• Net Loss of $282 million and Return on Equity of (5.0)% for the three months ended March 31, 2022, driven by unrealized losses on fixed income securities in the rising interest rate environment
• Book Value per Ordinary Share and Adjusted Book Value per Ordinary Share* of $286.51 and $282.10, respectively, as of March 31, 2022, a decline of 9.4% and 9.2%, respectively, from December 31, 2021
• Returned $42 million to shareholders through share repurchases at a weighted average discount to book value of 18.6%
  

HAMILTON, Bermuda, May 05, 2022 (GLOBE NEWSWIRE) -- Enstar Group Limited (Nasdaq: ESGR) filed its quarterly report on Form 10-Q with the SEC earlier today, reporting a net loss of $282 million and return on equity of (5.0)% for the three months ended March 31, 2022.

Commenting on the Company’s results, Enstar CEO Dominic Silvester said:

"We started the year by signing one of our largest ever loss portfolio transactions and completing another successful debt raise at competitive rates, while our financial results in the first quarter reflect rising interest rates and economic uncertainty.

We remain focused on delivering long-term value and are well positioned to maintain our momentum during these volatile times."

First quarter results included:

• Net loss of $282 million, compared to net earnings of $183 million for first quarter 2021. Net loss of $16.04 per diluted ordinary share, compared to net earnings of $8.38 per diluted ordinary share for the comparative quarter.
• Return on equity ("ROE") of (5.0)% and Adjusted ROE* of (1.4)% compared to 3.0% and 5.4%, respectively, in the first quarter 2021. Our ROE was impacted by unrealized losses from the impact of interest rate increases on fixed maturity portfolios that we classify as trading combined with unrealized losses in our non-core portfolios.
• Annualized run-off liability earnings ("RLE") of 5.1% and Annualized Adjusted RLE* of 0.0%, compared to 5.0% and 1.2%, respectively, in the first quarter 2021. Our RLE benefited from reductions in the value of certain portfolios that we hold at fair value and favorable results on our inactive catastrophe programs held by Enhanzed Re.
• Annualized total investment return ("TIR") of (6.1)% and Annualized Adjusted TIR* of 0.5%, compared to 3.6% and 8.4%, respectively, in the first quarter 2021. Our recognized investment results were impacted by the combination of interest rate increases and equity market declines.

*Non-GAAP measure; refer to "Non-GAAP Financial Measures" further below for explanatory notes and a reconciliation to the most directly comparable GAAP measure.

Operational Highlights

• On January 10, 2022 we entered into a transaction with Aspen Insurance Holdings Limited ("Aspen") to assume $3.1 billion of net loss reserves in a loss portfolio transfer ("LPT") transaction, subject to a limit of $3.6 billion. As a result of an existing ADC between Aspen and us that will be absorbed by this transaction, we will assume an incremental $2.4 billion of net loss reserves with a diverse mix of property, liability and specialty lines of business, in exchange for incremental premium of $2.4 billion¹, and assume claims control. This transaction is expected to close in the second quarter of 2022.
• Following the redemption and subsequent liquidation of the InRe Fund L.P. (the “InRe Fund”) in 2021, we have invested or committed the remaining proceeds into liquid and illiquid non-core assets in accordance with our strategic asset allocation.
  
  For certain illiquid asset classes such as private equity, real estate equity and infrastructure equity, funds have been committed to the appointed manager. For these illiquid asset classes, our manager is deploying funds into liquid non-core asset classes while implementing a plan to rotate these investments into illiquid asset classes over time. We expect this rotation will be complete over the medium term.

• We took advantage of January's strong capital markets, raising $500 million of junior subordinated debt at 5.5% and used a portion of the net proceeds to repay the remaining $280 million aggregate principal amount of our 2022 senior notes at their March 2022 maturity. We also returned an additional $42 million to our shareholders through share repurchases in the first quarter of 2022.
• As part of our strategic review of Enhanzed Re, we evaluated the current marketplace offerings and the strategic position of Enhanzed Re to take advantage of future opportunities and have concluded that we will not be seeking new life business portfolios for the Enhanzed Re platform.
• We made progress on our environmental, social and governance ("ESG") strategy. In the first quarter of 2022, we published our inaugural Corporate Sustainability Report, a Sustainability Accounting Standards Board (“SASB”) Report and a Task Force on Climate-Related Financial Disclosures (“TCFD”) Report.
  
  We also announced a partnership with two U.K.-based women’s sports teams as part of our commitment to championing diversity and equality for women. Our ESG strategy remains focused on addressing climate change, sustainable investing, and developing our human capital. We believe that our achievements to date, in addition to our ongoing and future priorities, will benefit the communities we have a presence in and are an investment in our long-term value.

• The Russian invasion of Ukraine has led to volatility in global commodity markets, most notably the energy market, as well as the loss of insured property in Ukraine and Russia. We have performed a review of potential exposures in our investment portfolio, our underwriting risks, and our acquisition pipeline, and considered operational disruption, and have concluded that there are no significant direct impacts from this event at this time. We continue to monitor for changes to sanctioned individuals and organizations and update our procedures accordingly.
• We have published the "First Quarter Earnings Review" audio presentation with our Acting Chief Financial Officer, Orla Gregory, which contains expanded commentary on first quarter results and other business updates, and is available to listen to on the Investor Relations section of Enstar's website.

_______________
¹ The amount of net loss reserves assumed, as well as the premium and limit amounts provided in the LPT agreement, will be adjusted for claims paid between October 1, 2021 and the closing date of the transaction pursuant to terms of the contract.

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 reconciliations.

Results of Operations by Segment - For the Three Months Ended March 31, 2022 and 2021

Run-off Segment

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

NM - Not meaningful, we define NM as changes greater than or equal to +/- 300%.

Our Run-off segment net earnings decreased by $14 million, primarily due to:

• Decreases in net premiums earned of $56 million, which was largely offset by decreases in current period net incurred losses and LAE and acquisition costs of $33 million and $21 million, respectively. The reduction in each of these amounts was driven by reduced levels of activity arising from our exit of our StarStone International business beginning in 2020.
• A reduction in other income of $12 million primarily driven by lower favorable prior period development related to our defendant A&E liabilities in the current quarter; and
• An increase in general and administrative expenses of $11 million; partially offset by
• An $11 million increase in favorable prior period development in the current quarter driven by:
  • An increase in the reduction in provisions for ULAE of $7 million; and
  • A $4 million increase in favorable prior period development compared to the comparative quarter, driven by a $23 million increase in favorable development on the workers’ compensation line of business resulting from favorable actual claims experience compared to expected claims trends, partially offset by a $16 million increase in adverse development on our property line of business due to unfavorable loss emergence relating to construction risks.

Investments Segment

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

NM - Not meaningful, we define NM as changes greater than or equal to +/- 300%.

Segment net loss from our Investments segment was $314 million for the three months ended March 31, 2022 compared to segment net earnings of $156 million for the same period in 2021, an unfavorable change of $470 million primarily due to:

• net realized and unrealized losses of $328 million on our fixed income securities, driven by rising interest rates and widening credit spreads, an increase of $123 million from the comparative period;  
• net realized and unrealized losses of $84 million on our other investments, including equities, in comparison to net realized and unrealized gains of $185 million in the comparative period, primarily driven by underperformance of our fixed income funds, public equities, hedge funds and CLO equities as a result significant volatility in global equity markets and widening high yield credit spreads, partially offset by gains on our private equity funds, private credit funds and real estate funds, which are typically recorded on a one quarter lag; and
• an $87 million decrease in earnings from equity method investments largely due to our acquisition of the controlling interest in Enhanzed Re, effective September 1, 2021 (consolidated net earnings from Enhanzed Re business, inclusive of investment results, corporate allocations and the effect of noncontrolling interests were $15 million for the three months ended March 31, 2022). Prior to that date, the results of Enhanzed Re were recorded in earnings from equity method investments.

Income and Earnings by Segment - For the Three Months Ended March 31, 2022, and 2021

⁽¹⁾ Other income (expense) for corporate and other activities includes the amortization of fair value adjustments associated with the acquisition of DCo LLC and Morse TEC LLC.

⁽²⁾ Net incurred losses and LAE for corporate and other activities includes the amortization of deferred charge assets (“DCAs”) on retroactive reinsurance contracts, fair value adjustments associated with the acquisition of companies and the changes in the discount rate and risk margin components of the fair value of assets and liabilities related to our assumed retroactive reinsurance contracts for which we have elected the fair value option. The three months ended March 31, 2022 included accelerated amortization of $24 million corresponding to increased favorable prior period development on net ultimate liabilities recorded in our Run-off segment. There was no accelerated amortization for the three months ended March 31, 2021.

NM - Not meaningful, we define NM as changes greater than or equal to +/- 300%.

For additional detail on the Enhanzed Re segment, the Legacy Underwriting segment and corporate and other activities, please refer to the Form 10-Q.

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 our Form 10-K for the year ended December 31, 2021 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, Australia, and other international locations. A market leader in completing legacy acquisitions, Enstar has acquired over 110 companies and portfolios since its formation in 2001. 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 EARNINGS (UNAUDITED)
For the Three Months Ended March 31, 2022 and 2021

ENSTAR GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of March 31, 2022 and December 31, 2021

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 annual 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.

We have presented the results and GAAP reconciliations for these measures further below. The following tables present more information on each non-GAAP measure.

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

Reconciliation of GAAP to Non-GAAP Measures

The table below presents a reconciliation of BVPS to Adjusted 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.

*Non-GAAP measure.

The table below presents a reconciliation of Annualized ROE to Annualized Adjusted ROE*:

⁽¹⁾ Net (loss) earnings comprises net (loss) earnings 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⁾ Represents the net realized and unrealized 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.

⁽³⁾ Comprises the discount rate and risk margin components.

⁽⁴⁾ 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.

⁽⁵⁾ 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.

*Non-GAAP measure.

The table below presents a reconciliation of PPD to Adjusted PPD* and Annualized RLE to Annualized Adjusted RLE*:

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

*Non-GAAP measure.

The table below presents a reconciliation of our Annualized TIR to our Annualized Adjusted TIR*:

⁽¹⁾ This amount is a two period average of the total investable assets, 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*, 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.

Source: Enstar Group Limited