Enstar Group Limited Reports 2019 Year-End Results

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Enstar Group Limited Reports 2019 Year-End Results

Feb 27, 2020
  • Net Earnings of $902.2 million for the Year Ended December 31, 2019
  • Non-GAAP Operating Income of $553.4 million for the Year Ended December 31, 2019
  • Increase in fully diluted book value per share of 26.9% during 2019

HAMILTON, Bermuda, Feb. 27, 2020 (GLOBE NEWSWIRE) -- Enstar Group Limited (Nasdaq: ESGR) filed its annual report on Form 10-K with the SEC earlier today, reporting its earnings and financial position for the year ended December 31, 2019.

Enstar reported consolidated net earnings of $902.2 million (or earnings of $41.43 per fully diluted ordinary share) for the year ended December 31, 2019, compared to consolidated net losses of $162.4 million (or $7.84 loss per fully diluted ordinary share) for the year ended December 31, 2018.

The key drivers of net earnings for the year ended December 31, 2019 were:

  • Net realized and unrealized gains on fixed income investments of $534.7 million for the year ended December 31, 2019, compared to net realized and unrealized losses of $243.1 million for the year ended December 31, 2018. 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. Historically, we have generally accounted for our fixed income portfolio as trading, which is reflected in earnings. However, from October 1, 2019 we have elected to use available-for-sale accounting for all newly acquired business and, where permissible, as trading fixed income securities mature, we are reinvesting the proceeds into available-for-sale securities;
     
  • Net realized and unrealized gains on equities and other investments of $496.6 million for the year ended December 31, 2019, compared to net realized and unrealized losses of $169.8 million for the year ended December 31, 2018.

Non-GAAP operating income1 was $553.4 million (or $25.42 per fully diluted ordinary share) for the year ended December 31, 2019, compared to $61.6 million (or $2.95 per fully diluted ordinary share) for the year ended December 31, 2018.

Enstar's ordinary shareholders' equity at December 31, 2019 amounted to $4,332.2 million (or $197.93 per fully diluted ordinary share), compared to $3,391.9 million (or $155.94 per fully diluted ordinary share) at December 31, 2018. The Form 10-K, which is available on Enstar's website, www.enstargroup.com, contains a more detailed description of Enstar's business and financial results.

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 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 approximately $19.4 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 completed or announced the acquisition of over 100 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 (loss) attributable to Enstar Group Limited ordinary shareholders and diluted earnings (loss) per ordinary share determined in accordance with U.S. GAAP, we believe that presenting non-GAAP operating income (loss) attributable to Enstar Group Limited ordinary shareholders and diluted non-GAAP 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.

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) (gains) losses 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 (gains) losses 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 aligned with that in which Enstar'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 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 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:

    Year Ended
    December 31,
    2019   2018   2017
  In thousands of U.S. dollars
(except for per share data)
Net earnings (loss) attributable to Enstar Group Limited ordinary shareholders   $ 902,175     $ (162,354 )   $ 311,458  
Adjustments:            
Net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed (1)   (534,730 )   243,093     (70,747 )
Change in fair value of insurance contracts for which we have elected the fair value option   117,181     6,664     30,256  
Loss on sale of subsidiary           16,349  
Net (earnings) loss from discontinued operations           (14,183 )
Tax effects of adjustments (2)   51,102     (16,588 )   5,364  
Adjustments attributable to noncontrolling interest (3)   17,689     (9,166 )   4,840  
Non-GAAP operating income attributable to Enstar Group Limited ordinary shareholders (4)   $ 553,417     $ 61,649     $ 283,337  
             
Diluted net earnings (loss) per ordinary share   $ 41.43     $ (7.84 )   $ 15.95  
Adjustments:            
Net realized and unrealized (gains) losses on fixed maturity investments and funds held - directly managed (1)   (24.55 )   11.70     (3.62 )
Change in fair value of insurance contracts for which we have elected the fair value option   5.38     0.32     1.55  
Loss on sale of subsidiary           0.84  
Net (earnings) loss from discontinued operations           (0.73 )
Tax effects of adjustments (2)   2.35     (0.79 )   0.27  
Adjustments attributable to noncontrolling interest (3)   0.81     (0.44 )   0.25  
Diluted non-GAAP operating income per ordinary share (4)   $ 25.42     $ 2.95     $ 14.51  
             
Weighted average ordinary shares outstanding - diluted   21,775,066     20,904,176     19,527,591  

(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.

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, 2019 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

$21.3bn

Assets
June 30, 2020

$15.7bn

Liabilities
June 30, 2020

$5.2bn

Shareholders’ equity
June 30, 2020

100+

Total acquisitive transactions since formation