- Net Earnings of $21 million and Return on Equity of 0.5%, primarily driven by investment results
- Book Value per Ordinary Share grew 8.6% to $284.76 (Adjusted* $279.37) as of June 30, 2023
- Completed Loss Portfolio Transfers with QBE and RACQ
- Received upgrade from S&P on long-term issuer credit rating
- Extended term to May 2028 and upsized revolving credit agreement by $200 million to $800 million at lower cost of capital
HAMILTON, Bermuda, Aug. 02, 2023 (GLOBE NEWSWIRE) -- Enstar Group Limited ( 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 | ||||||||||||||||||
