UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): August 9, 2022
Enstar Group Limited
(Exact name of registrant as specified in its charter)
| Bermuda | N/A | |||||||||||||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (441 ) 292-3645
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | |||||||||
| LLC | |||||||||||
| LLC | |||||||||||
| Perpetual Non-Cumulative Preferred Share, Series D, Par Value $1.00 Per Share | |||||||||||
| LLC | |||||||||||
| in a 7.00% Perpetual Non-Cumulative Preferred Share, Series E, Par Value $1.00 Per Share | |||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 9, 2022, Enstar Group Limited (the "Company") issued a press release announcing its results for the quarter ended June 30, 2022 (the "Press Release"), a copy of which is furnished with this report as Exhibit 99.1 and incorporated herein by reference, and a Financial Supplement for the quarter ended June 30, 2022 (the "Financial Supplement"), a copy of which is furnished with this report as Exhibit 99.2 and incorporated herein by reference. The Financial Supplement will be available on the "Investor Relations" page of the Company's website located at www.enstargroup.com.
The information contained in the Press Release and the Financial Supplement is summary information that is intended to be considered in the context of the Company's Securities and Exchange Commission ("SEC") filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in the Press Release and the Financial Supplement, although it may do so from time to time as its management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
The information presented in Item 2.02 of this Current Report on Form 8-K and Exhibits 99.1 and 99.2 shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, unless the Company specifically states that the information is to be considered “filed” under the Exchange Act or specifically incorporates it by reference into a filing under the Securities Act of 1933, as amended.
Item 7.01. Regulation FD Disclosure.
On August 9, 2022, the Company released a presentation (the "Investor Presentation"), a copy of which is attached hereto as Exhibit 99.3 and is incorporated herein by reference. The Company expects to use the Investor Presentation from time to time in connection with presentations to potential investors, industry analysts and others. The Investor Presentation is available under the “Events & Presentations” tab of the Company's “Investor Relations” website located at www.enstargroup.com/events-and-presentations.
By filing this Current Report on Form 8-K and furnishing the information in this Item 7.01, the Company makes no admission as to the materiality of any information in the Investor Presentation that is required to be disclosed solely by reason of Regulation FD.
The information contained in the Investor Presentation is summary information that is intended to be considered in the context of the Company’s SEC filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in the Investor Presentation, although it may do so from time to time as its management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
1
Item 9.01. Financial Statements and Exhibits
Exhibits
Exhibit No. | Description | |||||||
| Press Release, dated August 9, 2022. | ||||||||
Financial Supplement for the quarter ended June 30, 2022. | ||||||||
| Investor Presentation. | ||||||||
| 101 | Pursuant to Rule 406 of Regulation S-T, the cover page information in formatted in Inline XBRL. | |||||||
| 104 | Cover page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101). | |||||||
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ENSTAR GROUP LIMITED | |||||||||||
| August 9, 2022 | By: | /s/ Orla Gregory | |||||||||
| Orla Gregory | |||||||||||
| Chief Financial Officer | |||||||||||
Press Release 
Date: August 9, 2022 Contact: Enstar Communications
For Release: Immediately Telephone: +1 (441) 292-3645
Enstar Group Limited Reports Second Quarter Results
•Net Loss of $493 million and $775 million and Return on Equity of (9.8)% and (13.9)% for the three and six months ended June 30, 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 $245.93 and $241.05, respectively, as of June 30, 2022
•Returned $163 million to shareholders through share repurchases at a weighted average discount to book value of 20.3% during the six months ended June 30, 2022
•Agreed a Loss Portfolio Transfer with Argo Group International Holdings, Ltd. (“Argo”) covering a number of Argo’s U.S. casualty insurance portfolios, with a policy limit of $1.1 billion
Hamilton, Bermuda - August 9, 2022 - Enstar Group Limited (Nasdaq: ESGR) filed its quarterly report on Form 10-Q with the SEC earlier today. An audio presentation reviewing the second quarter 2022 results with expanded commentary is available on Enstar's investor relations website at investor.enstargroup.com.
Second Quarter 2022 Highlights:
•Return on equity ("ROE") of (9.8)% and Adjusted ROE* of (2.9)% compared to 6.0% and 5.1%, respectively, in the second quarter 2021. ROE was impacted by $379 million of net unrealized losses arising from interest rate increases on fixed maturity portfolios that are classified as trading, combined with $212 million of net unrealized losses in Enstar's non-core portfolios.
•The market dislocation has resulted in material unrealized losses in our investment portfolio impacted by the combination of interest rate increases, widening credit spreads and equity market declines. While we recognized net investment losses of $522 million in the quarter, we are confident in our investment strategies for the long term.
•Positively, our solvency or economic balance sheet became stronger during the second quarter. This is driven by two factors:
◦First, our solvency ratio reflects not only losses on investments but also the impact of a higher discount rate on our reserves; and
◦Secondly, our core fixed income securities are shorter in duration than our insurance liabilities.
•Our quarter's run-off liability earnings ("RLE") benefited from reductions in the value of certain portfolios that are held at fair value and favorable loss activity in the professional indemnity/directors and officers and workers' compensation lines of business net of amortization of deferred charge assets ("DCAs").
* Non-GAAP measure; refer to "Non-GAAP Financial Measures" further below for explanatory notes and a reconciliation to the most directly comparable GAAP measure.
Enstar Group Limited | Second Quarter 2022 | Press Release 1
•On August 8, 2022, we executed an LPT agreement with a wholly owned subsidiary of Argo covering a number of its U.S. casualty insurance portfolios, including construction, for accident years 2011 to 2019. We will provide ground up cover of $746 million, and an additional $275 million of cover in excess of $821 million, up to a policy limit of $1.1 billion. Argo will retain a loss corridor of $75 million up to $821 million. The closing of the transaction is subject to regulatory approval and other closing conditions which we expect to be completed in the second half of 2022.
Commenting on the Company’s results, Enstar CEO Dominic Silvester said:
“We completed one of our largest-ever loss portfolio transactions in the quarter, assuming an incremental $1.9 billion of subject loss reserves from Aspen, an established business partner, and transitioned claims management authority to Enstar. In addition, on August 8, 2022, we announced a reinsurance agreement with Argo which will provide us with the opportunity to bring our legacy expertise to the run-off of Argo’s US casualty book.
Our second quarter financial results continued to be impacted by unrealized investment losses, resulting from rising interest rates and ongoing economic uncertainty. Our fixed income portfolio has incurred a significant amount of the unrealized losses. However, it is important to keep in mind that this portfolio is designed to largely complement the maturity of underlying loss reserves and as such, we expect the losses to unwind over time. Overall, we remain confident that our investment strategy can generate strong value for the long term. We maintain a strong balance sheet with capacity to continue to pursue our active pipeline of opportunities and remain focused on delivering long-term value to our partners and shareholders.
We are seeing a robust market demand for our solutions and we maintain discipline with respect to acquiring new business and will only execute on transactions where we can generate appropriate risk-adjusted returns.”
Six months ended results included:
•Net loss of $775 million, or $44.54 per diluted ordinary share, compared to net earnings of $561 million, or $25.60 per diluted ordinary share, for the six months ended June 30, 2021.
•ROE of (13.9)% and Adjusted ROE* of (4.2)%, compared to 9.1% and 10.9%, respectively, for the six months ended June 30, 2021. ROE was impacted by unrealized losses arising from interest rate increases on fixed maturity portfolios that are classified trading combined with unrealized losses in Enstar's non-core portfolios.
•Annualized RLE of 3.7% and Annualized Adjusted RLE* of 0.5%, compared to 2.5% and 1.1%, respectively, for the six months ended June 30, 2021. RLE benefited from reductions in the value of certain portfolios that are held at fair value, favorable loss activity in the professional indemnity/directors and officers and workers' compensation lines of business net of amortization of DCAs, and favorable results on Enstar's inactive catastrophe programs held by Enhanzed Re.
•Annualized total investment return (“TIR”) of (8.1)% and Annualized Adjusted TIR* of (0.8)%, compared to 6.8% and 8.0%, respectively, for the six months ended June 30, 2021. Recognized investment results were impacted by the combination of interest rate increases, widening credit spreads and equity market declines.
•We repurchased 697,580 voting ordinary shares during the six months ended June 30, 2022 for an aggregate $163 million, representing an average price per share of $233.92 and a weighted average discount to our net book value per ordinary share of 20.3%. During the six months ended June 30, 2022, we utilized $105 million of the $200 million authorized under the 2022 Repurchase Program and the remaining $59 million authorized under the 2021 Repurchase Program to repurchase our ordinary shares.
* Non-GAAP measure; refer to "Non-GAAP Financial Measures" further below for explanatory notes and a reconciliation to the most directly comparable GAAP measure.
Enstar Group Limited | Second Quarter 2022 | Press Release 2
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, 2022 | June 30, 2021 | $ / pp / bp Change | June 30, 2022 | June 30, 2021 | $ / pp / bp Change | ||||||||||||||||||||||||||||||
| (in millions of U.S. dollars, except per share data) | |||||||||||||||||||||||||||||||||||
| Key Earnings Metrics | |||||||||||||||||||||||||||||||||||
| Net (loss) earnings attributable to Enstar ordinary shareholders | $ | (493) | $ | 378 | $ | (871) | $ | (775) | $ | 561 | $ | (1,336) | |||||||||||||||||||||||
| Adjusted operating (loss) income attributable to Enstar ordinary shareholders* | $ | (150) | $ | 296 | $ | (446) | $ | (223) | $ | 591 | $ | (814) | |||||||||||||||||||||||
| ROE | (9.8) | % | 6.0 | % | (15.8) | pp | (13.9) | % | 9.1 | % | (23.0) | pp | |||||||||||||||||||||||
| Annualized ROE | (27.7) | % | 18.2 | % | (45.9) | pp | |||||||||||||||||||||||||||||
| Adjusted ROE* | (2.9) | % | 5.1 | % | (8.0) | pp | (4.2) | % | 10.9 | % | (15.1) | pp | |||||||||||||||||||||||
| Annualized Adjusted ROE* | (8.4) | % | 21.7 | % | (30.1) | pp | |||||||||||||||||||||||||||||
| Key Run-off Metrics | |||||||||||||||||||||||||||||||||||
| Prior period development | $ | 79 | $ | 10 | $ | 69 | $ | 222 | $ | 120 | $ | 102 | |||||||||||||||||||||||
| Adjusted prior period development* | $ | 29 | $ | 24 | $ | 5 | $ | 28 | $ | 50 | $ | (22) | |||||||||||||||||||||||
| Annualized RLE | 3.7 | % | 2.5 | % | 1.2 | pp | |||||||||||||||||||||||||||||
| Annualized Adjusted RLE* | 0.5 | % | 1.1 | % | (0.6) | pp | |||||||||||||||||||||||||||||
| Key Investment Return Metrics | |||||||||||||||||||||||||||||||||||
| Total investable assets | $ | 20,869 | $ | 20,169 | $ | 700 | |||||||||||||||||||||||||||||
| Adjusted total investable assets* | $ | 22,115 | $ | 19,830 | $ | 2,285 | |||||||||||||||||||||||||||||
| Annualized investment book yield | 2.32 | % | 2.65 | % | (33) | bp | 2.03 | % | 2.24 | % | (21) | bp | |||||||||||||||||||||||
| Annualized TIR | (8.1) | % | 6.8 | % | (14.9) | pp | |||||||||||||||||||||||||||||
| Annualized Adjusted TIR* | (0.8) | % | 8.0 | % | (8.8) | pp | |||||||||||||||||||||||||||||
| As of | |||||||||||||||||||||||||||||||||||
| June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
| Key Shareholder Metrics | |||||||||||||||||||||||||||||||||||
| Book value per ordinary share | $ | 245.93 | $ | 316.34 | $ | (70.41) | |||||||||||||||||||||||||||||
| Adjusted book value per ordinary share* | $ | 241.05 | $ | 310.80 | $ | (69.75) | |||||||||||||||||||||||||||||
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.
Enstar Group Limited | Second Quarter 2022 | Press Release 3
Results of Operations by Segment - For the Three and Six Months Ended June 30, 2022 and 2021
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, | $ Change | June 30, | $ Change | ||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| INCOME | (in millions of U.S. dollars) | ||||||||||||||||||||||||||||||||||
| Net premiums earned | $ | 9 | $ | 42 | $ | (33) | $ | 26 | $ | 115 | $ | (89) | |||||||||||||||||||||||
| Other income: | |||||||||||||||||||||||||||||||||||
| Reduction in estimates of net ultimate defendant A&E liabilities - prior periods | 1 | 5 | (4) | 4 | 14 | (10) | |||||||||||||||||||||||||||||
| Reduction in estimated future defendant A&E expenses | 1 | — | 1 | 1 | 3 | (2) | |||||||||||||||||||||||||||||
| All other income | 5 | 9 | (4) | 12 | 19 | (7) | |||||||||||||||||||||||||||||
| Total other income | 7 | 14 | (7) | 17 | 36 | (19) | |||||||||||||||||||||||||||||
| Total income | 16 | 56 | (40) | 43 | 151 | (108) | |||||||||||||||||||||||||||||
| EXPENSES | |||||||||||||||||||||||||||||||||||
| Net incurred losses and LAE: | |||||||||||||||||||||||||||||||||||
| Current period | 14 | 42 | (28) | 25 | 86 | (61) | |||||||||||||||||||||||||||||
| Prior periods: | |||||||||||||||||||||||||||||||||||
| Reduction in estimates of net ultimate losses | (108) | (42) | (66) | (137) | (67) | (70) | |||||||||||||||||||||||||||||
| Reduction in provisions for ULAE | (13) | (17) | 4 | (34) | (31) | (3) | |||||||||||||||||||||||||||||
| Total prior periods | (121) | (59) | (62) | (171) | (98) | (73) | |||||||||||||||||||||||||||||
| Total net incurred losses and LAE | (107) | (17) | (90) | (146) | (12) | (134) | |||||||||||||||||||||||||||||
| Acquisition costs | 9 | — | 9 | 17 | 29 | (12) | |||||||||||||||||||||||||||||
General and administrative expenses (1) | 36 | 64 | (28) | 75 | 92 | (17) | |||||||||||||||||||||||||||||
| Total expenses | (62) | 47 | (109) | (54) | 109 | (163) | |||||||||||||||||||||||||||||
| SEGMENT NET EARNINGS | $ | 78 | $ | 9 | $ | 69 | $ | 97 | $ | 42 | $ | 55 | |||||||||||||||||||||||
(1) Second quarter 2021 results include incremental expenses attributable to the first quarter 2021 general and administrative expenses following a refinement made to the allocation of expenses in the second quarter of 2021, which increased the general and administrative expenses of the Run-off segment for the three months ended June 30, 2021 by $16 million.
Three and Six Months Ended June 30, 2022 versus 2021: Net earnings from our Run-off segment increased by $69 million and $55 million, respectively, primarily due to:
•A $62 million and $73 million increase in favorable PPD for the three and six months ended June 30, 2022, respectively, driven by a $66 million and $70 million increase in the reduction in estimates of net ultimate losses, respectively, primarily due to favorable loss activity in the professional indemnity/directors and officers and workers’ compensation lines of business; and
•A decrease in general and administrative expenses of $28 million and $17 million, respectively. Excluding the impact of the refinement made to the allocation of expenses in the second quarter of 2021 as described above, these decreases were primarily driven by lower salaries and benefits due to reductions in head count and long-term incentive plan costs and decreases in professional fees for the three and six months ended June 30, 2022; partially offset by
•Reductions in net premiums earned that were greater than the reductions in current period net incurred losses and LAE for the three and six months ended June 30, 2022, following our exit of our StarStone International business beginning in 2020; and
•A reduction in other income of $7 million and $19 million, respectively, primarily driven by lower favorable prior period development related to our defendant A&E liabilities for the three and six months ended June 30, 2022.
Enstar Group Limited | Second Quarter 2022 | Press Release 4
Investments Segment
The following is a discussion and analysis of the results of operations for our Investments segment.
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| June 30, | $ Change | June 30, | $ Change | ||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||||||||||||||||
| INCOME | |||||||||||||||||||||||||||||||||||
| Net investment income: | |||||||||||||||||||||||||||||||||||
| Fixed income securities | $ | 85 | $ | 87 | $ | (2) | $ | 153 | $ | 138 | $ | 15 | |||||||||||||||||||||||
| Cash and restricted cash | 1 | — | 1 | 1 | — | 1 | |||||||||||||||||||||||||||||
| Other investments, including equities | 22 | 15 | 7 | 41 | 29 | 12 | |||||||||||||||||||||||||||||
| Less: Investment expenses | (4) | (26) | 22 | (15) | (30) | 15 | |||||||||||||||||||||||||||||
| Total net investment income | 104 | 76 | 28 | 180 | 137 | 43 | |||||||||||||||||||||||||||||
| Net realized (losses) gains: | |||||||||||||||||||||||||||||||||||
| Fixed income securities | (30) | 5 | (35) | (65) | (6) | (59) | |||||||||||||||||||||||||||||
| Other investments, including equities | (8) | 1 | (9) | (10) | 2 | (12) | |||||||||||||||||||||||||||||
| Net realized (losses) gains: | (38) | 6 | (44) | (75) | (4) | (71) | |||||||||||||||||||||||||||||
| Net unrealized (losses) gains: | |||||||||||||||||||||||||||||||||||
| Fixed income securities | (377) | 105 | (482) | (670) | (89) | (581) | |||||||||||||||||||||||||||||
| Other investments, including equities | (212) | 295 | (507) | (294) | 479 | (773) | |||||||||||||||||||||||||||||
| Total net unrealized (losses) gains: | (589) | 400 | (989) | (964) | 390 | (1,354) | |||||||||||||||||||||||||||||
| Total income | (523) | 482 | (1,005) | (859) | 523 | (1,382) | |||||||||||||||||||||||||||||
| EXPENSES | |||||||||||||||||||||||||||||||||||
General and administrative expenses (1) | 10 | 13 | (3) | 19 | 16 | 3 | |||||||||||||||||||||||||||||
| Total expenses | 10 | 13 | (3) | 19 | 16 | 3 | |||||||||||||||||||||||||||||
| Earnings (losses) from equity method investments | 1 | (3) | 4 | 32 | 115 | (83) | |||||||||||||||||||||||||||||
| SEGMENT NET (LOSS) EARNINGS | $ | (532) | $ | 466 | $ | (998) | $ | (846) | $ | 622 | $ | (1,468) | |||||||||||||||||||||||
(1) Second quarter 2021 results include incremental expenses attributable to the first quarter 2021 general and administrative expenses following a refinement made to the allocation of expenses in the second quarter of 2021, which increased the general and administrative expenses of the Investments segment for the three months ended June 30, 2021 by $3 million.
Three and Six Months Ended June 30, 2022 versus 2021: Net loss from our Investments segment was $532 million and $846 million for the three and six months ended June 30, 2022, respectively, compared to net earnings of $466 million and $622 million for the three and six months ended June 30, 2021. The unfavorable movements of $998 million and $1.5 billion, respectively, were primarily due to:
•net realized and unrealized losses on our fixed income securities of $407 million and $735 million, respectively, driven by rising interest rates and widening credit spreads, in comparison to net gains of $110 million and net losses of $95 million, respectively, in the comparative periods;
•net realized and unrealized losses on our other investments, including equities, of $220 million and $304 million, respectively, in comparison to net gains of $296 million and $481 million, respectively, in the comparative periods, primarily driven by underperformance of our fixed income funds, public equities and CLO equities as a result of significant volatility in global equity markets and widening high yield credit spreads. The results were 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 net gains on our hedge funds for the three months ended June 30, 2022 as a result of exposure to Chinese equities; and
Enstar Group Limited | Second Quarter 2022 | Press Release 5
•an $83 million decrease in earnings from equity method investments for the six months ended June 30, 2022, largely due to our acquisition of the controlling interest in Enhanzed Re, effective September 1, 2021 (consolidated net loss from Enhanzed Re was $95 million for the six months ended June 30, 2022). Prior to that date, the results of Enhanzed Re were recorded in earnings from equity method investments within the Investments segment; partially offset by:
•increases in our net investment income of $28 million and $43 million, respectively, which is primarily due to an increase in our average aggregate fixed income assets due to new business during the past year and the reinvestment of fixed maturities at higher yields.
Net investment losses recognized on the fixed income securities that support our Enhanzed Re life reinsurance business for the three and six months ended June 30, 2022 were $109 million and $128 million, respectively.
Income and Earnings by Segment - For the Three and Six Months Ended June 30, 2022 and 2021
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| June 30, 2022 | June 30, 2021 | $ Change | June 30, 2022 | June 30, 2021 | $ Change | ||||||||||||||||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||||||||||||||||
| INCOME | |||||||||||||||||||||||||||||||||||
| Run-off | $ | 16 | $ | 56 | $ | (40) | $ | 43 | $ | 151 | $ | (108) | |||||||||||||||||||||||
| Enhanzed Re | 1 | — | 1 | 15 | — | 15 | |||||||||||||||||||||||||||||
| Investments | (523) | 482 | (1,005) | (859) | 523 | (1,382) | |||||||||||||||||||||||||||||
| Legacy Underwriting | 6 | 15 | (9) | 8 | 28 | (20) | |||||||||||||||||||||||||||||
| Subtotal | (500) | 553 | (1,053) | (793) | 702 | (1,495) | |||||||||||||||||||||||||||||
| Corporate and other | 14 | (6) | 20 | 17 | 4 | 13 | |||||||||||||||||||||||||||||
| Total income | $ | (486) | $ | 547 | $ | (1,033) | $ | (776) | $ | 706 | $ | (1,482) | |||||||||||||||||||||||
| SEGMENT NET (LOSS) EARNINGS | |||||||||||||||||||||||||||||||||||
Run-off (3) | $ | 78 | $ | 9 | $ | 69 | $ | 97 | $ | 42 | $ | 55 | |||||||||||||||||||||||
| Enhanzed Re | (7) | — | (7) | 22 | — | 22 | |||||||||||||||||||||||||||||
Investments (3) | (532) | 466 | (998) | (846) | 622 | (1,468) | |||||||||||||||||||||||||||||
| Legacy Underwriting | — | (2) | 2 | — | — | — | |||||||||||||||||||||||||||||
| Total segment net (loss) earnings | (461) | 473 | (934) | (727) | 664 | (1,391) | |||||||||||||||||||||||||||||
Corporate and other (1)(2)(3) | (32) | (95) | 63 | (48) | (103) | 55 | |||||||||||||||||||||||||||||
| NET (LOSS) EARNINGS ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS | $ | (493) | $ | 378 | $ | (871) | $ | (775) | $ | 561 | $ | (1,336) | |||||||||||||||||||||||
(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 and six months ended June 30, 2022 included accelerated amortization of $72 million and $96 million, respectively, corresponding to increased favorable prior period development on net ultimate liabilities recorded in our Run-off segment. The three and six months ended June 30, 2021 included accelerated amortization of $11 million corresponding to increased favorable prior period development on net ultimate liabilities recorded in our Run-off segment.
(3) Second quarter 2021 results include incremental expenses attributable to the first quarter 2021 general and administrative expenses following a refinement made to the allocation of expenses in the second quarter of 2021, which increased/(decreased) general and administrative expenses of the Run-off and Investment segments by $16 million and $3 million, respectively, as well as corporate and other activities by $(19) million, for the three months ended June 30, 2021.
For additional detail on the Enhanzed Re segment, the Legacy Underwriting segment and corporate and other activities, please refer to the Form 10-Q.
Enstar Group Limited | Second Quarter 2022 | Press Release 6
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 | Second Quarter 2022 | Press Release 7
ENSTAR GROUP LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
For the Three and Six Months Ended June 30, 2022 and 2021
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (expressed in millions of U.S. dollars, except share and per share data) | |||||||||||||||||||||||
| INCOME | |||||||||||||||||||||||
| Net premiums earned | $ | 14 | $ | 59 | $ | 48 | $ | 152 | |||||||||||||||
| Net investment income | 106 | 76 | 186 | 138 | |||||||||||||||||||
| Net realized (losses) gains | (38) | 6 | (75) | (5) | |||||||||||||||||||
| Net unrealized (losses) gains | (591) | 400 | (972) | 390 | |||||||||||||||||||
| Other income | 23 | 6 | 37 | 16 | |||||||||||||||||||
| Net gain on sales of subsidiaries | — | — | — | 15 | |||||||||||||||||||
| Total income | (486) | 547 | (776) | 706 | |||||||||||||||||||
| EXPENSES | |||||||||||||||||||||||
| Net incurred losses and loss adjustment expenses | |||||||||||||||||||||||
| Current period | 13 | 50 | 26 | 104 | |||||||||||||||||||
| Prior periods | (79) | (10) | (222) | (120) | |||||||||||||||||||
| Total net incurred losses and loss adjustment expenses | (66) | 40 | (196) | (16) | |||||||||||||||||||
| Policyholder benefit expenses | 6 | — | 18 | — | |||||||||||||||||||
| Acquisition costs | 12 | 5 | 20 | 39 | |||||||||||||||||||
| General and administrative expenses | 83 | 93 | 168 | 176 | |||||||||||||||||||
| Interest expense | 23 | 17 | 48 | 33 | |||||||||||||||||||
| Net foreign exchange (gains) | (13) | (10) | (10) | (7) | |||||||||||||||||||
| Total expenses | 45 | 145 | 48 | 225 | |||||||||||||||||||
| (LOSS) EARNINGS BEFORE INCOME TAXES | (531) | 402 | (824) | 481 | |||||||||||||||||||
| Income tax benefit (expense) | 4 | (9) | 4 | (3) | |||||||||||||||||||
| Earnings (losses) from equity method investments | 1 | (3) | 32 | 115 | |||||||||||||||||||
| NET (LOSS) EARNINGS | (526) | 390 | (788) | 593 | |||||||||||||||||||
| Net loss (earnings) attributable to noncontrolling interests | 42 | (3) | 31 | (14) | |||||||||||||||||||
| NET (LOSS) EARNINGS ATTRIBUTABLE TO ENSTAR | (484) | 387 | (757) | 579 | |||||||||||||||||||
| Dividends on preferred shares | (9) | (9) | (18) | (18) | |||||||||||||||||||
| NET (LOSS) EARNINGS ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS | $ | (493) | $ | 378 | $ | (775) | $ | 561 | |||||||||||||||
| (Loss) earnings per ordinary share attributable to Enstar: | |||||||||||||||||||||||
| Basic | $ | (28.62) | $ | 17.44 | $ | (44.54) | $ | 25.95 | |||||||||||||||
| Diluted | $ | (28.62) | $ | 17.28 | $ | (44.54) | $ | 25.60 | |||||||||||||||
| Weighted average ordinary shares outstanding: | |||||||||||||||||||||||
| Basic | 17,224,449 | 21,631,749 | 17,400,257 | 21,597,236 | |||||||||||||||||||
| Diluted | 17,470,691 | 21,832,218 | 17,634,698 | 21,892,744 | |||||||||||||||||||
Enstar Group Limited | Second Quarter 2022 | Press Release 8
ENSTAR GROUP LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of June 30, 2022 and December 31, 2021
| June 30, 2022 | December 31, 2021 | ||||||||||
| (in millions of U.S. dollars, except share data) | |||||||||||
| ASSETS | |||||||||||
| Short-term investments, trading, at fair value | $ | 15 | $ | 6 | |||||||
Short-term investments, available-for-sale, at fair value (amortized cost: 2022 — $43; 2021 — $34; net of allowance: 2022 and 2021 — $0) | 42 | 34 | |||||||||
| Fixed maturities, trading, at fair value | 2,783 | 3,756 | |||||||||
Fixed maturities, available-for-sale, at fair value (amortized cost: 2022 — $5,673; 2021 — $5,689; net of allowance: 2022 — $42; 2021 — $10) | 5,099 | 5,652 | |||||||||
| Funds held - directly managed | 2,481 | 3,007 | |||||||||
Equities, at fair value (cost: 2022 — $1,819; 2021 — $1,831) | 1,776 | 1,995 | |||||||||
| Other investments, at fair value | 3,125 | 2,333 | |||||||||
| Equity method investments | 506 | 493 | |||||||||
| Total investments | 15,827 | 17,276 | |||||||||
| Cash and cash equivalents | 785 | 1,646 | |||||||||
| Restricted cash and cash equivalents | 301 | 446 | |||||||||
Reinsurance balances recoverable on paid and unpaid losses (net of allowance: 2022 — $137; 2021 — $136) | 948 | 1,085 | |||||||||
| Reinsurance balances recoverable on paid and unpaid losses, at fair value | 327 | 432 | |||||||||
Insurance balances recoverable (net of allowance: 2022 and 2021 — $5) | 191 | 213 | |||||||||
| Funds held by reinsured companies | 3,956 | 2,340 | |||||||||
| Deferred charge assets | 286 | 371 | |||||||||
| Other assets | 648 | 620 | |||||||||
| TOTAL ASSETS | $ | 23,269 | $ | 24,429 | |||||||
| LIABILITIES | |||||||||||
| Losses and loss adjustment expenses | $ | 12,142 | $ | 11,269 | |||||||
| Losses and loss adjustment expenses, at fair value | 1,499 | 1,989 | |||||||||
| Future policyholder benefits | 1,363 | 1,502 | |||||||||
| Defendant asbestos and environmental liabilities | 620 | 638 | |||||||||
| Insurance and reinsurance balances payable | 205 | 254 | |||||||||
| Debt obligations | 1,905 | 1,691 | |||||||||
| Other liabilities | 475 | 581 | |||||||||
| TOTAL LIABILITIES | 18,209 | 17,924 | |||||||||
| COMMITMENTS AND CONTINGENCIES | |||||||||||
| REDEEMABLE NONCONTROLLING INTERESTS | 174 | 179 | |||||||||
| SHAREHOLDERS’ EQUITY | |||||||||||
Ordinary Shares (par value $1 each, issued and outstanding 2022: 17,574,197; 2021: 18,223,574): | |||||||||||
Voting Ordinary Shares (issued and outstanding 2022: 15,976,485; 2021: 16,625,862) | 16 | 17 | |||||||||
Non-voting convertible ordinary Series C Shares (issued and outstanding 2022 and 2021: 1,192,941) | 1 | 1 | |||||||||
Non-voting convertible ordinary Series E Shares (issued and outstanding 2022 and 2021: 404,771) | — | — | |||||||||
| Preferred Shares: | |||||||||||
Series C Preferred Shares (issued and held in treasury 2022 and 2021: 388,571) | — | — | |||||||||
Series D Preferred Shares (issued and outstanding 2022 and 2021: 16,000; liquidation preference $400) | 400 | 400 | |||||||||
Series E Preferred Shares (issued and outstanding 2022 and 2021: 4,400; liquidation preference $110) | 110 | 110 | |||||||||
Treasury shares, at cost (Series C Preferred Shares 2022 and 2021: 388,571) | (422) | (422) | |||||||||
Joint Share Ownership Plan (voting ordinary shares, held in trust 2022 and 2021: 565,630) | (1) | (1) | |||||||||
| Additional paid-in capital | 769 | 922 | |||||||||
| Accumulated other comprehensive loss | (490) | (16) | |||||||||
| Retained earnings | 4,310 | 5,085 | |||||||||
| Total Enstar Shareholders’ Equity | 4,693 | 6,096 | |||||||||
| Noncontrolling interests | 193 | 230 | |||||||||
| TOTAL SHAREHOLDERS’ EQUITY | 4,886 | 6,326 | |||||||||
| TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND SHAREHOLDERS’ EQUITY | $ | 23,269 | $ | 24,429 | |||||||
Enstar Group Limited | Second Quarter 2022 | Press Release 9
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 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.
| Non-GAAP Measure | Definition | Purpose of Non-GAAP Measure over GAAP Measure | ||||||||||||
| Adjusted book value per ordinary share | Total Enstar ordinary shareholders' equity Divided by Number of ordinary shares outstanding, adjusted for: -the ultimate effect of any dilutive securities on the number of ordinary shares outstanding | Increases the number of ordinary shares to reflect equity awards granted but not yet vested as, over the long term, this presents a prudent view of our book value per share. We use this non-GAAP measure in our incentive compensation program. | ||||||||||||
| Adjusted return on equity (%) | Adjusted operating income (loss) attributable to Enstar ordinary shareholders divided by adjusted opening Enstar ordinary shareholder's equity | Calculating the operating income (loss) as a percentage of our adjusted opening Enstar ordinary shareholders' equity provides a more valuable and consistent measure of the performance of our business, and enhances comparisons to prior periods: •by adjusting investment returns for the temporary impact of the change in fair value of fixed maturity securities (both credit spreads and interest rates) which we hold until the earlier of maturity or used to fund any settlement of related liabilities which are generally recorded at cost; •by removing the impact of non-cash charges that obscure our trends on a consistent basis; and •by removing items that are not indicative of our ongoing operations; We use this non-GAAP measure in our annual incentive compensation program. We include the amortization of fair value adjustments as a non-GAAP adjustment to the adjusted operating income (loss) attributable to Enstar ordinary shareholders as it is considered to be a non-cash charge and not indicative of our operating results. | ||||||||||||
Adjusted operating income (loss) attributable to Enstar ordinary shareholders (numerator) | Net earnings (loss) attributable to Enstar ordinary shareholders, adjusted for: -net realized and unrealized (gains) losses on fixed maturity investments and funds held-directly managed -change in fair value of insurance contracts for which we have elected the fair value option (1) -amortization of fair value adjustments -net gain/loss on purchase and sales of subsidiaries (if any) -net earnings from discontinued operations (if any) -tax effects of adjustments -adjustments attributable to noncontrolling interests | |||||||||||||
Adjusted opening Enstar ordinary shareholders' equity (denominator) | Opening Enstar ordinary shareholders' equity, less: -net unrealized gains (losses) on fixed maturity investments and funds held-directly managed, -fair value of insurance contracts for which we have elected the fair value option (1), -fair value adjustments, and -net assets of held for sale or disposed subsidiaries classified as discontinued operations (if any) | |||||||||||||
Enstar Group Limited | Second Quarter 2022 | Press Release 10
| Adjusted total investment return (%) | Adjusted total investment return (dollars) recognized in earnings for the applicable period divided by period average adjusted total investable assets. | Provides a key measure of the return generated on the capital held in the business and is reflective of our investment strategy. Provides a consistent measure of investment returns as a percentage of all assets generating investment returns. Adjusts investment returns for the temporary impact of the change in fair value of fixed maturity securities (both credit spreads and interest rates) which we hold until the earlier of maturity or used to fund any settlement of related liabilities which are generally recorded at cost. | ||||||||||||
Adjusted total investment return ($) (numerator) | Total investment return (dollars), adjusted for: -net realized and unrealized (gains) losses on fixed maturity investments and funds held-directly managed | |||||||||||||
Adjusted average aggregate total investable assets (denominator) | Total average investable assets, adjusted for: -net unrealized (gains) losses on fixed maturities, AFS investments included within AOCI -net unrealized (gains) losses on fixed maturities, trading instruments | |||||||||||||
| Adjusted run-off liability earnings (%) | Adjusted PPD divided by average adjusted net loss reserves | Calculating the RLE as a percentage of our adjusted average net loss reserves provides a more meaningful measurement of our claims management performance. We use this measure to evaluate our ability to settle our obligations for amounts less than our initial estimate at the point of acquiring the obligations. In order to provide a complete and consistent picture of our claims performance, we combine the reduction (increase) in estimates of prior period net ultimate losses relating to our Run-off segment with the amortization of deferred charge assets, both of which are included in net incurred losses and LAE and have an inverse effect on our results. We also include our performance in managing our defendant A&E liabilities, that do not form part of loss reserves. The remaining components of net incurred losses and LAE and net loss reserves are not considered key components of our claims performance as they are either not non-life run-off in nature, or are considered to be non-cash charges that obscure our trends on a consistent basis. We use this measure to assess the performance of our claim strategies and part of the performance assessment of our past acquisitions. | ||||||||||||
Adjusted prior period development (numerator) | Prior period net incurred losses and LAE, adjusted to: Remove: -Legacy Underwriting and Enhanzed Re operations -the reduction/(increase) in provisions for unallocated LAE (ULAE) -amortization of fair value adjustments, -change in fair value of insurance contracts for which we have elected the fair value option (1), and Add: -the reduction/(increase) in estimates of our defendant A&E ultimate net liabilities. | |||||||||||||
Adjusted net loss reserves (denominator) | Net losses and LAE, adjusted to: Remove: -Legacy Underwriting and Enhanzed Re net loss reserves -current period net loss reserves -the net ULAE provision -net fair value adjustments associated with the acquisition of companies, -the fair value adjustments for contracts for which we have elected the fair value option (1) and Add: -net nominal defendant asbestos and environmental exposures. | |||||||||||||
(1) Comprises the discount rate and risk margin components.
Enstar Group Limited | Second Quarter 2022 | Press Release 11
Reconciliation of GAAP to Non-GAAP Measures
The table below presents a reconciliation of BVPS to Adjusted BVPS*:
| June 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
Equity (1) | Ordinary Shares | Per Share Amount | Equity (1) | Ordinary Shares | Per Share Amount | |||||||||||||||||||||||||||||||||
| (in millions of U.S. dollars, except share and per share data) | ||||||||||||||||||||||||||||||||||||||
| Book value per ordinary share | $ | 4,183 | 17,008,567 | $ | 245.93 | $ | 5,586 | 17,657,944 | $ | 316.34 | ||||||||||||||||||||||||||||
| Non-GAAP adjustments: | ||||||||||||||||||||||||||||||||||||||
| Share-based compensation plans | 344,890 | 315,205 | ||||||||||||||||||||||||||||||||||||
| Adjusted book value per ordinary share* | $ | 4,183 | 17,353,457 | $ | 241.05 | $ | 5,586 | 17,973,149 | $ | 310.80 | ||||||||||||||||||||||||||||
(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.
The tables below present a reconciliation of Annualized ROE to Annualized Adjusted ROE*:
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2022 | June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) earnings (1) | Opening equity (1) | (Adj) ROE | Annualized (Adj) ROE | Net (loss) earnings (1) | Opening equity (1) | (Adj) ROE | Annualized (Adj) ROE | ||||||||||||||||||||||||||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) earnings/Opening equity/ROE/Annualized ROE (1) | $ | (493) | $ | 5,024 | (9.8) | % | (39.3) | % | $ | 378 | $ | 6,251 | 6.0 | % | 24.2 | % | |||||||||||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||
| Remove: | |||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized losses (gains) on fixed maturity investments and funds held - directly managed / Net unrealized losses (gains) on fixed maturity investments and funds held - directly managed (2) | 409 | 458 | (110) | (228) | |||||||||||||||||||||||||||||||||||||||||||
Change in fair value of insurance contracts for which we have elected the fair value option / Fair value of insurance contracts for which we have elected the fair value option (3) | (48) | (201) | 17 | (109) | |||||||||||||||||||||||||||||||||||||||||||
| Amortization of fair value adjustments / Fair value adjustments | 5 | (104) | 6 | (125) | |||||||||||||||||||||||||||||||||||||||||||
Tax effects of adjustments (4) | 20 | 4 | |||||||||||||||||||||||||||||||||||||||||||||
Adjustments attributable to noncontrolling interests (5) | (43) | 1 | |||||||||||||||||||||||||||||||||||||||||||||
| Adjusted operating (loss) income/Adjusted opening equity/Adjusted ROE/Annualized adjusted ROE* | $ | (150) | $ | 5,177 | (2.9) | % | (11.6) | % | $ | 296 | $ | 5,789 | 5.1 | % | 20.5 | % | |||||||||||||||||||||||||||||||
(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 (gains) 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 interests associated with the specific subsidiaries to which the adjustments relate.
*Non-GAAP measure.
Enstar Group Limited | Second Quarter 2022 | Press Release 12
| Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2022 | June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) earnings (1) | Opening equity (1) | (Adj) ROE | Annualized (Adj) ROE | Net (loss) earnings (1) | Opening equity (1) | (Adj) ROE | Annualized (Adj) ROE | ||||||||||||||||||||||||||||||||||||||||
| (in millions of U.S. dollars) | |||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) earnings/Opening equity/ROE/Annualized ROE (1) | $ | (775) | $ | 5,586 | (13.9) | % | (27.7) | % | $ | 561 | $ | 6,164 | 9.1 | % | 18.2 | % | |||||||||||||||||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||||||||||||||||||||||||
Net realized and unrealized losses on fixed maturity investments and funds held - directly managed / Net unrealized gains on fixed maturity investments and funds held - directly managed (2) | 743 | (89) | 96 | (560) | |||||||||||||||||||||||||||||||||||||||||||
Change in fair value of insurance contracts for which we have elected the fair value option / Fair value of insurance contracts for which we have elected the fair value option (3) | (146) | (107) | (58) | (33) | |||||||||||||||||||||||||||||||||||||||||||
| Amortization of fair value adjustments / Fair value adjustments | 7 | (106) | 8 | (128) | |||||||||||||||||||||||||||||||||||||||||||
| Net gain on sales of subsidiaries | — | (15) | |||||||||||||||||||||||||||||||||||||||||||||
Tax effects of adjustments (4) | (4) | (13) | |||||||||||||||||||||||||||||||||||||||||||||
Adjustments attributable to noncontrolling interests (5) | (48) | 12 | |||||||||||||||||||||||||||||||||||||||||||||
| Adjusted operating (loss) income/Adjusted opening equity/Adjusted ROE/Annualized adjusted ROE* | $ | (223) | $ | 5,284 | (4.2) | % | (8.4) | % | $ | 591 | $ | 5,443 | 10.9 | % | 21.7 | % | |||||||||||||||||||||||||||||||
(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 (gains) 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 interests associated with the specific subsidiaries to which the adjustments relate.
*Non-GAAP measure.
Enstar Group Limited | Second Quarter 2022 | Press Release 13
The tables below present a reconciliation of PPD to Adjusted PPD* and Annualized RLE to Annualized Adjusted RLE*:
| Three Months Ended | As of | Three Months Ended | ||||||||||||||||||||||||||||||
| June 30, 2022 | June 30, 2022 | March 31, 2022 | June 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||||||
| PPD | Net loss reserves | Net loss reserves | Average net loss reserves | Annualized RLE % | ||||||||||||||||||||||||||||
| (in millions of U.S. dollars) | ||||||||||||||||||||||||||||||||
| PPD/net loss reserves/Annualized RLE | $ | 79 | $ | 12,238 | $ | 10,962 | $ | 11,600 | 2.7 | % | ||||||||||||||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||||||||||||
| Enhanzed Re | (1) | (147) | (150) | (149) | ||||||||||||||||||||||||||||
| Legacy Underwriting | 6 | (140) | (142) | (141) | ||||||||||||||||||||||||||||
| Net loss reserves - current period | — | (26) | (13) | (20) | ||||||||||||||||||||||||||||
| Reduction in provisions for ULAE / Net ULAE provisions | (13) | (504) | (394) | (449) | ||||||||||||||||||||||||||||
| Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies | 5 | 99 | 104 | 102 | ||||||||||||||||||||||||||||
Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) | (48) | 239 | 201 | 220 | ||||||||||||||||||||||||||||
| Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities | 1 | 574 | 586 | 580 | ||||||||||||||||||||||||||||
| Adjusted PPD/Adjusted net loss reserves/Annualized Adjusted RLE* | $ | 29 | $ | 12,333 | $ | 11,154 | $ | 11,743 | 1.0 | % | ||||||||||||||||||||||
| Three Months Ended | As of | Three Months Ended | ||||||||||||||||||||||||||||||
| June 30, 2021 | June 30, 2021 | March 31, 2021 | June 30, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||
| PPD | Net loss reserves | Net loss reserves | Average net loss reserves | Annualized RLE % | ||||||||||||||||||||||||||||
| (in millions of U.S. dollars) | ||||||||||||||||||||||||||||||||
| PPD/net loss reserves/Annualized RLE | $ | 10 | $ | 10,835 | $ | 9,215 | $ | 10,025 | 0.4 | % | ||||||||||||||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||||||||||||
| Legacy Underwriting | 4 | (156) | (153) | (155) | ||||||||||||||||||||||||||||
| Net loss reserves - current period | — | (91) | (48) | (70) | ||||||||||||||||||||||||||||
| Reduction in provisions for ULAE / Net ULAE provisions | (18) | (410) | (396) | (403) | ||||||||||||||||||||||||||||
| Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies | 6 | 120 | 125 | 123 | ||||||||||||||||||||||||||||
Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) | 17 | 91 | 109 | 100 | ||||||||||||||||||||||||||||
| Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities | 5 | 584 | 599 | 592 | ||||||||||||||||||||||||||||
| Adjusted PPD/Adjusted net loss reserves/Annualized Adjusted RLE* | $ | 24 | $ | 10,973 | $ | 9,451 | $ | 10,212 | 0.9 | % | ||||||||||||||||||||||
(1) Comprises the discount rate and risk margin components.
*Non-GAAP measure.
Enstar Group Limited | Second Quarter 2022 | Press Release 14
| Six Months Ended | As of | Six Months Ended | ||||||||||||||||||||||||||||||
| June 30, 2022 | June 30, 2022 | December 31, 2021 | June 30, 2022 | June 30, 2022 | ||||||||||||||||||||||||||||
| PPD | Net loss reserves | Net loss reserves | Average net loss reserves | Annualized RLE % | ||||||||||||||||||||||||||||
| (in millions of U.S. dollars) | ||||||||||||||||||||||||||||||||
| PPD/net loss reserves/Annualized RLE | $ | 222 | $ | 12,238 | $ | 11,555 | $ | 11,897 | 3.7 | % | ||||||||||||||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||||||||||||
| Enhanzed Re | (29) | (147) | (181) | (164) | ||||||||||||||||||||||||||||
| Legacy Underwriting | 5 | (140) | (153) | (147) | ||||||||||||||||||||||||||||
| Net loss reserves - current period | — | (26) | — | (13) | ||||||||||||||||||||||||||||
| Reduction in provisions for ULAE / Net ULAE provisions | (35) | (504) | (416) | (460) | ||||||||||||||||||||||||||||
| Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies | 7 | 99 | 106 | 103 | ||||||||||||||||||||||||||||
Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) | (146) | 239 | 107 | 173 | ||||||||||||||||||||||||||||
| Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities | 4 | 574 | 574 | 574 | ||||||||||||||||||||||||||||
| Adjusted PPD/Adjusted net loss reserves/Annualized Adjusted RLE* | $ | 28 | $ | 12,333 | $ | 11,592 | $ | 11,963 | 0.5 | % | ||||||||||||||||||||||
| Six Months Ended | As of | Six Months Ended | ||||||||||||||||||||||||||||||
| June 30, 2021 | June 30, 2021 | December 31, 2020 | June 30, 2021 | June 30, 2021 | ||||||||||||||||||||||||||||
| PPD | Net loss reserves | Net loss reserves | Average net loss reserves | Annualized RLE % | ||||||||||||||||||||||||||||
| (in millions of U.S. dollars) | ||||||||||||||||||||||||||||||||
| PPD/net loss reserves/Annualized RLE | $ | 120 | $ | 10,835 | $ | 8,544 | $ | 9,690 | 2.5 | % | ||||||||||||||||||||||
| Non-GAAP Adjustments: | ||||||||||||||||||||||||||||||||
| Legacy Underwriting | (2) | (156) | (955) | (556) | ||||||||||||||||||||||||||||
| Net loss reserves - current period | — | (91) | — | (46) | ||||||||||||||||||||||||||||
| Reduction in provisions for ULAE / Net ULAE provisions | (32) | (410) | (334) | (372) | ||||||||||||||||||||||||||||
| Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies | 8 | 120 | 128 | 124 | ||||||||||||||||||||||||||||
Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) | (58) | 91 | 33 | 62 | ||||||||||||||||||||||||||||
| Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities | 14 | 584 | 615 | 600 | ||||||||||||||||||||||||||||
| Adjusted PPD/Adjusted net loss reserves/Annualized Adjusted RLE* | $ | 50 | $ | 10,973 | $ | 8,031 | $ | 9,502 | 1.1 | % | ||||||||||||||||||||||
(1) Comprises the discount rate and risk margin components.
*Non-GAAP measure.
Enstar Group Limited | Second Quarter 2022 | Press Release 15
The tables below present a reconciliation of our Annualized TIR to our Annualized Adjusted TIR*:
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, 2022 | June 30, 2021 | June 30, 2022 | June 30, 2021 | |||||||||||||||||||||||
| (in millions of U.S. dollars) | ||||||||||||||||||||||||||
| Net investment income | $ | 106 | $ | 76 | $ | 186 | $ | 138 | ||||||||||||||||||
| Net realized (losses) gains | (38) | 6 | (75) | (5) | ||||||||||||||||||||||
| Net unrealized (losses) gains | (591) | 400 | (972) | 390 | ||||||||||||||||||||||
| Earnings (losses) from equity method investments | 1 | (3) | 32 | 115 | ||||||||||||||||||||||
| TIR ($) | $ | (522) | $ | 479 | $ | (829) | $ | 638 | ||||||||||||||||||
| Non-GAAP adjustment: | ||||||||||||||||||||||||||
| Net realized and unrealized losses (gains) on fixed maturity investments and funds held-directly managed | 409 | (110) | 743 | 96 | ||||||||||||||||||||||
| Adjusted TIR ($)* | $ | (113) | $ | 369 | $ | (86) | $ | 734 | ||||||||||||||||||
| Total investments | $ | 15,827 | $ | 14,621 | $ | 15,827 | $ | 14,621 | ||||||||||||||||||
| Cash and cash equivalents, including restricted cash and cash equivalents | 1,086 | 1,126 | 1,086 | 1,126 | ||||||||||||||||||||||
| Funds held by reinsured companies | 3,956 | 2,202 | 3,956 | 2,202 | ||||||||||||||||||||||
| Net variable interest entity assets | — | 2,220 | — | 2,220 | ||||||||||||||||||||||
| Total investable assets | $ | 20,869 | $ | 20,169 | $ | 20,869 | $ | 20,169 | ||||||||||||||||||
Average aggregate invested assets, at fair value (1) | 19,826 | 19,176 | 20,464 | 18,636 | ||||||||||||||||||||||
Annualized TIR % (2) | (10.5) | % | 10.0 | % | (8.1) | % | 6.8 | % | ||||||||||||||||||
| Non-GAAP adjustment: | ||||||||||||||||||||||||||
| Net unrealized losses (gains) on fixed maturities, AFS investments included within AOCI and net unrealized losses (gains) on fixed maturities, trading instruments | 1,246 | (339) | 1,246 | (339) | ||||||||||||||||||||||
| Adjusted investable assets* | $ | 22,115 | $ | 19,830 | $ | 22,115 | $ | 19,830 | ||||||||||||||||||
Adjusted average aggregate invested assets, at fair value* (3) | $ | 20,711 | $ | 18,896 | $ | 21,024 | $ | 18,260 | ||||||||||||||||||
Annualized adjusted TIR %* (4) | (2.2) | % | 7.8 | % | (0.8) | % | 8.0 | % | ||||||||||||||||||
(1) This amount is a two and three period average of the total investable assets for the three and six months ended June 30, 2022 and 2021, respectively, 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 ($) by average aggregate invested assets, at fair value.
(3) This amount is a two and three period average of the adjusted investable assets* for the three and six months ended June 30, 2022 and 2021, respectively, as presented above.
(4) Annualized adjusted TIR %* is calculated by dividing the annualized adjusted TIR* ($) by adjusted average aggregate invested assets, at fair value*.
*Non-GAAP measure.
Enstar Group Limited | Second Quarter 2022 | Press Release 16
enstargroup.com ENSTAR GROUP LIMITED Investor Financial Supplement June 30, 2022
| enstargroup.com 2 Table of Contents Page Explanatory Notes 3 Financial Highlights 4 Consolidated Results by Segment 5 Capital Position & Credit Ratings 9 Non-GAAP Measures 10 Reconciliation to Adjusted Book Value per Share 12 Reconciliation to Adjusted Return on Equity 13 Reconciliation to Adjusted Run-off Liability Earnings 14 Reconciliation to Adjusted Total Investment Return 16 Investable Assets - Management’s View 17
| enstargroup.com 3 Explanatory Notes About Enstar Enstar is a NASDAQ-listed leading global (re)insurance group that offers innovative 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. Basis of Presentation In this Investor Financial Supplement, the terms "we," "us," "our," "Enstar," or "the Company" refer to Enstar Group Limited and its consolidated subsidiaries. All information contained herein is unaudited. Unless otherwise noted, amounts are in millions of U.S. Dollars, except for share and per share amounts. Certain prior period comparatives have been reclassified to conform to the current presentation. This Investor Financial Supplement is being provided for informational purposes only. It should be read in conjunction with documents filed by Enstar with the U.S. Securities and Exchange Commission, including its Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q. 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 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. Refer to pages 10 to 18 for further details. Cautionary Statement This Investor Financial Supplement 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.
| enstargroup.com 4 Three Months Ended Six Months Ended June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Key Earnings Metrics Return on equity (“ROE”) (9.8) % 6.0 % (13.9) % 9.1 % Annualized ROE (27.7) % 18.2 % Adjusted ROE (1) (4.2) % 10.9 % Annualized adjusted ROE (1) (8.4) % 21.7 % Basic net (loss) earnings per share $ (28.62) $ 17.44 $ (44.54) $ 25.95 Diluted net (loss) earnings per share $ (28.62) $ 17.28 $ (44.54) $ 25.60 Key Run-off Metrics Average net loss reserves $ 11,897 $ 9,690 Annualized Run-off liability earnings (“RLE”) 3.7 % 2.5 % Average adjusted net loss reserves (1) $ 11,963 $ 9,502 Annualized adjusted RLE (1) 0.5 % 1.1 % Key Investment Return Metrics Average aggregate invested assets $ 20,464 $ 18,636 Annualized total investment return (“TIR”) (8.1) % 6.8 % Annualized investment book yield 2.32 % 2.65 % 2.03 % 2.24 % Earnings from equity method investments $ 32 $ 115 Adjusted average aggregate invested assets (1) $ 21,024 $ 18,260 Annualized adjusted TIR (1) (0.8) % 8.0 % Key Shareholder Metrics Ordinary shares repurchased: Shares 535,446 30,364 697,580 48,367 Cost $ 121 $ 7 $ 163 $ 11 Average price per share $ 226.78 $ 237.39 $ 233.92 $ 236.39 As of June 30, 2022 December 31, 2021 Key Shareholder Metrics Ordinary shareholders’ equity $ 4,183 $ 5,586 Total Enstar shareholders’ equity $ 4,693 $ 6,096 Book value per ordinary share (“BVPS”) $ 245.93 $ 316.34 Adjusted BVPS (1) $ 241.05 $ 310.80 Change in adjusted BVPS (22.4) % 10.5 % Total ordinary shares outstanding 17,008,567 17,657,944 Adjusted ordinary shares outstanding 17,353,457 17,973,149 Key Balance Sheet Metrics Total assets $ 23,269 $ 24,429 Debt obligations $ 1,905 $ 1,691 Total liabilities $ 18,209 $ 17,924 Total investable assets to ordinary shareholders’ equity 4.99x 3.89x Total net loss reserves to ordinary shareholders’ equity 2.93x 2.07x Debt to total capitalization attributable to Enstar 28.9 % 21.7 % Financial Highlights (1) Non-GAAP financial measure, refer to pages 10 to 18 for explanatory notes and a reconciliation to the most directly comparable GAAP measure.
| enstargroup.com 5 Consolidated Results by Segment - QTD 2022 Three Months Ended June 30, 2022 Run-off Enhanzed Re Investments Legacy Underwriting Corporate & Other (1) Total INCOME Net premiums earned $ 9 $ 1 $ — $ 4 $ — $ 14 Net investment income — — 104 2 — 106 Net realized losses — — (38) — — (38) Net unrealized losses — — (589) (2) — (591) Other income 7 — — 2 14 23 Total income (loss) 16 1 (523) 6 14 (486) EXPENSES Net incurred losses and loss adjustment expenses Current period 14 — — (1) — 13 Prior period (121) — — 5 37 (79) Total net incurred losses and loss adjustment expenses (107) — — 4 37 (66) Policyholder benefit expenses — 6 — — — 6 Acquisition costs 9 — — 3 — 12 General and administrative expenses 36 2 10 (1) 36 83 Total expenses (62) 8 10 6 73 35 EARNINGS (LOSS) BEFORE INTEREST EXPENSE, FOREIGN EXCHANGE AND INCOME TAXES 78 (7) (533) — (59) (521) Earnings from equity method investments — — 1 — — 1 SEGMENT EARNINGS (LOSS) $ 78 $ (7) $ (532) $ — (59) (520) Interest expense (23) (23) Net foreign exchange gains 13 13 Income tax benefit 4 4 NET LOSS (526) Net loss attributable to noncontrolling interests 42 42 NET LOSS ATTRIBUTABLE TO ENSTAR (484) Dividends on preferred shares (9) (9) NET LOSS ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS $ (32) $ (493) (1) Other income (expense) for corporate and other activities includes the amortization of fair value adjustments associated with the acquisition of DCo, LLC (“DCo”) and Morse TEC LLC (“Morse TEC”). Net incurred losses and loss adjustment expenses for corporate and other activities includes amortization of deferred charge assets (“DCAs”) on retroactive reinsurance contracts and 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 liabilities related to our assumed retroactive reinsurance agreements for which we have elected the fair value option. The three months ended June 30, 2022 included accelerated amortization of $72 million corresponding to increased favorable prior period development (“PPD”) on net ultimate liabilities recorded in our Run-off segment.
| enstargroup.com 6 Consolidated Results by Segment - QTD 2021 Three Months Ended June 30, 2021 Run-off Investments Legacy Underwriting Corporate & Other (1) Total INCOME Net premiums earned $ 42 $ — $ 17 $ — $ 59 Net investment income — 76 — — 76 Net realized gains — 6 — — 6 Net unrealized gains — 400 — — 400 Other income (expense) 14 — (2) (6) 6 Total income (loss) 56 482 15 (6) 547 EXPENSES Net incurred losses and loss adjustment expenses Current period 42 — 8 — 50 Prior period (59) — 3 46 (10) Total net incurred losses and loss adjustment expenses (17) — 11 46 40 Acquisition costs — — 5 — 5 General and administrative expenses (2) 64 13 1 15 93 Total expenses 47 13 17 61 138 EARNINGS (LOSS) BEFORE INTEREST EXPENSE, FOREIGN EXCHANGE AND INCOME TAXES 9 469 (2) (67) 409 Loss from equity method investments — (3) — — (3) SEGMENT EARNINGS (LOSS) $ 9 $ 466 $ (2) (67) 406 Interest expense (17) (17) Net foreign exchange gains 10 10 Income tax expense (9) (9) NET EARNINGS 390 Net earnings attributable to noncontrolling interests (3) (3) NET EARNINGS ATTRIBUTABLE TO ENSTAR 387 Dividends on preferred shares (9) (9) NET (LOSS) EARNINGS ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS $ (95) $ 378 (1) Other income (expense) for corporate and other activities includes the amortization of fair value adjustments associated with the acquisition of DCo and Morse TEC. Net incurred losses and loss adjustment expenses for corporate and other activities includes amortization of DCAs on retroactive reinsurance contracts and 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 liabilities related to our assumed retroactive reinsurance agreements for which we have elected the fair value option. The three months ended June 30, 2021 included accelerated amortization of $11 million corresponding to increased favorable prior period development PPD on net ultimate liabilities recorded in our Run-off segment. (2) Results for the three months ended June 30, 2021 include incremental expenses attributable to the first quarter 2021 general and administrative expenses following a refinement made to the allocation of expenses in the second quarter of 2021, which increased general and administrative expenses for the Run-off and Investments segments by $16 million and $3 million, respectively, and decreased our corporate and other activities by $19 million.
| enstargroup.com 7 Consolidated Results by Segment - YTD 2022 Six Months Ended June 30, 2022 Run-off Enhanzed Re Investment s Legacy Underwriting Corporate & Other (1) Total INCOME Net premiums earned $ 26 $ 15 $ — $ 7 $ — $ 48 Net investment income — — 180 6 — 186 Net realized losses — — (75) — — (75) Net unrealized losses — — (964) (8) — (972) Other income 17 — — 3 17 37 Total income (loss) 43 15 (859) 8 17 (776) EXPENSES Net incurred losses and loss adjustment expenses Current period 25 — — 1 — 26 Prior period (171) (29) — 4 (26) (222) Total net incurred losses and loss adjustment expenses (146) (29) — 5 (26) (196) Policyholder benefit expenses — 18 — — — 18 Acquisition costs 17 — — 3 — 20 General and administrative expenses 75 4 19 — 70 168 Total expenses (54) (7) 19 8 44 10 EARNINGS (LOSS) BEFORE INTEREST EXPENSE, FOREIGN EXCHANGE AND INCOME TAXES 97 22 (878) — (27) (786) Earnings from equity method investments — — 32 — — 32 SEGMENT INCOME (LOSS) $ 97 $ 22 $ (846) $ — (27) (754) Interest expense (48) (48) Net foreign exchange gains 10 10 Income tax benefit 4 4 NET LOSS (788) Net loss attributable to noncontrolling interests 31 31 NET LOSS ATTRIBUTABLE TO ENSTAR (757) Dividends on preferred shares (18) (18) NET LOSS ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS $ (48) $ (775) (1) Other income (expense) for corporate and other activities includes the amortization of fair value adjustments associated with the acquisition of DCo and Morse TEC. Net incurred losses and loss adjustment expenses for corporate and other activities includes amortization of DCAs on retroactive reinsurance contracts and 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 liabilities related to our assumed retroactive reinsurance agreements for which we have elected the fair value option. The six months ended June 30, 2022 included accelerated amortization of $96 million corresponding to increased favorable PPD on net ultimate liabilities recorded in our Run-off segment.
| enstargroup.com 8 Consolidated Results by Segment - YTD 2021 Six Months Ended June 30, 2021 Run-off Investment s Legacy Underwriting Corporate & Other (1) Total INCOME Net premiums earned $ 115 $ — $ 37 $ — $ 152 Net investment income — 137 1 — 138 Net realized losses — (4) (1) — (5) Net unrealized gains — 390 — — 390 Other income (expense) 36 — (9) (11) 16 Net gain of sale of subsidiaries — — — 15 15 Total income 151 523 28 4 706 EXPENSES Net incurred losses and loss adjustment expenses Current period 86 — 18 — 104 Prior period (98) — (3) (19) (120) Total net incurred losses and loss adjustment expenses (12) — 15 (19) (16) Acquisition costs 29 — 10 — 39 General and administrative expenses 92 16 3 65 176 Total expenses 109 16 28 46 199 EARNINGS (LOSS) BEFORE INTEREST EXPENSE, FOREIGN EXCHANGE AND INCOME TAXES 42 507 — (42) 507 Earnings from equity method investments — 115 — — 115 SEGMENT INCOME (LOSS) $ 42 $ 622 $ — (42) 622 Interest expense (33) (33) Net foreign exchange gains 7 7 Income tax expense (3) (3) NET EARNINGS 593 Net earnings attributable to noncontrolling interests (14) (14) NET EARNINGS ATTRIBUTABLE TO ENSTAR 579 Dividends on preferred shares (18) (18) NET (LOSS) EARNINGS ATTRIBUTABLE TO ENSTAR ORDINARY SHAREHOLDERS $ (103) $ 561 (1) Other income (expense) for corporate and other activities includes the amortization of fair value adjustments associated with the acquisition of DCo and Morse TEC. Net incurred losses and loss adjustment expenses for corporate and other activities includes amortization of DCAs on retroactive reinsurance contracts and 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 liabilities related to our assumed retroactive reinsurance agreements for which we have elected the fair value option. The six months ended June 30, 2021 included accelerated amortization of $11 million corresponding to increased favorable PPD on net ultimate liabilities recorded in our Run-off segment.
| enstargroup.com 9 Capital position June 30, 2022 December 31, 2021 $ / pp Change Ordinary shareholders' equity $ 4,183 $ 5,586 $ (1,403) Series D and E preferred shares 510 510 — Total Enstar shareholders' equity 4,693 6,096 (1,403) Noncontrolling interests 193 230 (37) Total shareholders' equity 4,886 6,326 (1,440) Senior notes 991 1,270 (279) Subordinated notes 914 421 493 Total debt obligations 1,905 1,691 214 Redeemable noncontrolling interests 174 179 (5) Total capitalization $ 6,965 $ 8,196 $ (1,231) Total capitalization attributable to Enstar $ 6,598 $ 7,787 $ (1,189) Debt to total capitalization 27.4 % 20.6 % 6.8 pp Debt and Series D and E Preferred Shares to total capitalization 34.7 % 26.9 % 7.8 pp Debt to total capitalization attributable to Enstar 28.9 % 21.7 % 7.2 pp Debt and Series D and E Preferred Shares to total capitalization attributable to Enstar 36.6 % 28.3 % 8.3 pp Capital Position & Credit Ratings Credit ratings (1) Standard and Poor’s Fitch Ratings Long-term issuer BBB (Outlook: Positive) BBB+ (Outlook: Stable) 2029 Senior Notes BBB BBB 2031 Senior Notes BBB- BBB 2040 and 2042 Junior Subordinated Notes BB+ BBB- 2031 Subordinated Notes Not Rated Not Rated Series D and E Preferred Shares BB+ BBB- (1) Credit ratings are provided by third parties, Standard & Poor’s and Fitch Ratings, and are subject to certain limitations and disclaimers. For information on these ratings, refer to the rating agencies’ websites and other publications. pp - Percentage point(s)
| enstargroup.com 10 Non-GAAP Measures Non-GAAP Measure Definition Purpose of Non-GAAP Measure over GAAP Measure Adjusted book value per ordinary share Total Enstar ordinary shareholders' equity Divided by Number of ordinary shares outstanding, adjusted for: -the ultimate effect of any dilutive securities on the number of ordinary shares outstanding Increases the number of ordinary shares to reflect equity awards granted but not yet vested as, over the long term, this presents a prudent view of our book value per share. We use this non-GAAP measure in our incentive compensation program. Adjusted return on equity (%) Adjusted operating income (loss) attributable to Enstar ordinary shareholders divided by adjusted opening Enstar ordinary shareholder's equity Calculating the operating income (loss) as a percentage of our adjusted opening Enstar ordinary shareholders' equity provides a more valuable and consistent measure of the performance of our business, and enhances comparisons to prior periods: • by adjusting investment returns for the temporary impact of the change in fair value of fixed maturity securities (both credit spreads and interest rates) which we hold until the earlier of maturity or used to fund any settlement of related liabilities which are generally recorded at cost; • by removing the impact of non-cash charges that obscure our trends on a consistent basis; and • by removing items that are not indicative of our ongoing operations; We use this non-GAAP measure in our annual incentive compensation program. We include the amortization of fair value adjustments as a non- GAAP adjustment to the adjusted operating income (loss) attributable to Enstar ordinary shareholders as it is considered to be a non-cash charge and not indicative of our operating results. Adjusted operating income (loss) attributable to Enstar ordinary shareholders (numerator) Net earnings (loss) attributable to Enstar ordinary shareholders, adjusted for: -net realized and unrealized (gains) losses on fixed maturity investments and funds held- directly managed -change in fair value of insurance contracts for which we have elected the fair value option (1) -amortization of fair value adjustments -net gain/loss on purchase and sales of subsidiaries (if any) -net earnings from discontinued operations (if any) -tax effects of adjustments -adjustments attributable to noncontrolling interests Adjusted opening Enstar ordinary shareholders' equity (denominator) Opening Enstar ordinary shareholders' equity, less: -net unrealized gains (losses) on fixed maturity investments and funds held-directly managed, -fair value of insurance contracts for which we have elected the fair value option (1), -fair value adjustments, and -net assets of held for sale or disposed subsidiaries classified as discontinued operations (if any) Adjusted total investment return (%) Adjusted total investment return (dollars) recognized in earnings for the applicable period divided by period average adjusted total investable assets. Provides a key measure of the return generated on the capital held in the business and is reflective of our investment strategy. Provides a consistent measure of investment returns as a percentage of all assets generating investment returns. Adjusts investment returns for the temporary impact of the change in fair value of fixed maturity securities (both credit spreads and interest rates) which we hold until the earlier of maturity or used to fund any settlement of related liabilities which are generally recorded at cost. Adjusted total investment return ($) (numerator) Total investment return (dollars), adjusted for: -net realized and unrealized (gains) losses on fixed maturity investments and funds held- directly managed Adjusted average aggregate total investable assets (denominator) Total average investable assets, adjusted for: -net unrealized (gains) losses on fixed maturities, AFS investments included within AOCI -net unrealized (gains) losses on fixed maturities, trading instruments (1) Comprises the discount rate and risk margin components. (1) Comprises the discount rate and risk margin components.
| enstargroup.com 11 Non-GAAP Measures (continued) Non-GAAP Measure Definition Purpose of Non-GAAP Measure over GAAP Measure Adjusted run-off liability earnings (%) Adjusted PPD divided by average adjusted net loss reserves Calculating the RLE as a percentage of our adjusted average net loss reserves provides a more meaningful measurement of our claims management performance. We use this measure to evaluate our ability to settle our obligations for amounts less than our initial estimate at the point of acquiring the obligations. In order to provide a complete and consistent picture of our claims performance, we combine the reduction (increase) in estimates of prior period net ultimate losses relating to our Run-off segment with the amortization of deferred charge assets, both of which are included in net incurred losses and LAE and have an inverse effect on our results. We also include our performance in managing our defendant A&E liabilities, that do not form part of loss reserves. The remaining components of net incurred losses and LAE and net loss reserves are not considered key components of our claims performance as they are either not non-life run-off in nature, or are considered to be non-cash charges that obscure our trends on a consistent basis. We use this measure to assess the performance of our claim strategies and part of the performance assessment of our past acquisitions. Adjusted prior period development (numerator) Prior period net incurred losses and LAE, adjusted to: Remove: -Legacy Underwriting and Enhanzed Re operations -the reduction/(increase) in provisions for unallocated LAE (ULAE) -amortization of fair value adjustments, -change in fair value of insurance contracts for which we have elected the fair value option (1), and Add: -the reduction/(increase) in estimates of our defendant A&E ultimate net liabilities. Adjusted net loss reserves (denominator) Net losses and LAE, adjusted to: Remove: -Legacy Underwriting and Enhanzed Re net loss reserves -current period net loss reserves -the net ULAE provision -net fair value adjustments associated with the acquisition of companies, -the fair value adjustments for contracts for which we have elected the fair value option (1) and Add: -net nominal defendant asbestos and environmental exposures. Investable assets - management's view Investable assets, adjusted to reallocate certain categories of investments based on management's view of the underlying economic exposure of a particular investment. Refer to the reconciliation for further details. Management’s view “looks through” the legal form of an investment and aggregates the classification based upon the underlying economic exposure of each investment, which is consistent with the manner in which management views our investment portfolio composition. (1) Comprises the discount rate and risk margin components.
| enstargroup.com 12 Reconciliation to Adjusted Book Value Per Share As of June 30, 2022 December 31, 2021 Equity (1) Ordinary Shares Per Share Amount Equity (1) Ordinary Shares Per Share Amount Book value per ordinary share $ 4,183 17,008,567 $ 245.93 $ 5,586 17,657,944 $ 316.34 Non-GAAP adjustments: Share-based compensation plans 344,890 315,205 Adjusted book value per ordinary share* $ 4,183 17,353,457 $ 241.05 $ 5,586 17,973,149 $ 310.80 (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 financial measure.
| enstargroup.com 13 Reconciliation to Adjusted Return on Equity Three Months Ended June 30, 2022 2021 Net (loss) earnings (1) Opening equity (1) (Adj) ROE Annualized (Adj) ROE Net (loss) earnings (1) Opening equity (1) (Adj) ROE Annualized (Adj) ROE Net (loss) earnings/Opening equity/ROE/Annualized ROE (1) $ (493) $ 5,024 (9.8) % (39.3) % $ 378 $ 6,251 6.0 % 24.2 % Non-GAAP adjustments: Net realized and unrealized losses (gains) on fixed maturity investments and funds held - directly managed / Net unrealized losses (gains) on fixed maturity investments and funds held - directly managed (2) 409 458 (110) (228) Change in fair value of insurance contracts for which we have elected the fair value option / Fair value of insurance contracts for which we have elected the fair value option (3) (48) (201) 17 (109) Amortization of fair value adjustments / Fair value adjustments 5 (104) 6 (125) Tax effects of adjustments (4) 20 4 Adjustments attributable to noncontrolling interests (5) (43) 1 Adjusted operating (loss) income/Adjusted opening equity/Adjusted ROE/Annualized adjusted ROE* $ (150) $ 5,177 (2.9) % (11.6) % $ 296 $ 5,789 5.1 % 20.5 % (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 (gains) 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 interests associated with the specific subsidiaries to which the adjustments relate. * Non-GAAP financial measure. Six Months Ended June 30, 2022 2021 Net earnings (1) Opening Equity (1) (Adj) Ratio Annualized (Adj) ROE Net earnings (1) Opening Equity (1) (Adj) Ratio Annualized (Adj) ROE Net (loss) earnings/Opening equity/ROE/Annualized ROE (1) $ (775) $ 5,586 (13.9) % (27.7) % $ 561 $ 6,164 9.1 % 18.2 % Non-GAAP adjustments: Net realized and unrealized losses on fixed maturity investments and funds held - directly managed / Net unrealized gains on fixed maturity investments and funds held - directly managed (2) 743 (89) 96 (560) Change in fair value of insurance contracts for which we have elected the fair value option / Fair value of insurance contracts for which we have elected the fair value option (3) (146) (107) (58) (33) Amortization of fair value adjustments / Fair value adjustments 7 (106) 8 (128) Net gain on sales of subsidiaries — (15) Tax effects of adjustments (4) (4) (13) Adjustments attributable to noncontrolling interests (5) (48) 12 Adjusted operating (loss) income/Adjusted opening equity/Adjusted ROE/Annualized adjusted ROE* $ (223) $ 5,284 (4.2) % (8.4) % $ 591 $ 5,443 10.9 % 21.7 %
| enstargroup.com 14 Reconciliation to Adjusted Run-off Liability Earnings - QTD Three Months Ended As of Three Months Ended June 30, 2022 June 30, 2022 March 31, 2022 June 30, 2022 June 30, 2022 PPD Net loss reserves Net loss reserves Average net loss reserves Annualized RLE % PPD/net loss reserves/Annualized RLE $ 79 $ 12,238 $ 10,962 $ 11,600 2.7 % Non-GAAP Adjustments: Enhanzed Re (1) (147) (150) (149) Legacy Underwriting 6 (140) (142) (141) Net loss reserves - current period — (26) (13) (20) Reduction in provisions for ULAE / Net ULAE provisions (13) (504) (394) (449) Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies 5 99 104 102 Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) (48) 239 201 220 Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities 1 574 586 580 Adjusted PPD/Adjusted net loss reserves/Annualized Adjusted RLE* $ 29 $ 12,333 $ 11,154 $ 11,743 1.0 % (1) Comprises the discount rate and risk margin components. * Non-GAAP financial measure. Three Months Ended As of Three Months Ended June 30, 2021 June 30, 2021 March 31, 2021 June 30, 2021 June 30, 2021 PPD Net loss reserves Net loss reserves Average net loss reserves Annualized RLE % PPD/net loss reserves/Annualized RLE $ 10 $ 10,835 $ 9,215 $ 10,025 0.4 % Non-GAAP Adjustments: Legacy Underwriting 4 (156) (153) (155) Net loss reserves - current period — (91) (48) (70) Reduction in provisions for ULAE / Net ULAE provisions (18) (410) (396) (403) Amortization of fair value adjustments / Net fair value adjustments associated with the acquisition of companies 6 120 125 123 Changes in fair value - fair value option / Net fair value adjustments for contracts for which we have elected the fair value option (1) 17 91 109 100 Change in estimate of net ultimate liabilities - defendant A&E / Net nominal defendant A&E liabilities 5 584 599 592 Adjusted PPD/Adjusted net loss reserves/Annualized Adjusted RLE* $ 24 $ 10,973 $ 9,451 $ 10,212 0.9 %
| enstargroup.com 15 Reconciliation to Adjusted Run-off Liability Earnings - YTD Six Months Ended As of Six Months Ended June 30, 2021 June 30, 2021 December 31, 2020 June 30, 2021 June 30, 2021 PPD Net loss reserves Net loss reserves Average net loss reserves Annualized RLE % (in millions of U.S. dollars) PPD/Net loss reserves/RLE $ 120 $ 10,835 $ 8,544 $ 9,690 2.5 % Non-GAAP Adjustments: Legacy Underwriting (2) (156) (955) (556) Increase (reduction) in estimates of net ultimate losses - current period — (91) — (46) Increase (reduction) in provisions for ULAE (32) (410) (334) (372) Amortization of fair value adjustments 8 120 128 124 Changes in fair value - fair value option (1) (58) 91 33 62 Change in estimate of net ultimate liabilities - defendant A&E 14 584 615 600 Adjusted PPD/Adjusted net loss reserves/Adjusted RLE* $ 50 $ 10,973 $ 8,031 $ 9,502 1.1 % (1) Comprises the discount rate and risk margin components. * Non-GAAP financial measure. Six Months Ended As of Six Months Ended June 30, 2022 June 30, 2022 December 31, 2021 June 30, 2022 June 30, 2022 PPD Net loss reserves Net loss reserves Average net loss reserves Annualized RLE % (in millions of U.S. dollars) PPD/Net loss reserves/RLE $ 222 $ 12,238 $ 11,555 $ 11,897 3.7 % Non-GAAP Adjustments: Enhanzed Re (29) (147) (181) (164) Legacy Underwriting 5 (140) (153) (147) Increase (reduction) in estimates of net ultimate losses - current period — (26) — (13) Increase (reduction) in provisions for ULAE (35) (504) (416) (460) Amortization of fair value adjustments 7 99 106 103 Changes in fair value - fair value option (1) (146) 239 107 173 Change in estimate of net ultimate liabilities - defendant A&E 4 574 574 574 Adjusted PPD/Adjusted net loss reserves/Adjusted RLE* $ 28 $ 12,333 $ 11,592 $ 11,963 0.5 %
| enstargroup.com 16 Reconciliation to Adjusted Total Investment Return Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Investment results Net investment income $ 106 $ 76 $ 186 $ 138 Net realized (losses) gains (38) 6 (75) (5) Net unrealized (losses) gains (591) 400 (972) 390 Earnings (loss) from equity method investments 1 (3) 32 115 TIR ($) $ (522) $ 479 $ (829) $ 638 Non-GAAP adjustment: Net realized and unrealized losses (gains) on fixed maturity investments and funds held-directly managed 409 (110) 743 96 Adjusted TIR ($)* $ (113) $ 369 $ (86) $ 734 Total investments 15,827 14,621 15,827 14,621 Cash and cash equivalents, including restricted cash and cash equivalents 1,086 1,126 1,086 1,126 Funds held by reinsured companies 3,956 2,202 3,956 2,202 Net variable interest entity assets — 2,220 — 2,220 Total investable assets $ 20,869 $ 20,169 $ 20,869 $ 20,169 Average aggregate invested assets, at fair value (1) $ 19,826 $ 19,176 $ 20,464 $ 18,636 Annualized TIR % (2) (10.5) % 10.0 % (8.1) % 6.8 % Non-GAAP adjustment: Net unrealized losses (gains) on fixed maturities, AFS investments included within AOCI and net unrealized losses (gains) on fixed maturities, trading instruments 1,246 (339) 1,246 (339) Adjusted investable assets* $ 22,115 $ 19,830 $ 22,115 $ 19,830 Adjusted average aggregate invested assets, at fair value (3) $ 20,711 $ 18,896 $ 21,024 $ 18,260 Annualized adjusted TIR %* (4) (2.2) % 7.8 % (0.8) % 8.0 % (1) This amount is a two and three period average of the total investable assets for the three and six ended June 30, 2022 and 2021, respectively, 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 ($) by average aggregate invested assets, at fair value. (3) This amount is a two and three period average of the adjusted investable assets* for the three and six ended June 30, 2022 and 2021, respectively, as presented above. (4) Annualized adjusted TIR %* is calculated by dividing the annualized adjusted TIR* ($) by adjusted average aggregate invested assets, at fair value*. *Non-GAAP measure.
| enstargroup.com 17 Investable Assets - Management’s View* - June 30, 2022 * Non-GAAP financial measure. Consolidated Balance Sheet View June 30, 2022 Exchange traded funds backed by fixed income securities Bonds, CLO equities and private credit held in equity format Equities, private equity, privately held equity, and real estate held in fund format CLO equity funds Other assets and liabilities in funds held format Private equities in infrastructure format Cash held in fund format June 30, 2022 Management's View of Underlying Economic Exposure Short-term and fixed maturity investments, trading and AFS and funds held - directly managed, excluding other assets $ 10,374 $ 10,374 Fixed maturities Other assets included within funds held - directly managed 46 (46) — Equities 1,776 (562) (117) 86 1,183 Equities* Other Investments: Hedge funds 447 447 Hedge funds Fixed income funds 609 562 58 68 1,297 Bond/loan funds* Equity funds 3 (3) — Private equity funds 1,240 (295) (13) (306) 626 Private equity funds* CLO equities 144 27 213 384 CLO equities* CLO equity funds 213 (213) — Private credit funds 318 32 95 445 Private credit* Real estate debt fund 151 49 200 Real estate* — 13 13 Infrastructure* Total 3,125 3,412 Equity method investments 506 506 Equity method investments Total investments 15,827 15,475 Cash and cash equivalents (including restricted cash) 1,086 306 1,392 Cash and cash equivalents (including restricted cash) Funds held by reinsured companies 3,956 46 4,002 Funds held* Total investable assets $ 20,869 $ 20,869 Total investable assets
| enstargroup.com 18 Investable Assets - Management’s View* - December 31, 2021 * Non-GAAP financial measure. Consolidated Balance Sheet View December 31, 2021 Exchange traded funds backed by fixed income securities Bonds, CLO equities and private debt held in equity format Equities, privately held equity, private credit and real estate held in fund format CLO equity funds Other assets and liabilities in funds held format December 31, 2021 Management's View of Underlying Economic Exposure Short-term and fixed maturity investments, trading and AFS and funds held - directly managed, excluding other assets $ 12,254 $ 12,254 Fixed maturities Other assets included within funds held - directly managed 201 (201) — Equities 1,995 (969) (121) (3) 902 Equities* Other Investments: Hedge funds 291 291 Hedge funds Fixed income funds 573 969 64 1,606 Bond/loan funds* Equity funds 5 (5) — Private equity funds 752 (110) 642 Private equity funds* CLO equities 161 32 207 400 CLO equities* CLO equity funds 207 (207) — Private credit funds 275 25 85 385 Private credit* Real estate debt fund 69 33 102 Real estate* Total 2,333 3,426 Equity method investments 493 493 Equity method investments Total investments 17,276 17,075 Cash and cash equivalents (including restricted cash) 2,092 2,092 Cash and cash equivalents (including restricted cash) Funds held by reinsured companies 2,340 201 2,541 Funds held* Total investable assets $ 21,708 $ 21,708 Total investable assets
Enstargroup.com Mid-Year Review August 2022 Enstar Group Overview Realising Value
Property of Enstar Group – Not for Distribution 2enstargroup.com INFORMATION REGARDING FORWARD-LOOKING STATEMENTS This presentation, and oral statements made with respect to information contained in this presentation, may include certain forward-looking statements regarding our views with respect to our business, operations, loss reserves, strategy, investment portfolio, economic model, and our expected performance for future periods, as well as the insurance market and industry conditions. These statements are intended as “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. Actual results may materially differ from those set forth in the forward-looking statements. You may identify forward-looking statements by the use of words such as “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “may,” “should,” “could,” “will” or other words or expressions of similar meaning, although not all forward-looking statements contain such terms. Forward-looking statements involve significant risks and uncertainties, including risks of changing and uncertain economic conditions, the success of implementing our business strategies, the adequacy of our loss reserves, ongoing and future regulatory developments disrupting our business, lengthy and unpredictable litigation, risks relating to our acquisitions, increasing competitive pressures, loss of key personnel, the performance of our investment portfolio and liquidity, and other factors detailed in our Annual Report on Form 10-K for the year ended December 31, 2021 and our other reports filed from time to time with the Securities and Exchange Commission (“SEC”). Any forward-looking statement you see or hear during the presentation reflects Enstar Group Limited’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions. If any of these risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. You are cautioned not to place undue reliance on these forward- looking statements, which speak only as of the date on which they are made. The date of this presentation is listed on the cover page and Enstar does not undertake to update or keep it accurate after such date. ADDITIONAL INFORMATION The company has an effective shelf registration statement (including a prospectus) on file with the SEC. Any offering of securities will be made only by means of a prospectus supplement, which will be filed with the SEC. In the event that the company undertakes an offering, you may obtain a copy of the prospectus supplement and accompanying prospectus for the offering by visiting EDGAR on the SEC website at www.sec.gov. For more complete information about Enstar Group Limited, you should read our reports filed with the SEC. You may get these documents for free through EDGAR on the SEC website at www.sec.gov, or through our website at https://investor.enstargroup.com/sec-filings. DISCLAIMER
Property of Enstar Group – Not for Distribution 3enstargroup.com Full suite of capital release solutions designed to create shareholder value LEADING GLOBAL PROVIDER OF RUN-OFF SOLUTIONS Deliver Capital Release and Risk Management Solutions Industry founder and largest standalone provider Generate Positive Claims Outcomes Decades of consistent run-off liability earnings Growing Asset Base Using Origination Capabilities $20.9bn Investable Assets; ~4x investment leverage1 What We Do How We Do It Specialized M&A Expertise Well Established Leadership and Capabilities Investments and Capital Optimization Best in Class Claims Function 1. Investment leverage is calculated as average investable assets for the six months ended June 30, 2022, divided by opening equity as of December 31, 2021.
Property of Enstar Group – Not for Distribution 4enstargroup.com KEY HIGHLIGHTS Leading global insurance group with a proven record of consistently acquiring and sourcing run-off business during 29+ year history Well-positioned for long-term profitability across insurance cycles Competitive advantage driven by size, scale and depth of experience Highly diversified mix of innovative risk transfer solutions Consistent and disciplined approach to buying businesses Substantially differentiated claims management expertise Strong capacity and healthy pipeline for new transactions Seasoned leadership with top-tier talent secured over past several years
Property of Enstar Group – Not for Distribution 5enstargroup.com Run-off Focused Diversified Business Catalina Riverstone Marco Premia Swiss Re NICO Longevity (>20yrs in Operation) Presence in Global Run- off Markets Experience in All Types of Run-off Transactions Publicly Traded Deals Announced Since Inception 113 32 >22 4 7 N.A.1 N.A.1 Shareholders Equity ($ Billions)* 6.3 1.4 0.8 0.62 0.8 23.7 237.6 Enstar has the credentials to create value for shareholders 1. Not Available 2. Committed *Shareholders Equity as of December 31, 2021 BEST-IN-CLASS
Property of Enstar Group – Not for Distribution 6enstargroup.com FINANCIAL HIGHLIGHTS Total Cash & Investments Capital Redundancy at S&P2 Total Insurance Liabilities1 Net Loss Total Assets Total Shareholders’ Equity $22.1bn $11.4bn $284.72 1$22.1bn 2.1bn 6.8% Core Fixed Income3 1. Includes losses and loss adjustment expenses, future policyholder benefits, defendant A&E liabilities. 2. Source: Standard & Poor’s full analysis on Enstar Group Ltd. dated 07/30/2021. 3. The average credit ratings calculation includes cash and cash equivalents, short-term investments, fixed maturity securities and the fixed maturity securities within our funds held - directly managed portfolios. $(775)m $15.6bn 3 3 2.03% $4.9bn ‘AAA’ ‘A+’ YTD 2022 Growth in Book Value Per Share since 2018 Growth in Book Value Per Share since 2016 10.1% 13.5%
Property of Enstar Group – Not for Distribution 7enstargroup.com CONSISTENT ECONOMIC MODEL Redeploy Capital Enstar Run-off Business Model Leverage our industry relations and position to source new business opportunities Acquire New Business Redeploy Capital Apply our claims management strategies to generate run-off liability earnings and manage investments to obtain attractive risk adjusted returns Manage Liabilities and Investments Business model provides strong source of book value growth and internal financing Reduce capital requirements as claims are settled; any excess may be redeployed in the business
Property of Enstar Group – Not for Distribution 8enstargroup.com RETURN ON EQUITY COMPONENTS Generating attractive returns 1. TIR and RLE leverage factors are calculated as average investable assets and average net loss reserves, respectively, for the six months ended June 30, 2022, divided by opening equity as of December 31, 2021. TOTAL INVESTMENT RETURN (“TIR”) Leverage Factor1: 3.7x RUN-OFF LIABILITY EARNINGS (“RLE”) Leverage Factor1: 2.1x EXPENSES & OTHER Return On Equity
enstargroup.com A GROWING BALANCE SHEET Investable Assets ($bn) Net Loss Reserves ($bn) $5.4 $7.3 $7.7 $8.5 $11.6 2017 2018 2019 2020 2021 $10.1 $12.5 $14.1 $17.3 $21.7 2017 2018 2019 2020 2021 A platform for delivering balanced and sustainable growth through investable assets and reserves
Property of Enstar Group – Not for Distribution 10enstargroup.com 1 Excludes unallocated loss and loss adjustment expenses (“ULAE”) of $508 million as of June 30, 2022. EXPERTS IN RUN-OFF MANAGEMENT Utilize effective claims management & commutation capabilities and strategies to settle liabilities at lower cost than reserved value $13.2bn Run-off Segment Gross Loss Reserve Composition1 General Casualty (33%) Workers' compensation/personal accident (21%) Asbestos (14%) Professional indemnity/Directors and Officers (10%) Other (6%) Marine, aviation, and transit (4%) Motor (4%) Property (4%) Environmental (3%) Construction defect (1%) Global claims team of ~275 professionals Detailed policy-by-policy analysis to ensure each claim is uniquely handled Specialized by claims type e.g. workers’ comp, asbestos, etc. Successful claims execution drives RLE Utilize multiple solutions to handle claims expeditiously and settle at lowest cost • Litigation / compromise settlements • Policy buybacks from direct insureds • Commutation of reinsurance contracts avoid reserve issues
Property of Enstar Group – Not for Distribution 11enstargroup.com ROBUST TRANSACTION PIPELINE Each opportunity diligently analyzed to drive value for shareholders Data from January 2020 – June 30, 2022 1. Excludes Enhanzed Re. 161opportunities reviewed $52.8bn of reserves 13 1 deals completed $7.3bn1 of reserves
Property of Enstar Group – Not for Distribution 12enstargroup.com LARGE AND GROWING RUN-OFF MARKET P&C Rates Continue to Strengthen for Primary Insurers Major Loss Events Including Recent CATs and COVID-19 Increased Consolidation Business Transfer Legislation Solvency II & Capital Efficiency Reserve Releases Declining North America $402bn UK & Continental Europe $302bn Rest of World $160bn Key Market Drivers $864bn opportunity, propelled by favorable global tailwinds Source: PwC Global Insurance Run-off Survey 2021.
Property of Enstar Group – Not for Distribution 13enstargroup.com Significant Liquidity to Support Growth • $1.1bn of cash and cash equivalents • $600m of unused revolving credit facility capacity Well-Capitalized with Moderate Leverage • 28.9% financial leverage; within 25% - 30% target • FY21 Solvency ratio of 179%, has increased as of 06/30/22 • Over 5-years, BSCR (solvency) year end range 170% - 204%; above Bermuda BSCR minimum targets Ratings1 • BBB with positive outlook by S&P (ICR) and BBB+ with stable outlook by Fitch (IDR) Capacity • Closed Aspen LPT in May 2022 assuming incremental $1.9bn of net loss reserves • Announced $746m2 LPT in August 2022 with Argo; expected to close by Q4 • Significant capacity remains for additional M&A CAPACITY FOR GROWTH Well-funded as of 30 June 22 1. Credit ratings are provided by third parties, Standard and Poor’s and Fitch Ratings, and are subject to certain limitations and disclaimers. For information on these ratings, refer to the rating agencies’ websites and other publications. 2. Enstar’s subsidiary will provide ground up cover of $746 million. Argo will retain a loss corridor of $75 million up to $821 million with Enstar’s subsidiary then providing an additional $275 million of cover above the loss corridor up to a policy limit of $1.1 billion.
Property of Enstar Group – Not for Distribution 14enstargroup.com HISTORY OF ENHANCING BOOK VALUE 29+ year history operating in run-off space 113 total acquisitive transactions completed to date 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 CUMULATIVE BOOK VALUE SINCE 2010 8% NASDAQ Insurance Annualized Growth 7% S&P 500 Insurance Annualized Growth 14% ESGR Annualized Growth in Book Value Targeting long- term ROE low to mid double digits
Property of Enstar Group – Not for Distribution 15enstargroup.com 25 yearsAverage Industry Experience: 270+ yearsCollective Industry Experience: MANAGEMENT WELL-ALIGNED WITH SHAREHOLDERS Paul O’Shea President, Co-founder Years at Enstar: 27 Industry Experience: 35+ years Age: 64 Dominic Silvester CEO & Co-founder Years at Enstar: 29 Industry Experience: 40+ years Age: 62 Orla Gregory Chief Financial Officer Years at Enstar: 18 Industry Experience: 25+ years Age: 48 Paul Brockman Chief Claims Officer Years at Enstar: 9 Industry Experience: 25+ years Age: 50 Audrey Taranto General Counsel Years at Enstar: 10 Industry Experience: 10+ years Age: 42 Nazar Alobaidat Chief Investment Officer Years at Enstar: 6 Industry Experience: 20+ years Age: 44 Matthew Kirk Group Treasurer Years at Enstar: 2 Industry Experience: 25+ years Age: 48 Laurence Plumb Chief of Business Operations Years at Enstar: 2 Industry Experience: 15+ years Age: 38 David Ni Chief Strategy Officer Years at Enstar: 2 Industry Experience: 15+ years Age: 38 Michael Murphy Chief Accounting Officer & Deputy CFO Years at Enstar: 1 Industry Experience: 30+ years Age: 55 Seema Thaper Group Chief Risk Officer Years at Enstar: 3 Industry Experience: 15+ years Age: 42
Property of Enstar Group – Not for Distribution 16enstargroup.com KEY HIGHLIGHTS Leading global insurance group with a proven record of consistently acquiring and sourcing run-off business during 29+ year history Well-positioned for long-term profitability across insurance cycles Competitive advantage driven by size, scale and depth of experience Highly diversified mix of innovative risk transfer solutions Consistent and disciplined approach to buying businesses Substantially differentiated claims management expertise Strong capacity and healthy pipeline for new transactions Seasoned leadership with top-tier talent secured over past several years
APPENDIX Property of Enstar Group – Not for Distribution 17enstargroup.com
enstargroup.com Property of Enstar Group – Not for Distribution 18 $ millions Six Months Ended June 30, 2022 Six Months Ended June 30, 2021 Net premiums earned $ 48 $ 152 Net investment income and net realized and unrealized (losses) gains (861) 523 Other income 37 16 Net gain on sales of subsidiaries — 15 Net incurred losses and LAE 196 16 Policyholder benefit expenses (18) — Acquisition costs (20) (39) Interest expense (48) (33) General and administrative expenses and net foreign exchange gains (158) (169) Income tax benefit (expense) 4 (3) Earnings from equity method investments 32 115 Net (loss) earnings (788) 593 Net loss (earnings) attributable to non-controlling interest 31 (14) Dividends on preferred shares (18) (18) Net (loss) earnings attributable to Enstar ordinary shareholders $ (775) $561 FINANCIAL DATA Summary Income Statement
enstargroup.com Property of Enstar Group – Not for Distribution 19 FINANCIAL DATA Summary Balance Sheet $ millions June 30, 2022 December 31, 2021 Assets Investable assets $20,869 $21,708 Reinsurance balances recoverable 1,275 1,517 Deferred charge assets 286 371 Other 839 833 Total Assets 23,269 24,429 Liabilities Losses and loss adjustment expenses 13,641 13,258 Future policyholder benefits 1,363 1,502 Defendant asbestos and environmental liabilities 620 638 Debt obligations 1,905 1,691 Other 680 835 Total Liabilities 18,209 17,924 Redeemable noncontrolling interests (“RNCI”) 174 179 Shareholders' Equity Ordinary shareholders’ equity 4,183 5,586 Series D & E preferred shares 510 510 Non-controlling interests 193 230 Total Shareholders’ Equity 4,886 6,326 Total Liabilities, RNCI & Shareholders’ Equity $23,269 $24,429