp   5.6%   8.6%   (3.0) pp
                               
Key Run-off Metrics
Prior period loss development  $62   $10   $52   $86   $20   $66 
Adjusted prior period loss development*  $65   $8   $57   $89   $44   $45 
RLE   0.6%   0.1%   0.5  pp   0.8%   0.2%   0.6  pp
Adjusted RLE*   0.6%   0.1%   0.5  pp   0.7%   0.3%   0.4  pp
                               
Key Investment Return Metrics
Total investable assets  $17,375   $19,219   $(1,844)  $17,375   $19,219   $(1,844)
Adjusted total investable assets*  $18,178   $20,272   $(2,094)  $18,178   $20,272   $(2,094)
Annualized investment book yield   4.35%   4.47%   (12) bp   4.35%   3.78%   57  bp
Annualized TIR   5.2%   3.0%   2.2  pp   5.0%   6.1%   (1.1) pp
Adjusted Annualized TIR*   5.6%   5.1%   0.5  pp   5.6%   5.6%   —  pp
                               
               As of     
               June 30,   December     
Key Shareholder Metrics              2024   31, 2023     
Book value per ordinary share                 $358.74   $343.45   $15.29 
Fully diluted book value per ordinary share*                 $350.74   $336.72   $14.02 

 

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.

 

Enstar Group Limited | 2024 Press Release4 

 

 

 

Results of Operations By Segment - For the Three and Six Months Ended June 30, 2024 and 2023 

 

 

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,   $ 
                 
   2024   2023   Change   2024   2023   Change 
                         
   (in millions of U.S. dollars) 
REVENUES                        
Net premiums earned  $5   $7   $(2)  $16   $15   $1 
Other income:                              
Reduction in estimates of net ultimate defendant A&E liabilities - prior                              
periods   —    —    —    —    2    (2)
Reduction in estimated future defendant A&E expenses   1    —    1    2    1    1 
All other income   2    5    (3)   4    7    (3)
Total other income   3    5    (2)   6    10    (4)
Total revenues   8    12    (4)   22    25    (3)
EXPENSES                              
Net incurred losses and LAE:                              
Current period   4    3    1    9    13    (4)
Prior periods:                              
Reduction in estimates of net ultimate losses   (42)   (8)   (34)   (48)   (23)   (25)
Reduction in provisions for ULAE   (22)   —    (22)   (39)   (18)   (21)
Total prior periods   (64)   (8)   (56)   (87)   (41)   (46)
Total net incurred losses and LAE   (60)   (5)   (55)   (78)   (28)   (50)
Acquisition costs   1    4    (3)   2    6    (4)
General and administrative expenses   48    47    1    90    86    4 
Total expenses   (11)   46    (57)   14    64    (50)
SEGMENT NET INCOME (LOSS)  $19   $(34)  $53   $8   $(39)  $47 

 

Overall Results

 

Three Months Ended June 30, 2024 versus 2023: Net income from our Run-off segment was $19 million compared to net loss of $34 million in the comparative quarter, primarily due to:

 

•A $56 million increase in favorable PPD in the current quarter, mainly driven by a $34 million increase in the reduction in estimates of net ultimate losses and a $22 million release of ULAE provisions.
  
•During the second quarter of 2024, we recognized favorable loss development on our construction defect and professional indemnity/directors and officers lines of business of $24 million and $12 million, respectively, driven by favorable claims experience.
   
◦In comparison, during the second quarter of 2023 we recognized favorable loss development of $9 million on our workers’ compensation line of business as a result of 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 the 2022 LPT agreement with Argo, which offset other ULAE reserve adjustments from our run-off operations.

 

Six Months Ended June 30, 2024 versus 2023: Net income from our Run-off segment was $8 million compared to net loss of $39 million in the comparative period, primarily due to:

 

•A $46 million increase in favorable PPD, mainly driven by a $25 million increase in the reduction in estimates of net ultimate losses and a $21 million increase in the release of ULAE provisions relative to the comparative period.

 

 Enstar Group Limited | 2024 Press Release5

 

 

◦During the first half of 2024, PPD was driven by favorable loss development across multiple lines of business. We recognized $41 million and $22 million of favorable loss development on our professional indemnity/directors and officers and construction defect line of business, respectively, as a result of favorable claims experience, as well as $25 million of favorable loss development on our asbestos line of business resulting from actuarial analysis. This was partially offset by adverse loss development on our general casualty line of business of $17 million, driven by adverse claims experience and adverse loss development on our environmental line of business of $25 million due to results from actuarial reviews during the period.
  
◦In comparison, in the first half of 2023, we recognized favorable loss development of $20 million on our workers’ compensation line of business as a result of continued favorable claims experience, most notably in the 2021 acquisition year.

 

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,     
                 
   2024   2023   $ Change   2024   2023   $ Change 
                         
   (in millions of U.S. dollars) 
REVENUES                              
Net investment income:                              
Fixed maturities  $137   $145   $(8)  $279   $276   $3 
Cash and restricted cash   7    8    (1)   15    13    2 
Other investments, including equities   19    23    (4)   39    47    (8)
Less: Investment expenses   (8)   (4)   (4)   (18)   (8)   (10)
Total net investment income   155    172    (17)   315    328    (13)
Net realized losses:                              
Fixed maturities   (9)   (25)   16    (15)   (43)   28 
Total net realized losses   (9)   (25)   16    (15)   (43)   28 
Fair value changes in:                              
Fixed maturities, trading   (26)   (64)   38    (45)   (5)   (40)
Other investments, including equities   112    62    50    216    209    7 
Total fair value changes in trading securities and other investments   86    (2)   88    171    204    (33)
Total revenues   232    145    87    471    489    (18)
EXPENSES                              
General and administrative expenses   10    10    —    20    21    (1)
Total expenses   10    10    —    20    21    (1)
(Loss) income from equity method investments   (8)   14    (22)   (13)   25    (38)
                               
SEGMENT NET INCOME  $214   $149   $65   $438   $493   $(55)

 

Overall Results

 

Three Months Ended June 30, 2024 versus 2023: Net income from our Investments segment was $214 million for the three months ended June 30, 2024 compared to $149 million for the three months ended June 30, 2023. The increase of $65 million was primarily due to:

 

•an increase in the gain from fair value changes in other investments, including equities of $50 million, primarily driven by a favorable variance in relation to an embedded derivative related to the assets supporting one of our LPTs and increases in the gains for our CLO equities, hedge funds, private equity funds, privately held equities and infrastructure. This is partially offset by decreases in the gain from publicly traded equities, fixed income funds, and real estate; and

 

 Enstar Group Limited | 2024 Press Release6

 

 

•a decrease in the aggregate of net realized losses and losses from fair value changes in trading securities and funds held of $54 million, primarily as a result of moderating increases in interest rates across U.S., U.K. and European markets in the current period, relative to the comparative quarter. This is partially offset by;
  
•a decrease in our net investment income of $17 million due to an overall reduction in investments and funds held assets as a result of claims payments which outpaced new business relative to the periods and an increase in investment expenses primarily due to increased performance fees; and
  
•a loss from equity method investments of $8 million for the current quarter compared to $14 million income in the comparative quarter as a result of increased losses on our investment in Monument Re.

 

Six Months Ended June 30, 2024 versus 2023: Net income from our Investments segment was $438 million for the six months ended June 30, 2024 compared to $493 million for the six months ended June 30, 2023. The decrease of $55 million was primarily due to:

 

•an increase in the aggregate of net realized losses and losses from fair value changes in trading securities and funds held of $12 million, primarily as a result of comparatively more significant increase in interest rates in the U.S., as well as comparatively less significant tightening credit spreads;
  
•a loss from equity method investments of $13 million for the current period compared to $25 million income in the comparative period as a result of increased losses on our investment in Monument Re, partially offset by an increase in income on our investment in Core Specialty; and
  
•a decrease in our net investment income of $13 million, which is primarily due reductions in our investments and funds held assets as a result of claims payments which outpaced new business, less dividend income earned on our publicly traded equities and increased investment expenses primarily due to increased performance fees; partially offset by;
  
•an increase in the gain on fair value changes from other investments, including equities, of $7 million, primarily driven by our privately held equities, CLO equities, hedge funds, and private equity funds relative to the comparative period, partially offset by decreased gains on publicly traded equities, private debt, and real estate, and an unfavorable variance in relation to an embedded derivative related to the assets supporting one of our LPTs.

 

Income and (Loss) by Segment - For the Three and Six Months Ended June 30, 2024 and 2023

 

   Three Months Ended       Six Months Ended     
   June 30,       June 30,     
                 
   2024   2023   $ Change   2024   2023   $ Change 
                         
   (in millions of U.S. dollars)   
REVENUES                        
Run-off  $8   $12   $(4)  $22   $25   $(3)
Investments   232    145    87    471    489    (18)
Assumed Life (1)   —    —    —    —    275    (275)
Subtotal   240    157    83    493    789    (296)
Corporate and other (1)   (4)   (3)   (1)   (7)   (3)   (4)
Total revenues  $236   $154   $82   $486   $786   $(300)
SEGMENT NET INCOME (LOSS)                              
                               
Run-off  $19   $(34)  $53   $8   $(39)  $47 
Investments   214    149    65    438    493    (55)
Assumed Life (1)   —    —    —    —    275    (275)
Total segment net income   233    115    118    446    729    (283)
Corporate and other (1)   (107)   (94)   (13)   (201)   (284)   83 
NET INCOME ATTRIBUTABLE TO ENSTAR                              
ORDINARY SHAREHOLDERS  $126   $21   $105   $245   $445   $(200)

 

(1)Effective January 1, 2024, Assumed Life and Legacy Underwriting were determined to no longer meet the definition of reportable segments and their residual income and loss activities were prospectively included in Corporate and other activities. Activities prior to January 1, 2024 are recorded in their respective segments. In addition, Legacy Underwriting had no revenue or income activity for the three or six months ended June 30, 2024 and 2023 and therefore is excluded from the table above.

 

 Enstar Group Limited | 2024 Press Release7

 

 

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, 2023 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 Limited | 2024 Press Release8

 

P

 

ENSTAR GROUP LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2024 and 2023

 

   Three Months Ended June 30,    Six Months Ended June 30,
   2024  2023    2024  2023
   (expressed in millions of U.S. dollars, except share and per share data) 
REVENUES                  
Net premiums earned  $5   $7     $16   $15 
Net investment income   155    172      315    328 
Net realized losses   (9)   (25)     (15)   (43)
Fair value changes in trading securities, funds held and other investments   86    (2)     171    204 
Other (loss) income   (1)   2      (1)   282 
Total revenues   236    154      486    786 
EXPENSES                      
Net incurred losses and loss adjustment expenses                      
Current period   4    3      9    13 
Prior periods   (62)   (10)     (86)   (20)
Total net incurred losses and loss adjustment expenses   (58)   (7)     (77)   (7)
Amortization of net deferred charge assets   29    24      59    41 
Acquisition costs   1    4      2    6 
General and administrative expenses   98    85      185    174 
Interest expense   23    22      45    45 
Net foreign exchange losses (gains)   1    5      (8)   (1)
Total expenses   94    133      206    258 
INCOME BEFORE INCOME TAXES   142    21      280    528 
Income tax benefit (expense)   2    4      (3)   5 
(Loss) income from equity method investments   (8)   14      (13)   25 
NET INCOME   136    39      264    558 
Less: Net income attributable to noncontrolling interest   (1)   (9)     (1)   (95)
NET INCOME ATTRIBUTABLE TO ENSTAR GROUP LIMITED   135    30      263    463 
Dividends on preferred shares   (9)   (9)     (18)   (18)
NET INCOME ATTRIBUTABLE TO ENSTAR GROUP LIMITED ORDINARY SHAREHOLDERS  $126   $21     $245   $445 
Earnings per ordinary share attributable to Enstar:                      
Basic  $8.59   $1.36     $16.72   $27.44 
Diluted  $8.49   $1.34     $16.49   $27.19 
Weighted average ordinary shares outstanding:                      
Basic   14,664,767    15,460,318      14,652,962    16,216,080 
Diluted   14,846,505    15,660,981      14,854,673    16,366,517 

 

Enstar Group Limited | 2024 Press Release9 

 

 

ENSTAR GROUP LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2024 and 2023

  

   June 30, 2024  December 31, 2023
   (in millions of U.S. dollars, except
share data)
ASSETS         
Short-term investments, trading, at fair value  $9    $2 
Short-term investments, available-for-sale, at fair value (amortized cost: 2024 — $45; 2023 — $62)   45     62 
Fixed maturities, trading, at fair value   1,698     1,949 
Fixed maturities, available-for-sale, at fair value (amortized cost: 2024 — $5,381; 2023 — $5,642; net of allowance: 2024 — $14; 2023 — $16)   4,971     5,261 
Funds held   4,730     5,251 
Equities, at fair value (cost: 2024 — $602; 2023 — $615)   761     701 
Other investments, at fair value (includes consolidated variable interest entity: 2024 - $101; 2023 - $59)   4,091     3,853 
Equity method investments   318     334 
Total investments   16,623     17,413 
Cash and cash equivalents (includes consolidated variable interest entity: 2023 — $8)   469     564 
Restricted cash and cash equivalents   283     266 
Accrued interest receivable   63     71 
Reinsurance balances recoverable on paid and unpaid losses (net of allowance: 2024 — $119; 2023 — $131)   582     740 
Reinsurance balances recoverable on paid and unpaid losses, at fair value   199     217 
Insurance balances recoverable (net of allowance: 2024 — $4; 2023 — $5 )   169     172 
Net deferred charge assets   687     731 
Other assets   821     739 
TOTAL ASSETS  $19,896    $20,913 
LIABILITIES           
Losses and loss adjustment expenses  $10,148    $11,196 
Losses and loss adjustment expenses, at fair value   1,056     1,163 
Defendant asbestos and environmental liabilities   540     567 
Insurance and reinsurance balances payable   32     43 
Debt obligations   1,832     1,831 
Other liabilities (includes consolidated variable interest entity: 2024 and 2023 — $1)   408     465 
TOTAL LIABILITIES   14,016     15,265 
COMMITMENTS AND CONTINGENCIES           
            
SHAREHOLDERS’ EQUITY           
Voting ordinary Shares (par value $1 each, issued and outstanding 2024: 15,230,911; 2023: 15,196,685)   15     15 
Preferred Shares:           
Series C Preferred Shares (issued and held in treasury 2024 and 2023: 388,571)   —     — 
Series D Preferred Shares (issued and outstanding 2024 and 2023: 16,000; liquidation preference $400)   400     400 
Series E Preferred Shares (issued and outstanding 2024 and 2023: 4,400; liquidation preference $110)   110     110 
Treasury Shares, at cost:           
Series C Preferred shares (2024 and 2023: 388,571)   (422)    (422)
Joint Share Ownership Plan (voting ordinary shares, held in trust 2024 and 2023: 565,630)   (1)    (1)
Additional paid-in capital   591     579 
Accumulated other comprehensive loss   (357)    (336)
Retained earnings   5,435     5,190 
Total Enstar Shareholders’ Equity   5,771     5,535 
Noncontrolling interests   109     113 
TOTAL SHAREHOLDERS’ EQUITY   5,880     5,648 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $19,896    $20,913 

 

Enstar Group Limited | 2024 Press Release10 

 

 

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 (gains)/losses and fair value changes on fixed maturity investments recognized in our statements of operations, 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
Fully diluted book value per ordinary share

Total Enstar ordinary shareholders' equity

 

Divided by

 

Number of ordinary shares outstanding, adjusted for:

-the ultimate effect of any dilutive securities (which include restricted shares, restricted share units,directors’ restricted share units and performance share units) 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.  

 

Enstar Group Limited | 2024 Press Release11 

 

 

Adjusted return on equity (%)

 

 

  

  

Adjusted operating income (loss) attributable to Enstar ordinary shareholders (numerator)

 

 

 

 

 

 

 

  

  

 

Adjusted opening Enstar ordinary shareholders' equity (denominator)

 

 

Adjusted operating income (loss) attributable to Enstar ordinary shareholders divided by adjusted opening Enstar ordinary shareholder's equity

 

 

 

Net income (loss) attributable to Enstar ordinary shareholders, adjusted for:

-fair value changes and net realized (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 income from discontinued operations (if any),

-tax effects of adjustments, and

-adjustments attributable to noncontrolling interests

 

 

 

 

 

Opening Enstar ordinary shareholders' equity, less:

-fair value changes 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)

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 fair value changes and net realized (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 income from discontinued operations, as these items are not indicative of our ongoing operations.

 

We use this non-GAAP measure in our incentive compensation program.

     

  

Enstar Group Limited | 2024 Press Release12 

 

 

Adjusted run-off liability earnings (%) 

  

Adjusted prior period development (numerator) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

Adjusted net loss reserves (denominator)  

Adjusted PPD divided by average adjusted net loss reserves.

 

 

Prior period net incurred losses and LAE, adjusted to:

Remove:

-Legacy Underwriting(2) 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.

 

 

 

 

 

 

 

 

 

 

   

Net losses and LAE, adjusted to:

Remove:

-Legacy Underwriting(2) 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) and

Add:

-net nominal defendant A&E liability exposures and estimated future expenses.

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(3); as such, the results were not a relevant contribution to Adjusted RLE, which is designed to analyze the impact of our claims management strategies(2); 

•         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 total investment return (%)

 

Adjusted total investment return ($) (numerator)

 

 

 

 

Adjusted average aggregate total investable assets (denominator)

Adjusted total investment return (dollars) recognized in earnings for the applicable period divided by period average adjusted total investable assets.

 

Total investment return (dollars), adjusted for:

-fair value changes in fixed maturities, trading and funds held-directly managed; and

-unrealized (gains) losses on fixed maturities, AFS included within OCI, net of reclassification adjustments and excluding foreign exchange.

 

Total average investable assets, adjusted for:

-net unrealized (gains) losses on fixed maturities, AFS included within AOCI

-fair value changes in fixed maturities, trading and funds held-directly managed

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.

 

(1)Comprises the discount rate and risk margin components.
(2)As of January 1, 2024, Legacy Underwriting is no longer a reportable segment as it no longer engages in any active business.
(3)The reinsurance contractual arrangements (including the Capacity Lease Agreement) were settled during the second quarter of 2023. Other than the settlement of these arrangements, we did not record any other transactions in the Legacy Underwriting segment in 2023.

 

Enstar Group Limited | 2024 Press Release13 

 

 

Reconciliation of GAAP to Non-GAAP Measures

 

 

The table below presents a reconciliation of BVPS to Fully Diluted BVPS*:

 

   June 30, 2024   December 31, 2023 
       Ordinary   Per Share       Ordinary   Per Share 
   Equity (1)   Shares   Amount   Equity (1)   Shares   Amount 
   (in millions of U.S. dollars, except share and per share data)
Book value per ordinary share  $5,261    14,665,281   $358.74   $5,025    14,631,055   $343.45 
Non-GAAP adjustment:                              
Share-based compensation plans        334,625              292,190      
Fully diluted book value per ordinary share*  $5,261    14,999,906   $350.74   $5,025    14,923,245   $336.72 

 

(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.

 

The table below presents a reconciliation of ROE to Adjusted ROE* and Annualized ROE to Annualized Adjusted ROE*:

 

   Three Months Ended
   June 30, 2024   June 30, 2023 
   Net               Net             
   income   Opening       Annualized   income   Opening       Annualized 
   (loss) (1)   equity (1)   ROE   ROE   (loss) (1)   equity (1)   ROE   ROE 
 (in millions of U.S. dollars)
Net income (loss)/Opening equity/ ROE/Annualized ROE (1)  $126   $5,122    2.5%   9.8%  $21   $4,367    0.5%   1.9%
Non-GAAP adjustments for loss (gains):                                        
Net realized losses on fixed maturities, AFS (2) / Cumulative fair value changes to fixed maturities, AFS (3)   9    416              25    531           
Fair value changes on fixed maturities, trading (2) / Fair value changes on fixed maturities, trading (3)   16    251              42    316           
Fair value changes in funds held - directly managed (2) / Fair values changes on funds held - directly managed (3)   10    122              22    147           
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)   (4)   (249)             (8)   (278)          
Amortization of fair value adjustments / Fair value adjustments   6    (103)             6    (121)          
Tax effects of adjustments (5)   (3)   —              (3)   —           
Adjusted net income (loss)/Adjusted opening equity/Adjusted ROE/ Annualized adjusted ROE*  $160   $5,559    2.9%   11.5%  $105   $4,962    2.1%   8.5%

 

(1)Net income (loss) comprises net income (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)Net realized gains (losses) on fixed maturities, AFS are included in net realized gains (losses) in our unaudited condensed consolidated statements of operations. Fair value changes in our fixed maturities, trading and funds held - directly managed are included in fair value changes in trading securities, funds held and other investments in our unaudited condensed consolidated statements of operations

 

(3)Our fixed maturities are held directly on our balance sheet and also within the "Funds held" 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.

 

 

*Non-GAAP measure.

 

Enstar Group Limited | 2024 Press Release14 

 

 

   Six Months Ended
   June 30, 2024   June 30, 2023 
   Net               Net   Opening         
   income   Opening       Annualized   income   equity       Annualized 
   (loss) (1)   equity (1)   ROE   ROE   (loss) (1)   (1)(2)   ROE   ROE 
               (in millions of U.S. dollars)             
Net income/Opening equity/ROE (1)  $245   $5,025    4.9%   9.8%  $445   $4,464    10.0%   19.9%
Non-GAAP adjustments for loss (gains):                                        
Net realized losses on fixed maturities, AFS (2) / Cumulative fair value changes to fixed maturities, AFS (3)   15    380              43    647           
Fair value changes on fixed maturities, trading (3) / Fair value changes on fixed maturities, trading (4)   30    234              2    400           
Fair value changes on funds held - directly managed (3) / Fair value changes on funds held - directly managed (4)   15    111              3    780           
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 (5)   (8)   (246)             12    (294)          
Amortization of fair value adjustments / Fair value adjustments   9    (107)             9    (124)          
Tax effects of adjustments (6)   (5)   —              (6)   —           
Adjustments attributable to noncontrolling interests (7)   —    —              (2)   —           
Adjusted net income /Adjusted opening equity/Adjusted ROE*  $301   $5,397    5.6%   11.2%  $506   $5,873    8.6%   17.2%

 

(1)Net income (loss) comprises net income (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 12 of our condensed consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for further information.

 

(3)Net realized gains (losses) on fixed maturities, AFS are included in net realized gains (losses) in our unaudited condensed consolidated statements of operations. Fair value changes in our fixed maturities, trading and funds held - directly managed are included in fair value changes in trading securities, funds held and other investments in our unaudited condensed consolidated statements of operations

 

(4)Our fixed maturities are held directly on our balance sheet and also within the "Funds held" balance.

 

(5)Comprises the discount rate and risk margin components.

 

(6)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.

 

(7)Represents the impact of the adjustments on the net income (loss) attributable to noncontrolling interests associated with the specific subsidiaries to which the adjustments relate.

 

*Non-GAAP measure.

 

Enstar Group Limited | 2024 Press Release15 

 

 

The tables below present a reconciliation of RLE to Adjusted RLE*:

 

   Three               Three 
   Months               Months 
   Ended       As of       Ended 
   June 30,  June 30,   March 31,   June 30,   June 30, 
   2024  2024   2024   2024   2024 
               Average     
       Net loss   Net loss   net loss     
   RLE / PPD   reserves   reserves   reserves   RLE % 
       (in millions of U.S. dollars)     
PPD/net loss reserves/RLE %  $62   $10,518   $10,827   $10,673    0.6%
Non-GAAP adjustments for expenses (income):                         
Net loss reserves - current period   —    (9)   (5)   (7)     
Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies   6    98    103    101      
Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1)   (4)   253    249    251      
Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities   —    497    516    506      
Reduction in estimated future expenses - defendant A&E / Estimated future expenses - defendant A&E   1    31    32    31      
Adjusted PPD/Adjusted net loss reserves/Adjusted RLE %*  $65   $11,388   $11,722   $11,555    0.6%

 

   Three               Three 
   Months               Months 
   Ended   As of   Ended 
   June 30,   June 30,   March 31,   June 30,   June 30, 
   2023   2023   2023   2023   2023 
               Average     
       Net loss   Net loss   net loss     
   RLE / PPD   reserves   reserves   reserves   RLE % 
       (in millions of U.S. dollars)     
PPD/net loss reserves/RLE %  $10   $12,939   $11,226   $12,082    0.1%
Non-GAAP adjustments for expenses (income):                         
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 %*  $8   $13,940   $12,210   $13,075    0.1%

 

(1) Comprises the discount rate and risk margin components.

 

*Non-GAAP measure.  

 

Enstar Group Limited | 2024 Press Release16 

 

 

   Six Months               Six Months 
   Ended   As of   Ended 
   June 30,   June 30,   December   June 30,   June 30, 
   2024   2024   31, 2023   2024   2024 
               Average     
       Net loss   Net loss   net loss     
   RLE / PPD   reserves   reserves   reserves   RLE % 
   (in millions of U.S. dollars) 
PPD/net loss reserves/RLE/Annualized RLE  $86   $10,518   $11,585   $11,052    0.8%
Non-GAAP Adjustments:                         
Net loss reserves - current period   —    (9)   —    (5)     
Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies   9    98    107    103      
Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1)   (8)   253    246    250      
Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities   —    497    527    512      
Reduction in estimated future expenses - defendant A&E / Estimated future expenses - defendant A&E   2    31    33    32      
Adjusted PPD/Adjusted net loss reserves/Adjusted RLE/ Annualized Adjusted RLE*  $89   $11,388   $12,498   $11,944    0.7%

 

   Six Months               Six Months 
   Ended   As of   Ended 
   June 30,   June 30,   December   June 30,   June 30, 
   2023   2023   31, 2022   2023   2023 
               Average     
       Net loss   Net loss   net loss     
   RLE / PPD   reserves   reserves   reserves   RLE % 
   (in millions of U.S. dollars)
PPD/net loss reserves/RLE/Annualized RLE  $20   $12,939   $12,011   $12,475    0.2%
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%

 

(1) Comprises the discount rate and risk margin components.

 

*Non-GAAP measure.

 

Enstar Group Limited | 2024 Press Release17 

 

 

The tables below present a reconciliation of our Annualized TIR to our Annualized Adjusted TIR*:

 

   Three Months Ended   Six months ended 
   June 30, 2024   June 30, 2023   June 30, 2024   June 30, 2023 
       (in millions of U.S. dollars)     
Net investment income  $155   $172   $315   $328 
Net realized losses                    
Fixed maturities, AFS   (9)   (25)   (15)   (43)
Net realized losses   (9)   (25)   (15)   (43)
Fair value changes                    
Fixed maturities, trading   (16)   (42)   (30)   (2)
Funds held   (10)   (22)   (15)   (3)
Equity securities   35    39    72    92 
Other investments   78    27    145    112 
Investment derivatives   (1)   (4)   (1)   5 
Fair value changes   86    (2)   171    204 
(Loss) income from equity method investments   (8)   14    (13)   25 
Other comprehensive income:                    
Unrealized (losses) gains on fixed maturities, AFS, net of reclassification adjustments excluding foreign exchange   3    (22)   (9)   65 
TIR ($)  $227   $137   $449   $579 
Non-GAAP adjustment:                    
Net realized and unrealized losses on fixed maturities, AFS and trading, and funds held-directly managed   35    90    60    49 
Unrealized (gains) losses on fixed maturities, AFS, net of reclassification adjustments excluding foreign exchange   (3)   22   $9   $(65)
Adjusted TIR ($)*  $259   $249   $518   $563 
Total investments  $16,623   $18,033   $16,623   $18,033 
Cash and cash equivalents, including restricted cash and cash equivalents   752    1,186    752    1,186 
Total investable assets  $17,375   $19,219   $17,375   $19,219 
Average aggregate invested assets, at fair value (1)   17,587    18,548    17,825    18,831 
Annualized TIR % (2)   5.2%   3.0%   5.0%   6.1%
Non-GAAP adjustment:                    
Net unrealized losses on fixed maturities, AFS included within AOCI and net unrealized losses on fixed maturities, trading and funds held - directly managed   803    1,053    803    1,053 
Adjusted investable assets*  $18,178   $20,272   $18,178   $20,272 
Adjusted average aggregate invested assets, at fair value* (3)  $18,383   $19,572   $18,597   $20,218 
Annualized adjusted TIR %* (4)   5.6%   5.1%   5.6%   5.6%

 

(1)This amount is a two and three period average of the total investable assets for the three and six months ended June 30, 2024 and 2023, 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, 2024 and 2023, 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 measure.

 

Enstar Group Limited | 2024 Press Release18