Enstar Group Limited Reports 2018 Year-End Results
Mar 1, 2019
- Net Losses of
$162.4 millionfor the Year Ended December 31, 2018
- Non-GAAP Operating Income1 of
$61.6 millionfor the Year Ended December 31, 2018
The key drivers of the change in net earnings (losses) were:
- Net unrealized losses on fixed income investments of
$211.4 millionin 2018, compared to net unrealized gains of $69.8 millionin 2017. Many insurance companies predominantly use available-for-sale accounting where unrealized amounts are recorded directly to shareholders’ equity and therefore do not impact earnings. Unrealized amounts would only become realizable in the event of a sale of the specific securities prior to maturity or a credit default.
- Net unrealized losses on equities and other investments of
$173.8 millionin 2018, compared to net unrealized gains of $118.9 millionin 2017. These net unrealized losses were mostly experienced in the fourth quarter of 2018 during a period of heightened market volatility.
- Net losses in our StarStone segment of
$158.6 millionin 2018, compared to net earnings of $2.8 millionin 2017, primarily due to the frequency and severity of current year large losses across certain lines of business being higher than experienced in the past, notably in the international property, construction, marine cargo and marine hull and war classes of business.
These were partially offset by:
- Reduction in net claims reserves of
$306.1 millionin 2018 in our Non-life Run-off segment, compared to $190.7 millionin 2017.
- Net investment income of
$270.7 millionin 2018, compared with $208.8 millionin 2017, due to growth in invested assets and improved yields on fixed income investments.
Non-GAAP operating income1 was
1 Non-GAAP operating income and non-GAAP operating income per fully diluted ordinary share are non-GAAP financial measures as defined in SEC Regulation G. The reconciliations of these non-GAAP measures to the most comparable GAAP financial measures (net earnings (loss) attributable to
Enstar is a multi-faceted insurance group, with approximately
Non-GAAP Financial Measures
In addition to presenting net earnings (losses) attributable to
Non-GAAP operating income (loss) 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, (iii) gain (loss) on sale of subsidiaries, (vi) net earnings (loss) from discontinued operations, (v) tax effect of these adjustments where applicable, and (vi) 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) from discontinued operations as these are non-recurring rather than being reflective of the performance of our core operations.
Further, we believe these non-GAAP measures enable readers of the consolidated financial statements to more easily analyze our results in a manner more aligned with the manner in which our 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 our 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
Non-GAAP operating income (loss) attributable to
|Net earnings (loss) attributable to Enstar Group Limited ordinary shareholders||$||(162,354||)||$||311,458||$||264,807|
|Net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed (1)||243,093||(70,747||)||4,387|
|Change in fair value of insurance contracts for which we have elected the fair value option||6,664||30,256||—|
|Loss on sale of subsidiary||—||16,349||—|
|Net loss from discontinued operations||—||(14,183||)||(12,359||)|
|Tax effects of adjustments (2)||(16,588||)||5,364||4,956|
|Adjustments attributable to noncontrolling interest (3)||(9,166||)||4,840||5,990|
|Non-GAAP operating income attributable to Enstar Group Limited ordinary shareholders (4)||$||61,649||$||283,337||$||267,781|
|Diluted net earnings (loss) per ordinary share(5)||$||(7.84||)||$||15.95||$||13.62|
|Net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed (1)||11.70||(3.62||)||0.23|
|Change in fair value of insurance contracts for which we have elected the fair value option||0.32||1.55||—|
|Loss on sale of subsidiary||—||0.84||—|
|Net loss from discontinued operations||—||(0.73||)||(0.64||)|
|Tax effects of adjustments (2)||(0.79||)||0.27||0.25|
|Adjustments attributable to noncontrolling interest (3)||(0.44||)||0.25||0.31|
|Diluted non-GAAP operating income per ordinary share (4)||$||2.95||$||14.51||$||13.77|
|Weighted average ordinary shares outstanding - diluted||20,904,176||19,527,591||19,447,241|
(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. Refer to Note 6 - "Investments" in the notes to our consolidated financial statements included within Item 8 of this Annual Report on Form 10-K 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.
(5) During a period of loss, the basic weighted average ordinary shares outstanding is used in the denominator of the diluted loss per ordinary share computation as the effect of including potentially dilutive securities would be anti-dilutive.
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
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Source: Enstar Group Limited