Enstar Group Limited Reports Second Quarter Results

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Enstar Group Limited Reports Second Quarter Results

Aug 2, 2018

HAMILTON, Bermuda, Aug. 02, 2018 (GLOBE NEWSWIRE) -- Enstar Group Limited (Nasdaq: ESGR) filed its quarterly report on Form 10-Q with the SEC earlier today, reporting its earnings and financial position for the three and six months ended June 30, 2018.

Enstar reported consolidated net earnings of $8.2 million (or $0.40 per fully diluted ordinary share) for the three months ended June 30, 2018, compared to consolidated net earnings of $90.2 million (or $4.62 per fully diluted ordinary share) for the three months ended June 30, 2017, and consolidated net losses of $33.0 million (or $(1.65) per fully diluted ordinary share) for the six months ended June 30, 2018, compared to consolidated net earnings of $144.9 million (or $7.43 per fully diluted ordinary share) for the six months ended June 30, 2017.

Operating income1 was $83.0 million (or $4.01 per fully diluted ordinary share1) for the three months ended June 30, 2018, compared to operating income of $65.6 million (or $3.36 per fully diluted ordinary share) for the three months ended June 30, 2017, and $122.6 million (or $6.09 per fully diluted ordinary share) for the six months ended June 30, 2018, compared to $112.4 million (or $5.76 per fully diluted ordinary share) for the six months ended June 30, 2017.

Enstar's ordinary shareholders' equity at June 30, 2018 amounted to $3,517.4 million (or $161.67 per fully diluted ordinary share), compared to $3,136.7 million (or $159.19 per fully diluted share) at December 31, 2017. The Form 10-Q, which is available on Enstar's website, www.enstargroup.com, contains a more detailed description of Enstar's business and financial results.

1 Operating income and operating income per fully diluted ordinary share are non-GAAP financial measures as defined in SEC Regulation G. The reconciliations of non-GAAP measures to the most comparable GAAP financial measures (net earnings (loss) attributable to Enstar Group Limited ordinary shareholders and diluted net earnings (loss) per ordinary share, respectively) are provided below, and a discussion of the rationale for the presentation of these items is included later in this press release.

About Enstar

Enstar is a multi-faceted insurance group, with over $15.2 billion in assets, that offers innovative capital release solutions and specialty underwriting capabilities through its network of group companies in Bermuda, the United States, the United Kingdom, Continental Europe, Australia, and other international locations. Enstar is a market leader in completing legacy acquisitions, having acquired over 80 companies and portfolios since its formation in 2001. Enstar’s active underwriting businesses include the StarStone group of companies, an A- rated global specialty insurance group with multiple global underwriting platforms, and the Atrium group of companies, which manage and underwrite specialist insurance and reinsurance business for Lloyd’s Syndicate 609. For further information about Enstar, see www.enstargroup.com.

Non-GAAP Financial Measures

In addition to presenting net earnings (losses) attributable to Enstar Group Limited ordinary shareholders and diluted earnings (losses) per ordinary share determined in accordance with U.S. GAAP, we believe that presenting net operating income (loss) attributable to Enstar Group Limited ordinary shareholders and diluted operating income (loss) per ordinary share, non-GAAP financial measures as defined in Item 10(e) of Regulation S-K, provides investors with valuable measures of our performance.

Operating income excludes: (i) net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed, (ii) change in fair value of insurance contracts for which we have elected the fair value option, (ii) gain (loss) on sale of subsidiaries, (iii) net earnings (loss) from discontinued operations, (iv) tax effect of these adjustments where applicable, and (v) attribution of share of adjustments to noncontrolling interest where applicable. We eliminate the impact of net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed and change in fair value of insurance contracts for which we have elected the fair value option because these items are subject to significant fluctuations in fair value from period to period, driven primarily by market conditions and general economic conditions, and therefore their impact on our earnings is not reflective of the performance of our core operations.  We eliminate the impact of gain (loss) on sale of subsidiaries and net earnings (loss) on discontinued operations as these are non-recurring rather than being reflective of the performance of our core operations.

Further, these non-GAAP measures enable readers of the consolidated financial statements to more easily analyze the Company's results in a manner more aligned with the manner in which the Company's management analyzes our underlying performance. We believe that presenting these non-GAAP financial measures, which may be defined and calculated differently by other companies, improves the understanding of the Company's consolidated results of operations. These measures should not be viewed as a substitute for those calculated in accordance with U.S. GAAP.

Reconciliation of Non-GAAP Financial Measures

Net operating income (loss) attributable to Enstar Group Limited ordinary shareholders is calculated by the addition or subtraction of certain items from within our consolidated statements of earnings to or from net earnings (loss) attributable to Enstar Group Limited ordinary shareholders, the most directly comparable GAAP financial measure, as illustrated in the table below:

  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2018   2017   2018   2017
  (expressed in thousands of U.S. dollars, except share and per share data)
Net earnings (loss) attributable to Enstar Group Limited ordinary shareholders $ 8,244     $ 90,186     $ (32,966 )   $ 144,866  
Adjustments:              
Net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed (1) 64,696     (30,074 )   202,802     (55,824 )
Change in fair value of insurance contracts for which we have elected the fair value option 17,233     (13,232 )   (23,008 )   1,250  
Loss on sale of subsidiary     9,609         9,609  
Net loss from discontinued operations     4,679         4,090  
Tax effects of adjustments (2) (4,734 )   2,135     (15,960 )   3,418  
Adjustments attributable to noncontrolling interest (3) (2,488 )   2,248     (8,290 )   4,973  
Operating income attributable to Enstar ordinary shareholders (4) $ 82,951     $ 65,551     $ 122,578     $ 112,382  
               
Diluted net earnings (loss) per ordinary share $ 0.40     $ 4.62     $ (1.65 )   $ 7.43  
Adjustments:              
Net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed (1) 3.13     (1.54 )   10.08     (2.86 )
Change in fair value of insurance contracts for which we have elected the fair value option 0.83     (0.68 )   (1.14 )   0.06  
Loss on sale of subsidiary     0.49         0.49  
Net loss from discontinued operations     0.24         0.21  
Tax effects of adjustments (2) (0.23 )   0.11     (0.79 )   0.18  
Adjustments attributable to noncontrolling interest (3) (0.12 )   0.12     (0.41 )   0.25  
Diluted operating income per ordinary share (4) $ 4.01     $ 3.36     $ 6.09     $ 5.76  
               
Weighted average ordinary shares outstanding - diluted 20,671,232     19,511,429     20,140,367     19,506,077  


(1)    Represents the net realized and unrealized gains and losses related to fixed maturity securities. Our fixed maturity securities are held directly on our balance sheet and also within the "Funds held - directly managed" balance. The changes in the value of these managed funds held balances are described in our financial statement notes as: (i) funds held - directly managed, (ii) embedded derivative on funds held - directly managed, and (iii) the fair value option on funds held - directly managed. Refer to Note 5 - "Investments"  in the notes to our consolidated financial statements included within Item 1 of our Quarterly Report on Form 10-Q for further details on our net realized and unrealized gains and losses.
(2)   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.
(3)   Represents the impact of the adjustments on the net earnings (loss) attributable to noncontrolling interest associated with the specific subsidiaries to which the adjustments relate.
(4)   Non-GAAP financial measure.
     

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 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 Enstar's Form 10-K for the year ended December 31, 2017 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.

Contact:Guy Bowker
Telephone: +1 (441) 292-3645

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Source: Enstar Group Limited

QUICK STATS

$15.2bn

Assets
June 30, 2018

$10.8bn

Liabilities
June 30, 2018

$3.9bn

Shareholders’ equity
June 30, 2018

80+

Total acquisitive transactions since formation