Enstar Group Limited Reports First Quarter 2024 Results

• Net Income Attributable to Enstar Ordinary Shareholders of $119 Million; Return on Equity of 2.4% Primarily Driven by Positive Investment Results
• Growth in Book Value per Ordinary Share of 1.7% to $349.41 (Fully Diluted* $341.53)
• Announced $400 Million Loss Portfolio Transaction with SiriusPoint, Subsequent to Quarter End
• Bermuda-based Wholly Owned Subsidiary, Cavello Bay Reinsurance Limited Assigned 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.

HAMILTON, Bermuda, May 02, 2024 (GLOBE NEWSWIRE) — Enstar Group Limited (Nasdaq: ESGR) today announced financial results for the first quarter 2024.

First Quarter 2024 Highlights:

• Net income attributable to Enstar ordinary shareholders of $119 million, or $8.02 per diluted ordinary share, compared to $424 million, or $24.79 per diluted ordinary share, for the three months ended March 31, 2023.
• Return on equity (“ROE”) of 2.4% and Adjusted ROE* of 2.6% for the quarter compared to ROE and Adjusted ROE* of 9.5% and 6.8%, respectively, in the first quarter of 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. Year-over-year ROE performance was also impacted by a decline in the gain from fair value changes in trading securities, funds held and other investments. First quarter 2024 Adjusted ROE* also excludes $25 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 $24 million for the quarter (compared to RLE of $10 million in the prior-year period) was driven by favorable development on our professional indemnity/directors and officers and asbestos lines of business, partially offset by adverse development on our general casualty and environmental lines of business.
• Annualized total investment return (“TIR”) of 4.9% and Annualized Adjusted TIR* of 5.5% for the quarter compared to Annualized TIR and Annualized Adjusted TIR* of 9.5% and 6.3%, respectively, for the three months ended March 31, 2023. Recognized investment results in the first quarter of 2024 benefited from net investment income of $160 million and fair value change in other investments, including equities, of $104 million, partially offset by net realized and unrealized losses on our fixed maturities, including other comprehensive income (“OCI”), of $37 million.
• 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.
• Announced $400 million Loss Portfolio Transfer (“LPT”) agreement with SiriusPoint subsequent to quarter-end, to reinsure a portfolio of workers’ compensation business covering underwriting years 2018 to 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.

Dominic Silvester, Enstar CEO, said:

“Our momentum continues with a growth in book value of 1.7% in the first quarter, driven by solid performance in our investment portfolio and another quarter of positive Run-Off Liability Earnings.

We were pleased to execute a $400 million Loss Portfolio Transfer with SiriusPoint earlier this week. The transaction expands our Workers’ Compensation portfolio, which is a line of business where we have a wealth of experience and have had significant success. We look forward to taking advantage of opportunities across our business throughout the year, as we stay focused on meeting the growing risk management needs of the (re)insurance sector while creating long-term value for our shareholders.”

Key Financial and Operating Metrics

We use the following GAAP and Non-GAAP measures to monitor the performance of and manage the company:

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 Months Ended March 31, 2024 and 2023

Run-off Segment

The following is a discussion and analysis of the results of operations for our Run-off segment.

Overall Results

Three Months Ended March 31, 2024 versus 2023: Net loss from our Run-off segment was $11 million compared to net loss of $5 million in the comparative quarter, primarily due to:

• A $10 million decrease in favorable PPD in the current quarter, mainly driven by a $9 million increase in the reduction in estimates of net ultimate losses in the comparative quarter.
  • During the first quarter of 2024, the net favorable development was primarily due to favorable development on our Professional Indemnity/Directors and Officers line of business of $29 million driven by favorable claims experience and favorable development on our Asbestos line of business of $24 million resulting from actuarial analysis. These were partially offset by adverse development on our General Casualty line of business of $18 million driven by adverse claims experience and adverse development on our Environmental line of business of $25 million due to results from actuarial reviews in the period.
  • In comparison, during the first quarter of 2023 we recognized favorable development of $11 million on our workers’ compensation line of business as a result of favorable claims experience, most notably in the 2021 acquisition year.
• A net favorable change in current period net incurred losses and LAE and acquisition costs of $6 million.

Investments Segment

The following is a discussion and analysis of the results of operations for our Investments segment.

Overall Results

Three Months Ended March 31, 2024 versus 2023: Net income from our Investments segment was $224 million for the three months ended March 31, 2024 compared to net income of $344 million for the three months ended March 31, 2023. The variance of $120 million was primarily due to:

• a decrease in the gain from fair value changes in fixed maturities of $78 million, primarily as a result of increases in interest rates across U.S., U.K. and European markets in the current period, in comparison to decreases in interest rates in the comparative period;
• fair value change in other investments, including equities, of $104 million, compared to $147 million in the comparative period. The decrease of $43 million was primarily driven by:
  • a decrease in gain in the fair value change in other investments of $18 million for the three months ended March 31, 2024, primarily driven by an unfavorable variance in the fair value change of an embedded derivative in relation to the Aspen LPT, partially offset by increases in the fair value change related to CLO equity funds, private equity funds, real estate funds and high yield bond and loan funds relative to the comparative quarter; and
  • a decrease in the gain in fair value changes in equities of $16 million for the three months ended March 31, 2024, largely as a result of the reduced amount of equities within the investment portfolio relative to the comparative quarter.
• an increase in our net investment income of $4 million, which is primarily due to the reinvestment of fixed maturities at higher yields, deployment of consideration received from deals closed over the past 12 months and the impact of rising interest rates on the $3.1 billion of our average fixed maturities outstanding during the current period that are subject to floating interest rates. Our floating rate investments generated net investment income of $58 million, an increase of $2 million in comparison to the comparative quarter.

Income and (Loss) by Segment – For the Three Months Ended March 31, 2024 and 2023

⁽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 months ended March 31, 2024 and 2023 and therefore is excluded from the table above.

For additional detail on the former Assumed Life and Legacy Underwriting segments and Corporate and other activities, please refer to our Quarterly Report on Form 10-Q for the period ended March 31, 2024.

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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2024 and 2023

ENSTAR GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2024 and 2023

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.

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

⁽²⁾ As of January 1, 2024, not applicable. Refer to Note 2 – “Segment Information” of our Quarterly Report on Form 10-Q for the period ended March 31, 2024

⁽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.

Reconciliation of GAAP to Non-GAAP Measures

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

⁽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*:

⁽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 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 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.

⁽⁶⁾ 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.

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

⁽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*:

⁽¹⁾ This amount is a two period average of the total investable assets for the three months ended March 31, 2024 and 2023 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 period average of the adjusted investable assets* for the three months ended March 31, 2024 and 2023 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.